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 InvestorsTM.

Jason Hartman: Welcome to another edition of Creating Wealth. This is your host, Jason Hartman. And I am here on behalf of the Hartman Media Company and Platinum Properties Investor Network today as always. I want to talk to you about a few things today. We are going to talk to you about making money with your iPhone. Do you have an iPhone? If not, you need one. I love my iPhone. Have I told you that lately? We’re going to talk to you about an application that you can use to evaluate properties on a mobile basis on your iPhone and even for non-iPhone listeners this may be coming to the Blackberry. So you’ll want to listen into that. We’ve got Joel, prerecorded that we’ll be talking with him soon.

And then time permitting, we will have Jeff Cronrod with the American Apartment Owners Association here to talk about apartments and tenant screening and I think you’ll find that interesting as well. But before we get into that, I want to get into some listener questions. But before we even do that, I would like to talk to you a little bit about, well, one of my big subjects – gold, other precious metals, and inflation.

I’m looking at an interesting chart here that shows and this really, really illustrates this. We should get this up on the website for you because it’s really fascinating. It says, “From Five Cent Cokes to Five Dollar Lattés: The purchasing power of the U.S. dollar from 1920 to 2009.” And what this chart shows is – it’s just so telling – about the value of our strategy of buying packaged commodities with long – term, fixed rate debt, meaning that debt will become a huge asset to you and those packaged commodities – now if you’re a new listener, you may not know what I’m talking about when I say that. But we don’t like real estate very much. We like a set of construction materials sitting on cheap or free land. That is our investment strategy right now and it is going to create a lot of wealth for people going forward.

And so what we do is we use that with fixed rate debt. Inflation increases the value of the packaged commodities – the house, the apartment building, whatever it is sitting on the cheap or free land. And it decreases the value of the debt, because of course, our tenants who we’ve out-sourced our debt to, pay back in forever cheaper dollars. Now what could derail this strategy is if our government starts getting responsible all of a sudden. How many of you think that’s going to happen? Hmm. I thought so.

This chart shows that in 76 years from 1933 to 2009 – okay, remember 1933 was when Roosevelt made gold illegal for U.S. citizens to hold. Now of course, people could still have some gold jewelry and a few collectible coins, but you couldn’t own gold bullion in any sort of storable way. People weren’t allowed to have gold bars for many, many years. You know this makes the end of the pseudo-gold standard that was managed by the Federal Reserve. So that was 1933. They call that the “Confiscation Time,” and if you don’t think the government can take your property, your gold, guess what? They already did it, in 1933.

So during that time, by the way, 1933 to 2009, the U.S. dollar lost 94 percent of its purchasing power. Think about that. I know that seems like a long time, but that basically means in the span of one lifetime, the dollar became almost worthless. Wow! And over the course of those years, the government was a heck of a lot more responsible than it is today, in my opinion.

Now in 1945 that was the start of the Bretton Woods agreement. And that basically was when the U.S. had the reserve currency of the world and it was still backed by gold.

So now we move forward and we look at 26 years, from 1945 to 1971, and that’s when Nixon took us off the gold standard. So in that 26-year period the dollar lost – you care to take a guess? – 56 percent of its value, a whopping 56 percent of the value of a dollar. So think about it. If you had a 30-year mortgage in 1945, you would only be 26 years into the mortgage, and if that mortgage was $100,000 in consistent or constant real dollars, you would only owe $44,000 during that time.

What an opportunity to create wealth. Again, I’ve said it many times but people think that over the last few decades the reason they got so wealthy is because their real estate went up in value. But really what happened is the hidden wealth creator was the fact that their debt declined in value. And if they weren’t in debt they did not take advantage of this opportunity as well as they could have.

So the dollar loses a whopping 56 percent of its value in a short 26 years. And 26 years will fly by like nothing. I mean I think of this. A lot of you I know are on Facebook. And my ex-girlfriend from 25 years ago found me on Facebook and I went to see her Saturday, last Saturday. So in that same time span, that’s amazing – 56 percent of the value of the dollar was lost. I mean unbelievable; same amount of time.

So now we go 1971, which was the end of Bretton Woods and the start of what they call on this chart the “Modern-day Fiat Paper Currency Regime” – I love that by the way, which is an accurate way to put it, but it’s kind of a, I don’t know, a snarky way to put it I guess. So 1971 now and in the 28 years from 1971 to 2009, the dollar lost 81 percent of its value! Did you hear that? That means in 1971, if you took out a 30-year mortgage, you’d still have two years left if you were paying interest only and that debt would have declined – if it’s our $100,000 mortgage example, from $100,000 nominal dollars, or real dollars at the time you borrowed it obviously in 1971 – to $19,000. What a wealth creation opportunity. You’ve got to just love your debts. I love debts.

But in order for debts to be loved, they have to be long and fixed and they have to be tied to something where you outsource the repayment of the debt to someone else, namely a tenant and they have to be tied to packaged commodities – things that are likely to go up in value in inflationary times. This is what I call the double inflation arbitrage. You’ve heard me talk about it before.

Okay. I have got a 26-year-old in the office with me. Are you 25 or 26?

Brittney: Twenty-five.

Jason Hartman: Oh, you’re 23. No way, you’re only 23! Right?

Brittney: I am only 23.

Jason Hartman: Okay. So in Brittney’s lifetime – I mean look at what’s happened here on that chart at only 23 years old, right? In 28 years when you were minus 5, since then, the dollar lost 81 percent of its value. Isn’t that unbelievable to think of that?

Brittney: Yes.

Jason Hartman: Okay. I always give Brittney something – I throw her a curve ball like that she didn’t expect. Okay so, let’s see here, Brittney. We’ve got some listener questions.

Brittney: Yes. Before we talk about listener questions, I’d like to bring up our 101 episode, how we talked about the $5,000 down.

Jason Hartman: Oh. Thank you. Yes.

Brittney: An investing opportunity in Atlanta. We’ve had a lot of our investors calling in, many of our investors calling in, actually.

Jason Hartman: And these are flying off the shelf folks. So if you didn’t buy one of those, you’d better give us a call because everybody else is buying them – while supplies are limited. Do I sound like a sales person?

Brittney: Yes. But they are expressing a lot of interest in these opportunities, in these investing opportunities. However, on the show it mentions that these will be cash flowing. And on our website, they have been checking out the pro formas and we’re projecting a possible negative cash flow. Can you address this please?

Jason Hartman: Great question. Thank you, Brittney. So, basically what’s happened here is when we recorded the interview with Tore, who you heard on Show No. 101, he talked about how the properties were positive cash flow, even with just $5,000 down. And they are. That’s the thing you need to know. They are.

However, when you look at the pro forma on our website atwww.JasonHartman.com/properties and you click on the Atlanta area, you will see that these have a very slight negative cash flow. “Why is that?” you say. “Well, that doesn’t make any sense. You told us one thing and then on the website it says another.” Actually, there’s quite a good reason for it. The reason is because we are so conservative, at least we try to be, in our projections that we put the vacancy rate in there, even though there’s a rent guarantee opportunity and you heard Torey talk about that on Show No. 101. And we put some other expenses in there that are not necessarily going to happen, just because we want to promise less and try to deliver more. That’s always our goal with our clients. So that is why there is a disparity and it seems like it doesn’t make sense. So, I hope that answers the question.

Brittney: Thank you.

Jason Hartman: And folks, I got to tell you just one more time, really, call one of our investment counselors and get one of these properties. They are really, really going and people are loving the opportunity here to be able to do something with only $5,000 in today’s market. It’s mind blowing and that’s why they’re flying off the shelf. So take advantage of these because they are getting rare and we are having trouble supplying inventory to our clients already. And what is that show, just a week old? That’s when we announced that deal, so it’s a good opportunity.

Brittney: Our first question is from Deborah. Deborah asks we are interested in investment properties in Austin, Texas, North or South Carolina, and Colorado. Is there any one specifically we should talk to about these opportunities? We love your show and listen to them often.

Jason Hartman: Oh! Thank you so much. We’re glad you get a lot of value out of the show. And no, just call our office (714) 820-4200 and talk to any of our investment counselors. They’re all familiar with the inventory and they’ll be glad to help you out. And remember, one of the great things about dealing with us is we are area agnostic. So we are not attached to any one area. We go where the business makes sense, where the market makes sense, where we’ve got good property managers that we are prescreening for you, good markets that we are recommending.

When we don’t like a market, we just leave it. You know, we, of course, continue on in managing that market and helping our clients manage their managers. But if the market becomes frothy and over-valued, we just go somewhere else. And that doesn’t mean by the way because I know people get confused when I say that. That doesn’t mean that we tell all our clients sell their properties. They may have purchased in at a lower price and they have secured tenants before maybe vacancy rates increased. So all of those are what we call stabilized properties. So you just stay put and that’s just sort of a management job.

But we don’t do new opportunities and recommend new opportunities in these markets. So we will try and direct you where it is best for you based on your investment goals, whether they be cash flow, tax benefits, capital appreciation, based on your risk tolerance, your time horizon, etc, and we’ll help you build a well diversified portfolio in several markets nation-wide.

Since I mentioned nation-wide – I know these answers are always long. Brittney, you’re looking at me like, “Jason, here you go again.”

Brittney: Wrap it up.

Jason Hartman: But you know we’re always looking at international opportunities, too. One of our investment counselors, Sara and I had coffee the other day with an international opportunity in of all places, down under in Australia. We’ve looked in Eastern Europe. We’ve looked in Central and South America. We’re constantly looking all around the world at different opportunities. I’m reading reports from various different international property websites and you know, just the good old U.S.A. is still really the best opportunity at the moment. But when something comes up, we are global agnostic. That’s what I want you to know. But right now best opportunities are in the U.S. We have 41 markets to offer you.

Brittney: Now, speaking of global investments, Jason, one of our listeners on the show, Jemina says, “I’m a director of an exclusive real estate investment company, sourcing lucrative investment opportunities across Costa Rica comprising of premium properties and sustainable development prospects for international and local clients. Would your clients be interested in this model?”

Jason Hartman: Costa Rica, we have looked at it several times. We have people calling us constantly pitching Costa Rica product and I think we kind of missed the boat on Costa Rica. I think ten years ago, 15 years ago Costa Rica was probably a great deal. We’ve certainly considered it. I was in Panama about two years ago I guess it was, maybe two and a half now – time flies. And I looked at properties there and I thought Panama had some decent prospects. I think Costa Rica – a lot of people have come in there and it’s kind of been bid up a lot.

The other thing is a lot of these properties that are being recommended in these areas are really resort properties. And right now, we’re not too keen on resort properties. We like bread and butter rental type properties. So I will be glad to listen to what you say, take a look at it. But again, we’re not likely going to be interested in Costa Rica property right now.

Brittney: Next question is from Mike from Lufkin, Texas. Actually, it’s more of a comment. “Great stuff! Changed my whole investing strategy,” when referring to your Creating Wealth show.

Jason Hartman: Excellent. Well, thank you very much. We’ll keep up the good work for you. And by the way, I have to mention to all our listeners, Brittney just booked a big name guest, who’s coming on the show soon. Robert Kiyosaki, author of The Rich Dad series. So I’ll be interviewing him soon. And by the way, if any of you listeners have any questions that you’d like me to ask our guests, you know, that’s a good idea, Brittney. We should kind of tell them who the guests are coming up and if you have questions – we’re also trying to get Ron Paul on the show, Mike Huckabee and several politicians and thought and opinion leaders in the financial world. Chuck Norris I know you were working on. And he says, “No interviews until next year.” So, we’ll get him next year. But if you have questions for Robert Kiyosaki you’d like me to ask, just go to www.JasonHartman.com and click on the “Ask Jason” and say, “Hey, Jason – here’s a question I’d like you to ask Robert Kiyosaki.” And I’ll be glad to ask.

Brittney: This next question is from David from Illinois. He is referring the Mobile Home University Boot Camp that we had offered as one of our events on our website. He made a statement saying that he made a couple attempts to register, but has been unsuccessful.

Jason Hartman: Yes! Sorry about that. We took it off the website because Corey who was on Show No. 99, I believe, postponed the boot camp because he’s got some other stuff going on with his business partner and the attendance wasn’t super hot. He had several people register, but it wasn’t really enough to do the whole boot camp. So what he asked me to offer to any one who’s interested – and this might actually be more convenient for you; it’s certainly less expensive – is the Boot Camp in a Box, which is a home study course that he offers. It’s $997 and I think the boot camp was around $2,700. So it’s less expensive, and they will ship out all the materials to you and go ahead and get you that.

And also there’s even a better benefit. They will apply the price of the home study course, the $997, toward the next boot camp. So when they do have the boot camp, you’ll actually get it for a lot less money, plus you’ll have the boot camp in a box home study course. So, if you’re interested in that, just give one of our investment counselors here a call and we’ll go ahead and get that order processed for you; (714) 820-4200. We don’t have it on the website at the moment at www.JasonHartman.com, but we will get it up there as well.

Brittney: The next question is from Pat from La Palma, California.

Jason Hartman: Right here in Orange County.

Brittney: Pat says, “Whenever I get a chance, I tell my friends, associates, etc, about your program.”

Jason Hartman: Well, thanks. Hey, you know everybody listening, do your friends a favour, do your enemies a favour – nothing really annoys them more than when you do them a favour, if they’re your enemy. See? They say “Forgive your enemies because it’s really annoying to them.” That’s a good quote I saw the other day. Thank you for referring people. You know, refer people to the show. I’m glad you like it. We want more listeners. Let’s expand this thinking and let’s get back at the crooks on Wall Street and make sure that we move as much money into direct investment of solid, sustainable income properties as possible. So please tell your friends and family. Tell everybody about the show and get them listening. Thanks so much for your support and spreading the good word.

Brittney: Last question is from Steven from San Diego. Steven’s referring to the San Diego Union Tribune in his question, stating that, “Housing prices were 21 percent undervalued in this article. With the high unemployment and lower wages that I see around in San Diego, I’m not sure I agree with this. Can you comment on this article? Do you continue to believe that it will be a long time before Southern California becomes a good investment market?”

Jason Hartman: You know what? I think that’s a mixed bag. I’m getting close to calling a bottom, believe it or not. Not in time am I getting close to that, but I think it is probably getting moderately safe. I’m not going to say safe to say, but moderately safe to say that if we lose another 10 percent in value, we’re bumping on the bottom. Okay? And I think we are getting close in some Southern California markets. I think we’re getting close in some other markets nationwide. There are a lot of markets that we have not looked at for a while that are getting interesting to us.

Brittney and myself are both following up and looking and making new contacts in these markets and doing new surveys of the markets. So you’re going to see us being area agnostic. Start to recommend some properties somewhat soon in California, Arizona, and I know we have not done that for a long, long, long time. But these markets have been pretty darn beat up and they’re getting interesting again.

And you know what we say is why take the risk? We’ve got a whole nation out there to look at properties. We’ve got a turnkey program where you can easily manage your managers who manage your properties from a distance. And we just want you to be in the best place because the old saying is, “All real estate is local.” So don’t put yourself in a position where you have to invest near where you live because you may not live in the right place at the right time. So we want to always be looking at the very best markets at the right time. So we are considering a few opportunities in California. I don’t think it’s time yet, but I will say that the time is drawing nearer. And we monitor that situation every single day, frankly. We talk to people about it every day.

So stay on the look out for our offerings in new markets because they are coming up. And believe me we are thinking about it. We’re area agnostic. So Brittney, thank you so much for helping me out today on the show and you know, sorry. I thought you were a couple years older than you were. I actually knew that, but I don’t know why. I think I was thinking of Sara, that’s why.

Brittney: Maybe. Sara or Jenna is our new investment counselor.

Jason Hartman: Oh, yes. They’re all the 25, 26-year-olds. And by the way, I’ve got to say something about your generation. I’m pretty impressed. You guys are smart. You’re technologically savvy and a lot of the Gen-Y employees I’ve been very pleased with. You know a lot of people kind of say Gen-Y is sort of a slacker generation. I don’t think so.

Brittney: You just hire the quality ones.

Jason Hartman: I hire the good ones, yeah. Exactly. Do you have any slacker friends?

Brittney: They’re out there.

Jason Hartman: They’re out there, okay. But you’re definitely not a slacker so keep up the good work and thank you.

Brittney: You are who you associate with, right?

Jason Hartman: Well, there you go. Yes and you are who you pretend to be. That’s another good quote. And we become what we think about. There you go.

Brittney: And we’re done.

Jason Hartman: Okay, enough of this waxing philosophical. Okay, let’s get into our guests. Do we have time? You know what? I think we might be able to fit them both in. We’re going to leave that up to the editor. So here is Joel talking about Property Tracker and about the new Property Tracker application for the iPhone. This is pretty cool. You’ll want to listen in. Even if you don’t have an iPhone, you’ll learn some stuff about evaluating properties. And time permitting, we’ll have Jeff Cronrod with the American Apartment Owners Association talking about rental properties in different markets and tenant screening and so forth. So let’s listen in and we will see you on the next show.

Interview with Joel – Property Tracker for iPhone

Jason Hartman: It’s my pleasure to welcome Joel to the show. He’s been on before and he’s the developer of a fantastic software tool called Property Tracker.com and a fantastic new adjunct to Property Tracker.com which is the iPhone app. Now I don’t know if I’ve told all of you listeners lately, but there are a few things in life that I really, really love and one of them is my iPhone. And Property Tracker now has an iPhone application, so that’s another handy tool we’re going to talk about today. Joel, welcome.

Joel: Thanks, Jason. It’s great to be here.

Jason Hartman: Give us a little background real quickly if you would.

Joel: Well, my background is actually in aerospace engineering. I spent eight years designing unmanned airplanes and then in 2002 my wife and I started investing in real estate and we currently own about 15 investment properties. So when we first started investing, I bought a bunch of software and it was all pretty lousy, so I started making my own spreadsheets to analyze properties. And then I started sharing them with my friends. They gave me some feedback and wanted updates. So I turned it into a business and started Property Tracker.com in 2004.

Jason Hartman: What’s really nice about your software program, or your application I should say, it’s a web-based product, which is great in so many ways – is that you really are doing this. And this grew out of a personal need.

Joel: Absolutely, yeah.

Jason Hartman: Rather than someone who is just trying to see a market and see a business opportunity, which is fine and dandy, but you really use this yourself and developed it from your own needs for the small to medium size investor that is investing in properties usually in diverse markets all over the U.S.A. And I know our investment philosophies mesh quite well, too. And it’s just a handy, handy little program. I mean I’ve used it for – I don’t know – four, five years now. Five years I guess and really love it. So tell us more.

Joel: Yeah. Thanks. So what I saw when I was buying the software off the shelf back in ’04 was a lot of stuff was either designed for people that manage large apartment complexes and it’s overly complicated. It takes a week to learn and it’s expensive. Or there are a lot of these relatively cheap spreadsheets out there, but a lot of those don’t really go into a lot of the detail that you’d like to see and a lot of them either evaluate potential properties or they’re book keeping programs like Quicken or Quick Books.

Jason Hartman: We have a show on Best Practices in Property Management and we have another one on Managing your Managers, another show, and I think it’s somewhere in like the ’30’s, in those numbers. We talk about how you need Property Tracker for really two purposes – evaluating your investments and seeing the potential from them and doing projections and so forth. And then on the other side of that program is the tracking side as the name would imply, where you really – it keeps you organized. It does a lot of your tax functions. And Joel, as we both know, real estate, or income property I should say, is the most tax favored asset class in America. So it helps do that and kind of tracks them and stuff. But you also need a book keeping program. These are not competing programs. A lot of people think they are. They think, “Oh, you know, I don’t need Property Tracker because I use Quick Books, or Quicken, or something like that.”

Joel: I use Quicken along with Property Tracker.

Jason Hartman: Yeah, they don’t do the same thing.

Joel: Right. The way I look at it is Quicken is good at capturing the raw data – the income and the expenses on your property. But Property Tracker helps you make smart management decisions with that data. So, for example, in our detailed Tracker Report, you can look at an income analysis, a loan analysis, and a sale analysis. So at any time I can look at my whole portfolio of properties and say, “Okay, I should hold this one for another couple of years. I should do a cash-out refinance on this one. And maybe I should sell this other one and do 1031 Exchange.”

Jason Hartman: Yeah that’s great. Good stuff. Tell us a little bit more about the Property Tracker Program. And then I want to jump because we have had you on the show a long time ago. Now the program has developed a lot since then. And you’ve added so many great features to it, which I know you’ll be demonstrating tomorrow as sort of the second speaker to kick off Masters Weekend. But I want to jump at through that to the iPhone app. And that’s really what I want to make the bulk of this show on.

Joel: Yeah. Like Jason said, the Property Tracker.com web based service has two components. There’s the Property Evaluator, which helps you evaluate potential investment properties before you buy to find the best deal. And then there’s the Property Tracker tool which helps you track the properties you already own. So on the evaluator side, it’s pretty user friendly. You just enter some basic information like the purchase price, square footage, and rental income, and the software creates some performance projections to show you how the property is going to perform. You can see things like cash flow, cap rate, and return on investment, and a one-year projection and a multi-year projection. And the bottom line is you can see a true apples-to-apples comparison between properties, and that takes the guess work out of finding the best deal.

Jason Hartman: Yeah. I absolutely agree. You know, Joel, since you mentioned cap rate and return on investment, I’d like to just talk about that for a moment. Commercial real estate people always talk cap rate, cap rate, cap rate.

Joel: Right.

Jason Hartman: And that’s basically a measure of the property exclusive of financing. And one of the things that make the small investment side versus the large institutional investment side so great from an opportunity standpoint and a wealth creation standpoint is that the financing is so good.

Joel: Right.

Jason Hartman: Even now. Even in the midst of the mortgage meltdown as they say-

Joel: Oh, the interest rates are the best they’ve ever been.

Jason Hartman: Not just that though, you know – the ability to obtain financing still compared to many other things is relatively easy. And I know I’m saying that at a time when it’s much harder than it was two years ago, for sure.

Joel: Right.

Jason Hartman: But the down payments are lower. You can get fixed-rate financing for three or four decades, which on many commercial properties you don’t get this kind of opportunity. So I think it’s really most important to look at return on investment.

Joel: Right.

Jason Hartman: To me, that is the primary metric when investing. It’s not cap rate. And you know I get these people that come in sometimes to our events and you can kind of tell by how they talk, they view themselves as very “sophisticated” people. “I do commercial real estate or whatever.” Right? Tell us about the difference if you can contrast those two.

Joel: Yeah, well in the Property Evaluator analysis, it actually takes into effect the cash flow on the property. So that’s the most basic thing that people understand when they look at real estate, and a typical real estate agent can show you how it cash flows. But when you buy a stock, you wouldn’t buy a stock just for a dividend, which is like the cash flow. You also buy it for the capital gain, which in real estate is like the appreciation.

Jason Hartman: Right.

Joel: So we really take the cash flow plus appreciation plus principal pay-down – so, you know if you have an amortizing loan, part of that will be principal pay down which increases your equity over time. So when you add all three of those together, you get what’s called the gross equity income. And that’s truly the bottom line return on your property. And that would be in a stock like having dividend plus capital gain. So you own it for those two reasons.

Jason Hartman: So these commercial real estate investors, they’re excluding financing and they’re excluding appreciation potential as well, right?

Joel: Yeah. So the cap rate is kind of overly simplistic in that respect. And the reason they do it is a commercial property is judged based on the income it produces. So the price is a function of the income, whereas, in single family homes to four-plexes, the price is a function of comparable sales in that neighborhood.

Jason Hartman: Which is one of the things I really like about the small investment side is that it’s more imperfect.

Joel: Right.

Jason Hartman: And the imperfection brings the opportunity because you can add value in all sorts of ways. And you know, frankly, you can just get lucky and you can get someone who just has to have this one particular house. And they may act more emotionally than logically and that will create an opportunity. And so it creates an opportunity on the buy side and on the sell side sometimes.

Joel: Right. Yeah. So in Property Evaluator, we take that gross equity income which is your bottom line return and we divide that by you total cash invested when you bought the property, so that’s your return on investment. And that’s really the best bottom line indicator of how these different properties compare with each other.

Jason Hartman: Excellent. Well tell us more about Property Tracker before we jump into the iPhone app.

Joel: Yeah, so the Tracker side is a tool that helps you stay organized and track the performance of the properties you already own. It shows you some financial metrics, cash flow, return on investment, but now they’re based on the actual income and expenses for that property. So every month you just enter your income and expenses into Property Tracker and it takes care of the rest. Another example is that at the end of the year you can just push a button and it generates your Schedule E and your Schedule of Depreciation. It can also generate a Schedule of Real Estate Owned for your loan applications. You know when you have a lot of properties it becomes more difficult to fill out that loan application because the lender wants to know how much each property is worth, what the loan balance is. And normally, you’re digging through file folders to figure all this out.

Jason Hartman: Right.

Joel: On Property Tracker you just click a button and it’s done and you can just email or fax it to your lender.

Jason Hartman: Yeah, it makes it so easy. That’s great.

Joel: And like I said before, it’s really kind of your instrument panel for your properties. It helps you make the smarter management decisions like whether it’s better to hold on to it, do a cash-out refinance, or sell it.

Jason Hartman: Any more we want to know about Property Tracker and Property Evaluator? I mean it’s called Property Tracker, but there are really the two sides to it-

Joel: Right.

Jason Hartman: -the Evaluator and the Tracker side – before we jump on to the-

Joel: Yeah. Well, the last thing is price – it’s $19.95 a month, or $199 a year. And that’s a discounted rate for Platinum members. So go to www.PropertyTracker.com/Platinum to get that rate.

Jason Hartman: And easier to remember, just go to www.JasonHartman.com and down at the bottom of each page is the Property Tracker logo. You can just click on that – it has the link for you.

Jeff: Yeah. So that’s about it for the web-based service. And you can use it on a Mac or a PC as long as you have an internet connection.

Jason Hartman: Excellent and it’s always being updated because it’s all web-based.

Joel: Right.

Jason Hartman: You know, a lot of people – sometimes I hear, and I want you to address this on the show, if you would, Joel? They object and they say, “You know, I don’t want to pay a monthly fee. I want the software right on my hard drive.”

Joel: Yeah.

Jason Hartman: Do you want to address that for a moment? Because I think one of the great things is that it’s constantly being updated. You don’t even tell people. Sometimes I just log on to my account-

Joel: Yeah. There are actually a lot of advantages.

Jason Hartman: -and I see there’s all these updates going on and all this innovation. I don’t have to pay for upgrades or anything like that.

Joel: Yeah. So you’re always using the latest version, which is nice. And if a bug ever pops up, we can usually fix it within an hour. You don’t have to worry about backing up your data; it’s always backed up on our servers. So, you know, a lot of people when I ask them, “How often do you back up your hard drive at home?” a lot of them say, “Never.” So if you lost that computer, you’d be losing all of your bookkeeping information.

Some of the other neat things we have are online document storage.

Jason Hartman: Oh, that’s a great feature.

Joel: So for example, scan in a copy of all of my closing documents. Store it as a PDF, in my Property Tracker account. Only I can access it through my user name and password, so it’s secure. And that’s a great off-site storage place. If your house ever burned down, or you got flooded out, like the people in New Orleans, you would have a way to retrieve all of your important real estate documents.

Jason Hartman: Good stuff. So the iPhone – one of the biggest advances in history, I think.

Joel: Yeah. It’s amazing.

Jason Hartman: And it’s really revolutionized my life. I’m not kidding, folks. The iPhone is just such a handy device. I’ve got all my show content there. I’ve got all my music. I’ve got websites. I’ve got applications and just so many tools. And now I’ve got the Property Tracker iPhone application.

Joel: Yeah. So, Jason beat me to the iPhone trend. He had one a lot longer than I did. But I finally bought one when the 3G came out. I waited for the second generation and immediately when I got it, I was just blown away – like Jason said with the user interface and the convenience of it. And when Steve Jobs was introducing it, he called it, “having the internet in your pocket.” And the way I saw it with my Property Evaluator tool is, “Man, wouldn’t it be great if you had property analysis in your pocket?” So I immediately started developing a version of Property Evaluator for the iPhone. And the idea is, when you’re driving around looking at properties, you can enter a few things into your iPhone and create a complete property analysis right there in your hand. And you can even take a picture with your iPhone and store it with the property.

Jason Hartman: Excellent. Tell us more.

Joel: After we released version 1.0 around Thanksgiving, last fall, the most requested feature we had from people is, “This is great to have all this on my phone, but what if I want to send this projection out to one of my clients?” A lot of real estate agents are using it, for example. So we added that feature in January and now you can email a copy of the performance projections to your clients as a beautifully-formatted PDF file directly from your phone. And a lot of individual investors are using this feature to email a PDF to their investment partner or their lender.

Jason Hartman: And you can also email that copy to yourself. So if you’re out in the field, you can just send it right over to yourself.

Joel: Right.

Jason Hartman: That’s a nice feature too, or your CPA or investment advisor, whatever.

Joel: Right. And so it’s been a pretty good success so far. We’ve sold about 3,000 copies as of this week, which is far better than my initial expectations. And it’s just growing every week with the number of iPhones that are being sold by Apple. And it also works on the iPod Touch by the way. So even if you have another cell phone or you don’t want to switch carriers, you can get an iPod Touch which is just like the iPhone but without the phone. And that will connect with wireless networks as well. So I’ve gotten a lot of great feedback from people. For me, one of the most gratifying things about writing software is getting an email from a customer saying how the software really helped him out. So, I’ll read a couple of them to you.

Here’s one from John Applewhite, who’s a real estate broker. He says, “Your program has helped me immensely. I’m about to sell a warehouse property because of it. Thanks.”

Jason Hartman: That’s great! Wow.

Joel: And then, so here’s another one from this guy named Frank Saldana, who’s an investor and attorney. He says, “I bought three houses last week and Property Evaluator really helped in analyzing different scenarios during the negotiations. It also helped the bank in assessing properties for the loans. We impressed the people we were negotiating with and convinced them to accept aggressive purchase prices based on the cash flow scenarios included in the PDF projections. Thanks again, and keep up the good work.”

Jason Hartman: Yeah, you know, one of the things I really like about this program, whether it be the web-based application or the iPhone app, is that it really makes it objective. You start making investment decisions on a rational, objective basis. You compare apples to apples. You stop looking, “Oh, gee that’s a really nice property.” Or, “It’s in a great location.” Which, you know, those are all things you want to consider of course, but you really want to look at it on a numbers basis. The vast majority of my properties around the country and I’ve got properties in 11 states and 17 cities. I’ve never seen them. I may have owned them for four years now and I’ve never been to them, you know?

Joel: Absolutely. Yeah.

Jason Hartman: And sometimes I go to the city and I don’t even bother to go look at my property. That may sound careless or crazy, but when I buy stock in a company, Joel, I don’t go to the headquarters and interview the people. That would be good if you could do it. Not that it’d tell you anything because a lot of people interviewed Bernie Madoff and the Enron people and yeah, Stanford – the guy with those CD’s, you know? And all these rip-offs there are just scams everywhere. As long as I’m getting my checks and I’m getting my tax benefits, and I’m keeping track of the market and what’s going on with that property, I just do it right from my computer screen.

Joel: Yeah, that’s a good point.

Jason Hartman: I mean, it’s very objective. It’s just an investment. It’s just dollars and cents.

Joel: Yeah, a lot of people get emotional when it comes to real estate as an investment. But really it is a numbers game and if you’re able to process the numbers better than the next guy, you’re going to have a significant advantage.

Jason Hartman: I agree. You’ll definitely have a leg up on them because you’re looking at it objectively and they’re looking at it less objectively or I should say emotionally. Tell us a little bit about fees for this – for the iPhone app. How much does it cost?

Joel: The Property Tracker web-based service is a monthly on-line service. But the iPhone app is just a one-time fee.

Jason Hartman: Can you use one without the other?

Joel: Yeah. They’re both independent.

Jason Hartman: Okay.

Joel: In the future, we’ll probably make them sync up with each other. So you can enter a property in your iPhone and then upload it to your Property Tracker account. But that’s further down the road.

Jason Hartman: Yeah, great. So this is a one-time charge when you buy the iPhone application. How much is it?

Joel: Normally it’s $9.99 – that’s nine dollars and ninety-nine cents.

Jason Hartman: Yeah. Not nine hundred and ninety-nine dollars.

Joel: And right now it’s on sale for $4.99, so-

Jason Hartman: So, less than $5?

Joel: Right. So, it’s a pretty good deal.

Jason Hartman: And see, even with this inflation that’s coming, this is quite a good deal.

Joel: Yeah.

Jason Hartman: Good stuff. How do listeners buy a copy?

Joel: So you can just go to the App Store, either within iTunes or on your iPhone, and search for “Property Evaluator”. And you can get more information by going to www.PropertyTracker.com/iPhone and there you’ll see some screen shots, a quick tutorial, and there’s a five minute video demo that gives you a good overview of the features.

Jason Hartman: Excellent. Well, Joel, thanks so much for being with us and happy investing.

Jeff: All right, it’s great to be here – thanks, Jason.

Interview with Jeff Cronrod, American Apartment Owners Association:

Jason Hartman: It’s my pleasure to welcome Jeff Cronrod to the show. Jeff will be talking to us today in two capacities – one as a board member for the American Apartment Owners Association and also as the Enforcer, who has got vast experience in collections. So, you want to make sure you don’t have deadbeat tenants out there. Make sure you screen them well. And you’ll learn a lot from Jeff today on that subject. Jeff, welcome to the show.

Jeff: Thank you, Jason.

Jason Hartman: Let’s talk a little bit about the landscape of the apartment world and the income property world if we can. Based on your experience and your knowledge, what areas around the United States look prime for good investments nowadays?

Jeff: There are several parts throughout the country. Certainly the southeast has been looking very strong. There’s a lot of opportunity, especially perhaps in Florida. We’re seeing some in Las Vegas. Some parts of even California, I’m seeing some opportunity maybe with single family or smaller buildings that will be coming up soon. There are probably pockets all throughout the country that are experiencing some opportunity in terms of lower prices, higher cap rates. Some of them might be a problem in terms of financing of course, but I guess that’s a different subject.

Jason Hartman: Yeah, absolutely. Well, now that prices are softening a bit that creates a lot of opportunity for investors. And you know, Jeff, the demographics coming at the apartment-owning world from the landlord side now, look pretty darn good. I mean Generation Y is entering their prime renting years and it looks like for the next decade or so we’ve got a pretty good demographic coming at the apartment world. Would you agree with that?

Jeff: Yes, definitely. It’s all part of the change that we’re seeing.

Jason Hartman: How are owners preparing for that, or adjusting to that?

Jeff: Well, again it’s going to vary. We’re seeing all sorts of issues. The American Apartment Association caters to a lot of folks that are smaller landlords. They might own just a home or a couple single family homes and they certainly have their share of issues right now – both in terms of shifting demographics as well as a greater loss of liquidity perhaps than they thought they’d have, inability to refinance out – that kind of thing. So that’s causing a little more grief. We’re hearing through the American Apartment Owners Association some of those issues. But all in all I think that they’re recognizing that there are some opportunities there as well. Some right in their own back yard. We have some owners, some are members, asking more and more about to learn about foreclosures – how to buy them and how to stay out of them. And they’re recognizing those sorts of opportunities.

Jason Hartman: So, you have about 140,000 members I believe in your Association. Are those members concentrated in any certain area? Are those members sort of investing in any certain area? You may not even know this, I’m not sure, but I just thought I’d throw the question out there.

Jeff: Well, I know the demographics on our membership are pretty much similar to the general population in as much as New York, California, Florida, Texas – the more populated states we have more members. But we also know that most of our members tend to invest close to home – wherever they live. Not all of them, certainly, but they tend to feel more comfortable investing in a property that’s in their city or close by. A lot of them are very hands-on management folks that drive over the property regularly, collect the rents, do the repairs themselves. They’re real roll-up-the-sleeves kind of people and get it done. Not all of them, but we do see that a lot.

Jason Hartman: Yeah, this is the landlord who’s out there painting their building in between tenants. Maybe they’ve rented the carpet steamer, or they probably own one, and they’re cleaning the carpets and stuff like that. What would you say, though, for people that are looking to diversify? I mean if they live in the right area, I think that’s excellent advice. But maybe they live in a market that’s really over-valued, still falling in value – what I want to actually get to also, Jeff is since you’re in the business, your day time business is the collection and screening business, maybe you have some knowledge of where the better and inferior quality tenants are

Jeff: We always want to be careful; I mean every town has their good and bad areas. And the key really there is to properly screen. There isn’t any particular city I think that you want to avoid. You want to really make sure that you are diligent in your screening efforts. And we are forever dealing with landlords that are just learning the business, that don’t understand the value of properly screening a tenant, and spending a few dollars upfront can save you thousands, if not tens of thousands later in lost rent and in attorney’s fees to try to get somebody out that you just didn’t do your best in checking out to begin with. So we really emphasize tenant screening is very important.

Jason Hartman: Yeah. Very good point. So since we’re on that subject, let’s talk about it. I’ve got a few more questions for you on the general market and the financing outlook and so forth, but tell us about screening. I mean how does a landlord properly screen? Or how do they get their property manager to properly screen people? What are the different sorts of levels of screening?

Jeff: Well, that’s a show onto itself, Jason. But let me skinny it up for you. We offer tenant screening, of course, through the American Apartment Owners Association. We also have a company called Tenant Alert that also offers tenant screening, and at both levels the minimum we would always recommend is to get a credit report on the prospective tenant. But in addition to that, you can get landlord tenant and eviction records to get their history as to how good a tenant they’ve been the past. And even we encourage them to run criminal background reports. A criminal background check can be real helpful, especially if there are issues of drug abuse or domestic violence, or even any sort of vandalism to property – all that is really helpful in knowing who are renting. The more information you have going in the better you’re going to be at keeping the right people in the building and protecting your property.

And beyond that, you really want to spend some time training your managers as to be intuitive, to look at the application and sort of be a detective. I mean, I could tell you stories for days about things that people get away with and people with bad credit, for example, might use their child’s Social Security number, because they know they won’t be able to pass. And they might use the Social Security number of a three or four year old child. It’s pretty simple for a manager to see these things and check them out. We get a lot of fake ID’s, a lot of fake drivers’ licenses being used and again, all these things are easy to check out. But they have to be somewhat intuitive and curious. Sometimes managers are a little too anxious to please the owner and just get that apartment rented and tend to not be real thorough. So it’s important that they do that.

The other thing we always encourage people to do is ask for the previous month’s rent receipt as opposed to calling the prior landlord. If you call the prior landlord, and the tenant’s not a great tenant, the landlord may not be real forthright. He may not be honest because he’s anxious for that guy to leave. But if you ask for a copy of the rent receipt, at least you know they’re current because eviction data that we’re pulling may not be totally up to date. So if somebody’s just a week or two behind, you’re going to want to know that. So always ask for the most current rent receipt.

And there’s lots other things. You want to see a copy of their W2 Form confirming they really do work where they say they’re going to work, confirm that they really bank where they say they bank and so on. So there’s a whole checklist that we give out to our members of the American Apartment Owners Association to know how to do that.

Jason Hartman: We have an annual educational event and we just wrapped it up yesterday, actually- I’m sorry; not annual, semi-annual, it’s called the Masters Weekend, and one of our speakers there talked about identity theft and how people rent properties under assumed names with fake IDs. And how do you detect this type of thing? Is it a matter of matching up the documents? Is it a matter of looking more closely at their driver’s license to make sure it’s not a fake driver’s license? Or is it all things?

Jeff: Again, being intuitive, we call it cross-checking documents. One of the things we encourage our members to do is always run what we call a previous address history. And so if the applicant – and basically, it’ll go up to 10 years back into all their addresses. And so if the applicant has had five addresses and they’re all in the State of California, but the Social Security number that they’re providing indicates that they’re from Idaho, that’s a big red flag. The first three digits of every Social Security number tell you what state it came from. And so that’s a very simple cross-check. Or if they give you a driver’s license from Wyoming and their Social Security number is from Idaho and their address history is California, another red flag. I mean it’s a matter of there should be some consistency. It should all be logical. All the pieces of the puzzle should fit.

Jason Hartman: Society is so mobile nowadays though, so you know, it’s just really you’ve got to check the time. I mean they could be from Idaho and have that Social Security number and have their stuff in California, but it’s just a matter of really time, if they’ve lived here for ten years right?

Jeff: A lot of it’s logical. Again, if someone is standing in front of you who appears to be in his 50’s, but the driver’s license shows a date of birth of 1980, you might want to think twice.

Jason Hartman: Yeah. Good point.

Jeff: We see that – we deal with fraud all day long on the collections side of our company, Rent Recovery Service. And we see that constantly, where the dates are completely out of whack or the pictures are wrong. Even the race is wrong. We have had people apply that are Caucasian and the picture is not and vice versa. It’s amazing that people just don’t pay attention. It’s classic work. People just aren’t paying attention.

Jason Hartman: Well, that’s certainly the way they’ve been underwriting loans the last few years.

Jeff: Same problem. Yeah.

Jason Hartman: No question. Hey, talking a little bit about financing, actually, what’s going on? You know the last six months we have been through turmoil after turmoil and it has just been a crazy time. I mean, historically, epically crazy. What’s going on in the world of financing apartment buildings?

Jeff: American Apartment Owners Association offers up a lot of mortgage help and to a certain extent, it’s going to vary a little bit by location and the size of the deal, but generally speaking, I think values are a little bit lower, cap rate is a little bit higher, and financing has certainly become more difficult to get. But I’d say it’s prohibitive, but available. We’re seeing more equity being required by lenders. They’re certainly more careful in checking out the borrower and probably more than anything making sure the building is going to be able to support the debt. They’re still looking at the credit-worthiness of the borrower. But they’re really looking more carefully at the building more so than they used to. Everyone’s being more cautious. But we’re finding in most parts of the country there’s still – money is still available.

Jason Hartman: Yeah. And what type of money? I mean it looks like the conduit lending is pretty much gone. Is it all sort of local banks loaning money in their local market? Are brokers doing the business? Any thoughts there as to where the money is coming from?

Jeff: Well, again, I know we have some brokers listed with us that are very eagerly helping people and are closing some loans. So, I know that’s happening. I’m not too involved in those loans myself to tell you if they’re coming from local lenders or coming from other forms. I mean I know construction lending is even being done on some new construction in a couple parts of the country. I’ve heard of some loans going through there. And in fact, there was an article in Apartment Finance I think last month, talking about construction lending for apartments for new construction. So we’re seeing some loosening up, some available money. But I think they’re looking at 50 to 60 percent loan to value, which definitely is conservative.

Jason Hartman: Yeah. Well, that’s for construction, though, right? I mean not for an existing building that is stabilized.

Jeff: Well, existing I think they’re going a little better, obviously. But they’re looking more carefully at the building, the rent rolls, the condition of the property, the overall neighborhood. And more and more everyone is concerned with foreclosures that might be coming down the pike in that neighborhood and make sure that that doesn’t further lower the value of the building that’s being considered for financing. I mean, everybody is a little concerned about value going even lower.

Jason Hartman: And of course that all depends on the geography and what that market’s doing.

Jeff: Of course. Right.

Jason Hartman: What are some of the differences, Jeff, in terms of apartment investing versus residential versus retail versus office versus industrial? Why apartments?

Jeff: I’ve owned a few office buildings and a couple thousand apartment units and a little bit of industrial, so I’ve sort of had my fingers in those different pies over the years. Clearly, if you’re looking at commercial property, the key there is to have a very strong tenant. And with any of these, it’s being in a good location, being in the right neighborhood of the right town, at the right time. But you need a strong tenant. Whereas with, at least for me, I always viewed residential income property – apartments, there’s some diversification there. You have a larger group of people that you’re relying on, so if you do have one vacancy out of a 30 or 40-unit building, it’s not going to hurt you too bad.

And people are always moving around, so there’s always that movement. And if you can provide a better unit at a fair price, you can hopefully compete in the neighborhood. I mean I’ve always done well with my apartments. And certainly, through the American Apartment Owners Association, even the Fidelity clients, we’re always advising them to do the same. And again, be careful who you screen and it all helps the bottom line.

Jason Hartman: With the issue of the background checks, you mentioned some good red flags there and I appreciate that. Do you deal on the collections side at all? So say you have or haven’t checked someone out – who knows? But now you have a problem. The tenant has moved. They owe you money. They owe you back rent. Maybe they’ve beat the place up a little bit. And you’ve got to collect money from them. Do you deal with that side of it at all?

Jeff: Yes. Fidelity Information which has a division called Rent Recovery Service. Rent Recovery Service started in 1988, so we’re in our 21st year. And we’re the largest landlord collection agency in the country. Essentially, that is what we do. We take delinquent tenants that haven’t paid, that either skipped out, or there’s a judgment against them, and we go after them. We’re pretty relentless with that and pretty successful. We represent some of the largest management companies in the country as well as tens of thousands of smaller owners – helping them collect their delinquent rent.

Jason Hartman: One of the things about looking at filings and so forth when doing background checks is that every local area and every state is really different, isn’t it?

Jeff: Yes. And it’s difficult to get complete information all the time. Again, all the more important that the person on the frontline, be it the owner or the manager, really be intuitive and cross-check documents because when you pull a report from a tenant screening company, be it us or someone else, they’re never complete. It’s sort of one tool in the tool box, but it’s not the entire picture. We always tell our members not to rely solely on any one thing. But yes, eviction records, although they’re real helpful, they’re never complete.

Jason Hartman: Yeah, so when someone runs a background check – say they’re in Dallas, Texas, are you looking at that person, you’re not looking at their nationwide. They could have just been evicted for example in Houston, would it show up within the same state, or it depends?

Jeff: You can order either a statewide or a nationwide eviction search. They’re both available.

Jason Hartman: And it really checks every county – I guess the County Recorder’s office, right?

Jeff: Take a step back because there are two types. First of all, there are a handful of counties around the country that don’t participate at all – it’s not public information. And I don’t know them off the top of my head, but there are probably about a dozen counties around the country that you can’t get the information. So, again, it’s not a perfect record. That’s number one.

Number two, the only thing you’re really going to pick up in court records is evictions. And so we have millions of tenants who just skip out owing rent and landlords who do nothing about it. They don’t go to court. They’re happy to get the unit back. They eat the loss and those records you’re able to get from collection agencies, from Rent Recovery Service and some of our competitors around the country that contribute that information to databases. But again, you’re dealing with incomplete records because not every landlord shares the information when somebody skips out owing them rent or damages the unit. But the short answer to your question is you can run a statewide in Texas or you could run a nationwide.

Jason Hartman: How much does a background check cost?

Jeff: Again, it’s going to vary depending on – credit checks at AOA I believe start at around $10, as I recall. And you can spend upwards of about $25 or $30 for a complete package. And keep in mind that most states allow you to charge upwards of $30 to $35 to the tenant. So it’s not costing the landlord anything to do that.

Jason Hartman: Share some of your other wisdom with us. I mean anything specific? Take it where you want to go, just in kind of wrapping up here.

Jeff: I think there’s a lot of opportunity throughout the country for an aggressive investor who with some long-term view, whether it’s in their own neighborhood or seeking out those cities that are having significant problems, I think there’s some opportunity. We certainly through our newsletter, our blog at American Apartment Owners Association and our consultants there are always – we answer questions all day long and help our members decide where are good places to invest, go over it. We don’t give them investment advice, but we certainly will get demographics for them and get statistics for them and that sort of thing. We help them.

Jason Hartman: That’s fantastic. Good stuff. Hey, I’ve got one more question for you in terms of the collections. After someone leaves the property, they owe you money – is there a sort of a nationwide statistic generally on how much landlords are collecting? Or how often they’re collecting? And how often they’re not? And are you going to Small Claims Court for them and filing and actually getting a judgment? Or are you sort of like collecting through like just sending letters and putting it on their credit report? Can you sort of give us the spectrum there?

Jeff: Well, overall, delinquencies are up, of course, in this economy. We’re getting more files sent to us than ever before and it’s harder to collect than ever before because so many people are unemployed. Specifically, as to your question, they go in two directions. Either they send us a judgment because they’ve evicted someone; they get a judgment for remuneration – a money judgment for back rent and legal fees. And in that case, we report to the credit bureaus. We do not send letters. We do not make phone calls. We go directly after their assets and we take them. We do automobile repossessions. We do bank levies. We do wage garnishments. We do not send them a letter. We don’t give them a warning.

If there is no judgment, then we do take more traditional collection agency steps where we do send letters, make phone calls, and in some cases, we will file a lawsuit against them, if there’s something there. We have some clients we do that for. If you have a judgment, you’re about twice as likely than a non-judgment to get your money. So we always encourage our clients to get a judgment. If they’re going to get an eviction, go through the eviction process, and even if the tenant moves out in the middle – finish up with your eviction and get a money judgment.

Jason Hartman: And so do you have to serve them though to get that money judgment? Or can they have disappeared on you?

Jeff: It’s all part of the same unlawful detainer action.

Jason Hartman: Oh, okay. So they’re only served with the unlawful detainer filing initially and that can carry you all the way to a money judgment?

Jeff: Right, even if they don’t show up.

Jason Hartman: Oh, that’s great. Good because I would assume a lot of times these people just sort of disappear. Or sometimes they’re very transient, especially in really low-end apartments I would assume.

Jeff: Yes. More often than not these are default judgments. And the other thing I would always advise is list everyone on the judgment. Typically, we see a lot of roommate situations, or a boyfriend and girlfriend situations or whatever, where one will move out when the rent is current and leaving the other one there to make the rent and he can’t. But the person who has moved out is still responsible; he’s still on the lease. And so we always encourage you to name everyone you can on the judgment when you get the judgment.

Jason Hartman: Tell me about localities. And you know one of the things we look for Jeff, is we want to be dealing in areas where the regulatory environment is friendly to our cause as landlords. Places like California and New York, landlords just have such limited rights. One of the areas we really like is we like Texas. I mean you know that old saying, “Don’t mess with Texas.” I mean they can play the game as good as possible, but in 30 days they’re out of that house.

Jeff: Yeah, and Texas is what we call a debtor friendly state. So is Florida and Wyoming. Very hard to collect. They’re debtor friendly states. I mean that’s the famous OJ Simpson moving to Florida. That’s why he did it really was-

Jason Hartman: Because he had the homestead right?

Jeff: Exactly. And very hard to garnish wages in Florida and Texas.

Jason Hartman: Well, Texas doesn’t do garnishments – I know.

Jeff: That’s right. They can’t do it.

Jason Hartman: But the nice thing about Texas is at least the regulatory climate in the beginning is in your favor. That person is not going to sit there for six months, like they can in some areas, if they do bankruptcy on you and really know how to play the game.

Jeff: In terms of possession, much quicker.

Jason Hartman: Yeah.

Jeff: Yes. In terms of getting your money back, it’s tougher. We have reps both in Houston and Dallas that work for us there and as well, in Florida and we do collections there. It’s just a tougher way to go.

Jason Hartman: For our Masters Weekend, one of our property managers from Austin, Texas, was here and he’s very active in regulatory affairs and also in the Property Management Associations and so forth. He says he gets calls all the time from a tenant – he may not even be representing the owner any more, or the owner may have switched property managers, they are managing their own property, they’ve sold the property, whatever -but three, four years hence where the tenant will call them up and say, “Hey, I’m trying to buy a car and get a loan. I’m trying to buy a house and get a loan. They’re requiring me to satisfy this judgment that’s showing up on my credit report before I can do that. To whom do I write the check?”

Jeff: That’s right. We get those calls every day. All day. In fact, one of the services we have, that Rent Recovery has is a fully automated on-line reporting system so that a landlord can go on line any time he wants 24-7 and input a delinquent tenant and it gets reported directly to all three credit bureaus.

Jason Hartman: So many landlords they just kind of let their tenants off the hook and eat losses. Don’t do it.

Jeff: That’s right.

Jason Hartman: You’ve got to run your properties like a real business. And a business has got to get paid to stay in business. So, collect. I mean if these people skip out on you, get a company like Rent Recovery to go after them and get your judgment, finish the eviction process, and make it work because these judgments – what do they last for ten years? And then you can renew them I believe?

Jeff: Yes, California is ten plus ten. Most states it’s at least ten years.

Jason Hartman: And they accrue interest, right?

Jeff: Yes, they do.

Jason Hartman: So, eventually, you’re probably going to get paid. And you’re going to get paid with interest. I mean in 20 years, by golly, that tenant has got to do something with their life. I mean they’ve got to buy a car. They’ve got to buy a house some time. It’s a nice surprise gift. It may come five, six years later, but-

Jeff: Absolutely, we get those every day and people do get back on their financial feet and they do need to clean up their credit and they come back to us five, six – we’ve had them as much as 18 and 20 years later.

Jason Hartman: Wow.

Jeff: And pay the whole thing.

Jason Hartman: Excellent. Well, good stuff, Jeff. This is great wisdom. Thank you for the insights. Give us your two websites for both things that you’re involved in.

Jeff: Well, the American Apartment Owners Association is www.AmericanApartmentOwnersAssociation.org. I welcome all of your listeners to visit that site. For information on Fidelity Information, which would be Rent Recovery Service, they can go to either www.ABadTenant.com and for tenant screening they go to www.TenantAlert.com.

Jason Hartman: TenantAlert.com and ABadTenant.com – so for those of you who are using professional managers, impart some of what you heard today to your manager. Your manager may already be engaged in all the best practices, but they may not. So it’s incumbent on you to make your manager do the best they can to make sure you get paid. Jeff, thanks so much for joining us today – really appreciate it.

Jeff: My pleasure; thank you.

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Duration: 68 minutes