Hot Investment Opportunities in Jacksonville, Florida | PREI 021
Jacksonville is a very large coastal city located in the state of Florida. Unlike some cities where white-collar or blue-collar occupations dominate the local economy, Jacksonville is neither predominantly one nor the other.
With a population expected to more than DOUBLE over the next 10 years, Jacksonville offers exceptional investment opportunities hard to find in most markets around the country today.
In this episode we explore the five key fundamentals that create the “perfect storm” for real estate investors in Jacksonville. Listen in as we dive in and uncover a golden investment opportunity.
If you missed our last episode, be sure to listen to The Truth about Property Insurance.
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Hot Investment Opportunities in Jacksonville, Florida
We’re going to talk about the Jacksonville, Florida market. This is a relaunch for us in that market because we have just had a hard time getting good inventory, but that all changes today. We are bringing on our local market partner here to talk about the market, the opportunities there. Why it’s such a great market and why so many investors just don’t know about that market is beyond me. Anyway, it’s a good opportunity for us if you know what’s going on. Timing and the market cycle really play into your decisions as to where to invest when you’re investing in real estate. What you’ll find is that Jacksonville is almost a perfect storm. We’ve got everything going on there that is in our favor as a real estate investor.
Brian is our new local market partner in Jacksonville, Florida. When I say new, what I mean is this show is effectively marking the relaunch of Jacksonville, Florida. We’ve been in the Jacksonville market for a number of years. However, the greatest challenge we have found is getting the right inventory and enough of it. That sounds like a problem with some good fundamentals, but it is a problem. We needed to bring on a new team that has excellent product that are in the right areas. Brian and his team are well-vetted. They are fantastic. Their knowledge of the market is exceptional. I wanted to bring Brian onto the show today to talk about the Jacksonville market, the opportunity there for you as an investor, and share with you what we potentially could bring to the table, if you’re interested in opportunities down there. Brian, welcome to the show.
Thank you so much for having me, Marco, and the audience as well.
It’s my pleasure. I’m glad to have you on. I’m very impressed with your team. I’m also very impressed with your success story. As I understand it, you started off in California. You weren’t born here, but you were an investor here in California. Then you took that success and you repeated that model in Jacksonville. I have a trademark saying, “Live where you want. Invest where it makes sense.” Let’s start off by you telling our audience about your background and how you got started.
Actually, our first portfolio in California dates back when we started our first deal in 1998 in a place called Bakersfield, California. We were actually living in Santa Barbara, so live where you want and invest where it makes sense and the fundamentals. Living in Santa Barbara, the numbers made absolutely zero sense even in 1998. The median price in the coast there was $750,000. You could not cashflow property. My business partner and I have always, from day one, been focused on cashflow affordable property. We’ve made lots of mistakes along the way. One of the things we did upfront was surround ourselves with some good mentors and some smarter investors that had been around the block a lot longer than us. They always had us focused on cashflow. That brought us to Bakersfield in 1998.
Between 1998 and 2004, we cut our teeth and learned the business. We did 500 plus transactions there. One of the good things we did was, a couple of years into building the business, we started to hold a lot of property. By 2004, we had about 180-185 properties that my partner and I had bought and held as long-term rentals. I know you’re based in California market and a lot of the audience is West Coast, all over. No matter where you’re from, you probably know in California, between 2004 and 2006, was one of the biggest run-ups and the most unprecedented equity growth times in the history of real estate.
Fortunately for us, 2004 hit and we could not afford to continue to acquire property because the pricing just got so out of whack. All the fundamentals that we looked for were just not making sense anymore in Bakersfield. My partner and I started liquidating down all 180 of the properties one by one. We ended up selling 80% of the portfolio to our tenants that were in the homes, which is a really efficient and economical way to exit out of a property. We sold at the top. We made millions of dollars. We looked like we knew exactly what we were doing, but we made a huge mistake. I always like to be transparent because although we have a success story, we made costly mistakes, which I like to share with our audience and with our potential clients, because I think, transparency is a big thing. We took a lot of that capital out of California between ‘04, ‘05 and ‘06.
My business partner and I started getting on planes and flying around the country to identify the next market where we wanted to go and reallocate that capital that we had made in California. We were still young and single at the time, so very flexible. All of our homework and all of our due diligence, Marco, we flew up and down the West Coast, up and down the East Coast, took us to Jacksonville, Florida, where we are today. The major mistake we made is we couldn’t have timed at any worse. We thought we were entering into Jacksonville in 2006 still in a buyer’s market. But the reality was that it was tapped out. The money that we plowed into Jacksonville in ‘06 and ‘07 quickly disappeared from an equity standpoint.
The only thing, honestly, that kept us in business or out of bankruptcy was that we did buy affordable cashflow property. Value is one upside down. 2008 hit a global financial crisis. My partner and I sat on the sidelines and just managed what small portfolio we had built and had a couple of painful years to be transparent with. Between ‘08 and 2011, in my humble opinion, is when Jacksonville started to bottom out in our niche. That’s when we started to dip our toe back in the water. Between 2011 and today, as we have this call, we’re back up to a couple hundred properties. We’re doing a lot of providing turnkey investments for clients. We have very specific real estate investment rules and parameters that we adhere to. We do the same thing over and over and over about ten times a month. Our goal with a client or potential clients is just to plug them into our systems and the teams that we have here on the ground in Jacksonville. I’m only comfortable selling assets or investments to clients in neighborhoods or areas in Jacksonville where my partner and I are very, very heavily invested. It’s the old “put your money where your mouth is.”
You took your equity out of California, moved it to Jacksonville, and plunked it down into a bunch of property there. Then over the course of four plus years, you’ve watched that equity erode away. Is that right?
That’s correct. In a big way, properties that we paid $80,000, $100,000 for, we’re valuing it, $40,000, $50,000 during the meltdown. Then you had outrageous vacancy. You had just every problem that you can imagine. I think anyone that was exposed in 2008, and we were obviously exposed in a big way, probably felt some pain.
The reason I was asking if you actually had your equity all invested in additional property in a different market. I have this little saying, “The cashflow in the property is the glue that holds the deal together.” Even though your equity was vaporizing in front of your face, the fact is you still have the assets that were generating monthly cashflow for you. As long as you didn’t sell, you wouldn’t realize a loss. You could weather through that storm and come out of it on the other end still with the assets, still with the cashflow, but now, your equity is increasing again.
That’s correct. It’s always a long-term play for us. I always tell any client or a potential client coming to do business with us that you need to have patient money, as what we refer to it as, and look out. This is definitely a cashflow play. We understand and appreciate the real estate cycle a lot better now. It’s something that I study very closely. Where we’re at today in Jacksonville, we’re in a buyer’s market. We’re moving through recovery. I do see inventory getting shrunken down, but there’s still a great opportunity here. My partner and I, whatever handful of clients on a monthly basis that we work with are continuing to get into these properties so far below replacement costs. I would never tell you that it’s no risk or it’s impossible to get hurt because that’s just not true. As far as mitigating risk and understanding fundamentals and where we’re at in the cycle, after going through, we’ve been doing this for seventeen/eighteen years now. Just as much as we know what to do, we also know what not to do. I think that’s critically important.
You picked Jacksonville. It’s the fourteenth or fifteenth largest city in the US, which is an enormously large city. Aside from the beautiful beaches and the warm weather and the warm water, Jacksonville is really not a flashy or sexy city. The numbers make sense there. Talk a little bit about why you chose Jacksonville at a high level. Eventually, I’m going to drill down into more specifics about the fundamentals of that market.
I said that we got on planes and started doing some due diligence, because we knew we wanted to reallocate our resources after liquidating out of California. We looked at timing, fundamentals. We knew that we wanted to be warm by the water, if it was affordable, of course. Warm and by the water, if it’s a market like Santa Barbara, doesn’t make any sense. We took about twelve months and we both got on planes and took turns flying around the different markets in doing our due diligence. All the fundamentals are ultimately what drove us to Jacksonville. Just like Bakersfield is not as sexy, it probably still is considered by a lot of Californians, “the armpit of California.”
We’ve got a lot of grief, Marco, from all the smart investors in Santa Barbara in 1998 when we told them we were going over to Bakersfield. At that time, it had a third of the entire state of California’s foreclosure activity in 1998, that little town.
That was ground zero.
By 2006, it was ground zero for being the number one or second-rated market in the country for investments behind Las Vegas. The same thing with Jacksonville, in Jacksonville when you hit the nail on the head, you said it’s not a flashy-sexy city. Investors, or anyone for that matter, even tourists, hear about the state of Florida immediately they’d think of Mickey Mouse and Orlando. They think of South Beach in Miami. Jacksonville is a working class town that’s driven by a really strong job source and job base, and a very conservative and pro-landlord and pro-business friendly politics here. It’s just a really good place to be building a portfolio in our opinion.
When I say, you and I, we like to break down an analysis of a market into different categories. When you talk about the economic growth in the market, the population growth, affordability, desirability, and then ultimately supply and demand within that market, we could do an entire podcast episode just on those fundamentals. Let’s look at Jacksonville and break it down one by one, starting with affordability. The one comment I’ll say is that a key to affordability is being able to buy properties in that market below replacement cost. I know you can do that in Jacksonville, so maybe speak to that and break it down a little bit for our audience.
Affordability, if you’re going to be a cashflow investor, is so critical. Affordability is alive and well in Jacksonville. Our median price today is about $165,000 depending on what source you look at. The analyst is calling it $165,000. Our typical turnkey investment is around $100,000. We’re selling and buying and holding somewhere between $50,000 and $70,000 below replacement cost, which is what you just hit on. That is so critical as a risk mitigation factor when you’re buying and holding property. If there is, God-forbid, another big GFC or global financial crisis or downturn, people are going to downsize into our types of neighborhoods that are very affordable. How I describe our neighborhoods are they’re solid safe working class neighborhoods. They’re not sexy. There’s not gated communities and tennis courts and people driving Mercedes. That’s just not our niche.
These are just solid working class people. We’re attracting young families with kids in the school district. We have a lot of military families that we rent to and sell to; school teacher, police officer, that type of income. It’s just solid working class America. That’s one of the things that attracted us to Jacksonville. It’s because the median was so affordable. These neighborhoods are anywhere between five and twenty minutes from downtown and anywhere between ten minutes and a half hour to the ocean. It’s pretty incredible that the quality of life that you can get in the affordability that exist here.
I have a motto, “Our property should be safe, clean, functional and affordable.” When you look at people who move up and down to better jobs or if there’s an economic slump and they have to move down that socioeconomic ladder, if you’re investing in properties that are below replacement cost and below the median price within a market, what you’ll find is that people who have to move down that socioeconomic ladder will come from other areas of the city and move into your property. You’ll always have a large tenant pool to draw from.
I think I glazed over because I talked about the median, but I did not talk about replacement, which again, if you took our typical product, it’s a 1,500 square foot, three bedroom, two bath, block and brick home, to replace that same home at $100 a square foot, which you’ll actually be underwritten from an insurance perspective, just to rebuild the same house that you’re buying per $100,000 turnkey, you’d be into it $150,000 and then you still have the land cost on top of it. We’re really trying to mitigate risk as much as we can.
If you look at the economic growth in the city, when I think of Jacksonville, you’ve got a military presence there, although I don’t know how big the military presence is, it’s a logistical hub. Obviously, it’s a major seaport. I believe it’s probably the largest in the southeast. Medical community, you have aviation and high tech. Interestingly enough, with high tech, I was doing some searches online. I found a study that Forbes cited with Jacksonville being the second in the nation, in terms of tech job growth.
That really flies under the radar. I have it when I do a physical presentation from stage that I give third party rankings. Actually, Steve Forbes, the owner of that whole media company, I’ve had the pleasure of meeting. We spoke at the same event. He was touting Jacksonville, not even knowing that that’s where we were from. I obviously approached him after and said, “I appreciate it because you had no idea. You just plugged where we’re plowing a lot of money into.” There’s a very diverse economy here, Marco. Ultimately, at the end of the day, jobs are what drive a real estate market. You have these other fundamentals that we’re touching on. If you don’t have jobs and solid stable growth in jobs, your tenants can’t afford to continue to pay you and your potential buyers are not going to be able to qualify for a mortgage. That’s really the one thing that we’re hyper-focused on when we were doing our due diligence. What’s the job source there? Is the local government landlord-friendly and pro-business growth?
Again, we’re blessed having both of those things to address the military. They’re about 18% of our local economy. We’re not a military town and we don’t depend on the military. Yet, it is a sizable portion of our local economy. Again, probably a third of our tenant pool, are young military families. I’m a big fan of that in our niche. You hit on some of the big things. We’re a port town. We’ve been dubbed the logistics capital of the southeast because you have this trifecta of the port industry, which is having explosive growth via the Panama Canal project. Then you have the other part of the trifecta of the logistics is the port industry, the railway system, which is alive and well in downtown Jacksonville. We have a ton of transportation companies; Fortune 500 companies headquartered downtown Jacksonville. CSX interline would be some examples.
The third part of the trifecta is we have Highways 95 and 10 intersecting in Downtown Jacksonville. It creates this awesome opportunity for logistics, manufacturing, transportation, the port, all of these existing businesses, auxiliary businesses, and then a lot of foreign businesses are recognizing. Florida doesn’t have state income tax. That’s a big attraction for offshore money. To make it tangible, Matsui and a Hanjin have come in and set up shop as a direct correlation of the expansion of the port industry. Those two companies are creating 10,000 jobs in Downtown Jacksonville alone. It’s just a really diverse working class town.
Job growth is strong. Does it continue to expand like it did when you first looked at Jacksonville?
It does. A lot of that ties back to the politics. Obviously, having landlord-friendly and business-friendly environment politically, really, really helps. I did mention that “no state income tax,” which is a huge thing. When we moved our portfolio and headquarters from California to Florida, we saved between 10% and 13% just off the top from state income tax. It’s a major attraction for businesses.
Even your state corporate tax is very low. I think it’s 5.5% or something like that. It’s crazy low.
It’s a very business-friendly environment.
Population growth, jobs is at the heart of it. Obviously, when you have jobs, and you have job growth, it leads to population growth. You have your organic population growth within the market, but then it draws people in from other cities, other states. They want to work there. You’ve got this Panama Canal expansion going on. I’ve seen and read and heard statistics that range from 50% to 100% population growth over a ten-year period. I believe that was from 2014 on. I don’t know what you think about those statistics. Even if you take a 50% population growth over a ten-year period, that is enormous.
It’s a big deal; 10,000 jobs in one little industry in a diverse economy. Today, as we speak, we’re between 1.4 and 1.5 million in population in the greater metro. Economists, depending on the source, are saying, I agree with what you’re saying, it’s supposed to double in the next eight to ten years. Even if you’re conservative and you hit 50% of that, you’re still talking about huge, huge population growth. I always like to give real, tangible numbers. We paid to have a local economist do some research for us. His findings were 75 households a day moving into Jacksonville on a daily basis. Jacksonville has the youngest workforce in the state of Florida. The median age is 37. Coupled with a young work force, we also have a ton of baby boomer money moving into Jacksonville.
One of the reasons for that is hurricane activity. When you’re warm and coastal in Florida, obviously you have a valid concern of hurricane activity. My partner and I did the research. We would have not chosen Jacksonville if we thought we were going to be getting hammered by hurricanes every twelve months. South Florida is considered tropical. It’s ten degrees warmer in the winter, so for tourism that’s great. You’re going to have more tourists in places like Orlando and Miami. People that want to live here or have second homes, my parents are a perfect example, I grew up in Jersey. They liquidated out of Jersey and moved down here. I can’t tell you how many Tri-state area people are in North Florida now. You have that great combination of a young workforce coupled with a lot of mature baby boomer money coming in. According to The Economist, the population is supposed to explode in the next eight to ten years.
The problem with having growth that fast is home builders are always behind what is actually happening in the market. It takes time to develop land horizontally and then build it up vertically. During that period of time, it presents an increased amount of demand where investors like us could come in and take advantage of that. If we can pick up the affordable housing that you’re talking about, it puts upward pressure on rents and we get maximum cashflow out of these properties.
We’re going to probably see that for a number of years here. Now, this is more of a subjective thing. You call it desirability. I look at that as weather and lifestyle. The thing is I don’t consider that a major driver because everything else being equal comes down to where is the weather and the lifestyle going to be best for me. Maybe take a second and talk about the desirability of the Jacksonville market because I love the weather, I love the lifestyle. But beyond that, for me, it’s just a market to invest in.
You heard our personal story. We had a lot of flexibility and a significant amount of cash in 2006 when we had done selling down our portfolio. Just to be, again, real direct. We would not have chosen Jacksonville to move here to invest if it wasn’t a desirable place for us personally to live. We had that flexibility and we had a ton of cash reserves. Obviously, we wouldn’t have chosen to live in a place that we didn’t love and see a great place to raise a family, which I’m doing now. Again, I love your quote that you said a while ago.
Jacksonville is a coastal city. There’s a beach area. I actually live in a town called St. Augustine, which I’m a little biased, but probably one of the prettiest towns in North America. It’s where North America was founded. I live out at The Beaches. A little bit of a different lifestyle than the City of Jacksonville. I can get in the car and drive to the neighborhoods we’re investing in anywhere between 30 and 45 minutes, and get into this really affordable housing that we’re talking about that’s close to job source and close to downtown, still only fifteen minutes, half hour to The Beaches. Again, it’s almost having your cake and eating it too.
It’s comparable to what we did in California. We’re just replicating what we did. We could not buy in Santa Barbara, so we drove over the Grapevine and we bought in Bakersfield. Here, we chose to live out at The Beaches, in St. Augustine, Ponte Vedra area. Yet, we can drive into the City of Jacksonville, where there is, again, a million and a half people and great jobs and affordable housing, and build a portfolio of cashflow property. If there was well coming, to be honest with you, we’d get back in our car and drive home. We do have as well in St. Augustine in Jacksonville, where we live. We’re blessed here.
The fifth area of the fundamentals I want to talk about is the supply and demand. One thing to note about Florida is it’s a judicial state, which means that the foreclosure process there takes a very, very long time. It’s very slow to process foreclosure. You have this glut that’s backed up in the system and it just trickles out into the market. That’s got us good and bad points. From an investment perspective, it helps to keep the prices down and it provides a stream of inventory. It’s good for us. Talk about the supply and demand. How does that play into Jacksonville being a good market to invest in?
Supply and demand is critical in any investment vehicle, especially with single-family homes. Obviously, we looked at that as one of the fundamentals. Again, looking at Florida as a whole, as the state in the last run-up of equity growth and the new construction boom that happened between 2002 and 2006, South Florida had a gluttony of high rises going up on The Beaches and then Downtown Miami, Fort Lauderdale, Orlando. Jacksonville honestly did not experience. We had new construction, but nothing compared to South Florida. Again, that goes back to job fundamentals. We like the diversity here. All these fundamentals that we’re talking about all tie back into one another, if you really take a step back and look at them. We are still in a buyer’s market here. We’re still getting into solid deals. I do see inventory getting shrunken down. There’s more and more of a demand of first-time home buyers and investor dollars flowing in. That’s obviously driving down the inventory.
I like looking at market cycles because all markets go through cycles, even the stock market; precious metals, you name it, everything follows a particular type of cycle driven by various factors of supply and demand. In looking at the Jacksonville market, I’m not asking you to look into a crystal ball here. Just based on what you know and what you see going on in that market, what is the window of opportunity for Jacksonville from a real estate investor’s perspective?
I looked at it on a day-to-day basis because it’s our livelihood. You’re right, I don’t have a crystal ball, but I can learn from experience and pay attention to the numbers because the numbers don’t lie. In my humble opinion, Marco, we are somewhere between halfway through recovery. If you’d picture a clock, and I actually take this clock, if you look at it, if you can envision a clock, [12:00] the top, [6:00] at the bottom, you go through this boom slump recovery every eight to ten years. To answer your question, Marco, I believe in Jacksonville, in our niche, we’re somewhere in that [7:00], [8:00], [9:00] window in recovery, which is when you want to be buying in a buyer’s market. There’s no doubt that we’ve seen some appreciation, nothing radical. 8% to 10% growth over the last couple of years, but I believe that will continue to compound through the rest of the recovery. If we see 8% or 10% compounding equity growth for the next five years, I’ll be really, really happy. We’re hyper-focused on the cashflow. We definitely have done this of getting in the way of the equity that we see coming.
One of the non-profit think tanks, I can’t remember their name, labeled Jacksonville as one of the top five growth markets in the country right now. Actually, I think the study was last year. Even so, it’s probably still in the top five. Great place to be. If we were to summarize everything we’ve talked about thus far, in terms of the economics and the fundamentals, what we have is maybe a perfect storm. We’ve got the perfect combination of affordable properties delivering high cashflow, in a market that has strong upside appreciation potential or upside equity growth. Is that a fair assessment?
Absolutely. We call ourselves a hybrid market. We’re hyper-focused on cashflow, but there’s definitely potential for a long-term equity growth.
Would you say your market is somewhat cyclical in nature? Not the degree that you’re seeing here in coastal California and parts of the Northeast.
I would agree, but again, I would consider it a hybrid because, you mentioned it before, we’re a litigious state. The average foreclosure of the state of Florida takes 892 days. Call it three years. What that does is it backs up our court systems. Some people look at that as a crisis or I see it as an opportunity. I feel like we’re a hybrid. There’s no doubt that we’re cyclical in the State of Florida. Real estate, as you know, being an expert, is very local. Even within Jacksonville, there are lots of submarkets. What’s happening out at The Beaches right now, out where I live in St. Augustine, is very different than the fundamentals that are happening in the City of Jacksonville in the neighborhoods that we’re investing in. You have to understand that it’s so localized and there are submarkets within markets.
We’ve been talking about investing in Jacksonville. Give us an example of a typical deal that our investors and our audience can get through us from your team. Describe the rehab, the age, the numbers, just paint the profile.
That’s very easy for me because we do the same thing eight or ten times a month. Our typical product that you can expect from us would be single-family home, three-bedroom, two-bath, 1,300 to 1,500 square feet. It’s going to be completely renovated. The purchase price is going to be on the low-end depending on square footage, $90,000 up $110,000. Our sweet spot is $100,000. That same house rents for $1,000 a month. The goal is to attract a young family with kids in the school district because we want them to stay long-term. If I could wave a magic wand, they would be our buyers in five years when we’re back into a healthy seller’s market. We’re buying older established neighborhoods. These homes in developments were built out in the ‘50s and ‘60s, which can sound scary to some people. I would take all day long in Jacksonville, these older established neighborhoods of block and brick construction on concrete slab foundations versus newer construction that was built in the 2000s or the late ‘90s, made of frame. Truly and honestly, the integrity of the construction just was not there. We call them little soldiers, these little concrete block three-bedroom, two-bath homes. They’ve been there for 50 or 60 years. You have to update them obviously, as you have wear and tear. Honestly, these homes will be in these neighborhoods long after I’m gone. I don’t see them going anywhere.
You wanted to expand on the rehab?
We’ve always been rehab guys, Marco. You make your money when you buy. Everyone’s heard that before. We’ve always bought distressed property from the banks. Nine out of the ten that we buy on a monthly basis are from the same six bank foreclosure, your asset managers or REO brokers that we have relationships with. We buy them distressed, but they’re concrete blocks on slab. We take them apart and put them back together new. The thing that we’ve learned over the last eighteen years is pay now or pay more later. We choose to do it right up front. I don’t like cutting corners that we’ll go in and buy one of these older foreclosures and we got them. Typical scope of work would be a new roof, double-pane insulated windows; the big four.
Let me talk about the big four: new roof, heating and cooling is going to be brand new, the home is going to be re-plumbed on the interior of the home to code. We use a CPVC, which is code for City of Jacksonville. We upgrade the electric usually to a 200 amp service if it’s needed. Those are what we call the big four. They’re going to chew up a lot of the budget of the rehab. The remaining stuff is going to be cosmetic. Next, we would always update kitchens and baths because that’s really what’s going to rent or sell your property for you. You want to always get the emotion of the renter or the buyer. Curb appeal is also a big thing that I see a lot of new investors ignore that we pay attention to. I’m talking little stuff, pennies on a dollar, updating landscape with red mulch and fresh plants, just little stuff. Over the last eighteen years, we’ve learned again a lot that the devil is in the details. We make sure that the big four are taken care of, but then we also pay attention to little things like curb appeal.
The curb appeal, believe it or not, makes a big difference. Investors do look at what the property looks like because if they’re looking at it, prospective tenants are looking at it. That’s the first thing they see before they even step foot in the door.
That’s where you hook the emotion.
What you just described as rehab is fairly extensive. We’re doing renovations as well and some of our extensive renovations can be $30,000, $35,000, $40,000. I’m not saying that’s what you’re doing, but I do know that it could add up very quickly. We’d love what you’re doing as far as your scope of work.
That’s what we’ve done for eighteen years. That’s where the money is made in this sweat equity.
Brian, anything else you’d like to share, maybe frequently asked questions that you get, something I’d never covered?
One of the big things that I can address pretty quickly, but I think it’s absolutely critical, is ongoing property management. In our first portfolio, and this is definitely a frequently asked question, do you guys manage the property? The answer is no. The longer answer is we help our clients oversee their investment for the life of the investment. In our California portfolio, we had an office and lots of staff running around. We have property management under our roof. Going through that whole cycle and liquidation, we identified that, my partner and I, felt it was taking up about 70% of our energy and resources focused on the management side. We were taking our eye and energy off of the investment, which we believe is where the money is to be made.
When we started rebuilding in Jacksonville, we identified two groups on the ground here. There are two third party groups. We are their largest clients from a numbers perspective. The larger group has about 850 doors that they manage. About 400 plus of them are either my personal or our clients. Then, the second group, they have about 550 doors that they manage and we have about 75 with them. We get really good preferential treatment, discounted pricing. Our clients or investors are just plugging into those systems and teams that we have on the ground here. Management, there’s a saying that I always say “Money follows management.” I could sell you guys the best investment at the best timing, all the things we just talked about for the last half hour. But if management is not solid, then you’re going to have a serious problem. We help you guys oversee that for the life of the investment. I think that’s a really important point.
One last question about the numbers. We were talking about the typical deal. It sounds like a typical investment there has about a 1% rent-to-value ratio, so $100,000 property would rent somewhere around $1,000. Is that fair to say?
That’s correct. That’s our rule.
Someone leveraging with a 20% down payment after all expenses, what would a range of net cashflow look like?
With a 20% down, our performance, we go off of a 4.75% interest rate because that’s very realistic right now, conventional, up to 10%. I should say, up to 4% if you’re going to go 20% down. Cash-on-cash return is going to be in the 12% to 18% range after all expenses.
You’ve got the other benefits like the depreciation which is a phantom write off. You could write off for 27.5 years. Nothing beats real estate.
In my opinion, it’s the best asset class in the world. It’s tangible. You can depreciate while it’s appreciating. It’s all we’ve done for the last eighteen years. We put all our eggs in one basket. We watch it very closely.
Anything else, Brian?
No, I just appreciate the opportunity. I’m a big fan of education too. I know you are as well. Definitely, if you haven’t heard of that book, Marco, and definitely, the audience that are getting education, Grow Rich with the Property Cycle, I highly recommend it. It’s the playbook for real estate cycles.
To our audience, if you want more information about the Jacksonville market or the investment opportunities that are there, give one of our investment counselors a call. We will also be posting these properties as they come and go up in our website. Just go to NoradaRealEstate.com. Click on Properties, you’ll see Jacksonville listed there. Take a look at what’s available. If you’re not sure of what you’re looking for, give us a call and we’ll help guide you through the right market and the right properties that fit your investment goals and your investment criteria.
Having said that, Brian, thank you for your time today. You’re a wealth of knowledge. We will look forward to working with you here for years to come.
Thanks so much, Marco. I look forward to serving you and the community. Have a great day.
You too, Brian. Thank you.
That should answer the question of, why invest in Jacksonville? As you can tell from Brian’s explanation of everything, it’s a great market and the timing is perfect. If you’d like more information about the market or the investment opportunities within that market, get in touch with one of our investment counselors. If you have a general question about real estate or real estate investing, just send us that question via email on our contact form or through the voicemail app on our websites. We will cover those in future episodes. Don’t forget to download our free report, The Ultimate Guide to Passive Real Estate Investing. You can get those from our websites. Just go to PassiveRealEstateInvesting.com. Remember to subscribe. Thanks for listening and we will see you on the next episode.
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