Announcer: Please note disclaimers at end of show. Welcome to Creating Wealth with Jason Hartman. 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 Creating Wealth, Show No. 112 – great to have you with us today. This is Jason Hartman and I want to remind all of you investors that it is rental season. Rentals are hot right now and properties are renting quickly in several markets around the country. Keep in mind that you should always be diversifying. We are in 41 markets nationwide and our particularly hot, hot markets lately have been Atlanta – we are totally sold out in Atlanta right at the moment, but we’ll have more inventory in the future. Columbia, South Carolina is of a lot of interest – student housing opportunities with high cash flow and brand new properties – that’s a really interesting development – turnkey opportunity for investors; and Phoenix, Arizona, which we were ignoring for about four and a half years. Now, we’re back in there again because prices have been cut in half, so the rent-to-value ratios or the RV ratios are very good. And the LTI, land-to-improvement ratios are also very good in Phoenix again, but they were pretty bad for quite a while there. So, it’s all a matter of diversifying and moving in and out of markets. As they make sense, you move in. When they don’t make sense, you get the heck out of there.
Our event this Saturday, August 15th is Creating Wealth in Today’s Economy, the seminar that probably 8,000 – 9,000 people have been through so far. We get great reviews on it. It’s here across the street from our office in Costa Mesa, not at our office as usual. I just wanted to mention that on the show so you don’t go to the wrong place. We are off-site at the Marriott right across the street. There is free parking in our parking lot at Platinum Properties Investor Network, and right across the street, $9.00 with validation at the Marriott. I look forward to seeing you on Saturday.
And Masters’ Weekend on October 10th and 11th. Richard Lilycrop, thank you so much for joining us all the way from England, flying out for the Masters’ Weekend. The other listeners that we have all around the world – we know we’ve got listeners in 26 countries around the world, we’d love to have you join us, whether it be from Australia, New Zealand, the Middle East, Asia, whatever. We’d love to have you out, different parts of Europe, etc. Come on out and join us for the Masters’ Weekend. Reminder to everybody, look outside your own backyard, folks. There’s a world of opportunity out there. Do not be stuck to any one market – diversify.
I know that a lot of investors have had trouble with financing, so we want to take the first part of this show and talk about two new programs that can help investors and home-owners get better financing. Even if their equity has evaporated, if they bought at the wrong time in the wrong market, there are still some opportunities through a unique refinancing program and something called the ’HASP’ program which you are about to learn about from our guest mortgage broker, Randy, with Bank of America.
Also, the second part of our interview will be an interesting talk about entrepreneurship and marketing. John Bradley Jackson is a professor at Cal State Fullerton and he joins us on the second part of today’s show with some information about his new book called “First, Best or Different: What Every Entrepreneur Needs to Know about Niche Marketing.” So again, we’ve got a big show for you today. The second part is not totally on real estate, but it is on marketing and how you can stand out and really get noticed for yourself, your product, or your service. Let’s first talk about financing and then we’ll talk about “First, Best or Different “.
Interview with Randy, Mortgage Broker with Bank of America
Jason Hartman: So, Randy, tell us a little bit about this new ’HASP’ program.
Randy: Sure, Jason. The HASP program stands for the Housing Affordability and Stability Plan. And it was a program that was just signed into law on March 4th as part of the economic rescue package that’s been evolving in front of us. You know as well as I do that most economists agree that nothing’s going to stop what’s going on in our financial markets until we can put a base underneath the housing market. And I think that when we talk about this today, I think you’re going to see there are some real legs in this type of program.
Jason Hartman: So, this is really an Obama Administration creation?
Randy: Well, you know it’s been evolving I would say over the last 18 months or so. So, certainly it started in the Bush reign and in fact, this program really goes back to when with the IndyMac seizure and the FDIC takeover and prior to that they had a program called “Hope for Homeowners”. You’re familiar with that right?
Jason Hartman: Yeah. There was a lot of news about that. It was put up to be some great thing that was going to solve everybody’s problems. But it sure didn’t seem to do that.
Randy: Yeah, it ended up being an 800 number that people called to essentially not get very far because the lenders weren’t compelled to participate in it. And frankly, back a year and a half ago, they weren’t interested in participating in it for a variety of reasons. But with the HASP program, they’re going to be compelled to participate. And it’s also a systematized process that will work not only for people who are in trouble in their mortgage and behind on their payments, but it’s also going to work for those of us who have made our mortgage payments on time, as well as those of us who own real estate investment properties, as well as vacation homes.
Jason Hartman: The typical question a lot of people have with these loan modifications is what is the lender’s incentive to modify a loan?
Randy: Okay. That’s a fair question. And I’m going to back up just a step on that because really the HASP program, also known as “Making Home Affordable” is really comprised of two elements. One is a loan modification program and that’s kind of detailed. We’ll go through that in a moment. But the other one is just a refinance program, again for those of us who have been making our mortgage payments on time. So, the question is, “What’s the incentive in doing that?” Well, if you think about it, it’s actually kind of a brilliant stimulus package because there are so many people who would love to have the ability to refinance their loan, going from a 6.5 percent loan to say a 4.5 percent rate loan today, but they just don’t have the equity in their property. So even though they have a job and even though they have good credit, they just don’t have the equity, so they can’t do it. Well, with the HASP program, they’ll be allowed to refinance their first mortgage, even if it’s 105% of the value of the property. So the incentive is to basically create cash flow really in the homes of millions of Americans.
Jason Hartman: So, but what’s in it for the lender? I mean, there was some talk about the FDIC paying lenders $1,000 or $1,500 for each loan they modified. And I sort of don’t know where that really went, or what happened to it. Maybe they’re doing that, maybe they’re not. This is becoming so convoluted and so complicated, it’s just almost impossible for any one person to really know what the heck’s going on in the new business capital of the world, Washington, DC.
Randy: Yeah, it’s like wet clay. I mean, in other words, they’ve got the framework and now they’ve got to get the details. But back to your question, “What’s the incentive?” The incentive is if you can have a stable housing market, where people can refinance, and if you can – think about it – they wrote a check to us last year for what $300, $400, $500 as a one-time rebate check. Well, now, by allowing people, who have been diligent in paying their mortgages, to refinance and save $200, $300, $400, $500 a month for good – that’s a huge stimulus package. And if it’s done properly, it really shouldn’t cost the taxpayer anything.
Jason Hartman: Right. But you’re not really answering my question though. I’m asking you what the lender’s incentive is. You’re talking about the overall economy and the government, which I agree with you. But maybe the lenders incentive is we just don’t know – I know we talked a little bit before we were recording about maybe they’re compelled to do it through the TARP program or something, whatever. Anyway, it’s not important. I was just kind of curious, but if you have any comment on that.
Randy: Well, you know part two of it would be why. In fact, we talked a little bit about this as well. If all the major lenders are going to participate in this, if they’re being compelled to-
Jason Hartman: It’s like peer pressure.
Randy: There’s peer pressure.
Jason Hartman: Yeah, right. Okay.
Randy: Market pressure.
Jason Hartman: All right, go ahead. So tell us more about it.
Randy: All right, so let’s first of all talk about the refinance program because that’s really the simplest. As I mentioned a couple of times, refinance program is going to be applicable to not only your primary residence, but it’s also going to be applicable to any rental properties you own, as well as vacation homes. And what it’s really all about is allowing you to refinance your home into today’s current interest rates, which, as you know, are at unbelievably historically low levels.
Jason Hartman: I heard a mortgage commercial this morning, and it said that they could refinance your home at like 4.7 percent, 30-year fixed. Or maybe it was 4.9, but it’s still incredible either way. And they followed it on by saying, and this is owner-occupied, of course, not investment properties, which are a little higher. But they followed it on by saying, “If you think rates are going to go lower, ask about our rate protection guarantee program.” I mean, that is unbelievable, 4.9 percent, or whatever it said in the commercial! I just couldn’t believe it. This opportunity right now to borrow cheap long term money is really historic. And folks, you’d better take advantage of this. Or you’re just going to look back in five years and think, “Why didn’t I stock up on more debt?”
Randy: Yeah, when inflation kicks in and it will kick in-
Jason Hartman: Oh, it has to kick in, there’s no question; it’s coming.
Randy: -Anybody that has a loan at these interest rates is basically going to have it paid for by inflation. It’s just going to be an automatic. So yeah, you’re absolutely right. And those rates you’re quoting – now today is what, March 27, 2009, and yes, you can get rich. You can actually get rates below 4 percent if you’re willing to pay some points up front to get it.
Jason Hartman: For a buy-down?
Randy: For a buy-down.
Jason Hartman: Yeah, this may be a good strategy, if you’re going to hold the property for a long time.
Randy: A permanent buy-down.
Jason Hartman: Yeah. That’s pretty incredible.
Randy: It really is.
Jason Hartman: I’ve done buy-downs on a lot of my properties and what I find is that it doesn’t always make sense. It depends on what’s being offered that day. So, it may make sense and the way you do that math is just look at how long it takes to pay back the buy-down. So if you spend $5,000 in extra points and points are just prepaid interest, and then the difference in the payment is $200 a month, for example, lower. Well, how many months does it take you to recoup that? In this example, 25 months. So, it may make sense to do a buy-down, which is what you’re referring to. So good point.
Randy: Yeah, and it’s a permanent buy-down. It’s not something that’s temporary. It’s for the life of the loan.
Jason Hartman: Right. So, for the next 27½ years, beyond those initial two and a half, you’re going to have that deal.
Randy: That’s right.
Jason Hartman: So, that’s phenomenal.
Randy: That’s right and they are rewarding people for paying points today. It’s a much different environment than it was even a year ago.
Jason Hartman: So, in other words, the buy-down is cheaper than it used to be?
Randy: It’s half the cost as what it used to be a year ago.
Jason Hartman: I wonder why that is.
Randy: Well, for a couple reasons – if you think about it, to have a no-point loan when a consumer comes in and gets a no-points loan, that means that somebody, some investor, is betting that they’re going to hold onto that loan for a long period of time.
Jason Hartman: And they’re betting they’re going to get paid back, which may not be a good bet.
Randy: Exactly, so now they know that if they can get people to buy-down these interest rates, these rates are so low that the probably of them wanting to refinance or refinancing out of these in a short period of time is just not there.
Jason Hartman: I think the other thing the lenders are probably thinking is they’re thinking they’ve got more money into the deal, they’ve got more skin on the game, you know that’s going to be more of an incentive to make sure the property works and they keep it long term as well.
Jason Hartman: Okay, so tell us more about the two elements, you’re talking about the refinance program?
Randy: Yeah. And just to recap on the refinance, is the other important element again is that you can finance your home without being required to have mortgage insurance up to 105 percent of the value of your property today – that’s significant.
Jason Hartman: Okay. So, if you’re in a bubble market, which is certainly a market we wouldn’t have recommended, like California, Nevada, some parts of Arizona are pretty bad.
Jason Hartman: Florida. North Eastern states – if you’re in one of those markets, you may be a lot more than 105 percent LTV, or loan to value, right? It may be even much worse than that.
Randy: That’s true.
Jason Hartman: It may be 130 percent. So, in that case, because I’m sure we have, hopefully nobody that’s invested in those areas, but a lot of listeners may own their own homes in those areas. And they may be in that situation. Not an investment property, hopefully. What can they do? They just have to put down cash for the difference?
Randy: Yeah, that’s what they would be compelled to do.
Jason Hartman: Okay.
Randy: And also, there’s no cap on the combined loan to value, so if there’s a first and a second that takes you there, the lender doesn’t care. It’s just the first mortgage can only be 105 percent.
Jason Hartman: Of loan to value? So, if the property is worth $100,000, just for round numbers, you can have a loan for $105,000?
Randy: Without being required to have mortgage insurance.
Jason Hartman: Or any additional cash in the deal.
Randy: That’s right.
Jason Hartman: Yeah. Okay good. Now, I assume you can’t do a cash-out refi?
Randy: Oh, you got that right.
Jason Hartman: We’ve already been down that road and it didn’t work so well for the lenders.
Jason Hartman: It worked great for the borrowers though. It’s funny – everybody acts like the borrowers are the ones in trouble. The borrowers are the beneficiaries of this whole fiasco.
Randy: Yeah. Of course, you wouldn’t feel that way if you watched the news. But that’s the reality of it, of course.
Jason Hartman: But the news is maligning everything. So is the government. I mean it’s just they don’t understand the big picture, obviously. Okay, so what else do we need to know about the refinance side of this program?
Randy: You do have to have good credit. You cannot have the late-
Jason Hartman: And what is good credit? You’re about to define that, but give us a FICO score if you would?
Randy: Sure and when we’re talking about FICO scores, let’s be real precise here. It’s not just FICO, because there’s an Empirica score and a Beacon score. So, it’s really the middle score – your middle score of the three different models and it’s the middle score if there’s two borrowers – a husband and wife. It will be the lowest middle of the two. Okay? So each borrower will have three scores. They have a FICO score, an Empirica score and a Beacon score – one from each of the repositories. They all have their own little models. The middle score, then we compare the two. The lower of the two becomes your score.
Jason Hartman: Okay.
Randy: Now, to answer your question, what’s a good score? It’s 720.
Jason Hartman: Right.
Randy: 720 or more.
Jason Hartman: Which has always been considered a good score.
Jason Hartman: But what I’m finding now in the mortgage market is that some of these loans where they just go down a little bit, like their credit isn’t that bad, they just got maybe a couple of little problems here and there, and they’re looking at a 680 score. Can they qualify for this program, if they’re a 680?
Randy: I really can’t answer that. I know that they cannot have one mortgage late in the past 12 months. They have to have made their payments on time to qualify for the refinance program.
Jason Hartman: Okay.
Randy: They want good borrowers that have been faithful and now they’re going to get rewarded. That’s the plan.
Jason Hartman: Okay, so finally the incentives are in alignment with good behavior. Wow, that’s a change.
Randy: Yeah, until we talk about the loan modification program.
Jason Hartman: Okay. Then we’ll find that the – it’s like the bad boys get all the chicks. It’s kind of the same deal – these loans it seems like.
Randy: Yeah. Great analogy because these bad boys are going to get a lot of chicks.
Jason Hartman: Yeah, okay.
Randy: So here’s what happens with the bad boys. Now these are the people that there will be some people that certainly bad times have fallen upon them. They’ve lost their jobs or whatever. But for whatever reason, they’re not making their mortgage payments. They’re upside down on their properties. And these properties tend to be concentrated in areas so that it’s affecting hundreds, thousands of households that are around. So this is where it really gets expensive for us as taxpayers because what’s going to happen is the lender is going to take a look at the borrower’s situation. And by the way, you still need to be able to document income. This is not a “you don’t make anything, we’re still going to give you a loan” type loan. You have to be able to document income. But what they’re going to do is they’re going to make your mortgage payment 31 percent of your documentable income.
Jason Hartman: Okay. So, if your mortgage payment is now 55 percent of your documentable income, they will reduce it to make that mortgage payment 31 percent of documentable income?
Randy: That’s correct. And they have what’s called a waterfall process to take the borrowers through a sequence of steps to get them down to that 31 percent. And the first step in that waterfall is they’re going to try and adjust the interest rate, same loan term, same loan amount that you owe today, and then try and adjust the interest rate down until they can get you to 38 percent. And by the way, they’ll take it all the way down to 2 percent interest rate.
Jason Hartman: Not zero?
Randy: Not zero.
Jason Hartman: Okay.
Randy: They’ll take you down to 2 percent.
Jason Hartman: Alright. And now will that 2 percent be for the entire remainder of the loan? Up to 30 years?
Randy: No. It’s for a period of time, five to ten years. And that-
Jason Hartman: Well, that’s still pretty darn good.
Randy: It’s real good. And so once they get you to 38 percent, then the government steps in and they’re going to subsidize the loan to get the payment down to 31 percent. So the lender steps up to the plate and says we’re going to do what we have to do. Maybe take you from 7 percent down to 5, and then if that doesn’t get you to the 31 percent, then the government is going to step in and make the difference.
Jason Hartman: You know this just – I’m getting angry as you’re telling me this.
Randy: What you can learn here.
Jason Hartman: This is so unfair to all the people that did the right thing and didn’t buy the expensive home. Now I understand there are legitimate reasons that people get into trouble like you mentioned. You can lose your job. You could have been a conservative buyer and saved money and lost your job and done everything right, had a health problem, God forbid – that’s one thing. I’m not talking about that. I’m just taking about people that went out and bought a lot more than they could afford and really ever deserved frankly. But you know what? The system rewards you to be irresponsible, so I say go ahead. I’m going to get a lot less responsible than I’ve ever been in my life because I tell you I want my bailout too.
Randy: Oh, we’re going to keep on rewarding you too, Jason.
Jason Hartman: It gets better?
Randy: Oh, gosh yes.
Jason Hartman: Okay, great. Hey, wait. On that government subsidy though – so 38 percent the lender lowers your interest rate to get it to make it so you’re spending 38 percent. And the next sort of waterfall down is 31 percent subsidized by the government. How is it subsidized? Are they cutting the principle balance, or is the government making part of the payment? Is the government paying the bank or are they paying you? What happens there?
Randy: Yeah and I want to qualify this step. This plan was signed into law 23 days ago. And it’s still a lot of wet clay. In other words, they’re still forming a lot of the ways they’re going to do things. So it looks to me as though what’s going to happen is there’ll be a note rate. The government is going to step in and subsidize the payments basically for the lender. This is where the lender is rewarded to make these loan modifications because they’re going to pay you the difference – not by reducing the loan amount yet. We’ll get to that one. But at this point, it’s just taking and making the difference in the payment to the lender on the borrower’s behalf.
Jason Hartman: Okay, so that’s the next step down on the waterfall?
Jason Hartman: So step one is 38 percent DTI, debt to income ratio.
Randy: That’s right.
Jason Hartman: That doesn’t take into account like other expenses – student loans, credit cards, car loans, things like that?
Randy: No. It’s principle, interest, taxes and insurance.
Jason Hartman: It’s just your mortgage compared to your income.
Randy: That’s right.
Jason Hartman: It’s kind of simple.
Randy: That’s right.
Jason Hartman: That’s kind of nice. At least it’s easy to figure out. So if you make $10,000 a month your mortgage payment can be $3,800. Okay?
Randy: Right and then the government is going to lower it to $3,100.
Jason Hartman: Right. Wow. It pays to be irresponsible. I’ve been telling people that for years. And it’s not right morally, but I tell you that’s just the way it is and that’s the world we live in. So, what is the third step down in the waterfall? I think we’re going to hear principle reduction here.
Randy: You’re going to hear that, but that’s actually another step down. The next step is if we still can’t get you into the right debt to income range with the 2 percent interest rate, then the next thing we’re going to do is we’re going to extend the term of your loan. So we’re going to take you from a 30-year loan up to a 40-year loan.
Jason Hartman: Okay, so I don’t think many people listening really have a 30-year loan at the time they’re doing this modification though. They probably have a 26-year loan or a 28-year loan, or that’s the remainder of years? So, do the re-amortize that thing from the 26 years remaining to 40 years?
Randy: Yeah, they want to get it out.
Jason Hartman: But it’s always principle and interest. It’s not interest only?
Randy: That’s correct. And these are the steps, so now we’re going from 38 to 31. If we can’t get it down with a 2 percent interest rate, then we’re going to extend the loan – all these steps that we’re talking about so far are mandatory. If you’re going to be part of the plan, this is what you have to do. It’s part of the process and the lender is required to do it.
Jason Hartman: Okay.
Randy: Now, the next step is the principle reduction, okay? So, they have one other option which is forbearance. If you remember student loans – student loans you graduate from college and you can have a year or two before you have to make your mortgage payment.
Jason Hartman: Right, so you can kind of get going in your career.
Randy: Right, so the lender can forbear a portion of the mortgage as well, which means that at some point, it’s going to have to be paid, but you’re not being compelled to pay a principle and interest payment based on the amount that you owe them today.
Jason Hartman: Okay. So any details on the forbearance? Are they tacking it on to the back of the loan?
Randy: Yeah. That’s exactly what forbearance is. You basically say – the $100,000 example – we’ll take $20,000 and not include it in the payment, and then some day, you’re going to have to pay that back. That’s the forbearance part.
Jason Hartman: Okay.
Randy: And then finally, this is the part that’s not compelled and it’s at the option of the lender. They can actually forgive principle, if that’s what it takes to make it all work.
Jason Hartman: Okay, so any guidelines on principle forgiveness?
Randy: Not really, no. Again, this is the lender’s option at this point. All the other steps in the waterfall are part of the program. Principal forgiveness becomes an option of the lender.
Jason Hartman: Are lenders doing this today? Or is it something they haven’t geared up to do yet?
Randy: Today is March 27th and they haven’t implemented the plan yet. Most of the big banks are planning to roll this out on April 4th. So a week from today is when we should start seeing this and you’ll hear about it in the news all over the place, I promise.
Jason Hartman: Okay. So they’ll roll it out. Now does it matter if you have a fixed or adjustable rate loan currently?
Jason Hartman: Because what I found, which is another total unfairness in the system, is that they tend to be more willing to modify adjustable rate loans than they do fixed rate loans. The fixed rate borrower is the more responsible borrower, in my opinion because they didn’t live for instant gratification. They got a fixed rate loan. They thought I’m just going to take the tried and true old school approach and I’m going to have a fixed loan payment. I’m going to get what I can afford today and what I hope I can afford in two years and in five years and ten years. So, it doesn’t matter?
Randy: It doesn’t matter.
Jason Hartman: Fixed or adjustable?
Jason Hartman: Are you familiar with that, by the way?
Randy: Oh, yes.
Jason Hartman: The adjustable are much more – they’ve been much more apt to modify.
Randy: And in fact, outside of this – there’s another thing we didn’t talk about. These loans today have to be owned by Fanny Mae, or Freddy Mac.
Jason Hartman: Oh, okay. That’s a big issue.
Jason Hartman: Because Fanny Mae and Freddy Mac have most of the loans, but they don’t have all of them.
Randy: That’s right.
Jason Hartman: Can you give us a percentage so that someone listening, they don’t know who owns their loan?
Randy: That’s right.
Jason Hartman: They just know who they’re making their payments to and who’s servicing their loan.
Randy: And I’m going to give them a way to find out. But the percentage is Fanny Mae and Freddy Mac account for 50 to 60 percent of every loan in America.
Jason Hartman: Okay, so that means that 40 to 50 percent of people do not have Fanny Mae and Freddy Mac loans.
Randy: That’s right.
Jason Hartman: Okay.
Randy: And another little known fact is that just because your loan happens to be a conforming loan size – so in California, $417,000, right?
Jason Hartman: Or lower. Okay.
Randy: Or lower. It doesn’t necessarily mean that Fanny Mae or Freddy Mac owns that loan. It could be owned by a private investor group, which may not be compelled to participate in this program.
Jason Hartman: Sure.
Randy: So, the first step for people to find out if they can get involved in the refinance program or the loan modification program would be to find out if their loan is owned by Fanny or Freddy.
Jason Hartman: How do they do that?
Randy: Okay. Well, there’s websites that have been set up where the homeowner can go in, or the homeowner’s representative can go in and put in the information about their home address.
Jason Hartman: Who would their representative be, a loan modification company?
Randy: No. I would recommend either the person that you worked with to get your loan in the first place, if that person is still in the business. Of course, we’ve lost a lot of people in our industry over the last few years here. Or, I’ve actually posted the links on my blog site.
Jason Hartman: Now, you can – I just looked that up as you were talking. You can go and there are – I just typed in “Who owns my mortgage?” And MSNBC has an article here. But you know, one of the things they’re saying is just ask your lender. They’ll tell you. I mean you just call up the 1-800 number and-
Randy: The lender will tell you. But I’ve got to tell you, if you call the lender you know you’re going to go into “hold heaven” and all the other things to do it.
Jason Hartman: Yeah, right, which, by the way, I want to tell our listeners, there’s a great little app for the iPhone called “Dial Zero” that tells you how to get around what I call “voice jail” with a lot of these major companies. So it’s pretty cool, check that out. But go ahead.
Randy: So, anyway, if you go onto my blog site, there are the links that will take you right to the Fanny or the Freddy website and you need to check out one, well, actually both of them. If you don`t find your home loan being owned by one, you need to go check out the other and see if it is.
Jason Hartman: Okay and so we’ll post those links on the show notes for this show so that people can have them right there. They can go and find them.
Randy: Perfect. And then it takes seconds, Jason. That’s the point. You go online and in a second, you’ll know whether your home is owned by Fanny or Freddy.
Jason Hartman: Now, if it’s not owned by Fanny and Freddy, I would assume that peer pressure kind of thing is going to kick in, hopefully, right, for other people that don’t have their loans owned by Franny and Freddy?
Randy: I believe you are a 100 percent right. I think that initially, you’re going to see it – well, not think – we know initially it’s going to roll out for the Fanny/Freddy loans, but yeah, market pressure is just going to demand that they expand it. And frankly, it’s in everybody’s best interest, especially on the refinance side to give everybody an opportunity to basically get this permanent tax break.
Jason Hartman: And I just want to circle back on this. Loan modification programs are available for investment properties, but this particular loan modification program is only for owner-occupied right?
Randy: That’s absolutely correct.
Jason Hartman: The refinance program you talked about at first is available for any property, right?
Randy: As long as the loan is owned by Fanny Mae or Freddy Mac, yeah.
Jason Hartman: Okay. All right. Good. What else do we need to know, just wrapping this up?
Randy: Well, again, whatever you do don’t even think about being late on your mortgage payments right now. There’s been a lot of banter about this is the only way the lender is going to work with you is if you stop making your mortgage payments, get behind on them. That’s completely untrue. In fact, if you are, like I said before, late one time in the last year, you’re going to be locked out of this refinance program and –
Jason Hartman: But again, in all objectivity here, I think we have to say that this program isn’t really for every listener. For the listener who doesn’t have a Fanny Mae or Freddy Mac loan, now the peer pressure may kick in.
Randy: It will.
Jason Hartman: But then the guideline may or may not kick in, too. But also, they may not own a property that qualifies for the modification or the refinance really, but they want to do modifications on the ten investment properties they own. So, I think they really have to weigh that. But it’s good that you gave them the caution on that.
Jason Hartman: Because I know a lot of investors that are making noise about, “I’m just going to cut off the oxygen to the lender and get them to pay attention to me,” which the lender, frankly, has encouraged them to do.
Randy: There was actually a legal reason for that because if you think about it, when you make your mortgage payment, you’re really not making it to a lender. You’re making your payment to a loan servicer.
Jason Hartman: Right.
Randy: The servicer has certain contractual obligations to the actual owners of that loan. And one of them is as long as the payments are being made on time, they’re not allowed to modify the loan. So contractually, they can’t do a thing until you’re in default. Then they were able to do it. That’s, by the way, what TARP was supposed to be all about. TARP was supposed to allow the banks to buy back up all these pieces of loans from these different investment groups and give them the ability then to negotiate with the homeowner to modify their loan without having to go into default. But we all know what happened with our TARP funds.
Jason Hartman: Yeah. They disappeared thanks to Hank Paulson. It just was a complete scam.
Randy: Yeah, they kind of bought up each other, right?
Jason Hartman: Exactly. They got to consolidate and grow their business. It was basically a bank financing at the business side of the bank – they got to use that money.
Randy: $350 billion dollar’s worth.
Jason Hartman: Yeah, billion with a B – I know it doesn’t seem like much, folks. It’s not a trillion. We only talk in trillions now.
Jason Hartman: The other thing I think we should mention. I just want to make a little disclaimer on that last sort of banter we just had. We can’t advise anybody not to make their payments.
Jason Hartman: And nobody should be advising you to do that. So I want to make that very clear because we’ve talked about this subject on other shows. If you stop making your payments, there are consequences, folks. So be very careful thinking about that.
Randy: Yeah, and the consequences go beyond the mortgage, too.
Jason Hartman: Sure, they go to other lines of credit that you may want. You want to get a car loan. You want to get a credit card, whatever. Right?
Randy: That’s right. And people you know they’re used to this idea of being non-recourse meaning I’ll stop making mortgage payments and they won’t take anything else away from me. But it’s very different when you stop and you also have homeowners’ association dues, you have property tax issues, you have all kinds of things.
Jason Hartman: Insurance.
Randy: Insurance, exactly, so it’s like you said, this is not advice we would be giving our clients.
Jason Hartman: Yeah. So just be careful. It is something that I know a lot of people are considering. It may make sense. It may not make sense. Just consider everything and remember your property is encumbered by more than just your lender. It’s encumbered by a home owners’ association potentially, who has the rights to foreclose. It’s encumbered by the County tax collector who also has foreclosure rights. It’s encumbered by your lender. So, when you stop making mortgage payments, there are multiple parties and one could initiate a foreclosure faster than another. So it’s a little bit complex. Be careful. That’s what I want to say to people.
Jason Hartman: All right. Anything else?
Randy: Well, you know, just to wrap up, I always like to give you an acronym to get people the opportunity to take action here and the action acronym for today is “Don’t Miis Out”. And it’s spelling Miis with two “i’s” and one “s”. So “m”, right – mortgage rates, as you know, Jason are at post-depression levels. We’re below 120-year average out of 175 years of mortgage rates.
Jason Hartman: Wow! Boy, folks if you didn’t hear what he just said, you better stock up on cheap mortgages. I’m telling you. Money is on sale like never before. Well, almost never before.
Randy: It’s a super sale. It really is.
Jason Hartman: It’s incredible. Yeah.
Randy: We had some healthy debate about adjustable mortgage, or fixed rate mortgage in the past. But at this point in time, there’s no question, the fixed-rate mortgage is the product to go.
Jason Hartman: Absolutely agree.
Randy: Which brings me to “i” – if you can refinance, you must do it or you’re just going to miss out.
Jason Hartman: Or, you’re an idiot.
Randy: That’s what I put in my notes. I was being polite.
Jason Hartman: I was reading your notes there. It says, “If you can refinance, you must do it or you’re an idiot.”
Randy: The second “i” – if HASP, the Home Affordability and Stability Plan won’t work for you, maybe HEAP or FHA will. HEAP is a program that, a budgeting program that basically will redirect and manage your cash flow to help you to pay down the loan like we talked about before, accelerating the reduction of principle to make your home meet refinancing guidelines. FHA’s been around forever. And I’ve got to tell you, in the last 12 months, they’ve added so many robust features to FHA to encourage people to take advantage of the program. Understand it’s mostly owner-occupied properties. But Jason, you can refinance up to 95 percent loan-to-value on an FHA loan and it’s the only – think about this: it’s the only 30-year fixed rate loan that down the road is an assumable loan. Can you imagine, five years from now having a 4 ½ percent, 5 percent fixed rate loan and selling your property?
Jason Hartman: That’ll make the property a lot more valuable. Yeah. So that’s owner-occupied, basically. But there are some interesting points there.
Randy: There are some interesting points there and so “s” the last one – Stop wasting time and hoping for things to get better. Start making things get better yourself by taking action now. Right, Miis.
Jason Hartman: Good.
Jason Hartman: Don’t miis out.
Randy: Don’t miis out.
Jason Hartman: M I I S.
Randy: M I I S.
Jason Hartman: All right, thank you so much for this valuable information. And we will talk to you again on a future show.
Randy: All right, thanks Jason.
Interview with: John Bradley Jackson on Entrepreneurship & Marketing
Jason Hartman: It’s my pleasure to welcome John Bradley Jackson to the show. He is the Director of the Center for Entrepreneurship at California State University Fullerton. And since 2003 he’s been a lecturer in entrepreneurial marketing at Cal State University Fullerton. And we will look forward to an interview where we can learn about his book, “First, Best or Different”. John, welcome to the Show.
John: Yeah. It’s my pleasure to be here.
Jason Hartman: Excellent. Well, tell us a little bit about your book.
John: You know, it really sprung up from my work with small to medium-size companies, as a consultant and also at the University. I’d sit down in front of these small companies, the company owners and they all seemed to have the same challenges. They didn’t have enough sales. Their website didn’t meet their expectations. And candidly, they were struggling to create cash
Jason Hartman: And why this book? What is the sort of the big broad, 30,000-foot view of the book – differentiation?
John: You know, that’s one way to describe it. It’s really a compendium of a lot of little ideas. I think a lot of the books that are written these days have one big idea and maybe 50 pages into it, you kind of get it. You say, “Oh, I get the idea.” Instead, I collected a lot of thoughts about how people could market their products and services better. And definitely, I wanted to focus in on specializing in a niche.
Jason Hartman: Okay. You talk about the “first mover” advantage”, which is a common term in business, and there’s sort of some disagreement about that. I remember reading Al Reese and Jack Trout, they’re sort of the gurus of modern marketing – they talk about how the first is – they say sometimes it’s better to be first than it is to be better, which I think is a great saying. And I think there’s some truth to that. But then there are some other thinkers that say, usually the first one doesn’t really make the industry; they lead the way and I guess it’s like being a pioneer. How do you know who’s the pioneer? It’s the person with the arrows in their back. So, what about “first mover advantage”? You talk about that a lot in the book.
John: Yeah, I think it’s cool to be first. The challenge is that it’s hard and expensive. So what happens is when you’re first to market, you’ve got to go find a customer. You have to educate them. And it’s kind of like chopping your way with a machete through the forest. There are some rewards, but invariably, your competitors are watching and now that the path is cleared, they jump in. So fundamentally, my position on first mover is it’s more mythology and it’s damned hard work.
Jason Hartman: Yeah. And it’s interesting what you say about having to educate the customer because if you create a new category, the customer isn’t familiar with it, right? And so you have to sort of go out and tell the customer about it and get them to understand the marketing message. Is that correct?
John: Yeah, that’s my experience. And in fact, often times, the companies that are first movers aren’t exactly sure who their customer is. So they end up talking to a lot of the wrong people.
Jason Hartman: And so they have that shot gun approach rather than that rifle approach?
John: Exactly, and they end up wasting a lot of time and money.
Jason Hartman: Yeah. Okay. Some people say that the best thing that ever happened to Coke is Pepsi. And all of us in business, I think, tend to have the idea that we don’t want competition, right? But it’s your competitors that sort of help educate the customer and broaden the market. Is that true?
John: Unequivocally. I think that if you’re in a market that has no competitors, there may not be a customer actually.
Jason Hartman: There’s a reason there’s no competitors. Right?
John: Right. And so in a mass market, obviously, the competition feeds off of each other and that’s actually terrific for the end customer because then they have choices.
Jason Hartman: Okay, so the book is entitled “First, Best or Different,” and so, kind of define all of those three words, if you would. So, “First” – we’ve mentioned that a little bit – but do you want to elaborate on that a little bit?
John: So, you know being first to the market positions you in a unique fashion, as we discussed. It’s difficult to get there and then to stay there because other people will enter. What’s interesting about ’best’ is that it’s part of almost the American Dream to be No. 1, but if you really look at the companies who are best, it’s difficult to sustain it. It almost takes an obsession just to be No. 1. And I think for most small to medium-sized companies, choosing a differentiated strategy is really the way to go. And that would be to say “no” to a broad mass market approach and instead to focus in on a very specific customer.
Jason Hartman: So what about “Best?”
John: You know, there was the book “Good to Great” that was written a few years ago.
Jason Hartman: A very famous book by Jim Collins.
Jason Hartman: And you know what and I got to tell you, I thought it was okay. I wasn’t blown away by it like so many people in the corporate world are. And maybe I’m an idiot, maybe I just missed something, but it seems sort of obvious to me a lot of that.
John: Yeah and you know what’s interesting is it was a massive piece of research. I think they interviewed 6,000 or 8,000 companies and they analyzed them over a 15 or 20-year period. And here’s the sad fact. I think he identified only 14 firms that were best. And that is a very, very small percentage and frankly, unattainable for most businesses. So it just told me that you know what, being best probably isn’t the best R.O.I. for companies.
Jason Hartman: In other words, are you saying that you can have such an obsession about making your business the best that there’s a point of diminishing return in chasing that goal.
John: I think so, yes.
Jason Hartman: Interesting. Elaborate on the book a little more. What did you think of Jim Collins’ book? I know we’re not here to talk about that, but you know?
John: I think we’re of like mind, actually. And so I thought it was a brilliant piece of research, but I think the conclusions were wrong is that only the best are what really count. And so it was discounting the 1,000’s of companies that delivered a product. And what I was left with was, well – for a small to medium-sized business, how should they go about doing business? And how do they find their customer? And that’s when I really focused in on niche marketing, which is finding a market segment that is either overlooked or underserved.
Jason Hartman: Okay, so, on this issue of being the best, would you liken that to saying who makes the best car, for example? Would that be Rolls Royce? That’s the most luxurious car, I guess. Or is it Maybach? Or who is the better company? Is it Toyota? So, in other words, are you saying that that’s the sort of diminishing return in chasing the goal of being the best?
John: Yeah, I think that it depends on what metrics you use to evaluate “best” and Collins-
Jason Hartman: Yeah, is it quality? Is it profitability? Is it-
John: Yeah, so we could say Honda might be best in its own way. I think Rolls Royce is actually a niche market within the automobile industry.
Jason Hartman: Sure it is, but I’m just saying like if you ask, “What’s the highest quality, most luxurious car in the world?” most people are going to say Rolls Royce, right?
Jason Hartman: And so Honda doesn’t try to be Rolls Royce. Toyota doesn’t try to be Rolls Royce.
John: Exactly and those are mass market businesses anyway.
Jason Hartman: Doesn’t really apply to what our discussion is. Well, okay, so, “First, Best or Different” and different is about niche marketing, right?
John: Yeah. And niche marketing focuses in on that customer who has a unique requirement. And for the niche marketer what they need to do is become intimate with that customer, to really become expert at that customer’s need. And the rewards are actually very substantial. So what happens when that overlooked customer, underserved customer finally gets what they want, not only do they become satisfied, and a satisfied customer will buy your product again and pay your price, they might even become loyal. And what’s interesting about loyal customers is they have one unique characteristic, and that characteristic is they refer you to others. They don’t just talk about it, they actually do it. And when you achieve that relationship with a customer, boy; that’s just golden.
Jason Hartman: I agree with you and I would say that the worst thing that can happen to any business is commoditization. And so when you talk about being different, you never want your business to be a commodity, or at least be perceived as a commodity. So you know this has happened in the travel business, for example. It’s happened in the brokerage business, stock brokerage business. And in many businesses, the consumer sort of views it as, “Look, it’s a commodity and I’m just going to shop for the best deal now.”
And so, most people we’re really talking to, listening to the show now, they may be “solopreneurs,” where they have you know a one-person business. They might work out of the house. They might have a corporate job and then have a small business on the side. They might have a spouse with a small business. They might be a salesperson, which is really a business of its own, even if you work for a big company, right? I mean, what specific examples or advice can you give that person? It’s kind of very traditional and I’ve done it in this talk, to interview someone and talk about – and make comparisons to big companies that everybody recognizes. But what advice can you give to this solopreneur, the person with a small business with four employees? You know that type of thing.
John: I would say specialize. And so here’s an example, if you’re a real estate agent, you’re selling property. But what I would do is I would find a niche that you’re comfortable with and you’re expert in. And as an example, that might be to specialize in equestrian properties. And so that takes, for instance, on a residential basis, that probably eliminates about well, 99 percent of the potential properties out there. And then the messaging that you send through your website, through your marketing communications is that you’re an expert at helping people find that horse property that they want.
Jason Hartman: And I’ve got a great slogan for that agent, by the way. No horsing around. Hire me.
John: There you go. Neigh!
Jason Hartman: Yeah so that’s a good point. When I was in the traditional real estate business many years ago, I really believed in farming, picking small geographical areas and really becoming the expert. And one of my mottos was, “I’d rather be No. 1 with a small group than No. 2 with a large group.”
Jason Hartman: And I could target my marketing. I could really make my time very efficient because I didn’t have to know everything about everything. I just had to know everything about a small thing. And that was the area in which I specialized. That seemed to work very well for me. And I’ve got to tell you, when people would want to refer clients to me, I really a lot of times didn’t want the referrals because the referrals made me invent a new process for my business and my business wasn’t efficient at handling someone that wanted property on the other side of town, for example. That was not part of my specialty and I couldn’t do a really good job serving them. So a lot of times I would refer referrals to another person.
John: You’re a smart man.
Jason Hartman: Yeah.
John: Because that is exactly where I think small businesses, where entrepreneurs can get in trouble, is it’s hard to say no. And what I’m saying with this book is you have to say no if you want to be successful and get the leverage. And so going back to the horse property realtor, is you don’t work the condos in the neighborhood, you only work the horse properties because that’s where you’re going to have the most satisfaction with your customers. That’s where the referrals are going to come from and they hopefully go to other horse property buyers. Another example would be the small consultant, who in a desire to create cash flow takes on many different projects across the spectrum. So what happens in that situation is you’re not terrific at anything because you’re spreading yourself so thin.
And so, my simple advice is pick one thing. Do it really well and specialize and you’re going to get rewarded. And the rewards are going to come through your efficiency because you have plowed that field often enough that you’re getting really good at it. And there are operational efficiencies, there’s marketing efficiencies, your customers are happier, they give you referrals, and then it grows.
Jason Hartman: Yeah, it’s interesting. You know it’s really what you’re saying here is don’t be a jack of all trades and master of none. And we have seen that so many times in life where people, maybe ourselves, will try to be good at everything. And nobody can be that way in a highly specialized economy like we have today. So, entrepreneurs, sales people, solopreneurs, people with medium-sized businesses, whatever it is, they have to learn and be willing to have the discipline of saying no as if it means yes, I’m already committed to something else and that’s when you become a real expert. And you know it’s interesting, I find this in two businesses.
I’ll make a comparison for the listeners. One is medicine and the other is law. So if you have a heart problem, you go to a cardiac specialist. You don’t go to any other type of doctor for that problem. But when you have a legal issue, you look on lawyers.com or whatever and all of these lawyers specialize in just about everything. I mean it’s ridiculous that the legal system doesn’t really require much specialization, unless it’s like patent law or something like that. You know where lawyers can be generalists and I think that leads to a lot of unhappy customers frankly. Whereas, doctors have to be specialists many times, unless, they’re generalists by name, right?
And so, that’s what entrepreneurs need to think of. They need be good at something. They need to be exceptional at something. And if you look at the Olympics, Michael Phelps never tried to be a great figure skater, or never tried to be a great cyclist or runner or anything else. He’s a swimmer. And so he’s a specialist. And he’s great at one thing. And that’s what he is known for.
John: You got my message.
Jason Hartman: Yeah.
John: That’s exactly it and I think that talking about the attorneys, I’ve seen it many times as well. And I think that if there are any attorneys listening right now, I would choose one thing and do it really well.
Jason Hartman: Or choose one or two things that might overlap and integrate into the picture. But it drives me nuts. I look at these lawyer websites. Oh, we do estate planning, we do probate, we do wills and trusts, we do your divorce. And if you get busted for a DUI or something, we’ll help you with that. It’s like ridiculous. I mean, specializing, yeah.
Jason Hartman: Good point. So, any other examples of businesses – you said the consultant. And there’s this whole genre of business consultants. And they’re kind of attacking me all the time. I mean that in a way they’re trying to sell me stuff. They call on my business and so forth. What would you say to consultants like people in the – there’s a lot of independent sort of management consultants, if you will. I help businesses increase their revenue. What the heck does that mean? Any thoughts there? It seems like you’re familiar with that doing what you do.
John: Yeah. And I think similar thinking applies. It’s that if you can specialize in a particular work process, or if you’ve got some type of algorithm that you can put in place at a company, you’re just going to be more believable because I think the broader your charter, the less believable you are as well. And so if somebody walks into your office and they have a portfolio of 100 different offerings that they can do to make your business better, it’s confusing. There are too many choices as well for the buyer. Study after study shows that if you give too many choices to people, they’ll actually collapse under the burden and won’t make any decision.
Jason Hartman: Right. A confused mind always says no.
John: Exactly right.
Jason Hartman: And that’s the thing we want to avoid, is over-saturating the customer with choices, right? Talk to us about the world of financing and how a business gets off the ground? At first, it’s the three F’s, friends, families and fools. And then what happens after that?
John: It’s interesting. My advice to entrepreneurs typically is to start slowly and take baby steps. And so self-funding really is in all probability the way to go. And the next step certainly would be that inner circle of your family and friends to possibly help you out. And at that point in time, I think to get that type of investment, your concept needs to be at least out of beta. You know, it has to be real. And you have to have the affirmation of customers. And then beyond that there are obviously the banks, the angel investor, and then maybe even the venture capitalist. But those three investors are very unique and have different needs.
Jason Hartman: Tell us about the differences. I mean first start with bank or angel investors. VC’s come later.
John: Yeah, the bank is all about managing risk. They obviously want their money back and so they want a business that’s going to cash-flow and that ultimately pay them back with the interest along the way. It’s also a relationship and so I recommend getting to know the community banks. I would probably stay away from the big banks. And building a relationship with the lending officers, in all probability, before you need it because it still is all about people and a belief that you and your business are going to be able to meet the bank’s requirements.
Jason Hartman: So, how do you do that, though? I mean, can you give any specific examples? What do you do? You walk into a bank and say, “Can I talk to the Manager, or the business person that manages the business loans, or business accounts?” How do you do that?
John: I think it’s as simple as that. And you set an appointment with the manager or the lending officer and basically suggest that you’re starting a new venture and that you’ll be looking for financing. And ask them what criteria they look for in a viable business opportunity.
Jason Hartman: And today, based on the times, I just have to chime in here. We’re in the midst of a pretty severe recession. Some are even using the “D” word from time to time. So what they might say nowadays that they’re looking for – as Timothy Geithner is looking over their report every month to make sure they’re loaning money to small businesses. Remember that? It was just in the news, so I had to throw it in. But yeah, okay. Good point. Definitely, it’s always a human thing right, a Hi/touch.
John: Yeah. And I think the community banks, actually, in this market are going to be the better source. The bigger banks are so restricted right now that, basically, saying no is like a win to the bigger banks. Next in line is the angel investor and that can be just about anybody that’s got money, although there are some very sophisticated angel investors out there.
Jason Hartman: There are clubs and organizations built around angel investors. And by the way, a lot of people listening, I remember years ago when I didn’t know what that word meant. Like an angel, you know? And then they have sort of a modified version of a “Pure Angel” which is someone who just will invest in any type of business and is not industry specific and some angels are specific like here in Orange County, we have the Tech Coast Angels and they look for like tech oriented companies. But more about the angels.
John: Yeah, so there are many types. I’ve heard that as much as 70% of the money on an investment basis actually comes from angels of some variety and if you can come up with a sweeping generalization, I would say, normally, they’re going to invest in amounts somewhere between $500,000 and a couple million. And what’s unique about many of the angel investors is now they’re looking for a significant return. I mean this is about money. But for some reason, they want a piece of your company, they want to be involved. And so the best fit would be someone who had experience in your industry or has some connection with it. The angel investor, as a rule of thumb, has a minimum ROI – return on investment of 7 in 7 and that’s a 7 times return in 7 years. Some angels may actually speak in terms of 15 or even 25 times returns during that same period.
Jason Hartman: Wow. So if they invest $100,000 in your business, for example, then they’re going to expect in seven years to get $700,000 back?
John: That is the thinking. Now they know that there’s risk involved and this is not a no-risk world, but that’s really the goal. And then you contrast that with the venture capitalists. They’re really focused in on very high growth, emerging markets where there’s going to be some significant competition. They’re investing other people’s money. It’s not their money, contrasted to the angel investor and it is their money. The VC is investing money from pension funds, banks, endowments, whatever it is.
Jason Hartman: If there’s any left.
John: Yeah, if there is any left.
Jason Hartman: We have to make this current for the times.
Right. And then they’re looking for homeruns. And so they’re looking for that 25-to-1, 100-to-1 style returns, knowing that some of the companies in their portfolios are not going to make it out of the blocks. So, that’s really an elite form of investment and they’re going to fund businesses that have exactly the right pedigree. It’s very specialized. It’s very much inner circle and, in fact, you’ll see that the start-ups that actually get funded within a VC portfolio are invariably related to the other businesses in their portfolio. They’re doing business with each other, to actually give them a boost. It’s rarified air
Yeah, okay. What about a business plan?
John: I find that most small businesses don’t have it. And basically, they do business on the fly. And so it is just a – in my view of the world, is you’re going to end up somewhere. Why not end up where you want to be? And so you create a business concept and the business concept is this vision of the business you want to start. You test its feasibility. You write the plan and then you go sell the idea to your investors. And fundamentally, that is the business plan process.
Jason Hartman: And is the business plan a living document? Or it’s being modified all the time? Or is it something you write once and put it on the shelf? I know the answer, but-
John: I think the best practice would be to write the plan, you get funded, and then the first action should be go back and revise the plan because invariably you learn along the way. And I think good plans need to be updated and modified, and so a quarterly review of your plan with your start-up team, I think is a very appropriate thing. And there are external factors that change the game and so we have a climate change, we have an economic change, we have government intervention – it can have dramatic impacts on your plan.
Jason Hartman: You know we are in a pretty significant recession. What are your tips for dealing with the current economic climate in terms of marketing, in terms of any other items?
John: Yeah, I’ve got a few ideas. One is I tend to be negative on advertising for small businesses in particular. But in this market, what happens is fewer people choose to advertise, and what’s interesting is that your advertising dollars have a higher impact in a down market. And so, carefully chosen advertising vehicles will actually get you the return you’ve always wanted in the down market.
Jason Hartman: Yeah. Well, what are those carefully chosen vehicles?
John: You know, I like radio. If you have a mass market product, it’s radio.
Jason Hartman: Radio is expensive. We do radio.
John: Yeah, there you go. And it is a way to reach a lot of people. I really have a bias towards the web and your first money should really go into your website. Over the last five years, Google, Ad Words and Yahoo pay- per-click advertising has really emerged, but it’s become rather expensive. You know what is interesting? Eighty percent of the visitors on the web find you through the text listings on a Google search.
Jason Hartman: Otherwise known as the organic search results.
John: The organic search results. Now, what that tells me is that you need to focus in on that your website is optimized and so it has to be actually designed to be friendly and compatible to the major search engines and what I refer to that as is spider food. And so the search engine’s spiders crawl around the web and so you want to have your design, your website designed to be friendly, which includes all the proper tagging as they refer to it and meta tags, which are like the internet addresses to populate your website with keywords, and then very rich content.
Jason Hartman: So content is actually – that’s a big part of a website. So, I would say, to add to what you said, that everybody’s expert in something and so this entrepreneur is an expert at whatever their thing is. Put some of this on your site, articles you’ve written, ideas you have, things like that because that’s how the search engines pick it up.
Jason Hartman: And so that’s important.
John: And those articles that writing should be keyword rich probably – and by the way, another factor in the algorithms that the search engines spiders have is frequency and currency of that content.
Jason Hartman: Right. So not just putting it all up once, but adding to it on an on-going basis. Right, yeah.
John: Bingo. And I think for the business owner, one of the best ways to do it is with a blog. And blogs don’t have to be novels. They can be 100 words, 200 words that you can enter in a few times a week, and in fact, my own blog story is really a good testimony. So I wrote this book a couple years ago. I launched a website and I started blogging. And you know, when I first launched it, I couldn’t get my family to go read my blog. But slowly, over time, the word got out.
Jason Hartman: “No prophet is revered in his own home.”
John: Exactly. And so what happened is I continued to populate my website with new entries in my blog. And each was a stand-alone topic. I was trying to help my readers. The blog was not about me; it was about my readers’ issues and their problems. And over the next few months, after starting the blog, not only did my website crawl to the top of the heap, Page 1, I also was the recipient of hundreds of entries on the web and I ended up creating, in effect, internet celebrity because of it. And now when I go home to my home office tonight, the red light will be blinking on my phone and I will have dozens of messages from people who found me on the web. I have to tell you it really works.
Jason Hartman: Yeah. Yeah. The web is great. I mean that is really the ultimate leveler of the playing field for small business. I think you’re absolutely right. Good. Well, anything you’d like to say in closing, just to sort of sum up the whole idea around “First, Best or Different”?
John: You know, I’d follow your passion because I think that personal motivation, that feeling of this is really what I’m good at, that is really a good divining rod to find your place in the market place. And that might be a hobby, it could be within business, it could be from a technical standpoint, but grab a hold and run with it.
Jason Hartman: Excellent. Well, John Bradly Jackson, thank you so much. Where is the website that we can find out more?
John: Yes, please visit www.FirstBestorDifferent.com.
Jason Hartman: Www.FirstBestorDifferent.com – thanks for joining us today.
John: Yeah, my pleasure, thanks.
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Duration: 61 minutes