Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host jumping in for now. Let’s dive in. Welcome to today’s episode. I’m thrilled to have a special guest with us here today. A true expert in Florida real estate investing and a proponent of building family wealth through strategic investments. Our guest is not only a successful builder specializing in built to rent properties, but also the author of the number one Wall Street Journal bestseller, The Family Board Meeting. This book has helped countless families take control of their financial future by encouraging open communication and long-term planning.
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If you missed our last episode, be sure to listen to The Truth about Property Insurance
So today we are going to dive a little bit about that book, but we’re also going to be talking about the myths of Florida real estate investing. Please join me in welcoming Jim.
Thanks for having me, Melissa. Good to see you.
Wonderful to see you as well. I’ve been wanting to do this for quite some time. Yes.
Well we’ve been working together quite a long time now.
Yes, we have. Talking about this book has been on my to-do list for a bit now.
Good, good. Looking forward to it.
Let’s dive right into it. In your book, the Family Board Meeting, it’s all about building family wealth. So can you tell us a little bit more about the concept behind the family board meeting? And then the second part to that is gonna be real estate, obviously, but the first part is how did you come up with this? Where did this concept come from?
Yeah, you know, I had a lot of things happening in my life. Oh gosh. Now going back almost 15 years ago, it was 14 years ago. And there was a time in my life where 2011 I was coming out of, of those difficult oh 8, 0 9 years where I had survived the real estate crash. But it was not easy. And, and now I was running two real estate investment companies that were doing well that survived the crash, but we were still licking our wounds and bringing things back together. And it was also at this time that I was just about to adopt two children and I was donating a kidney to my father. And so I got hit with a lot of outside of real estate work experience. And it just changed the way I looked at Family Life, Melissa. And, and what it did was I wanted to be, have that balance of being successful in business and successful at home. And I also realized, wow, if I didn’t have my real estate in place, I could never do these things, these important things like adopt children and donating kidding to my father. So it it, it got me thinking at a deeper level of, well, how do I break that curse, that curse of we all hear, the first generation makes it, the second generation spends it, the third generation is left cleaning up the pieces. I don’t want that. I’m first generation wealth and I want it better for my family.
I love that so much. And I personally do resonate with that a lot. I have those same kind of thoughts because we’re building these real estate portfolios for many reasons. Most of us. It’s not just all about ditching the nine to five and create enough cash flow to leave your job, but it’s more financial security long term. And then after that generational wealth, we’re passing this down to our children. And like you said, how do we teach them these concepts so they don’t just all of a sudden inherit it and decide to go take a nap on the beach every day or throw it all away and sell it all. That’s my biggest stress and worry is, okay, they inherit this and then they fight with each other and who gets what and or they just all decide to just sell it off. And all that hard work is like gone. So how does a parent like myself, where do we start?
You know, one of the most important things to start with is involvement because there’s been so many times, Melissa, that I’ve seen us put the pressure on a next generation to, to responsibly handle wealth, yet we don’t even start them at it. You know, like if you’re learning to ice skate, you can tell if a kid’s been ice skating since he was five, six years old. Right. He gets out there and he is zooming around opposed to someone who’s trying to ice skate for the first time at 25. I mean, they’re falling all over and tripping all over. And I, I feel like that’s kind of what I’ve seen with wealth where we say, well, we’ve created some wealth. So I don’t wanna tell our kids what it is ’cause they’re, I don’t want to, I don’t wanna disclose that information until they’re in their twenties or thirties even sometimes.
And by that time I think it’s too late. You wanna be really building those muscles. And so involving your children in the discussions, being honest with this, I call it the money talk with my kids. We’re in their early teens. I have it, we all know as families talk about the birds and the bees and I think that’s important. But so is the money talk because they’re gonna deal with that one way or another. And I think if you involve them and they start to develop certain principles and even a respect and a a, a responsibility they can start to foster at a younger age, that’s not going to, that’s not a foolproof plan, Melissa, but it, it, it has been proven to work a lot better than hiding it from them until they’re in their twenties.
Right. I just remember growing up and my parents protected me from anything real life. I didn’t know how much money my parents had. And I grew up very like, it, like not knowing anything. I didn’t know when they had money. I didn’t know when they didn’t have money. I didn’t know when bills were due. I didn’t know what the stresses were. I just, I would know, oh, we’re moving. Or like, oh, like my dad worked a lot and he was gone all the time. Or my mom seemed stressed at times, but she didn’t ever tell me anything. I was very naive. I also didn’t expect a lot. Like I, I knew that I had to be responsible. I got a job at 15 and now I started paying for my own stuff. It was more of an expectation, but I didn’t understand it. So I avoided the whole, your parents are arguing ’cause they’re stressed and there’s bills and they’re yelling at each other. And I didn’t live that world. I lived in the opposite world. And so now talking to my children and trying to figure out how those conversations are gonna be has been very interesting. ’cause I’m like, I, I liked living in a bubble as a child.
And the intention was good with your parents. We do wanna protect our kids. I mean, there’s, there’s age appropriateness, right? We talk about that with movie ratings and such. There are a certain age, and this has been developmentally proven, there’s certain things just young kids should not be seen. I mean, extreme violence for a six or 7-year-old to watch the news and watch that, that is bad for their development. Are we denying that that happens in the world? No, but let’s, there there is a developmental process of when they can handle certain things, but there’s also holding back too much. And what I find, Melissa, what what can happen is you start to develop the the’s Something wrong with me, complex, and let me explain what that is. If everything was always hunky dorian hidden by our parents that we never showed emotions or let them know that there were ups and downs in the money and, and, and the finances.
Well then once you get out as that, you know, entrepreneur in your own family and all of a sudden you’re feeling this, and I don’t know any pro entrepreneur, not yet, I haven’t met one who took that straight line. I, I just haven’t, not anyone who’s been long term. You know, there’s ups downs, there’s sideways, there’s times where you’re flushed with cash, there’s times where you’re not. That’s just what’s been most of the experience I’ve seen for people, including myself. But if we’re not used to that, if we’re, if we weren’t shown that and we thought it’s just always this steady like basic heartbeat, once we get into that, we start to say, wow, there’s something wrong. I’ve done it wrong. What’s going on? And you really start to second guess yourself, doubt yourself, put depression on yourself. And so for, for me, like to compound that, for example, my, my oldest boys now are almost 22 and and 20, you know, since their teens.
They would sit in our Thursday morning accounting meeting and they would, they would hear, I mean there’s times as a real estate investor, we were flushed with cash. Other times we went out into projects and going, geez, what happened to all our money? Where is that? You know, and cash flow’s high, cash flow’s low. What’s happening? Oh this risk needs to be refinanced. And they saw us having to build a portfolio and the ups and downs, the sideways, the, the things that go right, the deals that go wrong. And, and I think that was very powerful for them to see. And they both right now are, have done their own entrepreneurial pursuits at young ages and they realize risk taking and they realize mistakes. And also it’s, they weren’t expecting everything to be white glove and perfect. They knew there was gonna be ups and downs and I think it better prepared them.
Interesting. I that’s so cool. I I like that idea. And also it made me think of, since you were talking about your boys, so are they interested in this then I guess what I’m trying to figure out is when we’re talking about our kids and having these open conversations and these family board meetings and we’re involving them and is that what they wanna do? Do they want to be a part of that family, your actual business that you’re building? Or are they open to explore other careers or other opportunities?
My, my rule was always when I’ve done talks for parents and I’ve gotten to do some pretty cool talks in different spots of the world, was if you, if you pick their path, be prepared to carry it. We talk about self-reliance and self-motivation. If you pick your kid’s path, man, I’ve just seen so many things from retreats and workshops I’ve done that. That’s an ugly recipe. And it, it doesn’t usually pan out well. There’s a lot of resentment, a lot of forced laziness ’cause they’re just not interested. So for me, I always said, you know, don’t worry about what I want or what I’ve done. What do you wanna do? What sparks your interest? What are you good at? You know, what do you enjoy? What does the world need? And both of my sons have interest in real estate investing, but neither one of ’em wanna make it their own focus.
And and unlike the family business, I always said, don’t do what I do. Don’t, don’t do what I do. Don’t, don’t do real estate investing to the degree and the level that I’ve done it. Why would you, I came from nothing. I, I had to retire grandma and grandpa. You guys don’t need to do that. I think you should use it. I think should, why would you? I encourage them not to go into the family business. And now my one son who’s 22, he has his own successful charter fishing business. He loves fishing. He got his fishing captain’s license now. He bought his first house at 20. So, so he is involved and he wants to buy a property a year. Which I said, you know, you’ll be a millionaire by the time you’re in your mid to late twenties. Then at that rate, the rate that he’s going, my other son from his own experience, he had a bad car accident when he was 17.
He fully recovered and he was so inspired by the fireman EMT that he is now just entered his first job. He came to me a year ago and said, dad, I wanna be a fireman, EMT and do real estate investments on the side. I said, that sounds like a phenomenal life. You have comradery, you’re doing something, you care. My parents didn’t have anything Melissa, to pass down to me or very, very little. At this stage they have something. And so they’re, they’re motivated. They’re doing their own thing, but they’re not, they’re not tied to my path. If that makes sense.
Yeah. And also, here’s the thing that, that I’m hearing and the thing that I try to talk about often is you and I had to learn all this from scratch. We didn’t inherit anything. We didn’t, this isn’t taught in school. We had to figure it out. The school of hard knocks Right. We went out there, we made a lot of mistakes. Yeah. And like you described the entrepreneur, my real estate journey is riddled with mistakes. Yeah. And, but we learned from that and we kept pursuing, here we are doing our thing and loving it and it’s our passion and we figured it out. But now I feel like it’s my job to teach it to my kids. Whether they’re not doing it as a career, but at least understanding financials and understanding what you know assets are and how to create money in your sleep. That I feel like that is my job and my role. So that when they do get to the point where they have, you know, money to invest in properties and a couple of my kids actually do own properties that I kind of made that happen. They don’t understand all the details of it, but they understand that real estate is an asset and some, at some point they’re gonna be rewarded and grateful for it.
Sure, sure. Yeah. And, and what I found is, again, there, there, as long as there’s curiosity, it doesn’t sound like you if you had tried to force them into it. Again, I could be wrong here, but I’ve seen it a lot of times it doesn’t go well. So just the curiosity in seeing what you do and and also what I do is not guaranteed to them. And let me explain that. And that’s been one thing people say, wow, how did you get your older children to be so self-reliance? You know, the entitlement trap is so serious with first time wealth where they, they think they can just lie around and do nothing. And the the Warren Buffett saying was, my kids had to, I wanted to get them set up where they could do something, but not nothing. And I always liked that. And I said, well one of the things that we had when we had that money talk in their early teens and I, I laid out our portfolio, our finances, our whole in our life, insurances, everything they could see.
And people said, oh that’s kind of young. I said, but I want them to understand it also see the tough times how it was built. ’cause I go through that and start joining our accounting meetings. But I’ve also told my kids, and they’ll tell you that they took that very seriously. ’cause There was no bluff within me. That our family wealth is tied to certain core values and, and I want to give them opportunities I didn’t have. And, and give them introductions. But they need to prove themselves. They need to do their own pushups. And if they take certain paths that the, the portfolio that we’ve built, it’s not guaranteed. You know, if they, so like one thing, Melissa, I always say like I I’ve had addiction on both sides of our family, my wife and I, you know, and you’ll be there for them, you’ll care for them.
But I will not fund addiction. I won’t do it. ’cause I’ve heard about enabling. If you know anything about it, that’s the worst thing you can do. And I’ve told my, like my oldest sons, I said, if you took like a a a road like that, I’ll be there to, to love you and try to support you. But just know I don’t fund something like that and you will receive nothing. And, and they had to test whether, and this is the strong part of a a parent, are you really strong enough to, to hold that line? And I know that I am only ’cause I believe the opposite would be absolute disaster. I’d actually put fuel on the fire. And so they knew that the the what I’ve created is not necessarily guaranteed to them. And so I think they said, no, we’re gonna stand on our own values and do our own thing. And from the looks of it they will be ge getting, you know, but it wasn’t guaranteed. And I think that’s where we all make the mistake saying just because that they, they’re, if they’re, if they’re practicing certain core values that could destroy them by handing them money, I’m not gonna hand them money. I just won’t do it.
Yeah, I love that, that, so what is the first steps that someone should take if they wanna get their family on the same page for investing or building wealth together? What are those first steps?
You know, I think one of the best things they can do, especially if we’re talking about the teenage, there’s the, the pre-teen and teenage. I love books and games. So those are two of the best things that you can do. Like I played Robert Kiyosaki’s Cashflow and then Cashflow for Kids with my own kids. That was a great way to have conversations and learn. We also have like a, a family book club. So we read, you know, Rich Dad, Poor Dad Together, we read The Richest Man in Babylon. These books were, were really good and we read ’em as a family slowly, we, you know, 10, 15 pages a week and discussed it and talked about it and applied it to real business things that we’ve done. And so that’s a great starting point to, to spur conversations. I, again, I know that the thing out there, Hey I’m gonna give my kid Rich Dad poor Dad and I’m gonna have them, I’m gonna pay ’em a hundred bucks to read the book and write a one page report.
That’s a good starting point. But we all know they’re just looking for the a hundred bucks then. And they’re gonna kind of glaze through it and put some words on a piece of paper. Are they gonna really embed it? If you read the book again, side by side with them and slowly talk about it every week. I mean I only read with our kids on average like three books a year. We’re not talking a lot of books, but we go through it really slow so it sticks. So anyway, that’s been one of the best ways that I’ve been able to get them on. I also bring my kids to events. It might annoy people, but I’m that guy who likes to bring my kids and have them sit in for some of it and listen and, and start to get exposed to it. It might be over their head, but I try to get ’em exposed, especially if there’s a family component. That’s how I got into the whole book and everything. ’cause I didn’t think there was, I try to get ’em to these teaching things.
Yeah, that’s amazing. I love all those ideas. The games is a fun one. I mean Monopoly, I mean Monopoly. Monopoly. Yeah. That is literally h how do you win at Monopoly? You have to own the most real estate like end of story <laugh>. Yeah, absolutely. It’s somehow how much money you have in the bank. It’s literally how much real estate you own. And so I whenever like the kids are like, I don’t understand what’s the point of the game, I’m like, buy real estate <laugh>.
Yeah, yeah. Absolutely. Yeah. Four green houses, one red hotel. Right. Although I’ve just gone more greenhouse and more green houses really. But <laugh>
<Laugh>. Well that’s perfect ’cause that, that leads into this next part. I made a social media post the other day. I was just trying to be clever. I’m not a good social media poster. I don’t even know what I’m doing. I just think of something that’s funny or somewhat entertaining and I throw it up and, ’cause I was making a comment on, there’s some people out there that are like only, you know, big apartments or big projects and, and I don’t have any interest in that. I’m a firm believer on small units under four doors, single family. And I know that we have that in common. So that leads to this next part is tell our audience exactly what you do. So you are what I call, correct me if I’m wrong, build to rent, build new construction in Florida and mostly single family.
Yeah. We stick to exactly what you said that four and under. So we build single family duplex and quads. Those are kind of our shtick where you can get great residential financing and yes, you can do that today. We’ll get into that. But it, it really, what build to rent means is new construction, turnkey rentals, that’s all it is. The term build to rent has gotten confusing. And man, it didn’t even exist 10 years ago when I started doing new construction. It kind of came about. But, but we decided that, look and you’ve read my book, the Passive Income Playbook, old Properties and Fixer Uppers got me started, got me really going. But it was the new construction that was allowing us to really buy back our time better for us and our clients and also expands more. We’re now in 12 different markets in Florida. It couldn’t have done that with fixer uppers. But our focus now is that new construction turnkey assets. ’cause We’ve just found after doing so many of them for for almost a decade, it it’s, it’s had a solid, solid return.
Yeah. Well and you’re creating your own demand, especially in, in Florida such a high demand market. I mean the growth, and we’ll talk about that too, but just the growth and the boom in Florida, which is where some of my myth questions are gonna come in. But if, if, if we didn’t have builders like yourself creating inventory for that demand, I mean gosh, how many homeless people would there be Florida? You had to find a solution to fit that demand.
Yeah. Well, and, and the National Home Builders, everyone says, oh there’s, there’s lots of builders out there, there, A lot of the national home builders have absolutely no interest in what we do. None. They would never build a duplex. They’re like, what the heck is a duplex? No thanks. And then even so with their single family homes, Melissa, you know, they’re, they’re higher margin. We’re a low margin builder. We do kind of the, we we wanna do volume and we make up for our low margins that way. And that’s just not the larger national home builders models. They’re gonna build a more expensive home that can have a bigger margin. And and that’s a little riskier to us. They don’t cash flow. And you know, that’s, that’s our model is right near the median workforce housing that they don’t like to build. ’cause There’s not a, there’s not a big enough spread to ’em honestly.
And we’re willing to do volume with that, which I think gives us a big advantage. And the need is there. The, the the stat I did on a webinar last week that I found for every 25 affordable workforce houses in Florida, there’s a hundred renters for them right now. A hundred renters. And that’ll, that’ll start to stir up some of the stuff, Melissa, about the myths where, oh, I heard real estate in Florida’s going down. I heard inventories going up there. There is such a look. There are 29 million people in Florida and there are several sub-markets happening and it’s important to dissect them. But, but again, it is, it is so diverse here that you really have to know what segment of the market you’re looking at when you’re, when you’re getting facts mixed up. <Laugh>.
Yeah, yeah, yeah, exactly. So let’s dive into these and have you bust some of these myths for us. So the first one is Florida real estate is a volatile market. Is this true or not true?
You know, this is again, true and false depending on what you’re investing in. If you’re investing in workforce, housing, new construction that’s fairly priced near the median, it’s very stable if you’re investing in higher end, older real estate right next to the coast, volatile, why insurance values went up tremendously in certain areas through the pandemic. And so they’ve fallen back some, they’re still way ahead from where they were four or five years ago. But, so you can look at this two submarkets, Melissa, and the answer is that’s true and false. Where we decide to build it’s false. So central Florida, you know, the greater Ocala area where a lot of people fought with us, you know, we’ve continued to have a few, a a a few percentage points of appreciation even the last few years where it’s been more flat and we’ve just had rental increases there again, now the median price for a home in like an area like Inverness is 270,000 still, you know, compared to a Miami where it’s gonna be, you know, two and a half x that. So this is the important decipher that you have to look at.
Perfect. And part of that is you’re meeting the demand of not only you’ve got two sides of it, you’re meeting the demand for the renter who’s, who needs to have a, a place to live and to rent. So we’re in areas that are demand, but then also you’re catering to the investor who wants to cash flow. There’s gotta be something there. Yeah. When we look at the proformas, there’s gotta be a little something at the beginning and it’s okay that it’s, we understand that the costs are a little bit more when we’re comparing a Florida to a, I don’t know, Jackson, Mississippi, but we also have a lot more rental increases happening and we also have a lot more appreciation happening. And so you’re kind of having to cater to both of those worlds.
Exactly. Exactly. And people had always said to us another myth, oh, you can’t build new construction and have a cash flow in Florida. Well that’s absolutely not the case, especially where you go to the market, you know, we’re always trying to find, you’re, we’re not in Miami, we’re not in Tampa, we’re not in Orlando. As a kid that grew up in the Northeast, I thought that’s all that Florida was. That’s only one part of it. We’re going to those second tier markets where there’s still population growth, economic growth, a great affordability index, which means the average price of home is really healthy compared to the average family income per household. There’s something desirable bringing there. And healthy supply and demand, like I talked about, we wanna go where there’s a shortage of workforce housing that we can build, not an oversupply.
Yep. Wonderful. Okay, the next one, Florida’s property taxes are too high to make investing worthwhile. What do investors need to understand about property taxes? And then the, the second myth busting is going to be about the insurance. So we’ll get to that one. So mix them, go, go, go hit them both together. Hit ’em both. It’s gonna be, yeah, hit ’em both
The, the, the property taxes that you might face in South Beach Miami are very different than the, the taxes you might face in one of the markets that we build in. And one of the things too that, that you have to look at what raises taxes, like we don’t build, it’s beautiful. I love going down to visit, you know, from, from like MidCentral Florida on the east coast down to the Florida Keys. Those are gorgeous areas, but expensive real estate in the highest hurricane risk zone. So taxes in Florida also tied to not only the pricing of property, which that’s a very expensive coastal areas, but also it ties to hurricane risk. That’s why I always joke that the taxes in Miami were like three times the taxes in Jacksonville, Florida, you know, where we got our start working with you guys and we’re still here, that’s still our hub, but very different six hours away from each other.
The taxes can be double two and a half, three times more down there. And so it depends on the area you’re investing. Again, this is where you have to look below the surface. If you just say Florida real estate, that that doesn’t get you the, the focus that you need. You need to look at individual areas and see what the actual property taxes are and what can lower property taxes and what goes with property tax, like you said is insurance. So insurance, this is one of the biggest that I call it the, I heard investing, I heard you can’t get insurance in Florida if I had a dollar, Melissa for every time I hear that now <laugh> and I just giggle and I always stop and, and kind of laugh and say, well what property are you talking about? And let me explain. So if you’re talking about a home built in 19 53, 2 blocks from the beach in Fort Myers, Florida that’s built in 1957, you are gonna have a hard time getting insurance.
Why? Because in 2004, all the rules changed here after a big hurricane Charlie hit southwest Florida, they said timeout no more. You gotta build at 13 to 14 feet above sea level and you gotta use stronger structural design and fasteners. And that’s performed really well. And so, and when insurance companies look at the risk new in construction, well we have to build at that higher thing, stronger structural design. So they give us great insurance rates. If you’re working with a, a smaller house could be, again, Fort Myers is beautiful. We build new construction, but the older stuff right there next to the beach where the hurricane hit, we had no damage and the older houses on lower ground had a lot of damage. So insurance companies are all about risk. And so those houses are much, much riskier. And so you are gonna have insurance, your insurance might be five to seven times more per year than a new construction home. But again, why, because insurance companies assess risk. That’s risky. New construction has to be built to a higher standard, therefore the risk goes down, therefore your premiums on new construction go down.
I, I kind of joke, same thing you said in the beginning is if I could have a dollar for everybody that says that I could be a rich person, yeah, that’s the first thing that somebody says when we’re talking, I go, Hey, let’s check out the stuff in Florida. Oh, I I don’t wanna do Florida because I’m worried about hurricanes and I’m worried about insurance and I just have to go down that myth busting. And I go, look, yes, this is actually an insurance policy and it’s literally the exact same price that I’m seeing in other markets. It’s the same as Kansas City and it’s the same as Indianapolis and Birmingham and all these other markets. It’s the same. It’s literally comparable. The biggest difference is obviously properties are a little bit more than that. A hundred thousand dollars property in Mississippi. Oh yeah. <Laugh>.
Yeah. So yeah. And then you balance your portfolio. Remember I, I started in California than came to Florida. So my play Melissa, has always been equity growth. I love cash flow, don’t get me wrong. But when I look back on the 25 years of real estate investing, the hundreds of properties I’ve owned, I’ve made way more money from buying a property and holding it long term with the equity growth than I have with the cash flow. Now cash flow is a great thing and that grows, but I’ve always looked at that. So what you guys do is help people balance. We believe Florida has quite a window of opportunity for the next five to 10 years still with what’s happening because even though it went up through the pandemic markets like I’m telling you about are still way undervalued and there’s just a great growth protection projection. And so those are the markets I’ve always liked to invest in and we provide that. Yep. It’s gonna be a higher buy-in. Yep. It’s gonna be a lower projected cash flow. But the overall numbers, well it’s always a, it’s proven to be from what we’ve seen working with you guys for the last 10 years to have some of our property in your portfolio <laugh>.
Speaker 2 ([spp-timestamp time=”29:10″]):
Absolutely. Second that we want a well-rounded portfolio. I mean a perfect portfolio is you’re gonna have some nice properties with that appreciation piece just long-term. Let them do their job, have a couple properties that are higher on the cash flow. Maybe you’ve got something in the middle. And we can also hit that not only with just market, but also the neighborhoods. And you can diversify within Florida. Yep. You can go to a bunch of different cities and you’re diversified. You can do a duplex, you can do a single family. There’s so many different ways that you can diversify a portfolio and there’s no wrong or right way, right?
No, there’s not. It’s, it’s what, here’s what I always say, what are your end goals and what do you want your involvement to be? Right? Because you don’t, you don’t have to find someone like you guys who’s going out and vetting and finding all those things. You could do it on your own, but are you needing to buy back your time already and you’re trying to, you know, do the do it yourself. I, I wish I had had turnkey investment like we have today. I could have learned so much more invested so much quicker. But I think you have to know what are you really looking for and, and what do you want? And, and so that’s, and you guys do that anyway. I I I’m preaching to the choir here right now, <laugh> for what you teach <laugh>. But again, our part is people always said to me, well what did you do?
What did you do? What? And I said, well I started in central California and then I went to Northeast Florida and I looked, I would sacrifice cash flow for something better area, better positioned and for growth. So right now I own way less property than I than I did 10 years ago. But I have more equity and more cashflow than than ever. So what, how does that work? Well, because I just, I went with a different model of going to, I’ve worked my way into higher houses and now our building model is just kind of a middle ground for getting people in and I think it has low involvement, a great track record. And the one thing with new construction too that I’ve seen is tenant occupancy. When I had my older properties, I was averaging about 13 months of tenant Melissa. And now we’re averaging about three years. And so that’s a positive thing where you’re not guaranteed, but normally you’re dealing with less turnover.
Yeah, well if you can imagine if you’re the first person that moves into a new construction home, you kind of go, this is my place. You know what I mean? You’re the first one to put the nail hole in the wall. And I, I feel like a lot of renters tend to respect the new construction and stay a little bit longer and you know, and also when it’s hard to get housing and there isn’t as much housing available, you wanna stay, you wanna kind of stay put. Nobody wants to move around 20 times.
Yeah. And, and and low density as you know, became a big term in, in the pandemic. You know, if someone has to move into an apartment or they can move into one of our duplexes located in a mainly single family home neighborhood, there’s really no comparison which one they’re gonna choose. The pricing is similar, but they have their own backyard. Their children feel like they’re growing up in, in like a, a more of an established neighborhood, which they are instead of a complex. So these, these are little things that really do go a long way.
Yeah, definitely. So another question that I have for you is about tariffs and costs. You know, there’s a lot of stuff going on right now that we have zero control over. So I know people are worried about the access to inventory. There’s plenty of stories out there of investors who were trying to buy properties during the, the covid boom we’ll call it. And builders just took on so many projects that people are still getting houses completed that they started in 2021 that just because they were not only backlogged but also the costs of it just went up and up and up and up and up and every time they like turn around the builder’s trying to ask him for more money. So what are you guys doing right now and any advice or help in that area?
Yeah, so let’s, let’s talk about tariffs will only affect future building projects. Does that make sense? So if yes, if you have, if you have property that’s already been built or 90% built tariffs at this time, and I’ll get deeper into that, shouldn’t affect it. So as you know, our, our company was partially acquired by Subby Tum Forestry about two years ago. So that is a large Japanese group. They’re 331 years old. Warren Buffett is very heavily invested in one of their other conglomerates. And we are very happy with our choice. And I’ll tell you why, Melissa. We used to have to do the pre-construction when we were working with our own money. Now with Sumitomo coming in, backing all of it, we have zero bank debt. So as you know, you wanna make sure a builder has a healthy balance sheet. Well we have no debt and a very healthy balance sheet through Sumitomo.
And what that allows us to do is not the pre-construction model but a continual build cycle. So we’re building on our own dime and just delivering finished products. So it’s not like you’re gonna say, Hey Jim, I want one of properties that, okay, give me a deposit and I’ll get back to you in 10 to 12 months. Your property will be done. We’re on this continual build cycle because we don’t have any bank regulations. We’ll take the risk with our own money Sumitomo backing us, where we’re coing properties every day. I mean certificate of occupancy, we have single families duplexes finishing every day and our clients can choose from those. And we always have a, a good amount of, of inventory coming out. So these are ahead of the tariff curve right now. I’m sure you got my email where I said, look, we never pressure people to to buy.
It’s just we, we’ve been here a long time, we’re gonna be here. You get in when you want. And I say if you’re not looking to buy within the next three years, this probably isn’t for you. Keep learning, keep listening to the podcasts. However, if you are serious about buying any time over the next, you know, six to 12 months, you might wanna look at buying right now. ’cause We don’t know what the tariffs are gonna do. And if you have existing inventory, especially new construction that’s already done and and therefore is pretty much immune to the tariffs that are coming or potentially coming, then you can step in and anytime these types of things step in, we usually do see two things happen, especially if there’s limited inventory, expensive expenses go up in, in how much cost to buy something, how much cost to rent something which is great for what you already own.
So I see the tariffs as actually a good thing and how we’re getting our people around it is we’re on a continual build. We always have property. So people who are buying right now, which we have, they’re able to beat that. The second thing I do wanna say is I am, I believe that the tariffs, I think there is gonna be some effect, Melissa, but I think if you and I did this podcast again in November and let’s hold me to it. I think the word tariff is gonna fall a lot lower in our vocabulary usage by this fall. I really do. Yeah. this is, this has been known. There’s already countries negotiating one of the biggest ones being China. And so will it cause some temporary slowdowns? And we’ve seen that and, and prices, yes. But I don’t think tariffs are gonna be as big of a deal as what we’re, we’re concerned with. And I do think it’s going to bring some very exciting things back to the US one of them being manufacturing, which is gonna be great for job and job source, especially here in Florida. And I think that’s gonna be a very positive thing.
So it is interesting, I just did ad cast with Richard Duncan, who’s a macro economist, a global macro economist. It’s actually, it’ll come out before this one so everybody listening can go, go listen to that one. And yeah, I think the biggest thing that I took away from his advice, what he was talking about is we’ve gotta put our money into assets. Whatever’s gonna be happening, whether we’re in a recession going into recession, how big is that recession gonna be? Whether the tariffs cause it, whether they go away, all of that. Like the message is still the same. There’s inflation, there’s the US dollar going down and we’ve gotta get our money into assets. And if there is any sort of recession or whatever it is, we know that during a recession, rental demand goes up. Yes. As we saw in Covid, that’s the perfect example was res, was Covid a recession?
Everybody’s gonna argue about that one because everything was just so manipulated that we don’t actually know, but we know for a fact that rental demand went up historically, whenever we look at recessions and the bubbles rental demand always goes up. I never ever ever hear an investor to this day, I’ve never heard an investor say, I regret buying a property in 2006 to 2008 and then I I regret it and I wish I would’ve sold it or so I’ve never heard anybody say that. The only regret I hear is people say, I wish I didn’t lose my property in 2008. Yeah, I wish we held onto it. Yeah. You know, that’s the only regret I hear. So even if we look at that and we try to learn from history, right, and we try to map out exactly what happened. So even if there is something on the horizon, we’ve gotta get our money into assets. I still believe that no matter what.
I, I don’t think you can, I don’t think you can keep up the pace of working that you can with asset investment. There’s no way that I could have created the wealth I had just by working my job and saving. There’s just, there’s no conceptual way. It’s because I, I would save and then I would invest in a property and then I wasn’t trying to time the market like, ooh, let me, let me, I I need to sell this in six months. I used to do a lot of flips. But if it’s gonna be a rental, it’s gonna be a long term buy and hold. And like you said, you know, there’s never been a a bad, especially in normal markets, not barring like going to the wrong areas, but a a a solid neighborhood. Do you know, Melissa, there’s never been a, a bad time to own res real estate for, for a seven year period in the US ever.
So if you’re saying, oh, I bought it the worst time ever, 2007, right, right before the oh eight meltdown. I say, did you hold the property? Yeah, yeah. And when did it, you know, go back up above what you bought it for in rent? Oh, it was about six years. So, but, but it was covering and they bought a good house and now what’s that property? Well, it’s two and a half x and the rents are up 80 to 120%. And so people have to remember, as you said, getting the assets and stop trying to time the market, look at your time in the market. ’cause It’s easy for me to look smart and I’m not very smart Melissa, but I’m saying, but I’ve been, I’ve owned some properties 20 years now that helps <laugh>, you know, so, so anyway, for what that’s worth, that’s one of the biggest myths of, oh, I don’t know where I’ll be able to do if history repeats itself. Just remember time in the market is your friend.
Yep, yep. That’s beautiful. And so many people are sitting on so much equity in their properties right now because the values have gone up. So your own house that you live in, can you imagine which all of you listeners out there, I’m gonna kind of knock on your heads a little bit, but can you imagine the same thing if you had 1, 2, 3, 4, 5 rental properties that have experienced that type of growth and the cash that’s in them. It just gives you exit strategies, it gives you so many options. Do you wanna sell the property, do you wanna keep the property, do you wanna cash flow the property, you wanna HeLOCK the property? That’s how true wealth is really built.
Yeah. And real estate’s one of the best tools that I’ve been able to find to make that happen. You know, I was never taught leaving college a four year degree. There was really three ways to make money. There was owning businesses, owning real estate and owning stocks and bonds and now I guess cryptocurrencies. Those were the three asset classes for me. I liked real estate the best because I could kind of have a real estate business. So I cheated into both categories, <laugh>, but also owning the real estate. I mean, you know this Melissa, it was, I grew up in northeast New Jersey and the northeast and north jersey and everyone ran to Wall Street and I hated that. I didn’t like that lifestyle at all and I had no desire to be at. And when I started really reading about real estate investing, the tangibility made sense.
I said, wait a minute, if I buy a hundred thousand dollars worth of stock, I need a hundred grand, but if I buy a hundred thousand dollars property, you’re telling me I need 20 grand to put down. Yeah, that’s correct. I’m going wait a minute and then I can refi money off of it tax free and the cashflow goes up and someone’s paying. I mean, it just made sense to me. And, and so hopefully that, you know, that really resonates with people don’t get wrapped up. What am I gonna produce in the first 12 months if you have the patients say, what historically will it show that I could produce in the next five years? You go, oh, five years. Five years happens like that. You know, it was five years ago, the pandemic doesn’t that sound crazy <laugh>? And so you’re going, holy moly, you know what could happen in, in, in or even go three years, three to five years and, and you might start to get a better feel of how important it is to pull the trigger and get something, something on your portfolio that is real estate based.
That was perfect. Thank you so much. I loved that and I could not agree more with it. My youngest is literally graduating from high school this year and I’m like, where did that go? She was just a freshman. Like it’s, and in the pandemic starting high school and all of that. But so I’m just like, oh my gosh, like these time, these are time warps. I don’t believe that we’re sitting where we are today. So thank you. Thank you so much Jim. I know that our listeners are going to resonate with so much and so let’s talk really quickly. I know you have a new book, the Passive Income Playbook. Yep. And I would like to make a call if this is okay with you, Jim, is for the listeners to go down to the show notes below and I am going to have some information for you. You’re going to be able to click on that link and then you can request it to me or somebody else on our team and then we are going to get you a copy of that book from Jim. Is that okay?
Absolutely. We love to give it out. It was a USA Today bestseller. We will get it to you for free. It sells in Barnes and Nobles for like $29 or not $22.95. You guys get it for free. It’s just isn’t my story and my wife’s story and our partners and our property counselors, but a lot of our clients. So it is a great learning tool for whatever, as you said, Melissa, like our kids are standing on our shoulders of the lessons we had to figure out. This book is 25 years of carving out the best direction we found in real estate and the do’s and don’ts that you can hopefully, you know, again, lean on us so you don’t have to go through all the pain.
Perfect. That’s beautiful. So you guys, you’re gonna see that link in the show notes. Reach out to me or somebody else here on our team that’ll go directly to somebody <laugh> and then just put in the subject title. I want Jim’s book, how about that? We’ll, just <laugh> Perfect Passive Income Playbook, Jim’s book. We’ll know exactly what you’re talking about. We will hook you up with Jim and we will get you a copy. So wonderful. Thank you so much for offering that and it was a pleasure today speaking with you and we’ll have to do this again soon.
Sounds good. Thanks for having me, Melissa.
That is it for today’s episode with Jim and Melissa. If you haven’t subscribed to the show, please do so. It only takes you a few seconds to click the subscribe button. If you have any questions about real estate or our turnkey properties, be sure to contact us at noradarealestate.com. Any of our investment counselors can give you you a hand. And if you are looking to invest and you want a free strategy session, contact one of our investment counselors for some help. Thanks for listening. I’ll see you on our next episode.
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