On today’s AIPIS show, Jason introduces an interesting format where it’s just Pat Hiban and him sitting down and having a real estate-focused conversation. Jason and Pat both switch off on the interviewing process to share each other’s stories on how they got into real estate. Pat shares some key mistakes he learned from investing in a mobile home, why he loves sorority housing, and much more on today’s show.
Key Takeaways:
2:15 – Pat talks about how he got started in real estate.
6:20 – Jason shares his personal story about how he achieved real estate success.
11:40 – Jason really loves single-family homes as investments.
18:20 – Where are some of the hottest real estate investment markets right now? Jason explains.
25:00 – Pat explains why his mobile home investment deal went bad.
29:30 – Pat loves section 8 tenants and he explains why.
32:40 – Pat also loves renting to sororities.
38:40 – There are so many rags to riches stories in real estate investing. It’s almost like those stories don’t exist on Wall Street.
Tweetables:
“When you invest your money somewhere, control it. Be where you can keep an eye on it.”
“Income property has more benefits than any other type of investment.”
“They say marijuana is a gateway drug. I would say real estate is a gateway investment.”
Mentioned In This Episode:
PatHiban.com
JasonHartman.com
@JasonHartmanROI
Transcript
Jason Hartman:
Hey, I wanted to invite you to eavesdrop on us today, yes, you can eavesdrop, because this is kind of an odd format. We don’t really have a show host and we don’t really have a show guest or, I guess you could say, we have two hosts and two guests at the same time. I’m here with my friend Pat Hiban who interviews real estate rockstars and we just wanted to invite you, the audience, to drop in and listen to us. By the way, I’m Jason Hartman. We’re going to play this on both of our shows. Hey Pat, how are you doing?
Pat Hiban:
Hey Jason, this is cool idea. I’m excited. It’s a weird format.
Jason:
You know, so you got me Jason Hartman, you got Pat Hiban and we’re going to talk about real estate and investing and all that good stuff. So Pat, tell everybody who you got started and more importantly maybe why you got started. What attracted you to real estate?
Pat:
Well, I think the main thing that attracted to me the real estate game was that I knew I wanted to work for myself and I wanted to be my own boss and at that point I became a real estate agent and then through real estate agency I found that I didn’t want to be a false prophet, so I started buying houses on my own and then I started building wealth through real estate and eventually I moved out of the day to day real estate agent activity to a point where it was about – over the years I bought real estate and I played the Monopoly. I played two games. One, Monopoly, and two, Kiyosaki’s Cashflow. So, I played a Monopoly where I bought the little green houses and traded them in for big red hotels, then I played Cashflow where once I got out of the rat race, I started investing in small private companies. So in about 2008 when the market crashed in our area, I kind of got sick of real estate commissions and started putting my money into private companies. I am now a proud owner of 14 private companies, anywhere between 1% and 51% that about half of them pay regular dividends. So, anyway Jason, that’s my story. Now I’m just kind of an investor and I just live off the passive income that all these investments and all these little real estate pieces pay me.
Jason:
So, Pat, when you say private companies, do you mean, are those companies basically real estate investment holding companies that hold investments or are they companies that, you know, I distinguish it of like an operating business as sort of a different company than a real estate investment. Like, if a the company owns an apartment building, it’s not passive, but it’s not like managing a business business the way I think most people think of a business.
Pat:
Right, the opposite of that. I mean, basically, you know, the story is 2008 came and I was running a big real estate operation, we were doing about 41 settlements a month, 41 commission checks a month I was bringing in, and suddenly it went down within a six month period to about six commission checks a month and I just became really discouraged at that point, so a friend of mine said, “Hey Pat, I know you’re bitching and complaining about the real estate world.” He was a payroll sales person, he sold payroll for another company and he said, “I have this book of business, this 15 year book of business and I want to start my own company, but I need some money to start it.”
So, I basically took $200,000 grand and invested in him and that company, Infinity HR, now does some 8,000 paychecks every two weeks and they’re in about 45 states and that, my ownership in that company has paid off multiple times of what I put in and since I hit the kind of small jackpot with that one, I started becoming a magnet for other small companies and now I have interests in a green energy company, I have an interest in an infectious disease control company, I have an interest in two marijuana dispensaries, and the list goes on. So, that’s what I got going on.
Jason:
Yeah, so those are operating-type businesses then and by the way I gotta laugh at the marijuana dispensaries, you know, you might be on to a big trend there. It looks like the legalization is the direction of everything’s going, so we’ll see more than just a couple of states.
Pat:
Tell everyone about your investments.
Jason:
So, basically my story is I grew up in Los Angeles, California. I was rather poor growing up and didn’t like it very much and when I was 16 years old I saw an infomercial with the typical real estate guru promising the world. It intrigued me. I went out and got the guru’s book and read three chapters, put it down, my mom picked it up, read the rest, I was only 16, you know, and two years later I”m about to graduate from highschool, I’m 18 years old now, and my mom says to me, “Hey Jason, you got me interested in this real estate stuff. I’ve been going to seminars the last couple of years and reading more books and learning more about it. There’s this big conference in Anaheim,” Right by Disneyland, “And it’s this weekend, why don’t you come along and check it out?”
So, being a typical 18 year old, I couldn’t do anything by myself, I rounded up nine of my buddies from highschool Friday night I got them all to the seminar and by Saturday morning only one was left, by Sunday afternoon when the thing finished, I was the only one left, and I just, you know, I remember hearing Earl Nightingale who I discovered about a year earlier when I was 17 say on one of his cassettes; yes, cassette types, that’s how long ago it was. At least it wasn’t 8-track or an record album, you know? I remember him saying, “You want to get rich in real estate? Learn the business first.” I thought, that’s good advice, I’ll go get my real estate license.
I enrolled in Century 21 real estate school for $99 bucks, about a year later or I don’t know exactly how long later, but it was basically my next school year, it was my first year of college, I was going to Long beach City college, I got my real estate license and I just started selling real estate part time for Century 21 in Anaheim and it all went from there. A few months later one of the properties I had sold to an investor, it was a little crappy one bedroom condo in Huntington Beach, California. That investor came back to me and said, “You know, I don’t really like this property, why don’t you list it for me and find a buyer and sell it.” His name was Jim and I said, “You know what Jim? How about if I buy it myself?” And that was my first investment property when I was 20 years old.
Pat:
That’s great, so how many doors do you own now?
Jason:
Between just myself and partnerships I’m in, I’ve got about 150 doors now, but I guess really with the development I’m doing apart of another 70 to that, because I’m developing for the first time 71 homes now. That’s in Kansas City. I’ve also got, I’ve got some limited ownership in a couple of other apartment complexes too as well that I’m kind of not counting in that mix and then I do hard money lending, private lending, on deals as well, and I like that. That’s kind of my second favorite. It’s not as good as the actual real estate in my opinion, you know, it doesn’t have any tax advantages, it has taxes, which aren’t good, but you know, for simplicity and ease of use, I do like the lending fairly well, it’s got scalability to it.
Pat:
What’s your foreclosure rate on that?
Jason:
Zero.
Pat:
Oh really?
Jason:
I have never lost money on originating my own first positioned hard money loans. They’ve all worked great and now, a long time ago I did do a couple of seconds, many, many years ago and one of them didn’t work out so well, I had to do a work out on one of those many, many years ago. That was a long time ago. Then I got another one that they defaulted on payments and I sort of never did much about it. I actually bought a second, but I’m going to collect on that one. I just found out. I’m really happy. I sort of didn’t do anything about it for years and I called my loan servicer and I said, hey, you know, why don’t you put this in your, they have like a special department where you pay a little bit more every month than the typical $20 a month servicing fee and they’ll, you know, do collections and foreclosures and all that good stuff and they said, you know, this property’s got a tone of equity, I mean, we’re going to collect for you so I thought, great!
Pat:
That’s awesome, that’s awesome. So, what kind of returns, what kind of rates do you get on your mortgages?
Jason:
You know, I’ll get anywhere from 8-12.5%, sometimes I get some points, sometimes I won’t, you know, it just kind of depends on the deal, but that’s the range.
Pat:
So, one these investments that you look to buy, well, first of all, let’s talk about a typical, a rental, for someone in the audience who is maybe just buying their first one or looking to buy their 8th or 9th house to rent out, what sort of rents do you look for, do you recommend?
Jason:
Well, that’s a lot of, a lot of times when I quote these numbers, you know, nothing is guaranteed of course, every investment is different, every situation is different, you know, on my website at JasonHartman.com I got pro formas of properties that are all around the country, I really like being a nation wide investor, I like diversification, and I love single-family homes. They really are, I think, the most historically proven thing for most investors apartment buildings, those are great, they are my second choice, they’re definitely more complicated, but you know, if you’ve got big money and you want to do bigger things and you wanna apply some work and creativity to them, you know, apartments can be fantastic, but just for the typical investor, get yourself 10 or 20 single-family homes and heck, you’re going to do great, okay.
Pat:
We’re talking detached houses.
Jason:
Yeah, detached homes. I don’t like condos. I don’t like town homes. I like single-family homes, because you have all that other risk, Pat, of the Home Owner’s Association, and some single-family homes do have Home Owner’s Associations, but I call those HOA light versus HOA heavy. I don’t mind the HOA light where you’ve got association fees of $30-40 bucks a month. Those actually can be beneficial I think where they keep the neighborhood nice and so forth, but you got these HOA where you’ve got condos and everybody is sharing common walls, you know, if the other guy’s plumbing leaks, it floods your house, and if the HOA gets into a lawsuit or they file bankruptcy for whatever reason, then none of the lenders want to do financing of any properties in there then your values go down. It’s problematic, man. I would just, you know, unless I’m going to own the majority of the condos in a complex where I’m going to control that HOA, if someone said to me, hey Jason, you want to buy 40 condos in a 70 unit building? I might say yes to that one.
Pat:
Okay, what would you say to this? You know, we have a guy that I know here that buys condos that are in distress say for 60 grand and with a condo $250 a month, okay, so you’re getting a 60 gran condo maybe put 10 in it, he’s going to have 70 gs in it and a $250 a month condo fee, but he rents them section 8, okay, housing assistance, government housing assistance, for $1,400-$1,500 a month. What do you say to someone who is getting those sort of returns?
Jason:
I’d say that’s pretty dang good. Wow. I don’t like that $250 month HOA fee, you know, basically you said if he’s getting $1,400 you lop that right off the top assuming you don’t have any special assessments in the future, which could make it even worse, but hey, from a cash flow perspective, that’s not bad. Where is it located? Tell the listeners that.
Pat:
Columbia, Maryland
Jason:
Okay, now is that a tough area or, you know, Baltimore suburbs aren’t known to be the best.
Pat:
Yeah, yeah, it’s not a, you know, the city itself is not bad, but it’s probably one of the worst neighborhoods within a decent city. Yeah, it’s not, I wouldn’t live there and this happening, I mean, he just bought one last week. I just talked to him yesterday, that exact same scenario. So, essentially what you’re saying is the returns are bombastic like that you might consider them, but for the most part, for most listeners out there, they’re not going to get those returns and they ought to stick with the more traditional detached homes.
Jason:
So, here’s something I talk about. Whenever we’re in a Wall Street-type of investment, a pooled investment like that, you know, I don’t like Wall Street, I call it the modern version of organized crime, okay, so I have no love for Wall Street, but you know, one of the things there is we have that counter party risk, right, we have the person on the other side of the transaction, the entity on the other side, so, you know, it could be your broker in a way as your counter party, because there are not necessarily doing what’s best for you’re, they’re doing what’s best for them, and you’ve got, you know, the buyer, the seller of that stock that you buy, and then you’ve got all the management, they’re skimming off all the profits off the top, right, and all that kind of stuff, but you know, it a condo complex, you have this other type of risk, you have that Home Owner’s Association, which can always go bankrupt, it can get in to litigation, all of that kind of stuff, I’m just keen on it, I’ve seen too many horror stories over the years, you know? So, single-family, man, that’s my favorite.
Pat:
Single-families, now, a lot of people live by that, you know, old 1% rule, which is, you know, you buy it for a 100 grand, you want to try and get a $1,000 a month in rent out of it. What are your thoughts?
Jason:
I love it. I think it’s awesome. I think the 1% rule is a great RV ratio or a rent-to-value ratio. Try to get close to 1% per month and you’re probably going to do pretty well. Now, if you’re in a real high-tax area or if you’re talking about a condo with HOA fees attached, you have to adjust your thinking for that, so if you bought a $100,000 condo for example and you had like that example you gave in Maryland, $250 a month HOA fees, you need to rent that for $1,250 per month just to be even with the guy that rents for a $1,000 in a single-family.
Pat:
Right, absolutely or more. Where’s the, where are you seeing the good return on investments now for real estate?
Jason:
Oh, you know Pat, I tell ya, last year we opened Little Rock, Arkansas, you know, good old Bill Clinton’s home town, right, and I’ve learned that Arkansas is literally the most landlord friendly state in the entire country. It is the only state, admittedly it has kind of these old laws, where tenants can actually go to jail for not paying rent. I mean, it sounds like medieval.
Pat:
Yeah, yeah, it’s Ireland. That’s how it is in Ireland. Matter of fact, if you declare bankruptcy in Ireland, you’re not allowed to leave the country.
Jason:
Oh my god.
Pat:
Like, literally you can’t leave the country for like 10 years.
Jason:
Wow, wow. That’s crazy. That’s just crazy. You want you to pay your creditors. You know, listen, I’m not saying that as a landlord I would even push my tenant jailed for not paying rent, but just the fact, I mean, I think that’s kind of medieval to tell you the truth, but just the fact that they think that will get them to pay the rent and be good citizens. So, that’s okay with me that they think that, right?
Pat:
So, Arkansas, so are you getting the 1% in parts in Little Rock, Arkansas no problem, huh?
Jason:
Right now our hottest markets are Little Rock, Arkansas, Atlanta, Georgia, Indianapolis, Indiana, Columbus, Ohio is pretty good. We’ve been in and out of Columbus over the years, not too bad. Memphis, Tennessee has been great for cash flow; Birmingham, Alabama is pretty good, Kansas City is pretty good, and then, you won’t believe this, because I move from the most landlord friendly to this next one I’m going to tell ya, it’s the least landlord friendly we offer, now granted, if you’re in Maryland or you’re in New York or certainty in Washington, DC or the socialist republic of California, you know, those are terrible markets for land lords. This one ain’t at the top of my list, but the numbers are fantastic and I think the appreciation is pretty good, it’s Chicago’s suburbs.
Pat:
Really? Like Naperville, that sort of thing?
Jason:
We like Dolton, you know, we like, there’s several suburbs we like and, you know, they’re working pretty good. The numbers are like $120,000 house that rents for $1,400 or $1,500 a single-family home, no association fees, and the reason you get this is that there are high-incomes in densely populated cities and the people do this thing, they commute until they qualify.
Pat:
Commute until they qualify. Wow. Interesting.
Jason:
Yeah, drive until you qualify, so that actually pushes up the home ownership rate in some of these areas and we like that, you know, we like a lot of home owners along side with our rentals.
Pat:
Wow, let’s talk some juicy stuff. Let’s talk bubbles. Two things, you know, a lot of people are saying Austin, Texas, Santiago, California, cities like that are looking at popping bumble and as you know, the real estate trends, if you look at the real estate cycles, you know, they last about seven years if you look at the last three-four-five of them, you know, obviously are the beginning of a cycle is about 2009 and if you add that you’re looking at 2016. A lot of people are saying, man, that’s when the bubble is going to bust. What are your thoughts on this?
Jason:
Yeah, I know, I don’t know you can go by that. First of all, it’s all local, it’s not really national. I mean, even though we had that huge financial crisis a few years ago, the great recession, the worst economy in seven decades, there are really, if you look at it, there really haven’t been except for that one and the great depression started in 1929, there really haven’t been any real national downturns, okay. So, I’m not too concerned about that thing. I’m more concerned about the general fake economy that’s built on this mountain of debt and some other things like that. I just think cash flow is pretty reliable. If you don’t invest for appreciation, then you’re going to be in pretty good shape, okay, cash flow is always what’s going to get you through this storm. So, if there is a storm and you don’t have to expect values to go, just if you’ve got cash flow, you’re good, you’re good.
Pat:
I never bet on appreciation at all. I mean, I’ve been lucky to hit, but I never bet. Everything I do is cash flow, what kind of return can I get, except, I’ll be honest with you, some of these private companies that I got involved with are more equity plays, especially if they’re in the beginning and they don’t plan to distribute the first or four or five years, you know, but that’s more recently.
Jason:
Those are more speculative type investments, but they’re speculative based on, you know, based on some smart thinking too. So, yeah, that’s kind of a different conversation, but hey, Pat, tell us what you’re doing in real estate now, you’ve got some apartment deals going and some interesting stuff, right?
Pat:
Yeah, I have three in Texas, I have two in Macon, Georgia, one in La Fayette, Georgia, one in South Carolina. These are all syndicated deals that I put together anywhere from 15 to just three other investors and we basically are looking at a C-type properties, properties built in the 60s-70s that need work. We put a decent of money into them, increase the rents, increase the occupancies, and then either refinance them and pull some money out and or dispose of them and sell them. A few of them actually, the Texas ones we’re looking at potentially selling at the end of this year just because, like I said, those markets seem frothy. Are you selling anything, Jason or you just hold on to stuff forever?
Jason:
No, I really do believe in holding on to stuff forever, but with that said at the rest of, I don’t want people to think I’m a hypocrite, I do believe in moving stuff around sometimes. For example..
Pat:
Oh yeah, same thing.
Jason:
Yeah, I’m not, it’s not like I’m actually decreasing my holdings, I’m actually increase them.
Pat:
Oh, I got ya.
Jason:
I am kind of, you know, it’s kind of like taking your furniture in your living room and moving it around, right. I got one property in one area we’re not too active in right now, I just don’t have a lot of support or a lot of business going on there now, so I’m doing a 1031 tax deferred exchange on that one and I’m probably going to buy two others in another one of our markets. I’m deciding between Little Rock, Memphis, Atlanta probably. I might do Chicago even though I’m not exactly known for being super decisive all the time, so I’m working on that.
Pat:
Well, you’re not going to have choice here.
Jason:
I know, I got a 45 day deadline staring me in the face with my exchange and then one of my apartment complexes, a big one, one of the bigger deals I’ve ever done, selling that one and doing a 1031 exchange on that for I don’t know what yet. I might, Pat, I might just get into my first mobile home park if I can find a deal that makes sense.
Pat:
Why do you like mobile, I had a real bad experience in a mobile home, I actually lost 100% of the money I put into it.
Jason:
Now, I didn’t think it was possible to loose 100% on a real estate deal. You have to our eavesdropping listeners why.
Pat:
Well, you know, what it was it was a group of people and, of course, sometimes there was a lot of lessons in it, this was about 10 years ago, but there was a group of guys and basically they were buying mobile home parks, rehabbing them, and then trying to sell off the mobiles, right, and then keep the lots, right, sell off the mobile homes, keep the lots, a lot of these parks, all the homes were owned by the park, and then they sorta like dividing an apartment building up in the condos, they would divide up the lots, charge ground rent to the owners and sell the actual mobile home them self or rent them all out and make it a big rental community and to make a long story short, they worked real fast and they did about 6 or 7 of them and I don’t know exactly what happened, but the entire company went bankrupt. We were told that we were going to get some proceed out from said bankruptcy, you know how they dwindle out a couple of cents.
Jason:
Somehow all the executives and the guys who setup the deal, the general partner, they managed to up abscond with all the money in somewhere or another and all the assets, yeah.
Pat:
Every year I get a letter about something, but I have yet to see a dime and this was, they went under probably four or five years ago.
Jason:
So, I’d submit to you, because you know, we really want to make this clear to the listeners and I hope you’ll agree with me, right. I will submit to you that you did not lose money in your real estate investment, you lost money investing in a pooled asset where the guys were probably crooks, you know, they were probably sleazy and they probably just stole the money, right?
Pat:
Probably, yeah, yeah, more or less.
Jason:
The properties, think about it, the property is still there, the property is worth something, the property is still producing income.
Pat:
Yeah, someone owns it and is probably making money off of it now. Yeah, through mismanagement and probably through them stealing money, like you said, paying themselves frothy expenses and salaries and who knows whatever else. I was not in control.
Jason:
You know, I have this ten commandments of successful investing and commandment number three, I swear, it’s the one everybody gets burned on it at one time or another in life and it is: Thou Shalt Maintain Control, okay, and it just means be a direct investor, you know. When you invest your money somewhere, control it. Be where you can keep an eye on it, you know what’s going on, you’re in the loop, because the three major problems people always have is they might be investing with a crook, they might be investing with an idiot, and assuming their investing with someone who is honest competent, a lot of times they’re taking a big management fee off the top for managing the deal. That’s why I don’t like Wall Street, because Wall Street is just famous for that. It’s like their whole business model, you know.
Pat:
Yeah, I can see that’s why you like to buy single-family homes and and small rentals as well, because you are in control, you know, ABC, like you said, ABC, Always Be in Control. When you get into things with multiple partners and sometimes it gets, if you want the money it’s certainty not as liquid as if you own the whole thing yourself and so that’s the nice part about that.
Jason:
I mean, you can’t do big deals by yourself. That’s the downfall is that, you know, if you want to some really big deals, you gotta get involved with other people and you gotta partner on this and you gotta invest on other people’s deal, but you know, just make sure you know them and trust them and all of that kind of stuff if you got to do it.
Pat:
It’s nice if they do have an exit plan, because at least you know that, like, some of the apartments that I’m in, we have a five year exit plan, so I know I’m essentially going to be illiquid for five years unless we refinance, which we will attempt to do, but for five years I can count on being illiquid, but if I need to liquidate at the end of five years that’s the goal and that will hopefully probably happen.
Jason:
Talk to us a little bit more about your investment portfolio that you own directly, you know, your single family homes. Do you like section eight, you know, government assisted tenants, or do you not like them? I find it’s either like a love/hate. It’s either investors really like them or they don’t like them. It depends.
Pat:
I have them, I love them for the right areas, because the rents are above market and it’s a direct deposit right into my account and they, for the most part, if you have a decent home and you’re not a slum lord, they will never move, because, you know, they might not be able to get another voucher, they only move if you’re a complete slum lord in my experience with them. They rent really fast, so they sit empty, you know, 30 days at the most after I’m done fixing them up, and I get crazy rents for them. I have places in Baltimore city that I bought for say, $60,000, put $20,000 into and I’m getting, you know, $1,400 a month.
That’s a no-brainer and I can do that today if I needed to do it today. If I needed to spend the next five days scouring the MLS to find that to do, I could do it, and within six months have it fixed up and rented to a tenant. I like them. I also like colleges. I like, for instance, at University of Maryland College Park, I have some single-family homes that I rent to sororities that sit right behind Fraternity Row and everything is rented by the bedrooms, so if you get a dormitory room there that’s close to $800 a month and if I have a six bedroom house and each person is paying me $700 a month, which is less than the dorm..
Jason:
But the dorms a lot of times include and food and so forth, right.
Pat:
No, that’s a, they gotta get a meal plan, so they don’t. The outside with the dorms is that you have a roommate, so you got to share a room. If you rent one of my houses you get your own room. Now, I think there’s a security aspect. Some people like the dorms, you know, the parents like the dorms, you know, you’re on campus, you’re in that thing, but kids like to be off campus and especially around the fraternity houses because like at University of Maryland College Part they made a regulation, you’re not allow to bring more than like three beers or something ridiculous like that per person into the fraternity house or what have you, so they’re all starting to like, move out, and I have two houses side by side that I built, you’ll like this, I built them side by side. I paid $70,000 a lot, and I put $90,000 house on them I think, and I rent them, I get eight grand for the two houses. One sorority rents 12 bedrooms, I get $8,000 a month for $320,000 investment. That’s a firecracker. I think I’ll never sell those two houses, you know what I mean.
Jason:
Okay, so, how much did you put into them?
Pat:
$320.
Jason:
And how much are you renting them for?
Pat:
$8,000 a month.
Jason:
Oh, that’s fantastic, but what are they worth now?
Pat:
They’re worth about 425, something like that, each. So, they’re worth about $800,000 together.
Jason:
But, you got $800,000, you’re getting $8,000 a month. You’re getting 1%.
Pat:
That’s true if you look at it that way.
Jason:
That’s not any big deal, right? That’s what you should get! I mean, it’s good because you basically made money on the deal being a developer, but you’re not making money, I mean, you’re doing fine as an investor, but that’s no better than we should hope for on any investment deal. That’s the comparison I want to give you, yeah.
Pat:
That’s a very good point. I guess the think I like about it though is the, it’s never empty, right, the same sorority has rented it for about five years and so it’s never empty. The lease just renews and I have parents co-signing on it and two month’s security deposit.
Jason:
One thing about that, I think fraternity and sorority houses can be a pretty good deal. It’s obviously a very niche market in real estate, but one thing about it that concerns the heck out of me is the liability, you know, I would want to have super special insurance that would cover all sorts of underage drinking, you know, sexual harassment, rape, I mean, you know, I’m like concerned about getting roped into all of this stuff that goes on at this places and they’re, believe me, they’re pretty bad. I mean, college is it’s a scary environment in some ways.
Pat:
It’s funny you say that. At one time, and I’ve sold several of these, like move my furniture around like you said, but at one point I owned eight of them right there across from the college and my insurance company sent me a letter one day, not even called, a letter one day, saying my policy on all eight was canceled and they said tey found out they were “boarding houses” they don’t ensue boarding houses.
Jason:
Which insurance company was that?
Pat:
It was StateFarm Insurance.
Jason:
Yeah, because I’ve had some problems with and some of our clients with Infinity Group and National Real Estate Insurance Group, they kind of go by two names and not a good experience with them, so I was just wondering if that’s who it was.
Pat:
Yeah, I scrambled. I scrambled like crazy and I ended up finding a policy to replace them all, actually, Allstate, but it was a panic mode for about a week. I was like, hell, I’m not going to have insurance on any of these, how could you just cancel on a blanket statement. They knew what they were. I mean, they’re across the street from the college.
Jason:
Well, but they said they didn’t. Okay, so what did you do when they canceled all those insurance policies?
Pat:
I just got a new insurance policy.
Jason:
I mean, it wasn’t hard to get a new one?
Pat:
It wasn’t, I panicked there for about a week and I probably had to interview three or four companies, but I found one.
Jason:
So, that’s what concerns me about the college-type rental stuff is that I think you have a lot of unholy things going on in those places. In fact, I know you do and that concerns me. God forbid there’s going to be some, you know, some hazing event, some kid is going to die or something, you know, this stuff is just, if that doesn’t scare you, I think you should worry a little bit. Sorry! Am I being too paranoid?
Pat:
I don’t know how I would be a liability. Now, obviously I got them into LLCs, I mean, I’m wearing some protective belts, you know.
Jason:
Good stuff. Well, hey Pat, one thought do you like people to leave with about real estate investing? I mean, I just think it’s the greatest thing. It’s the most historically proven asset class. I love it. I love housing, you know, I’m really into housing. What would you like people to know as we kind of wrap things up here?
Pat:
Yeah, unequivocally it has more benefits than any other type of investment. I mean, you know all the benefits and I think everybody listening knows of the benefits, but you know, your principle pay down, your deprecation that you get on your taxes, your appreciation if it goes up in value, which hopefully it does. You know, your tenants are paying the mortgage payment for you, it’s leveraged, where everything else you buy a stock of IBM and you’re paying full-value whatever cash flow. With real estate, you could probably burrow 80% of that and it goes on and on and on. It’s definitely a stepping stone, let’s call it, they say marijuana is a gateway drug. I would say real estate is a gateway investment. Through real estate, through a tiny town house that I once bought my first house that I ever bought and I rented out the basement and rented out a room and stayed in a room and the rent paid the mortgage, through that, I was able to gateway into other little greenhouses, big red hotels, and then businesses, and so it is, unequivocally, it is a gateway investment and I still buy the little green houses. I just bought one for 70 grand like a month ago.
Jason:
Good. It’s hard not to be addicted to those little green houses, they’re such awesome investments. You know Pat, one of the things that people are always saying and thinking about with real estate is that it’s just, it’s just pretty simple, you know. If you just get in the game, I mean, where else have you seen any of these stories of the person who started with like your little town house, my little condo that I bought when I was 20 and how you can just grow that into this huge portfolio. I mean, people get impatient, they think, oh, it’s going to take too long, but you know, I have news for ya. The time will pass anyway. You might as well have it be on your side with real estate, you know, income property, it’s on your side.
Pat:
Yeah, I mean, it does.
Jason:
I mean, where are those stories on Wall Street, right? Tell me the Wall Street story of the guy who started with $10,000 and parlayed that into a multimillion dollar portfolio in 10-15 years, right?
Pat:
Right, right. It’s so, it’s very risk adverse. You know, it’s not a risky investment. You know, certainty there’s stuff you can get into if maybe and if you also do too much, too fast, it could be risky, but buying a house a year and sticking with single-families in good areas and things like that and follow the 1% rule. I mean, you’re basically as close to little risk as you can get I think. I think with the ability to move up and get into bigger things.
Jason:
It’s about as low risk as you can get and it’s in my opinion definitely the most proven thing you can get. Well, hey, give out your website, Pat.
Pat:
Sure, I got a million of them. The best way is to Google me, but PatHiban.com is one you can look at my book 6 Steps To 7 Figures, it’s also in audio now and that’s the best way to find me.
Jason:
Good stuff and mine is JasonHartman.com or on Twitter, @JasonHartmanROI and thank you everybody for listening to this kind of oddly formatted not even interview just a conversation, hopefully you got some good ideas by eavesdropping on our little conversation here. We really thank you for listening and Pat. That was fun. Thanks!
Pat:
Yeah, it was fun. Jason, I love talking real estate, so this was good stuff. Thanks so much for setting us up and being apart of it and look forward to talking to you again the future.
Jason:
Let’s do it again soon. Thanks everybody.
Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.