Jason Hartman uses this Flash Back Friday episode to play a Q&A session with his team of investment counselors. But first, he educates listeners on the real estate market from 2004-2008 and what lead to the mortgage crisis. Jason gives us an idea of what signs to look for in the future. On the Investment Counselor panel, listeners get answers about mortgage sequencing, the importance of leverage, and other common client challenges.
Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made 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 1:05
Welcome to the creating wealth Show Episode Number 801 801. I hope you enjoyed Episode 800 a landmark with Grant Cardone talking about the 10 x rule. Today we are going to have a live clip from an investment counselor panel that I did at one of our live events. We’re just talking with them about some of their suggestions, thoughts, client experiences, you know, our team of investment counselors is on the front lines, dealing with clients dealing with local market specialists dealing with property managers, dealing with repair and rehab people all day long. That is what we do. And we learn a lot from it. And we learn a lot from you, our clients and one of our jobs here is to take that learning that we learn from our clients, our local market specialists, our vendors, our contractors, Sort of assimilate that, aggregate it and share it all back with you here on the podcast and in our live events. And speaking of live events, gosh, we got some exciting ones coming up. We got the venture alliance in Las Vegas, that is this weekend. So if you have not already planned to go, then we will not be seeing you. I’m just mentioning it. I’m real excited about the event, do get to one of our venture Alliance events, eventually, you know, we have them on a quarterly basis. So every three months, we’re doing something really fun and exciting. And we would love to have you come as a guest or a full member to one of those events. Check out venture Alliance mastermind.com or Jason Hartman calm in the events section for details. And then one of our public events coming up not for the mastermind group, but just for everybody is our Memphis creating wealth seminar and property tour and that is coming up at the end of March. So I hope you can join us for that, that is almost sold out. By the way, tickets have sold very briskly for that, even though we had some pretty big problems. We switched shopping carts on our website to try and upgrade the user experience. And we didn’t like it. So we were switching back. So we had a little few little stumbling blocks on that one. I tell you, everybody kind of there’s this perception at least it’s my perception that doing business online is so much simpler than having a physical store. You know, it’s really not it’s, it’s pretty complicated. All of these different programs that you use have so many little intricacies and they interact with each other in different ways. And they break and they don’t work together and they’re, you know, it’s just all the typical challenges of being in business. But yeah, it’s interesting how people view the virtual world is so simple inexpensive and, you know versus the physical world. And yeah, that’s a bit of a myth. I have to say it’s a bit of a myth. So anyway, the Memphis tour is almost sold out. And that’s the creating wealth seminar. It’s my oldest seminar, the one I’ve been doing for over 13 years now, I think. And the first one was in Newport Beach, California many, many years ago at our office. And I remember well, you know, I remember doing that seminar, and just announcing it to some of the people in my traditional real estate company that I own owned at the time that I later sold to Coldwell Banker, and that was in Irvine, California, to some of our clients and so forth. And I remember people, we had these, you know, glass doors and our commercial office building the Newport Beach office. We had this big room in the front, and we set that up as a seminar room and I don’t know must have held comfortably 4045 Five people maybe something like that, but uncomfortably, and please don’t tell the fire marshal this, because we might have gotten in trouble. You know, maybe 60 people could squeeze in there. And I remember at this one event, we had these double doors, these big glass double doors in the front. And, and people were standing outside of the double doors. And I want to say they were maybe eight people deep with the doors open. And I was trying to talk loud enough for everyone out outside to hear me. And and this is how it was in the crazy heyday. You know, this was Gosh, I guess it was 2004 wasn’t it? And people just couldn’t get enough. And at that time, I have to tell you, I’m gonna pat myself on the back here.
Jason Hartman 5:47
Can you hear the padding? Yeah, that was me patting myself on the back. I was predicting the collapse. And I was right. And I was right. And I base my prediction, mostly on One aspect. And that was simply that all of the people that were getting these idiotic, crazy adjustable rate mortgages, who could not qualify, I used to show screenshots from my email box of countrywide home loans and they were probably the biggest offender as we all know, now looking back, but all lenders were doing it at the time, these crazy loans, these these ninja loans, you know, no income, no job no nothing day out of prison day out of bankruptcy day out of foreclosure. We’ll give you a loan 555 go score 120% financing, adjustable rate mortgage, and we knew that something would happen and what was that something? Well, it was called payment, shock, payment shock. That’s what happened. And you could just it was so sort of so easy to really figure that out. I thought because all you had to do do is just reverse engineer it. If you look at and I owned a few mortgage companies over the years and you know they were in house inside my traditional real estate company not not my investment real estate company now, but my traditional real estate company. And I remember when the refi booms and the financing booms were going on, and just this massive onslaught of business, and these mortgages were so careless, it was insane the way these crooks were just giving out these loans, all you had to do is just do a reverse engineering. All you had to do is say look, so many people this massive amount of loans came through the pipeline and say 2000 or 2002. And if you just if you just back that up, by by 2005. All those payments, we’re going to be adjusting because They were the five one arms, or the three one arms. And those payments would adjust. And when they adjusted, those people could never afford those mortgages. It was absolutely irresponsible what was going on? And so you just knew that the market would would have a huge, huge problem at that point. And it really happened in November of 2005. And interestingly, not really known to me at the time, but the deal on my my business by the sale of my business to colo banker, closed November 11 2005. And nobody noticed that that was really the end of the market until probably late February or early March of 2006. Why didn’t they notice till then? Well, because in the traditional residential real estate market comprised of homeowners of home buyers and home sellers, that doesn’t really get very active until the spring. And so really, it was really about March before anybody really noticed that there was this giant problem this elephant in the room. And then, you know, that was the first part of the Great Recession, we’ll call that part the mortgage meltdown. But the second part of it, which I did not predict, I did not know about I did not know it would be this bad. And pretty much nobody else knew either unless they were on the inside. And of course, the book in the movie, The Big Short by Michael Lewis profiles that extensively where there was this whole wall street game going on, behind the scenes, and that, you know, I did not understand that I you know, until after the fact, most of the world did not understand it, till after The fact in fact, the country of Iceland didn’t understand it until after the fact, because they basically declared bankruptcy. And various municipalities had the same problem. So this was a very, very deep, very severe problem that most people just simply did not understand the depth of it, the massive criminal behavior that was going on in Wall Street. And, you know, that’s probably still going on, in a different way, in a different flavor to a different extent. But, you know, never trust the crooks on wall street because they’re always up to something, aren’t they? whenever you hear them, use terms like financial engineering, or financial innovation, run for the hills, because those are the words that should be a warning sign. The other one, this time, it’s different. This time, it’s different. Whenever you hear people using that one a lot, be careful and run for the hills. But anyway, hey, without further ado, let’s get to our investment counselor panel here. I hope you enjoy this live clip. It’s it’s live, it’s pretty raw. So you know, pardon the little ohms and ahhs and hopefully the editor will get some of those out, so you won’t be totally bored with it. Be sure to go to Jason hartman.com, click on the events section and join us in Memphis that is almost sold out. I don’t have the exact headcount on that handy. But that event, I know we’re gonna have to close the registrations for it very soon. So grab your tickets. That’s the creating wealth seminar and property tour in Memphis. And you know, it’s an entire weekend with us. And I think you’ll really, really enjoy it. If you haven’t come to any of our live events. Be sure you do that. Really do yourself a favor. Even if you’re not interested in that particular market. You know, the reason you need to come you need to meet her teams in meet our clients. And that is something that really differentiates us and differentiates the experience and differentiates your life as an investor coming to our live events, so you can meet our clients, you can talk to people that are actually investing with us. They’re always there. We always have lots of, you know, prior clients that are events that are repeats. coming back for more, you can hear their experience firsthand, hey, you know, corner them in the hallway outside of the seminar room where we’re doing the conference will have several meals together, you know, corner them at lunch or dinner breakfast and, and say, Hey, you know, how’s your experience? What’s going on? What do you think of? What do you think of these characters? What do you think of this Jason guy? And I’ve been listening to his podcast for years, but I don’t know. You know, he’s kind of opinionated. Is he all that he says he is or, you know, what are the properties like? What are the investments? Like? What’s the experience like? And hey, it’s no better roses, folks. The only thing I will say is that it’s better than everything else. It’s certainly not perfect, but it’s better than everything else. You know, you always have to ask yourself in life compared to what? Compared to what? Is there anything better, you know, compared to what? and income property the way we do it? Definitely the most historically proven asset class on Earth, the most historically proven asset class in the entire world.
Jason Hartman 13:40
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Check it out, come to our live event, Jason hartman.com. Click on events and let’s get to our investment counselor panel.
Jason Hartman 14:02
What we are doing now everybody is we are having a little investment counselor panel. Well, you’re I think everybody’s got their cookie in their hand, pretty much. So we’ll go ahead and actually start. First of all, why don’t you just introduce yourself and tell them a little bit about? Well, we’ll go into what you do all that stuff.
Right. So I’m Sarah. I’ve been working with Jason as an investment counselor since 2007. And she came right
Jason Hartman 14:26
after right during the crash. I started timing. Yeah, perfect timing.
So when I met Jason, I didn’t have a real estate background. He said, Well, if you want to, you know, work with me, you got to come see what I do. You got to come to one of my seminars. So I went to the Newport Beach office that he mentioned earlier, and he went to his creating wealth seminar. And, you know, all I had at that time was my primary residence. And you know, the market was going crazy. We had a ton of equity in our house. And the light bulb went on, right because I realized I could extract some of that equity and purchase properties. In other markets that were much less expensive and produce cash flow,
Jason Hartman 15:03
and so you live in, in LA moronic California,
Southern California, nobody knows. Okay.
Jason Hartman 15:09
It’s like the edge of Orange County. So nobody knows where Orange County is either.
So my husband and I had had, you know, we had an interest in real estate. And, you know, we had this idea of like, fixing and flipping, but we didn’t have any money or have any experience. All he had was, you know, experience, you know, being hands on. He’s in the construction industry. So, you know, we have this idea, but we could never make it work. We were, you know, in our 20s at the time, you know, capital. So, not only did I joined Jason’s team as the rental coordinator at the time, I worked on getting my real estate license and I took the plunge and purchase my first out of state rental property at age 24. And I did all that with you know, pretty much zero capital, I did it with my you know, with our home equity. You know, over the years, we’ve slowly acquired more properties. And finally, we’re in acquisition mode again, and I’ve got three more under contract. Now in Memphis, and just working on, you know, growing our passive income, and I’ve helped many, many clients do the same thing. I’ve worked with clients that have started like me with very little income, very little capital purchasing, you know, maybe one property year, all the way to, you know, big investors that, you know, they’re of retirement age, they’ve got a chunk of money that is not producing good return. And you know, they want they want more. So I’ve helped them to purchase bigger portfolios of properties. So it’s tough love what I do and love working with
Jason Hartman 16:30
Jason and our team. All right, thanks, Carrie. So Carrie is an investment counselor, but she also does another very important job that is onboarding new local market specialists. And so she screens them and you know, figures out sometimes which markets we should be in, as I’ve said many times on the podcast, there are markets we would like to be in, but we cannot find a good team in that market. And we unfortunately over the years have had to fire a lot of things. Call market specialist or we just sort of do the phone tag fade out. Have you heard that one? You know, when you’re dating someone, and you just kind of leave a phone message for them, and then you don’t call back right away, and you’re just like the fade out, phone type fade out, they call that? Yeah. So we do that with the local market specialist sometimes, too. Oh, yeah, he can’t do with voxer my favorite app, besides property tracker and property shopper and property evaluator. But she does a really important job with that. And Carrie, I mean, you can talk from either angle investment counseling or local market specialist onboarding them, but just you know, introduce yourself.
Sure. So my name is Carrie. I am an investment counselor and area coordinator. And I’ve been working with Jason for about two and a half years now. So what I do as part of the area coordinating, we’re looking for markets, you know, we’re not only just looking for the market, but the team behind that market. You know, who’s, who’s boots on the ground, who’s going to answer to you guys and us and who’s gonna make The transactions smoother, especially the property management, that’s, that’s one of the key things that we look for is their communication, you know, their agreements, you know, how, how well are they gonna attend to you? And I think Sara said at one time, we do like a, an evaluation test or a personality test. Okay, you’re gonna match up with property manager, because you’re, you know, this type of an investor. So we do a lot of that I probably talked to, I mean, probably 10 different potential local market specialists a week. And maybe one gets to the next round. So there’s a lot of vetting out, you know, whether there’s the economic growth, what kind of rents are there, what’s their fees, it’s just all across the board that you were just vetting them to make sure we get, you know, the three that we have in the backlog right now. So there’s a lot of background work to do it. Yes. Do you believe so, yeah, so I love it. And then from area coordinator, I turned into investment counselor and that’s where we’re at today.
Jason Hartman 19:00
Good stuff. Good stuff. Thank you, Oliver. Hey, everyone. My name is Oliver Freeman Freeman podcast a couple of times we’ve been on recently, a ton of fun. I recently started. Recently, I’ve started listening to Jason’s podcasts almost eight years ago now. And from that point is when I started picking up properties. A year and a half ago, I started as investment counselor. And that’s been a terrifically fun ride. I’m really happy to see so many of you here today, coming to events over and over again, and really helping you with the whole process from getting in to investment, being really interested with real estate and now just purchasing 1234 and essentially seeing how smooth and how you guys really progressed from your first purchase to your 910 and onwards. It’s a it’s a very, very cool transition to see. So glad to see you here again today. Good stuff. So think about what questions you have for investment counselor panel. You know, are there any any things you want to ask them them, you know, maybe kind of a stuff. Some of the things you might ask are just, you know, you’re all dealing with one of them or maybe, Fernando, in terms of having them be your investment counselor. And you know, maybe you want to ask some of the questions you asked when you originally got connected with them, just for the benefit of the room for the audience, or any specific questions you have right now. So if you have any questions, just raise your hand and we’ll get them Coco was very enthusiastic with questions. She’s got something going on here. I don’t know. Yeah. See? She’s got questions. And you got to get this picture. Fernando, by the way of the dog up here. See, this is even better. Yeah. Okay. So I’ll take one of those microphones, and we’re busy. So what is the most common area or challenge where you’re helping your clients? Where do you find more often having to help in the same way over and over again? That’s a great question. Typically, I would say it’s on the property management side, in a transitionary phase, from the time that you close the time You actually acquire the property, a lot of questions are going to come up where they’d be, hey, I thought that this was initially covered in the, in the rehab of the property. And then it just takes a simple phone call or if not emailed to the provider, and then sometimes they just need to be reminded, oh, yeah, you know, sorry, we charge you for that. or so. So what you mean there? Is that a client purchase? I mean, tell me if I’m, if this is correct, a client purchased a property, they’ve owned it for maybe six months, and then something goes wrong mechanically with property? Is that item, a property management item that they need to pay for having fixed or is it something that should have been done in the original rehab or under warranty? Wait under the rehab warranty, right, that the provider is the LMS is providing? Is that what you’re talking about? That’s exactly I’m talking about usually it’s caught much sooner than the six month here, they’ll use what’s covered on the first maybe month or two or three, we normally get that cleared up fairly quickly. But also it’s just in terms of the communication to ensure that everyone’s aligned because a lot a lot tends to get just lost exactly in emails and Just ensuring that the communication that you guys understand exactly what’s going on on there on the property management side. And it’s really easy and all of that and helping you with the process. Comments carries here. Any other comments on that?
Yeah, I would say, Well, I used to spend a lot of time with the maintenance issues, just clients that you know, we’re getting maybe nickel and dime from the property manager and having to
Jason Hartman 22:27
nickel and dime people. Come on.
But But now I spend more of my time setting expectations with clients up front and I fell in found that I spent a lot less time dealing with maintenance concerns, because a lot of this is mindset. You know, people hear the word turnkey, and they’re like, Okay, I’ve got this turnkey property, and we’re gonna have any problems and there are a lot of companies that will sell you on that. But at the end of the day, you guys are investors and if your house needs a new roof, you’re gonna put that new roof on, you know, so just making sure that you have your inspections done up front And again, they call me the investment therapists. Because, you know, I, every once in a while I know I’m gonna get this call, and I’m gonna keep my feet up on the couch and give some real good investment therapy. So
Jason Hartman 23:12
it happens definitely, this thing lives and dies on property management. It really does. That’s, yeah, it’s not that difficult to buy the property, right. You know, you can see because you’re in the standardizing your data. And that’s what we’re talking about this weekend with Michelle’s presentation. with mine, you know, you’re gonna you’re gonna use the website and see the standardized data. Hopefully, you’ll take that to the next step. And you’ll actually use the product and use it live. And by the way, Sarah, you just sent out an email to everybody who’s here. By the way, if you haven’t checked your email in a few minutes, you’ve got a free trial for a week.
Jason Hartman 23:52
Yep. Six months. Okay. So you’ve got property tracker for free for six months. Okay. So that’s in your email. Now it should be there. And you can follow along, as Michelle comes up and demonstrates more of that by creating your own account logging in, how many of you are already members of property tracker, maybe 20% of the room, if you’re already a member, I think there’s something Fernando has to do on the back end to extend that for six months, right. So it should be pretty simple for that link is good for new members. So the next thing beyond standardizing data in a static fashion is doing it dynamically to where you change assumptions and everything else changes. Okay. And then we will talk about self management and property management with a manager. Either way, so managing your manager or self management. Okay. Other questions for the investment counselors? Yes, appear? And then back there, maybe. So for some of you who were around during the early days, it looks they’re actually early days when the recession was at its peak and stuff. What were some of the challenges that you faced with helping clients and what were the seven solutions, zero to help them with and get them Do those hard times?
That’s a good question.
Well, one of the things that people got into a lot of trouble doing was over leveraging you back in the day you can, you can put nothing down, I think down I think when I started, it was like 10% down. Or if you could borrow against your primary residence like I did, you could put nothing down.
Jason Hartman 25:22
So destructively, nothing down, but no, nothing down on the property itself directly, right.
Yeah. Right. So that I would see. I mean, there were people that would come to our seminars, and they were like, I’m gonna put this property on my credit card, I’m gonna get credit. And you know, it’s going to be like 10% interest and, you know, you can tell people not to do that all day long. And some people are just going to do whatever they want to do. So, during the, the recession, you know, was counseling people again, it goes back to mindset and, you know, look, you purchase that property with little money down, you essentially defer to your down payment. So, you know, it’s more Now having staying power, you either say or you short sale or you modify your loans. There were different options and, you know, Jason multi millionaire, he got like 20 loan modifications, I got zero and I,
Jason Hartman 26:12
I deserve one more than Jason It’s so unfair, like,
every single month for like nine months, and I even, you know, got scammed and you know, paid a guy to modify my loan. And then you know, two months later his office was closed.
Jason Hartman 26:26
There were a lot of loan modification scams out there in the day. So,
yeah, just encouraging people to hang on to the deals that make sense short sale, the ones that didn’t, and not to give up on real estate because, you know, also during that recession, there were people that were just getting started, you know, like the David Porter’s of our company, and, you know, he bought all these properties in Indy and even though we told him to finance them, he paid cash but you know, that his portfolio has done
Jason Hartman 26:51
that he’s killed it. in Indianapolis. By the way, one of the things that’s interesting and it’s counterintuitive, is you know, I always like to quote act Little Book, the greatest management principle in the world by Michael lebeau, or buffer. I don’t know how you say it, but, and his whole thing is what gets rewarded gets repeated. What gets rewarded gets repeated. And if you think about every aspect of life, whether it be government welfare and entitlements, or whatever it is, that it’s interesting. And so what Sarah was mentioning with the loan modifications is how that’s totally unfair. And so I’ll share with you an example of our broker Dave, who was also a client, and he was buying up a bunch of properties years ago, and during the Great Recession, he got a whole bunch of loan modifications, as I recall, you know, he should be here to tell his own story, but, but he couldn’t get a loan mod on his house, his personal residence in Irvine. And I said why they turned it down and he goes, just what you say, Jason, I have too much equity. Too much equity. See, the lender never has any concern or much concern that they’re ever going to take that property back if there’s a bunch of equity, right. So the really high highly leveraged people got all great loan modifications. But the people who kind of did the right thing, it’s totally backwards. Okay? In like philosophically, I’m just saying it’s the way it is, right? So align your interests, not with your own philosophy, but with the way things really are okay with reality. And that’s what we talked about with aligning with governments and the Federal Reserve in terms of inflation, and so forth. Using leverage is a great tool. And it’s a powerful tool. And the old saying, I remember when I was very new in the business, and I would run around my REMAX office in Irvine when I was 21 years old, and the old timers used to tell me, you know, I would talk about how I bought this property and got all this leverage and you know, maybe it was 22 or three even by then. I remember Bob in the office, he would tell me, you know, Jason, leverage cuts both ways. It’s a two edged sword you better be careful. And I thought that was true back then. But I really don’t think that’s true anymore. Because You know, there’s that old saying, He who has the gold makes the rules, while the gold meaning the money, right? Once you borrow the money the borrower is in control of that transaction, not the lender. And and so if you if you look at what happens during bad times, whether it be in the mid 90s, like I described about Orange County, and the Orange County bankruptcy and so forth. I was doing short sales for all of these clients and traditional real estate. And then this last time around all the loan modifications, all the short sales and during Hurricane Katrina, the same thing happened. All the people that got relief, were the people that had high loan balances. after Katrina, they big lenders put a six month moratorium on mortgage payments that you just don’t have to make payment for six months, you know, and I remember reading about that in the paper and I thought what if you own your house free and clear what did you get? Nothing? Nothing. They couldn’t say don’t make a payment because you already own it. Oh, well, we know you have hundred percent equity so we’ll pay you no doesn’t work that way. You know, it’s just, it’s just the way the world is. So align your interest with the way things are. Okay? Not the way they should be because they should be different. I’m not saying it’s right. I’m just saying it is that way. Okay, wait. Another question back here. Yeah, yeah. Could you talk about the strategy for mortgage sequencing? Yeah, good question. And you asked about that before lunch. So anybody want to take that? I can talk about that. Carrie, you got something to say over there. So essentially, definitely speak with Aaron afterwards. But as most of you’re probably aware, right now, your first four mortgages are only 20%. down your fifth your 10th you’re putting down 25%. That’s assuming Yeah. grab the mic. What’s just let her go down. up to six. Aaron, is that’s it. It’s for right now. They thought it should change it but it actually went but let Erin clarify. Yeah, then went back.
Jason Hartman 31:11
Do a lot of investment, we’re gonna do a lot of investment financing for right now till we get a feel for what we’ve got. So now we’re back to following Fannie until Freddie eases up a little bit and they start getting comfortable again. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday. Okay, so whether that’s just in the last couple of months, so what they’re talking about, just, you know, so everybody understands not just a few people, is that Fannie Mae and Freddie Mac are the two large secondary markets for mortgages, right? And they have all these guidelines, right? They’re these government sponsored entities and they should really go away philosophically. That’s what I think. But practically, I love them. Okay. So you know, don’t, don’t be in love with your philosophy. Be in love with reality right? So what Oliver was saying is that the first four mortgages, you can put as little as 20% down now, this is for investment properties, not financing your house, you know, the standards are more liberal for financing your own home, and then the next six because you can get a maximum of 10 per person. So if you’re married, and both spouses qualify, you could get 20 of these loans. Right. And they’re called agency loans because these are the government insured mortgages or, well, exactly insurance, but whatever anyway. So it’s the Fannie Mae, Freddie Mac loans, okay. Then the debate was that you could get six with 20% down, and then the remaining four, but I guess that went away. So it hasn’t everybody, they’re just getting a good handle of what they got their hands on, because they’re taking a look at it. So he kind of slow down a little bit. Let’s look at it. So just follow the Fannie stuff for now until they ease up. So just attended to the on hold is for the moment. Yeah, yeah. It’s probably a short window of time. Okay. Okay. For those of you that just are wondering about multiplex It’s an extra 5%. So anything a duplex, four Plex whatnot, you’re really looking at 25% for your first four in this scenario and then 30% for number five to 10. So here’s the thing though on the mortgage sequencing, if you can, then you can’t always do this look, none of this stuff is perfect, but in an ideal world, buy more expensive properties first, because that’s where you get the best financing and the best leverage and so if you can buy a four Plex for $400,000 and you want to have plexes in your portfolio, which is a good question in and of itself, do you even want to have plexes and you feel free guys to disagree with me on this but I believe that if you have an A Plex meaning duplex triplex four Plex, right, you’re gonna have a usually a B tenant, your tenant downgrades a notch in a Plex. Whereas if you have a single family home, you’ll probably get an A tenant. Not always but that’s the gist of it. Okay. With an a four Plex you’ll get a B tenant and with a B four Plex, you know a rowdier property a little bit routier, you’ll get a C tenant, you always get a much slight downgrade in tenant quality with plexus. Okay. But you do get more leverage. How do you weigh this out? Is there an app for that? No, there’s not. You know, these are judgment calls. Right. So that’s one thing about mortgage sequencing. Okay. Anything else I’m gonna touch on the multiplexes. If you’re starting out if you’re brand new, I’ll just say that I personally found that it’s much easier to go the single family route. I started out with my first house, it was a four Plex. And it’s really like buying a house like four houses, essentially, you’re essentially buying like four tenants. You have four different units you have to now take care of. So if you’re starting out, you want to go do something that’s a little bit easier. Start with your single family houses. That’s my personal recommendation there. Oliver thinks these duplexes and for plexes because he’s Canadian, he thinks they’re a movie theater. It’s a multiplex. Okay, so
I was just gonna say, you know, it’s kind of a catch 22 right because you know here on one hand Jason saying we’ll do your first you know four loans where you only have to put 20% down do those on the bigger multifamily deals if you can and then you have all over over here saying well if you’re new to invest manage he’s right it might not be a fit and and i agree with all of our because you might talk yourself out of becoming an investor if you start with a four Plex and it’s just not what you thought it was going to be. years ago we had like some new construction duplexes, and I thought those were okay because you got a area type properties and B tenants and those were fine, but those are hard to find a lot of them the two to four unit deals we’re seeing today are going to be in your mostly like b2c neighborhoods. So you know, I wouldn’t if you’re brand new to this, I don’t think you should go all in with multifamily maybe maybe you do one and see how you like it. But the single family stuff and especially the stuff that’s renting for $1,000 a month or more and most of these markets, you know, that wouldn’t be true for Texas, Texas is more expensive, but like in a Memphis or an indie If you’re getting about a 900 to 1000, a month or higher, you’re probably going to be in a B or better area and the local market specialists can speak to that. But yeah, if you’re getting your feet wet with your first couple of deals, I don’t know if I would recommend a C area multifamily
Jason Hartman 36:14
deal. Pass it to carry. Any thoughts on that?
Okay. Well, I was I agree, I mean, at least do your first one or two single family, test the water see what it’s like, what if you don’t even like that market, and you’re you’re stuck with a four Plex. And then to note on the loans, that four Plex is one loan, right? So keep that in mind too, then if you want to maybe save it for number five or six, you’re gonna have a lower down payment than once you know. So keep that in mind. So you know, your four Plex, that’s one of your 10 loans. So instead of for single family, right,
Jason Hartman 36:47
so you get more leverage with it, but generally speaking, well not generally speaking, definitely speaking to single family home. Is that proven? thing okay. plexes apartment complex I own apartment complexes, one of our clients I’m partnering with on 136 unit building, okay. And let me tell ya, the tenant quality just just plummets in apartments and plexes. It’s not as good. The single family home appreciates really well, when you resell it. You don’t have to resell it to an investor. Because just a homebuyer can buy it from you and homebuyers aren’t very logical. And that’s good. use that to your advantage, right? Because they’re not going to go run a Performa on the property and say, you know, they’re not going to open a property tracker and say, well, gee, should we buy this home in the nice school district with a nice curb appeal? Well, what’s the cap rate? I don’t know. You know, they’re never going to think of that they’re never going to have that conversation. They’re just going to buy because they like it. Right. So that’s your resale buyer, and they’re not going to be that logical. So that can work to your advantage for sure. single family homes or just you know, if you’re a more conservative investor, and especially like they all said, I think if you’re new to it Single Family is really the better thing. Okay. 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 Hartman 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 episode.