Part One: Jason interviews Investment Counselor, Gia Jurevich, on drilling down to some of the specifics pertaining to property selection within a city or MSA (Metropolitan Statistical Area). Warning – Don’t follow our advice… well, sort of. The point is that a city is too large an area to consider when investing, we need to select property type, sector, community and neighborhood. There are many factors including; access to shopping, school districts, transportation, crime rates.
Part Two: As an experienced traveler, Jason has visited 47 countries and talks extemporaneously about his recent real estate scouting trip to Eastern Europe. You will hear some interesting things about the economies and real estate markets in Latvia, Estonia, Germany, Bulgaria and Romania. Book / essay recommendation: The Monument Builders by Ayn Rand.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Newport Beach, California. During this weekly program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, or a new slant on real estate, 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 nine states. This program will help you follow in Jason’s footsteps on the road to financial freedom through real estate. You really can do it. And now, here’s your host, Jason Hartman.
Jason Hartman: This is Jason Hartman and welcome to Podcast No. 27, and I wanted to start off this podcast today, we’re going to be talking about my recent trip to Eastern Europe. Now, I’m not going to sit you down and make you watch my vacation pictures. It’s nothing like that. This is actually about real estate investing. I was there for a few weeks looking at real estate deals and I think you’ll find this to be kind of interesting. Some of our listeners, I know, have thought of and maybe even experienced international or overseas real estate investing and I know that we have clients in other countries. We recently had a podcast listener from England who called us up and started investing with us, so that’s fantastic.
And it just so happens that the way I wanna start this podcast today is with Gia Jurevich, one of our investment counselors.
Gia Jurevich: Hi, Jason.
Jason Hartman: Hi, Gia. Welcome.
Gia Jurevich: Thank you.
Jason Hartman: Now, before we get into what you’re here to talk about, maybe just dovetail on the client from England.
Gia Jurevich: Certainly. Yeah, we had a podcast client come in over the internet from England and he was a big fan of listening to the podcasts.
Jason Hartman: He’s probably listening right now, hopefully.
Gia Jurevich: I hope so. Basically, what he said was he had listened to all the podcasts and he’s ready to purchase. He liked a couple of the areas that we had talked about already and we basically just chose a property for him and sent it to him, and he’s ready to go. It was easy for him. The dollar’s weak and our real estate looks cheap to him, so it was an easy decision to make.
Jason Hartman: And I’ll tell you, Gia, and I’ll talk about that later in the podcast, but on my trip, I could not believe how expensive Eastern European real estate was. I certainly know it’s expensive in England, especially London, and in many European capitals, like Paris, or London, or whatever, but I mean I was in Romania, Estonia, Latvia. I thought it would a lot less expensive – Bulgaria –
Gia Jurevich: Right.
Jason Hartman: –than it was. American real estate is pretty cheap, relatively speaking, and the other thing about it, which we’ll talk about after you go, is the currency issue. You can really benefit by arbitraging currencies. The dollar is weak now and it’s one of the weakest points it’s been in a long time, actually, and I believe because of inflation and our bad monetary policy in the U.S., it’s going to get a lot weaker. They used to say the three rules of real estate were what? Location, location, location. Well, maybe it’s “location, location, and currency,” or “location, location, exchange rate.”
Gia Jurevich: Right.
Jason Hartman: So we’ll talk more about that later. But Gia, I’m glad that you could join me today because I wanted to – we wanna talk more about specific client experiences, and before we get into the whole trip to Eastern Europe and talk about the real estate market there, I wanted to just have you, Gia, share with the listeners an experience one of our clients had. Before they found us, they invested directly; they did it themselves and it wasn’t a good experience. So in the future, we plan to do a podcast on some of the perils and pitfalls of real estate investing. There are a few things out there you need to be cautious about. But tell us about this particular client.
Gia Jurevich: Well, I just want to start off saying that when we recommend an area, we say a city, it’s not just anywhere in that city. Now, a lot of times, we have clients say, well, why would I wanna use you if I know Austin’s a good place to invest. And so this story just sort of illustrates the value that we bring. And this was a client who came to a seminar of ours and he had actually heard about one of the areas that we were investing in and that was Austin, Texas.
Jason Hartman: I mean everybody can just go to our website. Now, not all of our properties are up there, but it shows a lot of the areas we invest in and we talk about them on the podcasts, but there’s a lot more to it –
Gia Jurevich: Exactly.
Jason Hartman: –than the macro market, right?
Gia Jurevich: Exactly. So this was a client who, a few months prior to meeting us, had contacted an agent in Austin and purchased a home because he had heard that was a good market. After coming to us, he sat down with our area manager and he said, “You know, this property, I’ve had it several months and it hasn’t been rented. Do you think you could help me out with that?” And so our area manager said, give me the address and I will contact our property manager on the ground there and see what he can do.
Jason Hartman: One of the other values that we bring, that’s kind of a hidden unseen value, we recommend that our clients diversify. Diversification is a good idea because hopefully you participate in as few downsides as possible and maximize your upside, and you just make yourself a lot safer. There’s an old say, “Don’t put all your eggs in one basket.” But then there’s another saying, and this comes from Robert Allen, that I learned back in the early ’80s, reading one of his books where he quoted Andrew Carnegie, and he said, “Put all your eggs in one basket, but watch that basket.”
So here’s my thinking on that. Put all your eggs in one basket, the real estate basket. That is the most historically proven wealth-creator that has worked for tens of millions of Americans and zillions of people all around planet Earth. But use that as the vehicle. Real estate is the vehicle, but diversify geographically, so spread it around.
Now, what happens when you diversify? Well, that’s good advice, but the problem is that you only have maybe one property in each city. When it comes to dealing with that property manager, you as the investor, you just don’t have any leverage with them because they don’t make much money off of you. Property management, I always say, is a thankless, underpaid job. It really is.
Gia Jurevich: That it is.
Jason Hartman: I would not wanna be a property manager and if our property managers out there are listening, we appreciate what you do and we know that it’s hard, and you don’t make a lot of money from it, so we understand that.
But we, on the other hand, represent dozens of accounts to that property manager in that area, so we exert, frankly, a lot of leverage over them because we’re a big customer. So when you invest through our network, you take advantage of that leverage, and if you have a problem, just call your investment counselor here and they will talk to the property manager. They will email the property manager and get them to work and get the job done for you, and help you sort of manage your manager, if you will.
Gia Jurevich: Exactly.
Jason Hartman: Okay, sorry about that long interruption there.
Gia Jurevich: That’s okay. So anyway, we did contact the property manager in Austin that we worked with, gave him the address of the property, and he said, well, let me check it out and I’ll get back to you. He called back and he said, “I do not do business in that neighborhood and I will refer it to another property manager.” So unfortunately, somebody had recommended a property in a bad neighborhood that we would’ve never put this client into.
Jason Hartman: One of the great things about us is that we are area agnostic, and listen to Podcast No. 15 on the Ten Commandments of Successful Investing for more on that. But we have no interest in recommending properties that aren’t the best properties because we have the freedom to go anywhere and recommend anything. So why would we recommend bad stuff when we can recommend good stuff to our clients?
I remember, Gia, the last time I was in Austin looking at properties, I looked at some stuff offered through different networks and different companies. Some of the stuff was just – it was just junk. I mean it was really junky property. It was poorly built, bad floor plans. I remember one area I looked at, there was no supermarket nearby and for families and renters, one of kind of the rules of investing, too, is that owners will drive; renters won’t drive very long. So if you can own a house, you’ll take a longer commute to own. But to be a renter, you’re more into convenience and instant gratification. That’s probably one of the reasons you’re a renter, frankly.
Gia Jurevich: Right.
Jason Hartman: And because you don’t like to make sacrifices. So here was a neighborhood being built with no commercial infrastructure, no supermarket nearby, and that’s just not a good rental property. So what else happened with this guy? Is that pretty much the story there?
Gia Jurevich: Well, that’s pretty much it. The property did eventually get rented with a little help from our property manager kind of putting a push on the other ones, so he ended up purchasing a couple with us and those were rented, gosh, I believe within a month or two.
Jason Hartman: Good, good. Excellent. Well, listen; remember, be sure you talk to our investment counselors and get the specifics. Get in touch with and aware of the micro market within each macro market, and I know we talked about that on the last podcast. But we really want you to think of that because a city of a million people has a lot of options and there are a lot of different neighborhoods and many of you live in places or have visited places where it varies greatly.
Here’s another example of that. Probably most of you listening have heard of the show named after our town, The O.C., right? Orange County? Well, that show portrays – by the way, it’s not even filmed in Orange County. Just a little bit of it is, but most of it is filmed in Los Angeles area, up in like the South Bay, Redondo, and Hermosa and those areas, I think, or Palos Verdes area. But that show portrays Orange County as this ultra-wealthy place, which some areas are ultra-wealthy in Orange County. But a whole bunch of it is not at all. There are a lot of very bad areas within Orange County that I would not want to be a landlord in and I would not want to invest in, so the same is true of all these cities, so be conscientious about the micro market and let our investment counselors and our area managers guide you within them.
Okay, thank you, Gia. Appreciate that.
Gia Jurevich: You’re welcome. Thank you, Jason.
Jason Hartman: And let’s talk about Eastern Europe. I had an excellent trip in Eastern Europe and really, really enjoyed it. It was a great time. I went to look at properties, went to five countries, and also went for a Young Entrepreneurs Organization conference in Berlin. It was a great time and let me just tell you a little bit about the trip, what I saw in the economies, what I saw in the real estate market, and so forth.
I’ve traveled extensively. I’ve made it a real point to travel. Upon completion of this trip, I have now been to 47 or 48 countries, so I’ve had good extensive travel experience and plan to give you a report in a few weeks from my next trip, which is to the Ukraine that has a booming, booming economy.
My first stop was in Riga, Latvia. When I was picked up at the airport, I always make it a point when I travel to talk to the taxi cab drivers. Some of them have no idea what they’re talking about, but some are very interesting. It’s just a complete mix. And the guy I talked to on the way to my hotel in Riga was telling me – he was an older gentleman – and he was telling me about – I always ask them; quite fascinated by communism, and so I always ask about how was life in the old days before 1989, 1990-91 when they were under communism. And he said that he liked it better, which it’s a somewhat common response I get in these formerly communist countries from the older generation.
And what I gleaned from that is that it’s a little easier. You don’t have to compete like you do in the world of free enterprise. But he told me some interesting stories and I said I can’t imagine that you were even a taxi driver in the communist era, and he said, yeah, we had taxis. And I said, yeah, but did you have any tourists?
And he goes on to say, we had a small number of tourists and there was basically one main hotel, and in this hotel, they had a nice restaurant and in sort of a corner of the hotel downstairs, the KGB, you know the Russian Secret Police – I visited the KGB Headquarters a few years ago when I was in Moscow; quite fascinating – but he said that the KGB actually had their own table, their own sort of corner room, if you will, downstairs in this hotel. And whenever they would see anybody come into the restaurant that they would want to sort of monitor, they would hand the waiter a special plate, and in this plate would have a transmitter or a recorder of some kind so they could record their conversation.
I said to him, “And you liked that better the old way?” And then he tells me more about it. He says occasionally, the KGB would pull him over after he dropped someone off and ask him about “who were those people,” “where did they go,” “what did they say,” “what places did you take them to.” And it’s just amazing to me when I travel around the world that people who wanna live under a system like that. And so sort of my final question before being dropped off at the hotel of this taxi driver was, “How could you stand that, being monitored and not having freedom of speech?” And he says, “Freedom of speech. What did I need to say?” So that just kind of sums it up.
Anyway, enjoyed my stay in Riga, great place, nice architecture, cool nightlife and the economy has been booming. I’ll just share with you some different things in this podcast from some different sources, whether they be Lonely Planet Guides or the local publications. A lot of information I’m kind of pulling from here, but just generally, in one of the guidebooks, it says, “These are heady days for little Latvia. Not only is it finally part of the EU, but its economy is coming along at the fastest clip in Europe. Traffic seems to double annually at its flashy new airport. Its capital, Riga, is maturing like a fine wine, sprouting a lively cultural scene to match the exuberance of its world-class architecture.”
And I kinda feel that we’ve missed the boat real estate-wise in Latvia. I think they’ve got a lot of good things going for them. I met with an agent, toured around, looked at quite a few properties there, and it felt a little bit like, but to a much lesser degree, like some of the over speculated U.S. markets, whether they be in Miami. Oh, we went to condo complexes that were newly built and many vacant units. It struck me as though there were a lot of speculators in these properties looking for quick appreciation and you know what? They got a quick appreciation. They’ve made some real money there.
But I think that most of this is behind us. And at Platinum Properties Investor Network, we’re looking to get into markets where the appreciation is in front of us, undervalued markets, and I just think that in Riga, we’ve largely missed the boat. Of course, the future will hold good things for this area. A lot of stuff going on there, but I think a lot of the appreciation is really behind us.
I was most excited, by the way, about going to Bulgaria and Romania, which I’ll talk about in just a few minutes, because those two just joined the European Union, the EU, earlier this year, actually in January.
Now, my next stop after Latvia was I took a hot, warm bus with no air conditioning because that was about the only way they had. They had railroads, but they had closed the railroads and I guess demolished some of the tracks because there wasn’t much need for these railroads in the former communist regime.
And so I took the bus up to Tallinn, Estonia. Now, Tallinn is a beautiful city. A lot of attractions in Tallinn, and Tallinn is a booming economy, actually a real tech center, and two of the most widely downloaded programs, software programs, in the world, originated in Tallinn. And guess what they are? They are Skype, Skype.com. That is the web-based voice over internet protocol phone service and a lot of people use that around the world for free or extremely cheap telephone calls over the internet. And can you guess what the other one is? Music lovers out there, maybe you can. It’s KaZaa, which is sort of the successor to Napster where people could trade music files and you know the history of the whole music-sharing thing. Lots of litigation from the recording industry and so forth. So we won’t go into that.
But Tallinn is a beautiful city. Estonia is really one of Europe’s coolest destinations. Now, I’m looking at the guidebook here. Since it is now a full-fledged member of the EU, even more tourists have ventured this far northeast and liked what they saw. The images of coastline, technology overload, strange ramblings about cheap beer, and blood sausages. There’s kind of an old town area in Tallinn that I had a few meals in and it’s a really charming place. But again, real estate market-wise, I looked at some properties in Estonia and I just kinda felt that we sort of missed the boat. We’re a little too late, probably about two years late to Latvia or Estonia.
So let’s move on. Great places to visit, I’d highly recommend them, but in terms of investing, we’re a little late to the party. So let’s move on. Maybe we’ll come back and look at these areas in the future.
Next destination was Berlin. Now, Berlin was where my entrepreneur’s organization conference was and you know, I visited Berlin, oh, I’d say maybe 12 years ago and really enjoyed it. I remember spending literally the entire day at the Checkpoint Charlie Museum, which if you haven’t been there, you just have to go to. You’ll probably shed a tear or two when you see what people went through to get across the Berlin Wall or under the Berlin Wall.
It’s just amazing to see what a bad, bad system, what really an evil system, communism is, and I’d say Josef Stalin is probably one of the most evil men in history because 20 – 30 million people, estimates say, were killed under that. And then if you even don’t talk about the Gulags and the pogroms and the rounding up farmers and collectivizing the farms that he did in Russia, look at what happened for the next four decades or so and all of the people that were just living under a system where they could not experience their full human potential. So again, amazing.
But when I got to Berlin this time, 12 years after my first visit there, I was really, really amazed at the transformation of that city. Berlin is a gorgeous, gorgeous, newly designed city, a lot of it. Beautiful modern architecture. I stayed at the Ritz Carleton in Berlin with the YEO conference and that was just a terrific, gorgeous hotel, of course, but next door to it is a brand new, sort of building, office building complex, called the Sony Center. And just amazing architecture; stuff that makes the beautiful modern buildings in the U.S., it makes them look like no big deal. Just really, really incredible architecture.
I went to my conference, learned a lot as I always do with the Entrepreneurs Organization group and have been involved in that for about eight years. If you’re an entrepreneur and have your own business, I would highly recommend you visit EONetwork.org for more information about Entrepreneurs Organization.
But what I was amazed in learning about real estate in Berlin is that Germans aren’t used to homeownership and so properties in Berlin, that is now again the capital of Germany – it was many years ago and then moved out when everything changed there – and Berlin is a gorgeous city and it is a very, very low cost of living, which made it seem like a very intriguing real estate market. Obviously, an advanced culture, advanced economy in Germany, but only about 40 percent of Germans own their own home. They’re used to renting.
And Germany has a lot of sort of socialist hangovers in that country and I was actually born in Germany, myself, been there many times, and there are too many pro-tenant laws. One of the things you know from listening to our former podcasts or attending our live events is that we like to invest in areas that are pro-landlord rather than pro-tenant. We want to be invested in areas where the legal climate and the regulatory climate is friendly to our cause as investors, as property owners, and as landlords providing rental housing for people. And if you were to buy a property in Berlin, the RV ratio is actually not bad. You can spend maybe 150,000 Euros on a property there on a flat and get a decent rent for that flat, but here’s the problem. The renters have such ridiculous rights and there’s so much regulation and sort of rent control, if you will, not exactly like American rent control, where it’s hard to raise rents, it’s hard to get a tenant to move out. Can’t just say, hey, I want my flat back; I want my condo back. We call them condos. They call them flats or apartments; same idea.
So I didn’t like Berlin because of the regulatory climate, but I do like the city a lot and if you haven’t been or haven’t been lately, as I hadn’t for 12 years, I would highly recommend you take another visit. Nice prices, not too expensive, beautiful modernized city, and interesting, interesting, very rich history.
My next destination – jumped on another plane and went over to Bulgaria. My first time visit to Bulgaria and I was picked up at the airport by my tour guide. Now, as far as real estate investments, I was most excited before I left in all the research I had done about Bulgaria and Romania. Those were the two most intriguing to me, largely because both of these countries just joined the EU in January of this year, 2007. And in coming into the EU, what happens – the EU is the European Union – and when you come into the EU as a country, billions and billions of Euros are poured into these countries to increase and expand their infrastructure.
So when you’re driving down the road in Bulgaria or Romania, you will see signs all over the road, and if you’d like to see some of these signs, you can go to www.jasonhartman.com/photos where I have photos of my trip, so if you wanna see pictures of Berlin, you wanna see the road signs that the EU puts up. But you see all these signs all over. Just go to www.jasonhartman.com/photos, but you see these signs all over and they basically say this road or this project funded by the European Union and it is unbelievable the construction that is going on in these new EU member countries.
In many of these countries, I mean, there’s just massive development under way. But in the new members of the EU, Bulgaria and Romania, the newest ones, the infrastructure going in is unbelievable. I took a – I was picked up at night by my tour guide. He was an Estonian gentleman and he took me on a wild ride to a town called Bansko.
Now, Bansko is a resort, sort of a ski resort, in Bulgaria, that was about a three hour ride from the airport; a lot longer than I expected. I wasn’t much in the mood for a ride, but I wasn’t much in the mood, especially, for this ride because it was about three hours through the boonies and through streets under construction and road construction, and it was just a little bit of a crazy ride. It was bumpy, it was dark, and I didn’t know where the heck I was, and I didn’t know who this guide was either.
But survived the ride, got to a beautiful hotel that I stayed at, and you know, the name escapes me right now. And I was in this hotel that was almost empty because here I’m at a ski resort in the summer in Bansko.
Now, let me tell you about Bansko. It’s interesting. Bansko is building itself to make a case to earn the 2014 Winter Olympics. You know how in my previous podcasts maybe, or in my live seminars I talk about how the national bird of China should be the construction crane? Well, I couldn’t believe it. I got to Bansko when it was dark so I couldn’t really see much, but I woke up, went out onto the balcony of my hotel, and enjoyed the fresh mountain air and a beautiful sunrise, and I looked around and I couldn’t believe it. There were medium-rise condos going up everywhere. There were construction cranes everywhere. There was so much construction. It just amazed me. I mean an incredible amount of construction.
Now, from what I’ve heard, Bansko will not the 2014 Winter Olympic Games, but their city, this town, this resort town, is gearing up for it and they have all sorts of properties. Well, I had breakfast, jumped in the car, and started looking at properties. And I was amazed by the way, and I didn’t say this earlier, but I was amazed in all these, really, how expensive these properties were in Eastern Europe. And you have to sort of do the conversion, but I’ll help you with it a tad here. You know, they look at everything as price per square meter and of course, in the U.S., we look at price per square foot.
And in most of these places, you’re looking at 1,200 – 2,000 Euros, okay – not dollars, Euros – per square meter and in most of the places, if you do the math and you do the conversion for the currency conversion, and of course, the U.S. dollar is extremely weak – we talked about that at other times. It’s one of my pet peeves, but it’s actually good for you in many ways, and if you are listening to this podcast from a foreign country, I tell you. Buy U.S. real estate because you just got a huge discount on our real estate. For the first time since the mid-’70s, the U.S. dollar and the Canadian dollar are in parity, which means they’re worth the same amount, whereas before, the Canadian dollar used to be much weaker and us people in the U.S., we could go take our dollars into Canada and it felt like everything was on sale. It felt like the real estate was cheap. Going out to dinner was cheap. Everything was cheap.
Well, now, the U.S. dollar has just weakened so much that if you live your life in Euros, pounds, Canadian dollars, or almost any other currency on Earth, American real estate is looking awfully cheap to you now, okay? So buy up American real estate. That’s my advice.
But if you do the conversion for most of these properties, you’re looking at about $260.00 – talking dollars now, not Euros — $260.00 per square foot, depending on where you look. Now, in the U.S. in the markets that we invest in, and we’re in 33 markets around the United States, you’re only looking at about $70.00 – $100.00 per square foot. And to me, that makes U.S. real estate one of the world’s bargains.
Now I don’t say that talking about California real estate. I don’t say that talking about Florida or New York or Boston or Washington, D.C. or Chicago, or Oregon or Arizona or Nevada or Hawaii. But I do say that when talking about good sensible properties in Texas, Georgia, North Carolina, South Carolina, Alabama, Mississippi. These are the areas where real estate is really, really a bargain.
Now, the thing that scared me off with Bansko and Bulgaria in general that I didn’t like – and by the way, I’m not going to say Bulgaria altogether is not worth considering because I think that their capital city, which I didn’t spend too much time in, Sophia, but I flew in and out of Sophia and spent the aggregate of about a day there, maybe, probably is a place to consider in the future. Bansko, not now. Bansko is overbuilt, overpriced, and definitely the result of a speculative bubble probably leaving up to the hopes of getting the Winter Games in 2014.
Now maybe they’ll get the games later. Bansko is a beautiful place, but I don’t personally have much of an affinity for vacation properties, so again, I wasn’t crazy about Bansko. It may be something to look at in the future. Sophia may be something to look at in the future. So I won’t spend much time – I could spend a lot more time talking about it, but let’s move on.
Let’s move to my last destination and that was Bucharest. Bucharest, Romania, a crowded, not-so-clean city with beautiful architecture and a booming, booming economy. Romania, Bucharest, which is the only Romanian destination for me, I thought was the best thing I found on the trip.
Now, the question is is it better than what I invest in in the United States? My opinion, no. Reason: It’s already expensive. They just got into the EU in January and they’ve had a huge run-up in prices. The RV ratio, or the rent to value ratio – by the way, that pretty much works across any currency because think about it, the example we give here is that the ideal RV ratio for a U.S. property is .7 percent. An acceptable RV ratio is .5 percent, so what does that mean? That means that $100,000.00 – talking dollars – property would generate $700.00 a month in income ideally and it would be acceptable at $500.00 a month in income for $100,000.00 property asset.
If you’re dealing in Euros and you’re looking at something in Bucharest – by the way, regardless of the country’s currency, the real estate and the bigger purchases are pretty much all denominated in Euros so that makes the conversion pretty easy. Now, you might go out to dinner or buy clothing at a clothing store if you go shopping or whatever and they won’t be on the Euro necessarily as a country, but the bigger assets like real estate or cars, they’re all denominated in Euros. So it is pretty simple to do the conversion.
And if you have a property that’s 100,000 Euros, you wanna get 700 Euros a month. The same rule pretty much applies across the board. That’s your ideal. Acceptable, 500 Euros per month. The RV ratios in Romania were decent, but not great. So this area looks pretty good. It was the best of what I saw on my trip. The most likely investment I would make for this trip is in a property in Bucharest or at least some other part of Romania.
Now, here’s the interesting thing to look at, and we’re gonna talk about this a lot more in a future podcast, something that I call the global prosperity boom. The U.S. is not really the big player in the world’s economy anymore. The big player is the emerging countries, namely China and India, but there are many others. I leave for the Ukraine next week and there is a huge booming economy and massive prosperity that is being created in many, many countries around the world.
Now, largely, real estate prices are a reflection of how people can afford to buy the property and when people buy a property, they buy a property not based on its price as much as they do based on its monthly payment. Do you realize in Romania, they only got mortgages about a year and a half ago? That is amazing to me. If you wanted to buy a property and you’re a Romanian citizen a year and a half, two, three, four, five years ago, you didn’t even get a mortgage. It was not something you did. You just paid cash for a property.
Now, as of – from what I was told and what I learned there, about a year and a half ago, they started having mortgages for Romanian citizens. What does that mean? Well, it means a lot more access to real estate. A lot more people can buy property if they can finance it, right? Well, if they can finance it, what does that mean? It means that you have more demand and a limited amount of supply, so you’re going to see upward pressure on prices.
Well, then, only recently, and I think this was only about the beginning of this year, that foreigners could get mortgages in Romania. Isn’t that amazing? So what you see in really all of these Eastern European economies is that people from England mostly have rushed in and purchased properties in these markets. People from Ireland have done it.
Now, there’s been a lot of prosperity created in these countries especially, but definitely in other Western European countries, too. And so, they’ve looked at their neighbors and they’ve seen prices increase. And so they’ve rushed in and they thought, hey, compared to what I can buy in a Western European country, it’s very cheap there, and now that I can get a mortgage and put 20, 25, 30 percent down, which by the way, is what Europeans are used to, whereas Americans we’ve got it so good here, even in the midst of a so-called credit bubble or mortgage meltdown, where we can still on rental properties put only 10 percent down. Maybe, possibly, but very difficult, even 5 percent down.
So I think that Bucharest is probably a pretty decent deal and I’m still considering my own first international purchase in Bucharest. So more to come on that. As just sort of a matter of interest, I thought I’d tell you I have a dog and I’m a real animal lover. And what’s totally weird about Bucharest is they have all these dogs that are just sort of wandering around, all of these – they used to call them stray dogs, but now they gave them a more politically correct term. They call them community dogs. And so you’ll just see dogs roaming around and you know, it’s unfortunate that many of them get hit by cars because they’re just roaming around.
So they have these funny community dogs around that you can – they kinda just follow you around places. It’s kinda interesting.
One article that I read in a magazine called Business Review, which is Romania’s premier Business Weekly, at least according to them, said that local real estate is not ready to meet the capital market. Worldwide money is starting to pour more into properties than into stock, and those who have made money in the stock exchange are now putting it into real estate.
And there is definitely a supply shortage. I looked at some interesting developments in Bucharest and when I do my purchase there, if I do, I probably will do it. More to come on a future podcast.
But definitely a very interesting country, Romania. The amazing thing is what you’ll see there. You’ll be driving down the street and next to you will be a horse-drawn carriage with agriculture in it and farmers driving it. And then next to it, you’ll see a brand new Audi and you’ll see a police, a policeman, there with a radar gun and then you’ll see a person raking or farming talking on a cell phone. So you have like this mix of new and old world. It makes it quite an interesting place. Highly recommend a visit to Bucharest. It was very, very hot when I was there, just extremely warm and humid, so I would recommend that you avoid the summer. It wasn’t too pleasant as far as weather goes, except at night.
They had some good night life there. Met some new friends and had a good time and found the whole trip to be very, very interesting. I am not convinced overall that there’s anything there that tops American investment, at least at this time, and if there was, we would be recommending it and we would have product there because it’s not problem for us to get product in these markets and recommend it to you. But we are area agnostic and we wanna recommend what makes the most sense because, again, we have no attachment to any one market.
Anyway, that’s it for today. Got a couple announcements at the end of this podcast and we’ve got a bunch of great podcasts coming up, by the way. Some are a little bit off the topic of direct real estate, but they are about creating wealth. I’ve got a couple business and sales gurus that I’ll be interviewing on upcoming podcasts very shortly here. We’re also doing another podcast on GoZone property investing, so stay tuned and join us next time. We’ll try to get these out to you faster, on a weekly basis, and again, thank you for listening.
We are so excited to say that we have listeners from about 25, 26 countries around the world now, and thank you for making us so popular. We would highly appreciate it if you like the material you’re hearing here, to write a testimonial for our podcasts on iTunes or any of the podcasting websites. And we’re always happy to hear your questions. Just contact us, and we will look forward to talking with you soon.
Call our office if you have any questions about investing or email us. Just go to www.jasonhartman.com, fill out the Contact Us form, and again, we’ll be glad to help you and advice you on investments anywhere in 33 markets around the U.S. and to a somewhat lesser degree, around the world. Thanks for listening and happy investing and stay tuned for a few announcements.
I’m here with Senior Area Manager, Karam, and we wanted to talk to you quickly about his recent trip. He just returned yesterday from Jackson, Mississippi. Karam, what did you find there?
Karam: Well, Jason, it was a very interesting trip. Unlike other areas, this is a very unique area in the sense that we live here in California and we go to all these markets, and every market is different. Jackson, Mississippi, on the other hand, the way it is different from the other areas is they don’t have the apartment complexes like we have in most of our metro areas.
Jason Hartman: Yeah, so you don’t have that high density attached housing, huh?
Karam: That’s correct. So what happens is all these houses have high demand of rental, and on the rental side, there is not too many houses available for rental, so there’s a quick rental and you get the high rents, so the cash flow is better. But you have to drill it down to the micro area, the communities that we want to invest in, buy the investment properties. The first thing we look at is the school system. Now, if you look at any particular city and suburb, it may have a good school system or it may not be in the good school system. Now, one particular city may be half in one county and the other half is in a different county.
Jason Hartman: So that was true of Hattiesburg, right?
Karam: That’s correct, yes.
Jason Hartman: So if you look at Hattiesburg, you can’t choose by just Hattiesburg. Some of the area is not so good –
Karam: Not so good.
Jason Hartman: And some is a desirable investment area.
Jason Hartman: You were telling me about how they gave you a list of 131 properties that the broker thought would be good for our investors and the process of you narrowing it down and what you narrowed it down to. Why don’t you tell everybody about that?
Karam: Well, I just narrowed it down to 21 properties.
Jason Hartman: Out of 131.
Karam: Out of 131, and that’s all I will sell from, 21 properties, and they are in a good school system, good quality product. Looking at the communities, the location of the communities, location of the properties, and that’s all I came up with.
Jason Hartman: Excellent. So Karam, talk to us about this specific property you’ve got in front of me. This one is $179, 760.00, so we’ll call it $180,000.00. It’s almost 1700 square feet. The projected rent is $1500.00 a month and return on investment, Karam?
Karam: Yes, 42 percent believe it or not.
Jason Hartman: Forty-two percent projected ROI and if you qualify for all that goes on tax benefits, projected first year ROI is 128 percent. Don’t try that in the stock market, huh?
Karam: That’s correct. The reason is these areas, not only the high rent, but the property tax is very, very low.
Jason Hartman: Only $195.00 a month on that property. Wow.
Jason Hartman: Good stuff. Okay, Karam, anything else you wanna talk to us about. Let’s – you’ve got one more property, maybe this one in Indianapolis; that looks kinda interesting. There’s some big discounts on this.
Karam: Yes, Indianapolis really surprised us, that market, and we are getting great deals.
Jason Hartman: Yeah, we weren’t expecting this one to be so good.
Karam: Yes. Great deals and I’ll give you an example of the property that I saw yesterday. Twenty one hundred and one square feet, four bedroom, two and a half bath, brand new single family house, comes with a rent-ready package, meaning washer, dryer, refrigerator, blinds, garage door opener, front and back yard sodded, for only $127,000. You know what that means, Jason, per square feet price?
Jason Hartman: Yeah, that’s amazing. You’re buying like very close to the cost of actual construction here. How much?
Karam: $60.00 per square feet only.
Jason Hartman: $60.00 per square foot. That is unbelievable. It’s like the downside risk is almost nothing. Go back and listen to our podcast on risk evaluation.
Karam: And again, return on investment is 41 percent.
Jason Hartman: So 41 percent projected return on investment, and these are some good properties. Give us a call or check out our website for more properties and all the details are listed there. And we will look forward to talking to you on the next podcast. Thanks.
Hey, I just wanted to announce a couple of quick things for you. If you are able to come to one of our live events, we would love to see you and meet you in person. We’ve had people fly in from all over the U.S. for them. Join us for the GoZone tax benefit event, the biggest gift the IRS has ever given the American people. There is still a chance to recoup the taxes you paid in the last five years, so if you paid federal income taxes in 2002, do not miss the GoZone event. It’ll be the last one of the year on Tuesday evening, November 13. This event is at our office in Newport Beach, California. Join us and don’t miss this one. It’s a very important event.
So hopefully, you can join us for some of those events. Also, remember our rental coordinator is here to help with your rental properties. If you need assistance with your rentals, your property managers, your advertising, remember we’re here to help and we stay with you through the life of the investment. So feel free to call our office anytime and ask for the rental coordinator for assistance on your rentals.
Also wanna remind you, listen to our old podcasts. At least go back to podcast No. 13 forward and listen to all the podcasts after that. You’re welcome to listen to all of them. The ones before No. 13 are older, but they’re also good, but the newer ones are No. 13 and forward, which are really good ones to listen to, so please take advantage of that.
And remember, the overall market commentary right now, due to the mortgage meltdown, the subprime issues that are going on out there in the market, is that rents are going up all across the nation. When people cannot qualify as easily to buy a property, they are forced to rent. So let that work in your favor by accumulating more rental property assets and don’t be afraid to ask for more rent and raise your rents. That’s a good thing to do.
Also, if you are interested in career opportunities with us, our company is growing quickly and we would love to talk with you about career opportunities. We’re in the process of getting approved for franchising. If you’re interested in a Platinum Properties Investor Network franchise, we’d be happy to talk with you about that and get you set up there once we are finished with our approval process.
Be sure to see appropriate disclaimers and disclosures on our website at www.jasonhartman.com. Remember that we are not tax or legal advisors. So give us a call on any of these issues, and remember, we are here to help, and we will look forward to talking to you on the next podcast.
This material is the copyrighted creative work of either Jason Hartman, the Hartman Media Company, Platinum Properties Investor Network, Incorporated or the J. Hartman Company, all rights reserved.
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Duration: 48 minutes