Heroic Investing
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Self-Management Tips with Sue and Gary

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Jason Hartman and Gary Pinkerton host Sue to discuss mortgage sequencing. She discusses some of the challenges early on and how to get lending in multiple markets. Gary and Sue give some self-management types and insight into their experience as investors. They look at Section 8 and discuss some of the challenges. Jason explains the fragmentation of single-family real estate and why that’s a good thing for individual investors.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:40
Welcome to the heroic investing show, a podcast for first responders, members, the military, veterans and anyone looking to improve their financial future and gain some freedom with their time. We teach America’s heroes how to build passive income, build their startup business and safely grow wealth through real estate and other alternative investments. We have current and prior first responders put protections systems and a team in place to help them build a life where they can focus on their passion, that service or product that they’re uniquely gifted to share with others, making the world a better place for all of us. My name is Gary Pinkerton. And I co host this show with Jason Hartman. So this is the second half of the interview Jason did with Sue my wife, Sue and myself on our real estate portfolio. It’s a client case study. And in the first half, we talked about some of the challenges that we had early on about multiple markets, about mortgage sequencing. So in this second half here, we’re going to talk about Sue has some great tips about self management. We’re going to talk about the fragmented nature of single family, you know, real estate investing, sometimes that’s frustrating, but it’s also to our advantage that not everyone gets into it, the hedge funds don’t get into it right. And then we also talked about making sure that everyone understands there really is no such thing as support. Passive investment, anything that you do passively, anything that you decide get into your mind or get convinced, is going to be passive where you can just hand your money off for somebody else to manage it is going to come back and bite you, I guarantee it. And it’s just there’s nothing in nature that way, right? Like squirrels can’t just outsource getting the nuts for the winter and storing them away. Trees can’t outsource getting water to their roots to keep the tree alive to the other younger trees. You cannot outsource the security in your life, the financial security and your security in general, you can’t outsource your health, right? You can’t outsource your family’s relationships, nothing like that works. And it goes the same way with your finances. You have to pay attention. And you have to just constantly make sure that you’re on the right path, and that the people you have in place that are helping you with things remain focused and have your best interests at heart. So I’ve learned a tremendous amount. I’ve spoken with thousands of investors and clients I have mine who have had bad experiences. And they all really go back to a couple of traits. And one of them is that, you know, we don’t do enough due diligence on on evaluating the character of the individuals we’re, we’re getting into an agreement with, but then also it’s about abdicating. It’s about not paying attention. It’s about not thinking about that concept and surrounding yourself with other individuals that are, you know, like minded and focused on improving their own wealth. Listen, I’m not saying it has to be your day job. I’m saying that you you cannot just abdicate responsibility. And the same goes with real estate investing as it does with your stocks. Many of us out there have abdicated our stocks and bonds to some money manager and when things are going south, and the guy’s paying no attention, he will and you talk to him on the phone out of fear. They’ll say things like you’re in it for the long haul, you know, stocks go up and down and all those kinds of things. You need to maintain some control really primary rule number one Gary’s rule number one is maintain some control over Your assets, you know, that’s one of Jason’s commandments as well. I found it to be extremely important. Invest in yourself primarily than invest in things you directly control. And then start thinking about investing in passively in things that other people are in control of. And last, lastly, for sure, invest in speculative things where you don’t even have a clue who’s in control, you just buying some shares, right? So anyway, a little bit of advice from my side. And let’s get into this conversation as how this kind of direct control and no such thing as passive relates to our real estate portfolio.

Jason Hartman 4:37
So now that you’ve had some time with these properties, and with your portfolio, share some best practices tips, if you will, for dealing with property managers. I don’t think you self manage anything, but certainly self management is probably something you’ve considered. I think the two of you, Sue and Gary have maybe listened to every single podcast episode I’ve done. Have you listened to all of them?

Gary Pinkerton 5:02
Oh. I’ve listened to all of them numerous times. Because I’m with helping you with kind of some of the flashback Friday stuff. So lots of stuff there. My first comment on this Oh, management Gary, I actually do self manage that four Plex that’s original property. We self manage that entire building for a while. And I’ve found it to be amazingly easy. And I won’t go too much into mind because Jason and I cover that on a previous episode. My thoughts, I would love to hear yours. One of the things I was going to mention at the end of the journey, Jason is that Susan, as you said, had finished up her full time job, and is now becoming the real estate professional to run our properties. And it’s pretty amazing, but she knows more, and has probably more lessons now at this point about managing the managers than I do.

Jason Hartman 5:43
Good stuff, Suze, share some of those with us if you would,

Sue 5:46
so we self managed the single family residence in Oklahoma City because that was a newer construction. And then we still self manage, I believe two of the units in the four Plex kind of just got to where it was time for attendance. turnover. And, you know, we weren’t really clued in on the background checks and you know, all of that kind of stuff for new tenants. So we handed over two units to property management down there. But otherwise, you know, kind of, I just find sometimes you do have to, you know, I’m still spending some time managing the managers, because I find that things will slip through the cracks, you know, and I’ll use our Memphis as an example, one of the houses is a section eight property, and we weren’t getting paid the section eight portion, one month, it was less than the normal than the next month, it was nothing. And it took me to say, Hey, you know, what’s going on here? Why is this going on and to get on the property manager and to look into it and then you know, that ended up being a four to five month ordeal and, you know, we got Sarah involved and all that. It came out, okay. But you know, we were good for a couple months and then no, now, we just had another issue for a month. And so I do find that I can just take their numbers and put them in my spreadsheet.

Jason Hartman 7:09
You know what they’re doing? Yeah, you gotta pay attention. But you know what, I’m curious. Both of you have talked. And this is one of the things I really value is transparency. And I try to share on my show, and I think everybody that’s listening for a while will completely agree with this, hopefully, that, you know, I’m just really transparent, the good, the bad, and the ugly. Because you know, when you are just upfront about it, people’s expectations are set correctly, you know, and I find that makes my life a lot easier. Frankly, I’ll say it’s even for a selfish reason. But to an outsider who’s maybe happened to catch this as the first episode that they listen to, right. Then they’re thinking, Well, why would I want to deal with this with all this problem? You know, I’ll just put my money in the stock market or keep it in the bank or something. You know, it sounds like a headaches. Can you guys address that is why would you be excited about it? After all this, right? We’re trying

Gary Pinkerton 8:04
to drive away the competition. Okay, got

Jason Hartman 8:07
it. Got it. You don’t want other investors buying properties, right? You’re trying to turn them on? Yeah.

Sue 8:13
Oh, I was gonna say it’s because when when you have that month where everything goes great, and you’re just like, that’s why I do it. Because, you know, had minimal maintenance calls, everyone paid their rent on time. And then I fully realized, like, all my cash flow that month, and I’m just like, there you go. Now it’s like, a game, like, how many months in a row? Can I can I make this happen?

Gary Pinkerton 8:34
Right? Yeah. And and for me, it’s about one of the things that’s important is that that the investor learns how to keep score correctly. And I’m kind of repeating you know, something that you’ve talked about a lot. But when you correctly keep score, it’s not just about the cash flow. And in fact, you know, the being able to offset the depreciation of the dollar to offset inflation. It’s huge, especially when you do it leveraged, right. So I talked when we were at Oklahoma State Jason Hartman university that you know that now numbers that are on all of these properties that we were looking at are in the 30s and 40%, total return on investment. And that’s actually what we’re still seeing with our properties because of the multi dimensions of it. Right. And, and so, yeah, you know, your comment about you feel every bump in the road. It’s a fractionalized industry. It’s gonna keep a lot of people from joining it. But we’re

Jason Hartman 9:21
a fragmented industry is what I’m going to say. Yeah, yeah. One of the things let me just comment on that, Gary for a moment. One of the things I say is that, you know, this is a common frustration with investors Hey, it frustrates me everyday to is that it’s a very fragmented industry. You know, everybody’s doing stuff a different way your property manager in in one city will do it differently than in another city. One of my sayings is embrace the fragmentation because that fragmentation is what makes it very difficult for the institutional investors to get into the game. Now, granted, we all know they’re here to some extent, but in comparison to the overall marketplace. The institutional investor component in the business of buying and holding and renting single family homes is like nothing. Okay? You know, you can say, okay, invitation homes, as you know, 50,000 homes or whatever they have now. And that sounds like a lot. But in comparison to the overall marketplace of 15 million or so, single family property, residential properties owned by small investors, they’re nothing, okay? They’re nothing. And if this was not fragmented like that, Goldman Sachs, and Warren Buffett, and every NBA or Berkshire Hathaway, I should say, you know, or in every other institutional investor would be in this market eating our lunch. Okay, so it’s good that it’s fragmented. That’s what keeps it’s hard for them.

Gary Pinkerton 10:45
zactly Yeah. Okay, exactly. What I was gonna say is that some of the stuff that I’m going to talk about it that incredible opportunity to to talk and tell our story, meet the masters. Is that this opportunity for I mean, we are both extremely bullish We’re on the right path and that a lot of Americans need to take this path. Because it until you develop part of your personal finances that enables you to have consistent passive income and offset any concerns of inflation, you’re never really going to have the ability to go off and do what you want. You know, I mean, there’s no bank account big enough, in my opinion, that will do that for you. But if you have something that keeps up with the changing economy keeps up with inflation, it gives you the freedom to go off and you know, step off the treadmill of life and do stuff you want to do. I mean, the reason we’re bullish on it, I think sulit agrees because of the freedom that it creates for our family.

Jason Hartman 11:37
Yeah, and pardon my crass language here, but it just sounds better to say it this way. It doesn’t keep up with inflation. This kicks inflation’s asks Is it does it in two ways, of course, inflation induced dead destruction, which you know, regular listeners all understand very well by now. But also just leverage basic leverage because, you know, you outpace inflation on A five to one ratio. It’s a beautiful, beautiful thing. So and then you have other dimensions where you earn return on investment as well. So, yeah, good stuff. Good stuff. Yeah. You know, Gary, you just can’t do it. And but see the thing I would argue and I’m sure you know, I don’t know, we’ve never talked about this before. Over the years, you’ve been clients, but I’m sure you guys have invested in stocks and bonds and done all those sorts of Wall Street pooled assets stuff. And you know what that stuff, it’s like, you have to totally pay attention to that. I mean, anybody listening who thinks they can give their money to some financial planner or even put it in an index fund? They are crazy. You have got to pay attention that you’ve got to read, you’ve got to learn you’ve got to watch CNBC all day. Even then, it’s so out of your control. You really have no idea how you’ll do but you know, I always say there’s no such thing as a passive investment. And let me share a small example. This is not a major example, but It’s worth talking about, even the bank is not a passive investment, because, of course, your money is getting destroyed by taxes and inflation. We all know that. But, you know, I have some bank accounts that you know, I just spread money around in different banks. And, you know, I don’t want to go over the FDIC $250,000 limit. And so, you know, I just never do anything with them. They just sit there right I you know, I have a little bit I admit, I have some money in the bank because I honestly don’t have enough time to deploy it. Okay, sometimes, and I do my real estate investing, I do hard money lending. And so I get this, you know, notice, like, we think your account has been abandoned. You’ve got to sign this letter and fill out this paperwork. Otherwise, we’re gonna let this cheat to the state. And I’m like, Are you kidding? There is nothing passive here. Oh, like even a bank account. There’s an example right? So yeah, it’s it’s a hassle.

Gary Pinkerton 13:57
Sue, any thoughts?

Sue 13:58
Um,

Jason Hartman 14:00
We’re off on a tangent here, are we?

Sue 14:02
I know?

Jason Hartman 14:05
before real estate investing, you know, before Gary got us kick, and then he got you enrolled in it. What did you do? Were you were you not the money person? Was Gary the money person? Or both? Or, you know, were you looking at your 401k and the stock market and that kind of stuff?

Sue 14:20
Yeah, we would both do it, keep an eye on it. And we were just, you know, kind of mutual funds because, you know, we thought we could just invest in it and not really have to pay attention to it, right, because you’re investing for the long haul, and we’re not buying and selling. And,

Gary Pinkerton 14:36
certainly now.

Sue 14:38
So that was where we were, you know, put as much money into your 401k as you could or Gary had the Thrift Savings Plan. And so that was what we did. And then you know, and I know Gary has told the story before you know, my parents are retired now, but yet my dad is constantly like, Am I gonna have enough money to make it through you know, he’s only in his 70s how much longer you know, am I going to need Money for and you know, so it just kind of all circles back to not wanting to have to worry as an older that I’m gonna outlive the money. Yeah,

Jason Hartman 15:11
yeah. So as a as a health care person that you are you gotta, I’m sure agree with this that the biggest problem a lot of people are going to face and it’s a good one is too much life left at the end of the money because people are sadly because of obesity and diabetes and all this stuff. You know, life expectancy actually has gone down slightly in America for like the first time ever. I believe I just read that. But overall, I am I think it’s an amazing time to be alive. As you’ve heard me say, and I think that that is going to take a real turn with some of the longevity technologies, longevity sciences that are just, it feels like they’re on the verge of making some rubber spray. Yeah, yeah, better pen.

Unknown 15:58
You know, hopefully Age expectancy will go back up and then you know, what are you gonna do work into your 70s or work into your 80s or 90 or 100?

Jason Hartman 16:08
You know, like, if you listen to Ray Kurzweil, he says, We’re gonna have things that you know, clean out our veins and arteries. And yeah, it’s amazing. I mean, all this stuff that’s right around the corner is pretty incredible good stuff. Want to share any other like another best practice before you go? And let’s kind of wrap it up or any anything I didn’t ask you about that you want to share?

Gary Pinkerton 16:30
Well, Jason, most importantly, I just wanted to say thanks for having us on. Thanks for helping lead us through this journey of five to six years. I mean, it’s been just incredible for us. Like we pointed out earlier, we shared some complaints but I think that’s because we’re type a people and you know, your mom has commented once and you’ve laughed about we’ve laughed about numerous times your mom’s comment that she complains all the way to the bank about her section eight tenants. Yeah. But you know, in the end when you look at those B class or even your C code And the a class will be at the end of the year. If you spend time to actually keep score correctly, you’ll be amazed at the impact and then everything got so much better with the new tax changes. So I’m very, very bullish on this. I can’t wait to, you know, kind of share our experience and talk about what I do. You know, it made the master. So this next couple of weeks coming is going to be amazing.

Jason Hartman 17:22
Yeah, good stuff. Well, thank you so much for sharing Sue Gary, we really appreciate it. It’s always great to have case studies, our listeners love it. And they love to hear from real people that are doing real stuff that have real challenges, real highs, real lows, you know, you know, it all kind of go out in the wash. So you know, I think the key, the key thing is just understand, go in with realistic expectations. There will be problems. It’s just part of life. It’s, you know, we’re all adults. We know it’s not all a bed of roses. Hopefully we learned that by now. And God, you know, you just got to be persistent and Work your way through it. That’s what you do with anything that you want to see come to fruition. So, so thank you to both so much for sharing with us today. We appreciate it and we’ll look forward to seeing you soon at meet the masters. Thank you.

Sue 18:14
Thank you.

Announcer 18:16
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