Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the Complete Solution for Real Estate Investors.
Jason Hartman: Greetings! And welcome to Show No. 101. This is the Creating Wealth Show and I’m your host, Jason Hartman – talking to you today from historic Charleston, South Carolina. I’m just about to depart from the Mill’s House Hotel and drive up to Myrtle Beach. I’ve been looking at properties all through Tennessee, North Carolina, and South Carolina. I will conclude my trip here in just a few days and you’ll be hearing in future shows what I found and so on and so forth. But I will say that my last visit before Charleston, was Greenville, South Carolina, and I was very impressed.
That was a market that we did some business in a couple of years ago. Many of our clients purchased properties there. And in seeing it this time I was thoroughly impressed with the city planning and just the charm of the way they developed the downtown and the amenities, and the river walk and the restaurants, and they’ve done such a nice job in that city. Of course, the sister city there, Greer, is where the new BMW plant is. Anyway, I’ll be telling you more about the trip on future shows. But I’m just about to depart now.
Today’s show we have got an opportunity that many of you think you probably have missed. And I know you think this because I’ve heard it from you many times. A couple of years ago, when people were purchasing properties with zero, five, or even ten percent down, they were able to lock in on historically cheap, long-term – three decade long – fixed-rate debt with minimal down payments. And of course, one of the huge benefits of investing in income properties is you get to use other people’s money. And if you do that in a responsible, prudent manner, you can beat the game in so many ways.
Of course, the obvious benefit is leverage. But one of the lesser known benefits, and if any of you are new listeners, is that you get to pay your debt back in cheaper dollars as inflation comes. And this morning at breakfast here at the hotel, I was reading USA Today and there was an article about how hedge fund managers and business leaders the world over are really thinking inflation is going to be rather severe and they also said in the article that the dollar lost seven percent of its value against the Euro in just about the last month. And it is at the lowest point this year so far against a whole basket of currencies. So, we are seeing signs of that inflation coming and that is going to be a huge benefit and a huge wealth creator for our investors following our plan.
By the way if you’re a new listener, be sure to listen to the Core Content shows. Go to www.JasonHartman.com, click on Education and Podcast Radio and click the button “New Listeners Start Here” so you’ll know what I’m talking about.
Before we go into today’s two guests, I want to tell you about a couple of upcoming events. Of course, June 6th is our Creating Wealth in Today’s Economy program in Costa Mesa, California – Southern California. Come out and visit us. If you’re far away we’d love to have you. And if you have to get on a plane to come, we will comp you in for free. Also, we have the mobile home boot camp. It is Corey’s event. You may have heard Show No. 99 where we talked about that. That’s coming up in San Angelo, Texas, in mid June. I will be there and I hope to see you there. There are a lot of opportunities in mobile homes and self-storage. You’ll be hearing more about that in Texas in mid June in San Angelo.
Today’s show, the opportunity we are going to present today, we have two guests. The first one will talk about how you can buy near new, foreclosure and rehab properties for only $5,000.00 down; $5,000.00, the homes are below market. They are incredible deals. It’s a very creative approach and I think you’ll be very impressed. This opportunity is fantastic. I recorded that interview when I was in Atlanta, just a couple of weeks ago. There are some good opportunities there, so let’s listen closely. I think you’re really going to like this $5,000.00 opportunity.
After that I interviewed one of the heads of the Chamber of Commerce for the greater Atlanta, Georgia, area, who is talking on the show here about economic development and the opportunities in the economy and the general outlook for the greater Atlanta metro area. So I think you’ll enjoy that. And let’s go to the interviews. See you on Show No. 102 after this.
Interview with Torey:
Jason Hartman: It’s my pleasure to have Torey on the show. We are talking about the Atlanta market. We just looked at several homes here. Some great rehab opportunities for newer properties. And you will like this show because you can get in with very, very low down payments – $5,000.00 down in many, many cases, even in this market where lenders are requiring 20 – 25 percent down. So Torey, thanks for joining us.
Torey: Yeah. Thanks. Thanks for coming down to Atlanta and we’re very excited about Atlanta. We’ve been investing in real estate for about three years now, my partner and I own about 45 houses of our own and started this business just to buy our own real estate and own real estate. And we have two commercial buildings. We’ve got 45 single family homes. We’ve got some duplexes. And in the process of doing that, we realized that Atlanta was not only attractive to people locally to own real estate, but also across the country.
Jason Hartman: Fantastic. So what this really started out of is doing stuff for your own personal account and your own investing and then you saw that there was a lot of demand for outside investors. And so that’s why we’re talking today.
Torey: Yeah, absolutely – we were restaurant guys. We each had a franchise with a fast food restaurant and we’re looking – the reason many people buy today is we wanted tax write-offs. We wanted a long-term equity growth and we wanted cash flow. And our goal of getting into it is we wanted to buy below market and we wanted to get in very little money down. That’s what we were looking to do.
Jason Hartman: That’s excellent. Well, I really enjoyed looking at properties with you today. Why don’t you first just tell the listeners a little bit about the greater Atlanta area? I mean Atlanta’s such a big city. It should almost really be divided into four quadrants I would say. Talk to us about the specific area in which you’re recommending investments.
Torey: Yeah. My partner and I both have grown up in Atlanta our whole lives and we’ve just seen it just boom in the last decade really, starting with the Olympics in 1996. There’s a sign downtown that says there’s over 5,000,000 people in metro Atlanta now, which is just amazing. I remember that sign said like 1.5 million when I was little.
We particularly concentrate on the south side of town which is Henry County is the main county that we focus on along with some other neighboring counties: Fayette County, Clayton County, Rockdale County. We live in Henry County and the thing we like so much about it is it’s one of your suburbs on steroids. It’s been one of the top ten fastest growing counties for the last two decades.
Jason Hartman: For two decades? That’s amazing.
Torey: It was fourth in the ’90’s and it’s seventh this decade.
Jason Hartman: That is unbelievable
Torey: So, yeah, it’d be 20 years ago, there was nobody here and it was in the middle of nowhere. But it has just blossomed. I think there are a couple of factors. One is it’s 15 minutes from the world’s busiest airport. Secondly, you’re 25 minutes to downtown Atlanta. And so I think a lot of people just saw an opportunity to be close to all your major things, but at the same time be able to get into a house fairly inexpensively.
Jason Hartman: Are all of your properties in Henry County? Or do you do some other areas as well?
Torey: The bulk is in Henry County, but we do the neighboring counties as well. So we’ve got about three or four other counties we work in. We just really know Henry County and we’ve decided to try to focus on the areas that we really know.
Jason Hartman: Excellent. What is your sort of target renter, in terms of their employment opportunities? I mean employment drives them being able to pay the rent obviously. And I know that the economy here is very diverse. But can you sort of notch that up into a few big employers or industries at least?
Torey: Well, the biggest thing is that one stat we saw – 73 percent of people who live in Henry County actually work outside the county. Being such close proximity to downtown Atlanta, the bulk of people are either commuting out to the airport or working in the airline industry or actually –
Jason Hartman: About 15 minutes – not too bad, okay.
Torey: About 15 minutes. Or they’re going up to 25 – 30 minutes actually working in town.
Torey: The majority of people that actually work in the county are going to be a lot of school teachers and service type jobs. In terms of the tenant that we like to target is just really the $1,000.00 tenant is our ideal tenant. When we get up to $1,400.00, $1,500.00 we feel like that’s kind of the top of the market. You start losing people at that level. If we get down to the $700.00, $600.00, then you’ve got people who are more pay-check-to-pay-check. But we feel like the $1,000.00 people always have to have a place to live.
Jason Hartman: For a $1,000.00 a month.
Torey: For a $1,000.00 a month, even if the economy so far we’re at today, the $1,400.00 renter is coming down to the $1,000.00, so we’ve always got a bulk of people who are renting at that price point.
Jason Hartman: Yeah and we refer to this, for everybody listening, as rent elasticity. And it’s different in different markets isn’t it? So, your ideal target is about $1,000.00, maybe even a little bit higher than that, but not too much right?
Torey: Right. We try not to get above $1,200.00. We like that $900.00 to $1,200.00 range.
Jason Hartman: Okay. What does that renter get for their money, if they’re $900.00 to $1,200.00? How many square feet are they typically getting? What type of home?
Torey: Typically they’re looking for bedrooms. If we’re in that $900.00 to $1,000.00, they’re usually looking for a three-bedroom, two-bath. Two baths is usually standard. Bath and a half is tough. So we look for two full baths always. And then when we’re at $1,000.00 to $1,200.00 we’re usually at four to five bedrooms. It’s just depending on the neighborhood and the area and the age of the house.
Jason Hartman: I think most people listening will be pretty amazed with that number that you get four to five bedrooms for under $1,200.00 a month.
Torey: Yeah. It’s crazy. Well, that’s what’s unique about our market, too, is you’ve got to understand who your tenant is, too, because in metro Atlanta, for $1,000.00 a month, you can own a house. And so typically, the tenant we’re getting is someone who’s got a good income, but doesn’t have the credit, right now. Doesn’t have credit history, or has a bankruptcy or something on their credit. And so
Jason Hartman: Which, by the way, makes me think of something I want to mention to our listeners, that you know there’s always a silver lining in every cloud. And one of the silver linings in this bad economy is that a lot of people, I mean tens of millions of people, are really experiencing credit problems, which is going to feed a large renter pool for many years to come, in my opinion, as well as Gen Y people.
Torey: Right and absolutely and you know Atlanta – a couple of years ago in Forbes Magazine, Atlanta was the number one rental market in the country. And Atlanta’s always been a really strong rental market. And it’s interesting we haven’t seen the market getting soft because you’ve got more properties on the market obviously because people can’t sell their houses as much. You’ve got more foreclosures. But at the same time people are still moving to Atlanta and the market is still growing. So we’ve got more people.
Jason Hartman: Well, and it’s so affordable and there are lots of opportunities here for employment, for recreation, for shopping, for lots of entertainment, and so forth.
Torey: Right. And the one thing my partner and I like to talk about that Atlanta has is people really move to Atlanta for one reason.
Jason Hartman: What’s that?
Torey: It’s the economy and jobs.
Jason Hartman: I thought you were going to say the beautiful southern bells. No?
Torey: Of course, that, but we don’t have mountains. We don’t have beaches. We don’t have oceans. All that is six and seven hour drives away. So the reason people move here is because they can get a job.
Jason Hartman: Well, Stone Mountain. I mean that’s closer, right?
Torey: We do have Stone Mountain. My wife grew up in Oregon. She doesn’t count that as a mountain. She says that’s just a tall hill.
Jason Hartman: Right, that’s different than Pacific Northwest.
Torey: That’s right. We just feel really good from a rental standpoint and we’ve seen it for the last couple of years now, just at the velocity that we could rent properties. Our goal is to have the best properties and not be at the top of the rental market. So if we can have the best properties at $50.00 below the medium rent range, they rent off the hook. And we’ve seen that consistently for the last couple of years.
Jason Hartman: How quickly are the properties renting?
Torey: It obviously changes all over the place.
Jason Hartman: It changes.
Torey: But we have a couple of companies that we’re buyers coming from, that are buying the properties that you are rehabbing? And then I want to talk to you about how you rehab them and the sort of unique deal we have here to get in with as little as $5,000.00 down.
Jason Hartman: Okay. So talk to us about where in the country, or the world for that matter, are your buyers coming from, that are buying the properties that you are rehabbing? And then I want to talk to you about how you rehab them and the sort of unique deal we have here to get in with as little as $5,000.00 down.
Torey: Absolutely. When we first started doing this, it was all local. We were buying our own and we had about – at that time I guess we had about 30 properties of our own. And our friends would come to us because for us our friends all kind of make the same amount of money and we all kind of live in the same houses. And they would come to us and say, “Hey, we want to own real estate. We need the tax write-off. We want equity growth. And we know there are deals out there.” And so they came to us and what we realized is that they’re scared about certain issues. They’re scared about how do you find a house. They’re scared about how do you get the property in rent-ready condition. They’re scared about how you deal with the tenant. And we thought, well, if we embrace these issues we can create a buyer, who’s not necessarily ready to pull the trigger, but they understand the value of doing it. So we started locally and in doing that we saw you know what? We’ve really got a turnkey program here. And now, we’ve had buyers coming from – I think we have eight different States that have bought from us now. And we even have calls coming internationally. We’ve sold two properties within the last 45 days internationally.
Jason Hartman: Where were those buyers? What countries?
Torey: They were Middle Eastern buyers. You know, unfortunately for them, they had to put 30 percent down –
Jason Hartman: Right, the lending requirements are tougher for international, yeah.
Jason Hartman: But the interesting thing about that, by the way, is for our international listeners that are listening now, most of the time, in your own country, you’ve got to put 30% down, too, so comparatively it’s the same. And here you get the advantage of arbitraging the American dollar, which you know, we believe is going to become very, very weak in the future. And that is going to make your debt very, very easy to repay. I’ll put it that way because it will be more and more worthless as time goes on.
Torey: Absolutely, and another thing where there’s some value there is we have a tradition of there’s the $5,000.00 down deal that is a Fanny Mae, Freddy Mac guideline loan.
Jason Hartman: So $5,000.00 down for a property that’s – what’s the average purchase price?
Torey: The average value of those houses are going to be that $150,000.00 – $160,000.00. And we’re selling those at 75 percent of that value. So the bank will go do their independent appraisal. The buyer, the investor who comes in and buys is going to be getting that 75% loan of that value that bank deems the property.
Jason Hartman: Okay, since we led into this, let’s talk about the uniqueness of this deal. Here’s the way this works. This is known as a two-step closing. Is that what you’re calling it?
Torey: Yeah, a two-step closing.
Jason Hartman: Two-step closing. Lay out a timeline for us, if you would. Investor contacts us. We put them in touch with you. They identify a property they like. They decide I want to buy this property. And it is May 1st, 2009, for example. Okay? What happens after May 1st, 2009, when the make the decision to buy it? They write an offer and you’re the seller?
Torey: Yeah. We’re the seller. Our company we work with owns the properties and I guess specifically, if it’s okay, I’ll start why we went to this two-step in the first place?
Jason Hartman: Okay. Good idea.
Torey: You know three years ago, 100% financing was everywhere. Every lender was doing 100% financing. There were stated income loans and money was pretty easy. Well, as the guidelines started tightening up, which obviously they needed to, those products started disappearing. There’s obviously a lot more people out there that are willing to invest $5,000.00 than put $30,000.00 down, or even more in many cases, because you have to put 20 up to 25 percent down. We kind of figured out a small, little, I guess for lack of a better term, loophole in some lending guidelines that you can get away with, and it’s taking advantage of refinancing. If I go in to buy a property, the bank’s going to require me to put 20 – 25 percent down. But if I’m in a refinance situation, the bank will loan me 75 percent of the appraised value. Yes.
Jason Hartman: Okay.
Torey: And so what the bank will take and use the 25 percent equity that’s in the property based on the value and use that as the down payment. So that’s the guideline. Now in terms of the time line of this taking place, is it’s usually from contract to the refinance is usually about 45 days. So the first step is, you know, you’re going to select the property. Come in and say, “Yes, I want that property.” Get an inspection report, meet property management. We go through all the terms of the deal. Get the property on contract. Then we actually have a first closing in which we owner finance. The way the two-step process works after the property is under contract is we actually sell the property to the investor who’s coming in to buy. There’s a settlement statement, a Hud One, there’s a warranty deed, there’s a security deed. It is an official closing that is recorded with the County and that the investor comes in and actually takes ownership of the house.
Jason Hartman: And on what date does that occur, if this deal started on May 1st, 2009?
Torey: The first closing is going to take place within about 10 days. This could be about May 10th that the first closing takes place.
Jason Hartman: So that’s a quick closing then, the first one?
Torey: The first closing we try to do pretty quickly because we need to get that part done in order to get to the refinancing because the refinancing, there’s going to be a little bit more work involved because you’ve actually got a bank lender involved at that point. All right, so we seller–
Jason Hartman: You seller finance them the property?
Torey: We owner finance the property. We do no interest, so there’s no payments for the buyer who comes in. It is not a hard money loan. I think a lot of people envision that they’re actually getting a hard money loan. But it is not a hard money loan.
Jason Hartman: No. Here’s the problem, everybody listening, this is important. We have been approached to do these deals many, many times over the years. And one of our objections and why we haven’t offered them to you is that we were in a position where the person setting up the deal wanted to do a hard money loan at 15 percent interest. And I thought, “Gosh, you know? I’m really concerned. What if my client gets stuck with that hard money loan and they can’t do the refinance?” Now you have removed that concern, which I like. And that’s why we’re talking and that’s why you’re on the show today.
Torey: Absolutely and that’s what we saw because things just happened along the way. I think it’s a win-win for both sides. It helps us control the deal a little more to make sure that it’s a smooth transaction and it takes a lot of the risk off the investors coming in to buy.
Jason Hartman: Okay.
Torey: So during that time period there’s no payments. Now, we only do the first closing based upon the refinance approval. So basically, we have the same approval guidelines as the refinance does.
Jason Hartman: Okay.
Torey: So we’ve got a couple of approved lenders that have this unique loan product. They actually approve the investor for the loan before we do the first closing. When the investor’s done, now they own the property.
Jason Hartman: Occasionally and you said it was pretty rare, the refinance will be approved and then the lender will yank that approval later.
Jason Hartman: What do you do in that case?
Torey: We buy the property back. Give the owner his money back, no cost to the investors coming in. So we really do –
Jason Hartman: Okay. That’s a pretty risk-free deal for the investor.
Torey: Isn’t it? We try to make it as risk free as possible. Now, if the investor walks away on their own there are some consequences to them.
Jason Hartman: They would learn their earnest money if they walk away.
Jason Hartman: $5,000.00.
Torey: Yeah, absolutely, but as long as they’re ready to perform and it is an outside situation that causes them not to be able to get the loan, then we buy the property back and the investor gets all his money back. So the investor they’ve got their money in it, but they’re not making payments. They don’t have to worry about anything at that point. So now we’re getting ready for the refinance. During this time period, we’re finalizing inspections. Appraisal has taken place, finalizing relationship with property management. We do a lot of that after the first close. Even though the investor already owns the property, we still finish up a lot of the loose ends before the refinance. There’s no payment to the investor yet. So even though he owns the property, we are still taking on the financial risk. And so that’s when we finish up a lot of those loose ends. We then get to the refinance.
Jason Hartman: What date is it now?
Torey: Contract May 1st, first closing May 10th, so now we’re coming up around June 1st.
Jason Hartman: Okay. So 30 days, that’s all?
Torey: Yeah, everybody’s happy. The investor is happy with the condition of the property, third party inspector comes in and inspects the property to make sure the conditions are okay and they’re not walking into anything. We’ve got the warranties set up. We buy a one-year home warranty for the owner that’s coming in to buy the property. We provide our own rehab warranty on top of that as well.
Jason Hartman: For the repairs that you’ve made and the improvements you’ve made?
Torey: Exactly, for anything we do. We just see a lot of times a property that’s been sitting empty for six months. Stuff can pop up that we just don’t all catch –
Jason Hartman: Yeah.
Torey: — until a family’s really living in it. And we just take care of that stuff and it’s on us.
Jason Hartman: Okay.
Torey: We get everything set up and then we’ve got the refinance take place and at that point – now, once the refinance takes place, we kind of pass that relationship on to property management. That refinance is going to take place the beginning of June. So we’re looking 30 – 45 days for this whole process. The property management company now will come in. Now, where our involvement is still involved is we provide the rehab warranty. Secondly, if the property’s not ready, we pay for the tenant placement. We also offer a two-month rent guarantee lease assistance.
Jason Hartman: Okay. So that’s fantastic. So the first two months the investor has no risk of vacancy?
Torey: They have no risk and what’s nice about this is, so the property is starting to be marketed on that March 1st date. So the property is going under contract–
Jason Hartman: May 1st.
Torey: May 1st, excuse me. May 1st – so the investor comes in and buys it on June 10th. Well, the investor’s first payment isn’t until August 1st.
Jason Hartman: Right. That’s a good point.
Torey: Right? And so we are covering August and September.
Jason Hartman: If they don’t have a renter. Now what if they have a renter? You don’t cover it. They don’t need it, right.
Torey: Exactly. What’s great about this and we kind of chose that period because we feel like you know, they’re covered. Because our goal is we can’t take away all the risk into getting into real estate, but we can take away as much up front.
Jason Hartman: You can take a lot of that risk away. It works pretty good. Yeah.
Torey: We can. And so our property management company has from May 1st really until October 1st to rent the property before the investor has a payment without having rent in place.
Jason Hartman: That’s five months.
Torey: Five months.
Jason Hartman: That’s fantastic. Wow!
Jason Hartman: Investors, are you listening? This is a dream deal in a lot of ways. It’s really, really cool. I wish we had this in all our markets around the country. Only in Atlanta, right now, folks but we’re working on it. We’re talking to another group like yours for St. Louis actually. So, we’ll see. We haven’t really investigated that market enough yet, but good.
Torey: Well, good and we just feel like when the investor gets in, it’s really – you know it’s a five year plus hold. Obviously, we don’t know. We could see appreciation shoot up fast. It doesn’t have to be that long, but we feel like Atlanta’s a strong enough rental market and with the cash flow that you can be in good shape, owning for five years, and really see a profit.
Jason Hartman: And our belief is people should just buy and hold these properties. I mean when you can lock in mortgages for three decades at fixed rates this low – I mean, folks, inflation, I’ll bet you it’s going to come. And it’s going to be pretty severe. And it’s going to make these loans look so cheap in the future. And it’s also going to make these houses look cheap as the value of the construction materials increases. I call that packaged commodities. The builders have pretty much stopped building completely. Our investors are buying these below the cost of at least current construction costs. One of the tracts you showed me today was interesting. We went in and we saw what the builder was doing. The builder is still in there and they’re not selling anything. And the home that you’re offering, like we could offer it to our investors listening – is way below that cost and the builder can’t afford to do it any cheaper. So that means no more building.
Torey: The builders right now pretty much have to wait until the inventory runs out of the foreclosures because they can’t compete. Like you said, the neighborhood we looked at they were in the $180,000.00’s –
Jason Hartman: Now they’re $150,000.00.
Torey: $150,000.00’s and we’ll be selling them the property for $120,000.00ish. And the builder probably can’t build it for $120,000.00. I’m guessing selling it at $150,000.00 he’s just trying to get out of a standing inventory. And he won’t make any money.
Jason Hartman: Right. And you know, sometimes it’s better to let it go even below cost, which we have builders that do that just to get rid of the inventory and pay off their construction loans. Talk to us a little bit about the construction, the contracting, the actual rehab work that you do. What is it you typically do? How much are you spending on your side on the refinance? And what was interesting to me was you told me you used to outsource all of that rehab construction work, and now you’ve in-sourced it because last year, you spent about a $1 million with outside contractors you said.
Torey: We did and you know there were two reasons. One, is we want to keep it in house because –
Jason Hartman: You have control.
Torey: You have control and we can do it cheaper if we’re doing it in-house. The other reason is, you know, we want to know the quality of the house because if the property’s falling apart six months later, then nobody’s happy.
Jason Hartman: And we should mention to the listeners that at least at the time of this recording you’re focusing on properties that are pretty darn new. I mean these are not old junky properties. Again, they’re 2000 and newer and many times much newer than that. They’re two years old.
Torey: A year ago, we couldn’t do this. A year ago, we were buying houses that were built in the late ’70’s which were good houses.
Jason Hartman: Right.
Torey: But they’re older houses. The floor plans didn’t make a lot of sense. We’ve been doing this for three years and we have never seen the type of properties that we can pick up right now, with the ages of the houses, the builder still in the neighborhood. It’s amazing the value of what we can get done right now.
Jason Hartman: And what has led to this opportunity, I think the investors listening will find interesting, is that there are a lot less rehabbers in the market place buying up this good inventory, which means this is an opportunity for the investors listening to take advantage of because a lot of these rehabbers, you know they’ve gone broke. They haven’t managed their business well. Again, it’s the two famous quotes from the two famous billionaires – J. Paul Getty, “Buy when everybody’s selling. Sell when everybody’s buying.” And good old Warren Buffet, who said, “Be greedy when everyone’s fearful, and fearful when everybody’s greedy.” You want to just expand on that opportunity today?
Torey: You know, absolutely. Yeah. When we just first started doing this, there was a sign on every corner for wholesale properties. Buy a property. I mean everywhere you went they were there. But you know the business model was based on a strong buying economy.
Jason Hartman: And it was based on people flipping homes.
Torey: Based on people flipping homes so you had – it’s all about having the buyer.
Jason Hartman: Exactly. And flipping is high risk. You know? That’s like day trading. Very high risk activity. And when you don’t have the flip, when you can buy good sustainable investments that are stabilized, you buy them at or below the cost of actual construction, sometimes quite a bit below it, you know that’s just a winning solution. You lock in your cost of debt, your debt asset, which is really an asset, for three full decades! I don’t see much downside here, folks because even if inflation doesn’t come, you’ve got a stabilized investment. Even if the property doesn’t appreciate, you’ve got a stabilized investment that’s self-funding and self-perpetuating. Now, are people, are they breaking even? Are they having negative cash flow? Are they having positive cash flow with only $5,000.00 down?
Torey: I would say 90 percent of our people who buy have positive cash flow now.
Jason Hartman: With $5,000.00 down?
Torey: Yeah. And by positive, I’m talking maybe $50.00 to a $100.00 a month.
Jason Hartman: Not a big positive.
Torey: Not a big positive, but you’ve got positive. But we feel like where you’ve made your money is that – now you could have $300.00 if you want a month, but our mind-set is instead of putting $40,000.00 down and get $300.00 a month–
Jason Hartman: Right. You can keep the other $35,000.00 and buy other property. Stick it in the bank; put it under your mattress, whatever you want. You know?
Torey: Yeah and liquidity is so important today that you know, keep your cash. Look for the opportunities. We’ll never see an opportunity like this again in our life time. And so keep your cash to be able to spread it out as far as possible.
Jason Hartman: I couldn’t agree more. Anything else you’d like our listeners to know?
Torey: Rental properties are phenomenal because you’ve got a tenant who’s basically funding your retirement, but you are depending on a tenant, and so you know there is going to be a rainy day here and there. So I think just the reality going into it that you might walk into $40,000.00 equity and a $100.00 a month cash flow, but you know you own a property for seven years, you’re going to have a tenant who’s going to lose their job over the time.
Jason Hartman: Yeah, you could have a vacancy from time to time. You might have an eviction. Of course, these are the normal risks that come with investing.
Torey: But what we love about our properties and the price point is the average mortgage payment on a house that we’re selling is about $800.00 or $900.00 a month. And so, when that time does come, it’s not like you’ve got a $2,000.00 nut that you’re trying to figure out how how to cover on a monthly basis. $800.00 or $900.00, although we don’t like, we could figure out how to manage that for a three-month period while we’re trying to get the property re-rented. And that’s why we like this price point of house.
Jason Hartman: Tell us about your tax rate here? What are the property taxes like?
Torey: It depends on the counties. It’s about 1 to 1.2 percent.
Jason Hartman: Very reasonable.
Torey: Yeah. It’s pretty average.
Jason Hartman: Are they reassessed all the time? Or do they not reassess actively here, or what happens there?
Torey: You know they’ve been reassessed a lot lately because everybody and their brother is going to the court house and challenging their values. So, we’ve always seen it coming down.
Jason Hartman: h, they’ve reassessed down? Okay.
Torey: Everything is reassessed down because of the market being so soft. And so you know it’s not something that kills our cash flow at all.
Jason Hartman: Excellent. That is great information and again this opportunity, at least as it stands at the time of recording here, is $5,000.00 down, projected cash flow of $50.00 to $100.00 bucks a month positive. This is a great opportunity folks. You can see these properties on our website and contact one of our investment counselors for more information. Thank you for joining us today.
Interview with Hans Gant, Metro Atlanta Chamber of Commerce
Jason Hartman: It’s my pleasure to welcome Hans Gant to the show. He is the Senior Vice President of Economic Development for the Metro Atlanta Chamber of Commerce. Hans, welcome.
Hans Glad to be here, Jason. Thank you for having me on the show.
Jason Hartman: Well, it’s great to have you on. Tell us what is going on with the business climate in maybe Georgia and then focus down to Atlanta. We’d love to hear more.
Hans: Well, you know, Jason, the current economic crisis that the world is going through and the nation is going through, obviously Atlanta has not been immune to that crisis. So we’ve seen our share of companies reducing employment, laying people off. We definitely have seen the crisis have its effect on the housing market and the commercial real estate market. We’ve seen reduction in new jobs coming into the market over the last year or so and that has taken its toll on our economy.
But we’re beginning to, in 2009, see the crisis lessen. I think we’re beginning to see it ease. We’re beginning to see companies make the decisions to locate and to begin to expand again. A good example of some of that information is Verizon Corporation just recently announced that they’re going to add 500 jobs to the Atlanta market. First Data Corporation is moving its headquarters to Atlanta. We’re seeing other companies like IBM add employment here in Atlanta and also companies like Siemens. So companies are beginning to add back to their employment base.
Jason Hartman: The interesting thing that you mentioned though, from the start of what you said, it would sound rather negative and I know that overall, the climate nation-wide is pretty negative and globally as well. But the fact that you’re even talking about job creation in comparison to other markets is pretty impressive.
Hans: All of the bad news that has been in the media for the last year and a half in particular has all been doom and gloom essentially.
Jason Hartman: Oh sure.
Hans: But in spite of all of that news, companies in Atlanta are making decisions to grow. And we’re also seeing companies locate here. Matter of fact, even though we had a bad year in 2008, for example, we still were able to recruit nearly 60 companies to Metro Atlanta in 2008. Sixty companies made the decision that they’re going to either relocate or open a new operation in the Metro Atlanta area.
Jason Hartman: That is very impressive. And from where are most of those companies coming?
Hans: Well, 40 percent of those companies are actually coming from abroad. You know, these are companies from Europe, from Asia, from India, other parts of the world that are wanting to enter the U.S. market and they have chosen Atlanta as their gateway to the U.S. market. And in some cases have chosen Atlanta as their gateway to the American’s market.
Jason Hartman: What are the reasons that these companies are looking at Atlanta as a good place to settle?
Hans: There are really three primary factors that are involved. Most companies that we’re dealing with today are looking to, No. one, find a location where they can better reach and serve their customer base and also be able to grow their customer base. And Atlanta, as you know, has the busiest airport in the world, Hartsfield Jackson International Airport. We are connected fairly well to the rest of the world. Matter of fact, we are only second to New York, JFK Airport, in terms of the number of international destinations. We are very well connected to Latin America. Five years ago, we had a handful of routes to Latin America. Today we have nearly 40 destinations to Latin America. We’re connected to China. A year ago, we were not connected to China. That’s a brand new route to Shanghai. We’re connected to Moscow. We’re connected very well to Africa. Matter of fact, there’s probably no other airport in the U.S. that’s better connected to Africa.
Jason Hartman: I remember when I went to South Africa a couple of years ago. That was really the only U.S. flight, I believe, that went to South Africa–
Hans: That’s right.
Jason Hartman: –was from Atlanta. Otherwise, you had to go to London or Germany and then go. That’s the way I did it and I was envious of those people with those shorter trips because that is one long plane flight.
Hans: It is and the merger between Delta and Northwest has really helped us to be able to do that here from Atlanta.
Jason Hartman: Right.
Hans: We ride on the coattails of Delta Airlines so to speak. But Delta and Hartsfield International Airport have really allowed Atlanta to become a major international city, both as a destination, but also as a place to do business from.
Jason Hartman: Excellent.
Hans: And so being able to reach your customers on a global basis and on a national basis really has allowed companies to grow their customer base and reach their customers.
The other factor is cost of doing business. You know companies are looking to cut costs wherever they can right now in order to get through this economic crisis. So what they’re doing is they’re looking for ways to consolidate operations and then they’re looking for locations to where to consolidate, and cost is a big factor there. In Atlanta, when you start comparing Atlanta’s cost of doing business with other major global cities, including New York and Chicago and San Francisco and L.A. and places like London, Tokyo, Paris, you start comparing the cost of doing business. Atlanta came in as the lowest cost city among those major global centers.
Jason Hartman: Wow.
Hans: So that is a big factor, the cost of doing business. And the other factor is talent. Companies have to be able to find the right kind of talent and be able to recruit the right kind of talent to the place that they’re locating. And Atlanta has been a great location for companies to be able to recruit talent to, but also to be able to retain talent.
Another big factor on the talent scene is that Atlanta has 54 colleges and universities within the 28-county metro region. And some of those colleges are world-renowned universities and colleges like Emery University, Georgia Tech, and Georgia State University, and Morehouse Medical School. These are institutions that are producing world-class talent for companies.
The other factor is that Atlanta is growing in population of about 125,000 to 150,000 people a year. More than half of that growth comes from people choosing to move here. And they move here because they feel like they can find a career opportunity and a job opportunity, but they also move here because of the quality of life that Atlanta offers.
Jason Hartman: Now, Hans you mentioned where companies are moving from and that was interesting to see that a lot of them are foreign companies –
Jason Hartman: — actually coming to America for a change, which is a nice shift in things I must say. But where are the people coming from? I know it’s very dispersed, of course, but are there any, sort of, big players in that world where the individual people are coming from?
Hans: Oh, absolutely. Domestically, the majority of the newcomers are moving here from the surrounding south-eastern States. And Atlanta attracts them mainly because of the job opportunities, but also that the quality of life is a big factor there. But if you look at maybe two or three States that Atlanta really tends to draw from, Florida is the number one state that the newcomers are coming from.
Jason Hartman: And what do you attribute the Florida in-migration to?
Hans: I think it’s the young people. Atlanta is really attractive to that demographic that is commonly referred to as the “young and restless”.
It’s that demographic that’s aged 24 to 35, highly educated, looking for a location where they can find cultural diversity, where they can find the arts, where they can find professional sports, where they can find people like themselves. And Atlanta has really been one of the top centers in the country in terms of attracting that demographic. That demographic is extremely important to companies.
Jason Hartman: Yeah, because that’s an inexpensive, highly educated labor force.
Jason Hartman: And the companies can do very well with that. You know, I notice over the past several years the Chamber has been involved in recruiting about 240 companies to the region I guess, whether it be G.E. Energy, Russell, Rubbermaid, Manhattan Associates –
Hans: Newell Rubbermaid, right.
Jason Hartman: Yeah, exactly. Are you finding it pretty easy to recruit companies to your area? Are they offering incentives to get them or is it just sort of the standard business climate already so attractive?
Hans: We went back and looked at our numbers a few weeks ago and we tracked a number of business locations that we’ve been successful in over the last ten years. And over the last ten years, the Chamber has been involved in almost 500 company relocations to the Atlanta market. And those 500 companies have created new direct jobs around 40,000 to 45,000 new jobs. And that’s just the direct employment created by those companies. And then those companies have also created a lot of indirect jobs. So all in all, about close to 100,000 new jobs created as a result of those companies locating in the Atlanta area.
Ninety percent of the companies that come here do not come here because of incentives. They come here because it’s the right business decision – they can find the talent, the cost of doing business, connectivity to their customers, and logistics center in terms of being able to get their products in and out. The business reasons are what they’re looking at and they locate here for the right business reasons.
On the very, very big projects – yes, incentives are needed because the very, very big projects are highly competitive among the States that are recruiting those companies. And yes, Georgia does have a good incentive program and we do have tax credits, we have property tax abatements available at the local level, we have workforce training programs, we have retraining programs. I mean you name it. We do have a good portfolio of incentives that are available to companies to help them offset the initial cost of relocation.
Jason Hartman: Excellent. Back to the population question. You mentioned a lot of migration out of Florida into the greater Atlanta area.
Jason Hartman: Was there a second and a third on your list there?
Hans: I would say Florida is No. 1. Texas is No. 2, and then the New York/New Jersey area is No. 3.
Jason Hartman: I can see the New York/New Jersey thing no problem. A lot of out-migration from there – high cost of living, quality of life problems, etc. and into the greater Atlanta area. But a lot of areas in Texas are very attractive business-wise and we do quite a business in the major metros in Texas and we’re finding them to be quite similar to what you’re saying – where companies are moving there. And employment is, believe it or not, in this market, bucking the trend and growing slightly.
Hans: We do compete a lot with Houston and with Dallas and on some occasion we do with Austin on some of the technology projects.
Jason Hartman: Sure.
Hans: But you know one thing, there’s a lot of commonality between Texas and Georgia. Now, Texans wouldn’t agree to that, but there is a lot of commonality. There’s the Southern culture is very attractive to these. Southern hospitality is both in Texas as it is in Georgia.
Jason Hartman: And the people are very nice, I will definitely say that.
Hans: The climates are very similar. The people are very similar. So there’s a lot of movement back and forth between Georgia and Texas. I would dare to say there are probably as many Georgians moving to Texas as there are Texans moving to Georgia.
Jason Hartman: Okay, so that’s somewhat of maybe just sort of a trade-off. What else is going on in terms of economic and entertainment attractions? You know maybe we want to talk a little bit about the softer side as well, in terms of entertainment.
Hans: Sure. No. 1, I think everybody knows that we have all the professional sports covered here. The Braves, the Atlanta Falcons, the Hawks. We have a brand new aquarium – it’s the world’s largest aquarium, the Georgia Aquarium.
Jason Hartman: I was just there.
Hans: And it has made all the difference in terms of attractions for the downtown area. It is helped the downtown area become a very, very vital place again for visitors and for tourists. We have the CNN Centre. You know CNN is headquartered here in Atlanta.
Jason Hartman: Sure and Coca Cola.
Hans: Coca Cola is headquartered here. The New World of Coke has a new museum just adjacent to the Aquarium. We’re going to be building the Centre for Human Rights here in Atlanta in the next year or two. We also have recently attracted the National Health Museum to Atlanta and they will be building that here in the vicinity of Olympic Centennial Park. There’s Six Flags Over Georgia. There’s the Fox Theatre. There are just countless number of cultural and entertainment and attractions in the Atlanta area that have really made Atlanta a prime destination for tourists, as well as business visitors.
Jason Hartman: When I was there a couple of weeks ago, I stayed in Buckhead. I stayed at that Grand Hyatt and just loved it.
Jason Hartman: I was thoroughly impressed. I had not been there in a few years and I was thoroughly impressed with the architectural beauty, the shopping facilities were – I mean there was tons of shopping, a lot of great restaurants, night life – I was very, very impressed with it. Very clean and pretty, and then I looked at a lot of income properties in the Southern area of town. And I guess it took me about 30 minutes or so to get across to where I was looking at the investment properties and I was really impressed with the investment opportunities as well. Atlanta is such a large metro area that I’d almost say one wants to divide it into maybe four quadrants. Can you kind of do that for us and just give us a quick snapshot of some of the more micro areas within the city?
Hans: Well I think the way that we tend to break the market up would be the downtown/Midtown area, and possibly include Buckhead into that. Then the perimeter area, which would be the Northeast and Northwest of the downtown area, premier markets, and then you would have the southern markets. So you’d tend to have those up as your primary markets. Then you have the other corner markets such as Gwinnett County, as well as North Fulton and Cobb County. So there may be four primary markets and then maybe three or four other submarkets out there that we tend to evaluate.
You talk about real estate investment. I think there’s probably no better time than today to invest in real estate, if you have the long-term view in terms of investment. There’s a lot of vacancy in Atlanta right now. The fact that we’ve gone through this economic crisis, a lot of companies have reduced space. We had a building boom going on prior to this recession hitting us. That space is now on the market. There’s more space coming on the market as some of the other projects finish up. And companies moving here will find an incredible price. And companies looking to buy real estate will find a pretty incredible price as well.
Jason Hartman: And I just want to make a distinction with what you’re saying that you’re really referring to the commercial market.
Hans: The commercial market, that’s correct.
Jason Hartman: And mainly office space, of course, a lot of vacancies — even nation-wide it’s–
Hans: Yeah, primarily office space.
Jason Hartman: And retail too.
Hans: But there’s also a good amount of industrial space available.
Jason Hartman: Yeah. What about the residential side? We particularly like housing, whether it be apartments, mobile home parks, single family homes, duplexes, four-plexes — all that kind of stuff.
Hans: With people not being able to get bank loans for home purchases these days, or it being much more difficult to get home purchases, the apartment business is booming.
Jason Hartman: Yeah.
Hans: I think that is doing very well. If you’re an investor in multi-family residential, it’s a good opportunity to buy now.
Jason Hartman: And we’ve seen that nationwide to some extent in many of our markets.
Jason Hartman: The harder it is for a tenant to get a loan to buy a property, the longer they are to remain in the rental pool, and that actually has a strengthening effect on the rental market. The problem is that the federal government is getting in the way by forcing these lenders with threats of cram downs and really, really encouraging to modify loans and not letting the foreclosures occur enough to sort of cycle those people back into the rental market, where you know, maybe they really should have been in the first place on an individual case by case basis, obviously. But that would really strengthen the rental market and ultimately, it has to happen.
Hans: Right. And I think ultimately, it will happen. I think we have a crisis and I think our leaders in Washington, you know you may question some of the decisions they make, but they are honestly trying to find a solution to this economic crisis. You know, they’re going to make some good decisions and they’re going to make some bad decisions along the way. But I think over the next 12 to 24 months, I think all of this will be flushed out of the system pretty well and we’ll be back into what we call I guess a growth mode. We’re beginning to see the market improve today. I mean there are more people getting loans in the Atlanta area. The banks are beginning to loan some of that money that they got from the bailouts, so to speak, and we’re beginning to see that effect here. We’re seeing the pool of vacant homes beginning to shrink. That’s, over time, going to improve the value of homes, you know. We’ve lost some value in the homes in the Atlanta market, but I think we’ll begin to see that improve over the next six to twelve months.
Jason Hartman: Can you segment that at all by the way, Hans? I’m wondering if you’re talking about the higher end, the middle, the low end properties?
Hans: It’s actually the lower and middle end of the properties that are doing better than the higher end right now.
Jason Hartman: Right. And when you say high end what does that mean in your market? I know in the Buckhead area there are some elegant, beautiful, beautiful homes.
Hans: Well, let’s say this – I think the homes that are in the $500,000.00 or less are selling a lot better than the houses in the $500,000.00 to $1 million range. The homes that are above $1 million are not doing as well as the other two categories that I mentioned. I think what we’re seeing right now is we’re seeing the lower end of the housing market improving faster than the higher end.
Jason Hartman: Right. And I would agree with that. And it’s held pretty good compared to the high-end properties, yeah.
Jason Hartman: Sure. What we’re looking at nowadays is sort of a necessity level of housing versus a luxury level of housing, so that’s I think good advice.
Jason Hartman: Is there any other information you’d like to share with real estate investors, especially investors looking at housing opportunities to buy rental properties in your market?
Hans: I would point out to them No. 1 is that Atlanta will continue to be a fairly high-growth market over the next 20 years. We’ve added more than 2 million people to our population over the last 20 years. And we’re going to add more than 2 million people to our population in the next 20 years. That’s opportunity for housing. It’s opportunity for new companies moving here. So it’s opportunity for the commercial market. We’re all very bullish in terms of Atlanta’s ability to continue to grow over the next 20 years.
The other is the fundamental building blocks that Atlanta has put in place in order to sustain its long-term growth are pretty solid. You cannot in today’s world reproduce a Hartsfield Jackson International Airport. Our city and our airport are investing over $5 billion in expansions and enhancements today. It’s one of the biggest construction projects going on in the country. They’ve just recently in the last year and a half completed a new runway. Now they’re building a new international terminal and adding more gates. They’re looking at a lot of other internal redevelopment improvements on site; continue to invest in this airport to make sure that we continue to become a stronger global business center.
Jason Hartman: Sure.
Hans: You can’t reproduce world-class universities like Georgia Tech or Emery University either. They’re in place.
Jason Hartman: Yeah.
Hans: So we’ve got the ability to generate the talent. We’ve got the ability to continue to attract people and attract companies and we have a great location in terms of being able to serve the international markets and the domestic markets as well.
Jason Hartman: Right. Yeah. The location is definitely a very convenient gateway, no question about it. When you speak of infrastructure, Hans, one of the things that people have been somewhat concerned about and I think, temporarily, you’ve definitely solved the problem thanks to the weather, but is the water issue? I know you’ve had a very good year in terms of rainfall and that’s really solved the problem for the time being, but what is going on with water infrastructure in your area? There was a story on 60 Minutes maybe about eight months ago I remember seeing, where they were talking about the drought in Atlanta. Then I was hearing stories on the news about how people were being really forced to save water and do all kinds of things there. Problem solved for the moment. But what does the future look like?
Hans: The good news is on water this year, we’ve had a very wet winter and spring and continue to have a wet May. And the good news is the lakes are almost full. I think we’ve declared that the drought is over. But you know the drought can come back. And we can’t take the rain that we have today for granted. So you know, our State has been very aggressive and our region has been very aggressive in putting in place, No. 1, conservation measures. We’ve gone a long way in reducing the demand for water through conservation. The other thing that we have done is the State has adopted a water plan currently for North Georgia, but they’re also working on a statewide water plan that will deal with the long-range water needs of this State. That’s good news. And that water plan will include not only continued conservation measures, or an expanded conservation measures, but will include new water capacity. That means additional reservoirs to be built around the State to supply the water needs for the long term.
Jason Hartman: Projections look good. The water problem is definitely being addressed and it’s okay for the time being. You know, in closing just kind of wrapping this up, what would you like people to know about the Greater Atlanta area?
Hans: In short, it’s a great place to live. It has a variety of lifestyles. If you’re interested in a rural lifestyle, there are parts of the Metro Atlanta area that can provide that. If you want a vibrant urban lifestyle, we definitely have that to offer. The education system in terms of universities is absolutely excellent, a lot of opportunity there. If you’re looking for value for your dollar in terms of cost of living, the cost of living in Atlanta is considerably less than it is in California and the New York area and many other parts of the country and the world. So what you get for your dollar in terms of housing is pretty incredible. In terms of being able to find a job, Atlanta is going to continue to recruit companies because Atlanta is a very attractive place for the long term for companies to have their global businesses. And so there’s going to be opportunity for jobs and careers to be developed here. So jobs, quality of life, cost of living are all very attractive and that should be good news for investors as well.
Jason Hartman: I couldn’t agree more. Hans, thank you so much for joining us on the show today and informing people about the Greater Atlanta area. I’m sure they will be looking for investments in your area and we will be helping them do that.
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Duration: 59 minutes