Gregg Cohen is Co-Founder at JWB Real Estate Capital and as a company they have managed over 3,500 rental properties for 1,200 clients which has generated $26+ Million in positive cash flow. This year (2020) has been a roller coaster ride and we talk about the real estate market now and in the near future. Should you invest? Is now a good time or wait? Is a housing bubble on the horizon? 0% Interest Rates.. What does it all mean?
With your own money, would you buy a house right now or would you wait until the economy settles?
Oh, I’m buying, I think more wealth is going to be created right now than name your time period in the past, right? The last five years, three years, 10 years, whatever you want to say. And the deal right now is debt.
As investors we feel pretty good about our ability to borrow something at 4% and get more than a 4% return. I’m buying right now. I’m financing. Because these interest rates and the terms are so advantageous for those who understand it and are in a position to be able to act on it.
Alright, I got Greg Cohen here on the Establishing Your Empire podcast. Thanks so much for joining me, Greg, Greg he’s co-founder JWB real estate. and it’s like Kayden in Florida, which is what’s great about this, virtual podcast. We can talk to people all over the world. A few crazy stats that I’ve read about the JW B capital is 3,500 plus rental properties that you guys have managed over $26 billion in positive cashflow, which is, sounds crazy to your clients.
And you have like over 1200 clients. So, very excited. Cause I think real estate is very it’s interesting time. the market’s crazy right now and, I think I’m very excited to have you on the podcast. Well, thank you. Thank you so much for having me. This is a blast. Yeah. My first easy question or a super hard one is, you know, you know, what’s your elevator pitch, you know, who is Greg Cohen?
Right? Well, so I am the guy who, came from corporate America and, thought I kind of had it all figured out as far as what I wanted my career to be. In college and post college, and I got to corporate America and I realized that that was not the place for me. And, you know, what I ended up doing was grabbing one of my best friends and who was also jobless at the time.
And, you know, I was interested in making a career move and, and we started reading books on real estate and started watching late night infomercials and started going to real estate conferences. And I’m the guy who scared the hell out of his parents and everybody around him and left that corporate job to go and chase a real estate dream.
That everybody thought was crazy. And you know, 15 years later it’s been an incredible ride. You know, we’ve been blessed to, to bring on a large number of clients who place their trust in us. And at the end of the day, we make real estate investing easy for people. There’s a lot of people out there that are either too busy or they live in a market where they can’t buy rental properties.
but they want to, they want to own rental properties. And so. Within our company, we’re able to make that possible. We help people build a portfolio of rental properties. They get to buy them from us. These are already built or renovated. They already have a tenant in place. And then we do the property management in house for them.
So whereas people are kind of searching for an alternative to investing in the stock market and you know, they look at bonds and those really don’t produce really decent yields right now. But they want something safe and consistent. They can come to rental property, invest, and you can be as simple as investing in the stock market.
And that’s really what we’re all about. I love it. So let’s go back a little bit. so corporate America, you were, you had a corporate job, so I have a very similar story or for a big company. And, you know, just wasn’t for me, but like, so how did you actually start a company? Like you said, a lot of fun things that you kind of did some research, you know?
and, and I guess this was probably like, Early two thousands, probably. So how did, how did you actually start? I think a lot of people get stuck with the, they have an idea. They want to do something that they can’t take that first step really hard for me. If, if you knew me in college and even before then, I was not destined to be an entrepreneur.
I still am not a classic entrepreneur. I’m somebody who had a best friend who is a, who is a classic entrepreneur who was new. It was my first business partners. I now I now have a total of three business partners. and that entrepreneurial spirit is, is within Alex, who was my first business partner, but not with me.
I was the guy who thought that it was going to be learning and working up the corporate ladder. And there was a part of me that really enjoyed that process and enjoyed that security growing up. My parents were not entrepreneurs or not entrepreneurs in my family, nobody that invest in real estate in my family prior to me starting this company.
And, so it was not something that was easy or natural. You know, for me, the reason why it was something that I did was because combination of new, realizing that the pain of staying in corporate America and looking at what my life was, I thought going to become was greater than the pain me going out there and falling on my face for me.
I’ve never had a real fear of failure. It’s just, I guess I credit that to my parents for. Allowing me the space to go out there and fail and not really like connecting that and my self worth. And so that was a pretty easy kind of hurdle to overcome for me. But the pain of staying in corporate America in my specific situation, specific situation, it was really bad.
I had a bad manager, a bad situation that was backstabbing, and I was like a 22, 23 year old kid. And when I said to myself as if I really do have plans to try to be a mover and a shaker and work my way up, the corporate ladder and people are stabbing me in the back at age 22 or 23, when I’m a nobody in this company what’s going to happen is I really try to take a step forward and try to leave and try to.
To make gains. I just, I just envisioned that it would only become worse. And so, and you mentioned that you had, you started with a partner and then now you have multiple partners. That’s always been kind of an area that, I haven’t really gone into as much. I did start my first company with, with a partner and that one was a little easier, cause he was a, more of a mentor situation for me.
But I need advice with finding a partner or keeping a partner happy in any way, any direction you want to go there. Yeah. It’s been 15 years now that we’ve been together as business partners. it was, I started with my, my best friend who is Alex and we started the company together and six months later, Well, we had our first employee who, we hired a $10 an hour and quickly realized that, you know, he was somebody that we wanted that was going to help grow the pie of the company.
And so we brought him on as a business partner and then in 2010, that was about five years into the company we brought on our fourth business partner, atomizer. And so. Now we have a structure of making decisions in our company that is very different, done a number of podcasts and number of speaking opportunities, just specifically on how there’s like a four headed decision-making monster here at JWB.
And then we all have different titles. I happen to be the chief marketing officer and there’s. Adam is our CEO. We have one of my other business partners is also named Adam, which is fun. He’s our CFO. And then Alex is our president. So we have different roles and responsibilities and titles and whatnot.
But when it comes to making decisions, we view ourselves as a four headed monster. As far as being quote unquote DCEO. And how do you do that? Well, it’s not very normal. You know, usually you have to have that defined, you know, who is making the decision here, but we’ve gone a different approach. And we really believe that if we leaned in with a lack of ego and with empathy, and with a consensus decision making methodology that we would make better decisions.
And that’s something that takes a lot of humility. It’s something that is really difficult because if you know my business partners and me, we are some of the most stubborn guys you will ever meet, you know, and it. If you have some guys that have had some success over 15 years and have built up, but these organization, and they’re also stubborn, it makes it that much harder for them to back down if they don’t, you know, if you’re not going with their decision.
Right. And I think I can certainly, I’m certainly, that is my natural state. I want to do what I think is right. but what we also learned is that when there’s four of us moving in one direction, there’s nothing we can’t do. And so the benefit of four of us agreeing to this consensus decision making rather than voting, has been huge because what consensus requires is that not only do you agree with what the consensus is, is that you fully give yourself to that decision and you do not have the ability to SAPLAT to sabotage either knowingly or subconsciously.
And when you vote. If it’s a two versus one, or even a two versus tune boat, and somebody goes in one direction versus another subconsciously, you’re already pulling yourself in the opposite direction, if you didn’t get your way. And so it was a, it was, it was something that we learned, learned from a great mentor of ours.
We made that because quite frankly, many years ago now, I mean, she’s probably eight years, nine years ago. That was part of our toughest time as leaders. And it was because we weren’t, concentrically making decisions. We were, we were, we were voting and then, you know, there was some stuff, some sabotage, not knowingly, but just the first lovely.
so, so what happens when somebody doesn’t agree? Like somebody doesn’t want, like one person doesn’t want to go in that direction, what happens through it? And until that person says, I suppose, and if he does the support, just, it drops. It’s done. Nice. Well that, well, that’s great. Cause the thing about having, you know, it is interesting cause you know, we’re talking about voting well it’s even numbers, so that makes voting already difficult.
And then also it is interesting, cause it probably does slow you down in some ways, but speed you up in the ways that should speed you up in. Right. Cause if you’re all for going, wanting to do that item. It’s probably going to get done pretty quickly. But if like you were saying, that’s an interesting take on it to where if, you know, two of you really want to, but to two, you know, don’t really care or want to focus in different directions that might, the decision making process might be slower, but the actual actions of making those, those services or projects or whatever it might be, might actually end up being much quicker.
So why do we see those first five years , trials and tribulations, any ups downs that you that are fun to talk about? If you could think of about the wrong time to start a real estate business with. Couple of guys, three guys, you had no real estate experience, no money, no experience in business.
Overall 2006, which is when we started, would be about the wrong time to start a business in real estate. And that’s what we did. so, you know, in 2006, we bought about 40 rental properties. we were borrowed to the Hill. we borrowed, you know, bank financing, which, you know, generally those interest rates were six, 7% at that time, which sounds really high today, but not, not incredibly high, but we would borrow additional money to be able to buy those properties and then renovate those properties.
And so we had some really big, really big holding costs. And at that point, now we bought them the right way, meaning that they produce positive cash flow. So that was in our favor. And that was always our, you know, a belief. The number one rule when investing in real estate should be that it should be positively cash flowing, but, you know, we had never really been through a recession before we had never seen home prices drop.
We didn’t think they were going to drop. Nobody did in 2006. Now in 2007, 2008, 2009. I know what happened. The market crashed and prices fell over 35% in Jacksonville. And so you had these two or three guys at that time who had all of their money borrowed in 40 rental properties. And you would think that that was about the worst situation you would think that we had to, you know, give those properties back to the bank or shut down shop or do whatever.
But that wasn’t the case. And we learned a lot through it. We learned that cashflow is the number one reason why you invest because home prices fell but rent and right state rent rates stayed consistent in Jacksonville. And that allowed us on a monthly basis to continue to earn that positive cashflow.
People were still renting homes for us. People were still paying rent and it didn’t matter to us that the home values dropped so much on paper, because this was always a part of our longterm retirement plan. You know, we were investing not to sell it in one year, two years or three years, we were investing to sell it.
Maybe never, right. I still own those properties today and a whole bunch more. And so the plan was always to hold onto those for 10 20, maybe 30 years or more. so what we learned was the difference between positive cashflow and then your net worth on paper or net worth on paper was a Bismal in 2008.
Right? but our cashflow was nice. And so it allowed us to continue to grow. we contrary to what a lot of people did. We made investments in people in systems, we hired, we grew our business and we couldn’t have done that without consistent cashflow. So it was, but that’s me telling the story, you know, 15 years later, 13 years later, right?
At that time you want to talk about trials and tribulations. So scary, so scary for us. I mean, there were many days and many nights where I was like, what are we going to do? Because I knew how the fundamentals work, but I didn’t know. I was still still on pins and needles waiting for the other shoe to drop.
you didn’t know that 30% was the, you know, it could have kept going. You didn’t know that that was it right. Kinda kept going. Yeah. People are like, this is going to keep going. I don’t know if real estate’s ever going to come back and we’re like, so we did more research and we looked into it and we realized how market cycles work.
And, the really cool thing is that what we also learned through this experience now that we’ve been through a market cycle, you know, market cycle is generally known between 10 to 20 years. You know, even though home prices fell about 35% in Jacksonville from 2006 to 2009, the actual average appreciation rate in Jacksonville going back for the full market cycle is still over 4%.
So, if you look from 2001 to 2020, and you looked at the average appreciation rate per year, it’s over 4%. So what that shows you is that supply and demand work in real estate over a full market cycle. And if you buy and hold rental properties for the long haul, you’re going to end up with home values, appreciating as long as you’re in for a market cycle.
What about let’s jump ahead. 2020, 2021. COVID interesting economically, this kind of crisis that could happen. China is getting more powerful. Do you see, you know, do you think this housing bubble is one gonna happen and could it be worse? Any thoughts around like this, this world that we’re in right now?
I had a lot of questions, from current clients, folks who were thinking about investing in real estate and they’re saying, well, I love. Rental properties. I love positive cash flow, but if I could, if I know that home values are going to drop in six months or a year and two years, should I wait to purchase.
And so we really did a deep dive on the numbers, a couple of things to point out, you know, and it’s a little bit different than what common knowledge it’s most people think because of what happened in 2008, that anytime you hear the word recession, you automatically think housing crash, but actually that’s not the truth in four of the five previous recessions.
Home values actually appreciate the one recession where they didn’t go down was 2008 when home values dropped. And the big reason why that one is different is because real estate and lending practices caused the recession in 2008. Whereas they did not cause the four of the previous five recessions. So when you know, and this is prior to Kobe, we got a lot of this question cause people, if we can put ourselves back what it was like prior to Kobe, everybody was saying, well, we’ve had such a bull market for so long things, are the values have gone up.
Things are gonna, it’s going to be a bubble it’s going to pop. And so that was really interesting just to have that basic kind of knowledge, that if we did go into a recession, it does not automatically mean housing prices are going to crash. And what about supply and demand of these rental properties?
Are we seeing, are you seeing any cause obviously with the houses, just that the residential houses housing, the supply is very low. Is there anything happening there? Absolutely. So now, if we look towards this COVID reality people again at the beginning were saying, Oh, well, if people can’t go outside and buy a house, then you’re going to find that housing prices are going to crash.
And on our show and on our podcast, I came out and I said, I don’t spec house. It’s the prices to go down. And people are like, wait a second. Like, how can you possibly think that? Because housing prices really, there’s not a national real estate market. It’s all hyper-local. And you have to look at supply and demand in that hyper local market here.
And in Jacksonville, just like you mentioned, in many places across the country, we see an extreme housing shortage. And the best way to measure this is what’s called months of inventory. So you basically take the number of homes that are on the market in that month and the divided by the number of homes that sold for the previous month.
So if you had 8,000 properties on the multiple listing service in your area and a thousand properties sold last month, and that would be eight months of inventory. And historically six to seven months of inventory is known as an equilibrium market, and that would lead to historical average appreciation rates.
And Jacksonville happens to be 4.3% of the average historical home price appreciation rate. So if you’ve got six to seven months of inventory, you’re looking at an average amount of a home price appreciation. If you’re below six, You’re you’re looking at increased higher than average home price appreciation in the short run.
And if you’re over for seven and the higher over seven years, yo you would see downward pressure on pricing and lower than normal home price appreciation and potentially approach. Appreciate approaching, you know, a drop in prices. So since 2000, yeah, 14, since JWB started tracking months of inventory every single month.
Okay. We haven’t even touched six months of inventory. Since 2016, we haven’t gone above three months of inventory. And just last month, as we were doing the June data release, we had the highest number of home sales in Jacksonville’s history. We had 3,100 home sales, which is the most we’ve ever had in any month.
And we still have this shortage of, of, of inventory as well. We actually have 2.3 months of inventory in Jacksonville as of June. 2020. So when people are concerned about what’s going to happen with pricing right now, I don’t see housing prices going down anytime soon. What this means is that we could withstand a significant drop in the number of home sales.
Before you start to see prices even get to average historical home price, appreciation rates. So that’s why I came pretty strong in the beginning in March, instead of, I just didn’t see this leading to a decrease in home prices. And the other thing I shared with people is that, you know, buying rental properties is a beautiful thing compared to buying stocks because in the stock market, you’re, you’re trying to time the market.
You’re trying to. Bet on whether the value of the, you know, appreciate or depreciate, right. And rental property investing. That’s the least most important thing, right. Because if you buy today short term pricing, Matters the least, you’re also getting all this incredible rent that’s coming to you, right?
Which results in a positive income to you every single month, you’ve got tax savings. You’ve got principal pay down. Now you have this incredible opportunity to secure longterm interest rates at like 4%, which is incredible. so if you are trying to time the market and rental properties and even makes less sense.
Because you’re giving up all this real income that you could be getting for three months, six months a year while you’re potentially waiting for the market to drop. And even if it does, I’ve been through that before. And if you give it a long enough time period, it’s going to come back. So, so yeah, I keep pretty strong with that.
It’s nice to see that now home prices are falling. What we predicted at JWB. And I don’t see home prices going down anytime in the near future. And my main indication would be looking at months of inventory. If something would change. It’s pretty low supply right now. Just like you were mentioning. Yeah, Austin, Texas is really low here and prices are going through the roof.
what about, there’s so many different directions we go. What about single family homes versus multifamily? Like, you know, you hear like grant Cardone and all them just preaching the multifamily really strong. If somebody had a financial Mount of resources, they would invest, which we all do, I guess.
like w w I mean, do you have a favorite there where to put your money? I like multifamily. I like single family, but I put all my money in single family. And the reason is because I think Jacksonville is the best market and it’s largely market specific as to whether or not multifamily might be the best approach for you.
Or a single family, in the Northeast, there’s a ton multifamily properties and they can make great investments because you get economies of scale. You have reduced vacancy risk, you have one roof to fix. If it, you know, something breaks instead of three or four roofs to fix. So, you know, I liked that value there, but in Jacksonville, the way the housing stock is, you know, our neighborhoods are built in the fifties and sixties and it’s largely single family detached.
Housing, if, and the reason is because there are multiple the family properties in Jacksonville, but they’re not in the cashflow neighborhoods that I want you to be investing in. Right. Those are in low income neighborhoods and low income is not the best place for you longterm because you have such high turnover costs that I check that it’s not even on my list of where I would invest myself or where I put our clients.
So we’re looking for that cashflow sweet spot below middle income, but not low income. And so you just don’t see multifamily properties in that space very often. Let’s say somebody who’s, you know, you were pretty young when you started in this business. Like how much money does somebody need to get into to get into real estate?
Cause a lot of people get really nervous about that. They’re like, Oh, that’s something when I have a lot of money. Right. So how, how does one start? You know, it’s the whole idea of the no money down, you know, getting into real estate thing really makes me cringe. When you’re talking about rental properties, it’s not real right.
You need to have an investment. So for a typical investment property with JWB at a minimum, you’re looking at about $40,000, including your down payment, plus your closing costs. you know, that’s putting either 20% down or 25% down, plus your closing costs. So there is a cap contribution that, you know, you can’t around that without getting really creative.
And the reality is that the person who is best suited for this type of investment, this to be passive, you know, once just to be something that’s kind of like mailbox money, this isn’t that type of person who wants to be super creative and he wants to go and, you know, Be a little bit more active, like, like a house flipper, right.
A house flipper. It was out there. They want to get out there and figure out how to fight. Lansing can work to put a little as money down as possible. And I get all that. But you know, for rental properties, especially who we serve, it’s really that passive approach. And those folks generally want it to be very vanilla.
Okay. 20% down, 25% down. So it works kind of well. but that doesn’t mean that there aren’t ways for you to buy properties, buy rental properties, even if you don’t have $40,000 of capital right now. the first place that I would tell people to look at is their retirement accounts. Because many people actually have money in their retirement accounts.
They could invest in rental properties, but they didn’t think that they could do that. They thought it wasn’t a lie. and at the same time, most Americans are so heavily invested with their retirement account money in the stock market. That it’s really not a diversified and allocated portfolio as it is.
So. Be able to take some of those chips off the table, as far as what you have invested in the stock market to reallocate those into rental properties might be about place to find capital that you didn’t know you had, that you could put into it, different asset class. there are other things that you can do as well.
You know, when I first started, I had great, I had great credit. I knew the property that I wanted to purchase. I just didn’t have a down payment. And so I, I went to my dad and I said, dad, let me go ahead and be the credit partner on this. Will you let me borrow the down payment. And so, you know, maybe family, maybe in your circle of friends, maybe you have colleagues at work that you’re looking at potentially getting in this, in this together, kind of work out like a great team sport.
You know, you may be able to be the credit partner as a person. Your colleague may be able to be the down payment partner and you guys might split the property 50 50, or. You know, you may be the credit partner he may, or she may give you a loan and then you can pay them back with the positive cashflow over time.
that’s what I did with my dad. It was the loan. And when, when you, and when you say the credit partner, although I think I understand it just for some people who might not that that’s basically who’s whose name’s on the loan. Is that what you mean by that? I assume so. So they’re on the hook of course, but there are no cash in right.
$0 in . That’s great. That’s a great way also to partner with somebody. And, you know, partnerships are always great. A lot of people will get really weird about those. Now it is a little bit like a marriage, so don’t just jump in and with the first person who’s going to give you 40 grand, right? Cause you’re going to be tied to that person for awhile, but, it’s a great way to expedite your goals and get to other things.
What about 0% interest rates? Sounds crazy. Right. You know, cheap money. Lot of times, that’s a way to artificially mess with the market as led astray. That just happens. Right. It’s not really a natural way because that should never be right. so what’s your, what’s your take on, when did you, when do you think that will rise?
I know it’s hard to predict obviously, but. So you’re talking about like our, our national, like what the fed is doing. Yeah. You know, the number one goal for the fed right now is to keep our economy from going into shambles. And, you know, as the us economy, we have this incredible ability is to print money.
and so if you look at what’s, what’s the, what’s the lesser of two evils printing as much money as it takes to support our economy right now, knowing that there’s going to be a build if you paid later, but at the same time, you’re. You’re you’re leading to inflation, which is making that bill easier to pay out.
That’s kind of what the fed is doing right now. They’re pumping a ton of money into the economy and there’s this huge bill to be paid, but the more money that they pump into it inflation actually devalues debt. So it’s making it easier to pay down. So that’s what the fed is doing. They’re going to continue to do that because the alternative right now is so disastrous.
So. You know if I get it too. And it’s, it’s, it’s a, it’s a crazy thought process, but yeah. Does actually make sense too. and it, you know, I’ve heard of this, where basically every percentage point that the interest rates go down 10%, it goes up and, and housing prices. And I think we’re seeing some of that supply and demand plus this interest rates.
So, and I think you already answered this, but I’m going to ask it more directly. Like with your own money, would you buy a house right now or would you wait until the economy settles? Oh, I’m buying. I am buying so much right now. In fact, an article just came out literally, before I jumped on with you, we made a significant investment and downtown Jacksonville bought a, the federal reserve building downtown, which was the former federal reserve building many years ago.
it was a, it’s a vacant building. We bought it for $1.8 million. We’re going to do an extensive renovation to it. It’s our second purchase. Downtown Jacksonville. in this year and we have a few more coming. and so we’re making significant investments, not just in commercial buildings downtown. We continue to buy, we’ll buy about 700.
Rental properties this year as well, either lots or properties that will then renovate and turn into rental properties as well. And so I’m, I am buying a lot. I think more wealth is going to be created right now than name your time period in the past, right? The last five years, three years, 10 years, whatever you want to say.
And the deal right now is debt deal right now is being able to borrow at 4% for 30 years. Because Dan, you know, as investors, right? We feel pretty good about our ability to borrow something at 4% and earn better than a 4% return, you know, you know, and for you to have that locked in for 30 years is an incredible opportunity, right?
There’s never been a better time to understand the difference between good debt and bad debt and good debt is. Yeah. Taking out debt that is inexpensive. So think a 4% interest rate that’s incredibly inexpensive taking out that debt on something that pays you every single no month. So like a rental property, you take out that 4% debt you make the pay.
Amen. And more money comes back to you every single month. So it’s positively cash flowing. And then you’re investing in an asset that goes up over time. If you’re in for the long haul, it’s been shown and proven that real estate tends to go up in value and that’s smart debt. So you do need to understand it, be responsive, cool about it, but I’m buying right now, I’m financing because these interest rates and the terms are so advantageous for those who understand it and are in a position to be able to act upon it.
So, what about everybody talks? Well, not everyone. It’s a ver it’s a kind of common tale that your own, your own house is the number one moneymaking wealth creation investment that you’ll ever have. I mean, and I don’t know if I’m asking this question correctly, but is that something that you believe or when you, when you just, what I just heard, what you say is more like, get something that’s cashflow positive that to me, does that mean your own house?
Right? I don’t even know what the question is there any thoughts? A hundred percent. I don’t think your personal house is your greatest investment that you’ll ever make. I don’t think it is an asset. I think it’s a liability. you know, the first book I ever read in my transition from corporate America into the life that I have now is rich dad.
Poor dad. It read that book there. Yeah. Great book. Right. Robert Kiyosaki, the author and his definition of an asset versus a liability is pretty simple. And I adopt the same thing. Right. An asset is something that pays for itself and pays you every single month. The liability is something that you paid for every single month.
Right? Well, for my rental properties, they pay me every single month. Boom, their assets, my personal house. I pay a lot of money out the door. That is a liability, right. There is nobody that I’m not I’m renting out rooms. There’s no money coming in. There’s just house payments. There’s utilities. There’s. You know, the gardening that I have to pay for that my wife wants right now.
Like, you know, those, those that’s, that’s the liability. Now it’s a liability that I love. And I still think longterm that owning my house is a, is a, when they use that word investment, but I do, it does go up in value. So it’s not the worst liability to have out there, but it’s, it’s a liability, in the short run.
So, you know, a lot of clients come to us from California, New York and some of these high, high price markets. And they’ll say, you know what? I was looking at the numbers and I’m thinking about buying my own residence, but I gotta spend a million dollars to buy this house. You know, that’s like me putting down 300 grand to buy the house or something like that.
What if I took that 300 grand and I bought six rental properties in Jacksonville. Do you think that would be a good idea? And for a lot of a lot of folks, especially in the high price markets, that’s a great idea because what you’re doing is you’re setting yourself up for such a strong financial future.
and rent in those places is less than what your payments are going to be on your house when you’re, when you’re buying in California. So, yeah, I think it can be, a great opportunity for people to look at that and their own personal situations, but don’t just assume that your, your personal house is going to be your best, biggest invest investment.
It probably won’t be. So in, in Jackson, well, I’m from Kansas, right? So I’m from this college town where you buy a house, let’s say you spend a hundred thousand dollars to make math easy. You’re expecting like a thousand dollars rent, you know, ish, right. Maybe eight 50, 900, 1100, depending on the place. In Austin, Texas, you spent a hundred thousand dollars, which doesn’t happen.
You probably get $300 a month rent. Right? Where do you see? I mean, obviously the higher number, the better, but actually, where do you see that land? Like, I always heard this, heard that be called the 1% rule, whatever, and I see my first house was in college. I had three tenants with me. I bought it with.
$2,000 down. And I grew up very poor, so I had no money, but I’ve made it work and it was great and was able to sell it as a w was able to sell it at a profit. But of course that house was $74,000 of course, a long time ago, but still, What where’s kind of the sweet spot. Where are you, where do you kind of see that you could actually make investments at?
Right? I think that’s real. Yeah. Well, I think your number one rule when you’re buying rental properties has to be that it pays for itself. There has to be positive cash flow because I believe in acquiring assets and not liabilities, but then the question is, okay, do I always go with the market that has the best rent to price ratio?
Do I always focus on. The most positive cashflow, a lot of investors come to Jacksonville with this question. And I always ask him, you know, are you looking at this just because you want the best positive cashflow or do you want the best total return on your money? Because one of the best things about rental property investing is the other profit centers not named positive cashflow.
Right? We’ve got tax savings from depreciation, from a tax perspective, not from the value depreciation, but the IRS giving you tax breaks. We’ve got principal paydown we’ve got home price appreciation, and then we’ve got the value of inflation. De-valuing your debt. So the longer you hold the asset, it’s a hedge against inflation.
So you’ve got all these other profit centers. And what I really challenged investors to look at and understand is what’s most important to them, right? If you want just the biggest gains out there. And you’re willing to take whatever risk you’re going to go to a market like California, like San Francisco.
And you’re going to buy a house that’s a liability every single month and hope that you get 10% appreciation for three years. So you can make a hundred thousand dollars or something like that. Right. That’s one end of the spectrum. And that’s not how I subscribe because that’s a liability because you’re paying money and every single month.
You could go to the other end of the spectrum and go to a market like Kansas city is a, is a great markets from a cashflow perspective, right? You might even be able to get close to the 1% rule like you were talking about there, but what you get is a great rental price ratio, but the other profit centers don’t really compare.
You look at the longterm appreciation rate for a market like Kansas city or like Cleveland or Memphis, these historically grow well below the national average. And you know, when we’re talking to not investing in rental properties, we’re not talking about assets. That cost a hundred. Yeah. So the difference between, you know, an asset that appreciates at 2% a year versus an asset that appreciates that 4% a year, Over 20 years that you’re holding it is a big deal.
So when you ask, you know, where’s that sweet spot when I tell folks is number one, the market has to positively cashflow after that point, right? Would I rather have an additional hundred bucks a month of capital on the same return? But I have to be in a no growth market or a slow growth market, or would I rather have positive cashflow, maybe not the most positive cash flow, but be in a market that’s going to grow longterm, my personal opinion and what our clients think is it’s better to have the best of all worlds all the time as profit centers, because after a 10, yeah, you’re a 20 year hold.
You’re going to look back at your investment, including home price appreciation. You’re going to make a lot more by being in a growth market. I love it. So I got a couple and we could, if we want to, we could wrap a firearm. We could do it however you want, because I know we have a time constraint. so this one might be interesting question for you is, the future of realtors with more automations the world, getting a much easier.
I think it’s a, it’s an area that hasn’t really done a whole lot of innovation, a long time. Any thoughts on the future of realtors? It’s tough. I thing is going to be tough for real estate agents. You know, you got to look at the value that you’re providing for a long time. The value that real estate agents provided was access to the multiple listing service.
That is a lot of that has gone away now, right? I mean, Zillow really changed the game and you’ve got a whole lot more now of other players that are just making it accessible, that information accessible. Prior to COVID. We had, I buyers, so Zillow and other big players were actually making offers for people to buy their house, basically sight unseen, you know, and these were offers our slightly below market value, but still a lot higher than what that person would have to sell it for typically, if they were gonna sell it to a, a house flipper, you know?
So you’re S and what that means for real estate agencies. They’re not involved in that as well. There’s another option for people to basically sell their house, make it less friction and have all access to information. So all of these, the things I think spell really big problems for your typical, the middle real estate agent.
That doesn’t mean that there’s not going to be a value for somebody to be a resource, to help people buy their house. I think that’s going to be more valuable than ever. But the typical model and earning 6% or 3% on the sale to just list the house and let the listing with let the buyer come to you. I think is I don’t, I don’t see that lasting lasting right now.
And I just think that’s, that’s going to be a dead way of, of doing this. Did you know that? And I, my sister lives in Australia, nobody buys houses through a real estate agent in Australia. Yeah. They have auctions in Australia. And so, yeah, so, you know, I, that blew my mind. So they haven’t seen the value in your team, typical real estate relationship or real realtor relationship and Australia for a long time.
And I, I, it’s a great point. I haven’t been asked that question in a while, but I think realtors are really challenged now to figure out their best value proposition. Yeah. And, and, and innovate, you know, it’s a, it’s an area that is, is not wanting to innovate. they say they are, but they, I have real estate agents that are clients of mine too.
So I’m very in tune to that world. And they do really, they do great jobs, but, you know, at what, like, I think your best point there was, is it six or 3% on a million dollar property? Is that really what we’re paying for here? You know, and I think of some of the stuff we do for our clients for a couple thousand dollars.
And it’s like very touching to call on a lot more, probably touch points. And like, it might, it might not, might not be, I don’t know, but I think, I think also a lot of people get worried about listing their million dollar property without somebody to handhold it. So I do think that there will be some innovation that will come slower.
I did think COVID Mo was going to put a little more pressure, but it didn’t actually put less pressure, but, we’ll see what the future holds. I do have a question like what’s a, what’s the next five years, 10 years for you. Like what, what’s your kind of future outlook? What are you, what are you doing?
Anything new, different I’ll I’ll stay in the same area or some other, well, we’re committed to Jacksonville. There are a lot of other turnkey providers out there that go to multiple markets. They just have a different approach than we do. We really believe that we can make the most impact and create the best investments and limit the risk by being here, being active in the community, being a big part of downtown Jacksonville.
So, so we’re gonna here. my three business partners and I olives here near the beach here in Jacksonville. We live a few streets away from each other. We all have young families. so the thought of leaving Jacksonville is just not even on our radar, which is great. It makes our clients feel a lot more comfortable as well.
And it’s, it’s what we personally want to do. But as far as the business, it’s a really exciting time at JWB because you know, for so long, you know, it’s our 50th year in business. Now we started it with just a couple of us in the beginning. Just kind of fit you’re in this thing out on the fly. As we’ve grown, we’ve now established, layers of management with really incredible leaders that have been grown from within.
and, and that’s incredible. We’ve made some huge investments in our technology. We made a big investment in Salesforce have started a couple of years ago and have continued to invest in that. And we’ll, we’ll continue. We’ll continue to spend a lot of money with Salesforce many, many years going forward.
What about, what about, Do you do any short term rental, Airbnb, anything like that? but, and have you, what do you think about that, that market that, that doing that? You know, I think it’s, there are so many different ways that you can make a return on your investment in rental properties and in real estate in general.
And that can be a great way to earn a rate of return for some folks, you know, for me, and the way my mind works and the way our client’s minds work is a big value of this as being passive. And having everything done for you. And so what, what I feel like is that if I can win on this passive nature and have it all for me and have longterm leases in place, I mean, our average tenant stays over four years.
So like that kind of set it in for data model and just consistency means a lot to me. If I have to give up a potential, a couple of points of return, potentially in order to secure that. I’m okay with that. You know, this doesn’t have to be my home run. rental properties don’t have to be my home run.
So that’s, that’s how I feel. So now, when it comes to short term rentals, it’s pretty close to rental properties, but it’s not the same thing. You know, they’re short term rental leases are, you know, many times a day or a week. Right. Or, you know, something like that, that, so the constant turnover is a lot, you know, things break more often, right?
I mean, you’ve got to repair a whole bunch of stuff. If you’re doing it for yourself and you’re saving that property management fee, that’s a much more active approach for you. You’ll probably earn a better cash on cash return. I would imagine. But you’re putting in your time. A lot of times when you look at what their returns are, if you include that property manager, they’re pretty close to what the longterm rental yields are.
When you factor in that you don’t have nearly as much maintenance or vacancy costs or turnover. So, you know, it’s something that I think you can make a little bit more money and maybe even a lot more money on a cashflow basis. If you’re willing to put the work in, if this passive nature is the most important thing for you.
I think rental properties and securing longterm leases is really, you know, that’s the best kind of risk adjusted return that also kind of fits with the lifestyle. What about what’s your what’s you guys’ approach to marketing? How do you guys get clients? Like how does it, how does it happen? I’m trying to get on the Daran Herrman podcast forever.
I mean, geez. You know, you know, I keep pushing you back, right? No, thank you for this opportunity now, you know, our approach is really about investing a lot in the client experience and getting referrals. So over half of our business comes from referrals. It’s always been that way. We don’t spend a lot of money on your traditional advertising sources.
We invest a lot in the client relationships, and then we do a lot on social and we do a lot of, kind of just. You know, being there, being substantive and being in front of clients. So we have a show that we do twice a week and that’s really been our best return on our investment is just simply being there, being ourselves rather than shelling out a whole bunch of money on billboards or radio, or all of those apps spent a ton of money on that years and years ago.
And it just never paid off. And even the clients that we brought on board from those traditional advertising sources, it just didn’t come in with as much trust. And, you know, sometimes, you know, if there was a complaint to be had, it was more often one of those folks that came from one of those kind of like non-trusting lead sources.
And so, yeah, so we just pump all of our efforts into our client experience. Our, our motto. You know, it comes down to the fact that if you, if you want to come to JWB and you want to buy properties, you typically want to build a portfolio of maybe three, five, 10 rental properties. Well, if we just simply do a good job and we know what your plan is, you’re probably gonna come back and buy all those properties with us.
Cause you live in California, New York and you don’t want to go and find a new partner if you don’t have to. You know? So, so that’s really, what’s helping. What does success look like for you? Success for me personally. you know, it’s, I just think there’s no substitute for time spent with the people that you prioritize in your life.
So, you know, more than a dollar figure or more than some achievement or whatnot. I just look at, you know, the amount of days that, I get to go and be with my eight year old playing basketball with her, or my six year old, he’s really into golf right now. So, you know, getting to take him, you know, maybe.
being able to do that on a weekly basis and, you know, flexibility in my schedule is the most important thing. I’m never going to be that guy who wants to work, you know, 20 hours a week. I enjoy working. but I like to do it on a schedule that can also work with the priorities that I have. So I’m your guy who was up at five o’clock in the morning and, you know, if I can get out early and, you know, take my son golfing in the afternoon, that gives me a feeling of accomplishment.
you know, I just really like to be remembered. and that’s a tough one. I haven’t been asked that one. I feel like I’m too old, too young to be asked this question there. you know, I just think the, the way that you treat people is really important to me, the way you communicate and really. Tough times and good times should always be with a kind heart and truly trying to do the best for people.
So that’s the way that I like to be remembered. Hi, Greg. It was a big pleasure to have you on the establishing your empire podcast. I appreciate your time. you know, being Florida sounds like a great place. If you’re here, if you love to go play golf, you know, like you said, with your son and so that’d be really enjoyable.
So, All right, man. Well, I really, really appreciate you having it, having you on. Thank you so much, man. We’ll get you down here sometime soon. Daran. I’ve got that. That’s that’s right. Actually, my, my wife’s parents just bought a place in the keys, so we’ll we’re gonna, yeah, so I drive from Austin, just, you know, our 20 stop in Jacksonville, Florida.
Yeah. All right. Bye man. Cheers. See you later. Bye bye.