Episode #012 - How does insurance work for investors? In this episode we visit with Michelle Pepper. Michelle has extensive experience in the field of insurance.

Episode #012 - How does insurance work for investors? In this episode we visit with Michelle Pepper. Michelle has extensive experience in the field of insurance and she is highly qualified to discuss that question and many more. Join us as we get an insider’s opinion for this specific aspect of the insurance world. (

Michelle’s Bio: Michelle has years of experience with both State Farm and Davis Dyer Max, and she is adept at serving her clients whether locally or across the country. As an advisor to her clients, she helps them achieve a well-rounded plan to protect their assets and manage their risk. She works with businesses and individuals to prepare a customized risk management plan including insurance coverages, loss control recommendations, and risk tolerance assessments.

Links from this episode
Davis Dyer Max:

Michelle’s contact
Phone: 972-202-3947


Episode #012 - REN Podcast Transcription - Michelle Pepper

Jason: Good afternoon everybody. This is Jason Reynolds with the ‘Real Estate Now’ podcast. Today, I am excited because I have Michelle Pepper with Davis Dyer Max insurance. How are you doing Michelle?

Michelle: I am good.

Jason: Good, awesome. Michelle has been working for all my clients in the past that are specifically investors and she has done a great job. So, I wanted to bring Michelle on and we are going to get to know her a little bit and we are also going to talk about specifically insurance for investors and some topics in that arena. But first, I did a little research but there is not much about you online, so I guess that is a good thing. There are only two things; you were with ‘State Farm insurance for a little over 29 years.

Michelle: Yes.

Jason: And then, you have been with Davis Dyer Max for 10 years.

Michelle: That is correct.

Jason: Can you tell us a little bit about yourself? Do you live in the area? How long have you been in the area? Are you married? Do you have kids?

Michelle: I grew up here in Garland and I am married. We just celebrated our 40th wedding anniversary and we have one daughter. 

Jason: Awesome. All the family lives in the area then.

Michelle: We do.

Jason: When you were with ‘State Farm’, was it in the area as well? Was it in Garland?

Michelle: Yes, it is actually in the same building. We did not move far.

Jason: Then you jumped over to ‘Davis Dyer Max’.

Michelle: Yes.  

Jason: What is the difference between ‘State Farm’ and ‘Davis Dyer Max’? What would you say is the difference between them? (1:39)

Michelle: ‘State Farm’ is a direct writer and ‘Davis Dyer Max’ is an independent agent. The difference between them; ‘State Farm’, you work for ‘State Farm’. ‘Davis Dyer Max’ we have the ability to go out and shop the market.

Jason: So you are quoting multiple types of companies.

Michelle: Yes.

Jason: Okay, that makes sense. Jumping into the topic itself, you deal a lot with investor properties.

Michelle: Yes.

Jason: Is that the majority of your portfolio?

Michelle: Yes it is.

Jason: So what is the difference when you are looking at policies? What is the difference between a rental dwelling policy versus an owner-occupant type policy. What are some of the main things that are different? (2:15)

Michelle: Probably the largest is; you don’t typically have contents on this investment type properties. It will help with the pricing number one but, if they are going to have a deductible in there cost wise, it is not to me cost effective. I just tell them, “I will probably do without it. You are going to have a deductible involved”. That is probably your main difference; you if course got the structure coverage, you got the liability. We write all of our placement cost type policies and you kind of pick and choose deductibles and everything. But as far as the coverage type, they are pretty similar.

Jason: When you are looking at deductibles, I know for personal homes it can vary. What is the highest deductibles a person can have versus the lowest and what you maybe see on a typical policy in range? (3:23)

Michelle: Right, there are usually two deductibles. The first one is for ‘wind and hail’ and it is usually in percentages and it is 1-5% and that would be the percentage of the dwelling structure limit is.  Then you would have the ‘All other Peril’, which would be in any other type of claim except wind and hail. Which would be fire, lightning.   

Jason: Tornado.

Michelle: Tornado would be under the ‘wind and hail’. That would be wind.

Jason: Okay.
Michelle: Water damage and things like that. Those deductible start at 1,500 and go up to 5,000.

Jason: Okay. If somebody decided to get a 5% deductibles on similar premiums can be pretty low because they would be taking a lot of risks if something happened? (4:20)

Michelle: Certainly right.

Jason: Versus the 1% deductible you are going to be paying for a much higher premium.

Michelle: Right.

Jason: On average, what do you see a lot of your clients doing? Do they pick the middle road or does it always depend on what their…

Michelle: It is all about your comfort level.

Jason: Right.

Michelle: In this day and age, I see more of the investors wanting higher deductibles.

Jason: Okay.

Michelle: But it is all about if you are comfortable and probably whether you have 5 properties or 10 properties, that might make a difference also. But I have a lot of investors that have gone with the higher deductibles to help save the premium. 

Jason: They are almost self-insuring in some ways to cover that. (5:14)

Michelle: Yeah, you want to make sure that you got the coverage for catastrophic. I tell people, “It is not always wise to turn in the smaller claims because those are strikes against you”. I think it is better to save it for the larger loss.  

Jason: Okay, that makes sense. You mentioned some seconds ago about actual cash replacement; actual cash value versus replacement cost.

Michelle: Right

Jason: When I have done research before, it is very important to figure out what policy is on that because it can make a difference when you file a claim.

Michelle: It certainly can.

Jason: Do you do different policies for different options or do you… (5:51)

Michelle: I really stay away from the ones that are actually cash value. If there can be coverage, I want there to be coverage there when you do have a claim. Replacement cost is much different than the actual cash value policy especially if it is an older home. It is very important to have the replacement cost coverage on there.

Jason: Okay, if they were to call you to get a quote on insurance, are you always going to be quoting them for policies that have the replacement cost?

Michelle: Yes.

Jason: Okay. Even if they are contacting anybody else, it is important to ask that question.

Michelle: Yes, it is because there are a lot of policies. I deal with many investors and there are a lot of different policies out there.

Jason: Okay, got you. That makes sense. When you are talking about policies, this is a big area because you cover pretty much the whole Metroplex and I have seen you go even out of the Metroplex. (6:45)

Michelle: I do, I go all over the United States.

Jason: Okay, what areas do you cover?

Michelle: When I came here into the agency, they had never had so many licenses that they had to get for all these different states.

Jason: Chances are you cover it.

Michelle: One coast to the other and if we don’t have our license and we can get it, we will get licensed for that state.

Jason: Okay, if you are looking say, in this area, when you are looking at premiums. Do you see a difference in terms of older properties versus newer properties? (7:20)

Michelle: Definitely. The newer properties, you are going to receive a better wright on, same with the roofs. If you have an updated roof, you are going to see credit given to that quote. Even if you are issued a policy the next day, they would even get credit for one day out and when it needs to be effective. Lots of different types of credit that you can develop on these quotes and we try to ask all the questions to be able to get you the best pricing out there.

Jason: You mentioned having a newer roof can help. It is more of a shot at the dark based on areas like in the Metroplex or those it change on a yearly basis? (8:12)

Michelle: It’s changing all the time.

Jason: Okay.

Michelle: I do so much of the quoting and I can typically tell you and if an area changes, I can tell you that. Within a month or two, we will start seeing the change and it’s like, Oh! This is a really good wright for this carrier or with another carrier. They really have good wrights so it changes.

Jason: Does that change because say, a year ago, a storm blew through certain areas and there are claims. So that they are changing based on a region.

Michelle: Yes, all by storm, the county, zip code, a lot of that.

Jason: Jumping into that, there is a question that you and I have a gotten a ton from out of state investors. Are there certain areas to avoid for hailstorms or tornados? What is your response on that? (9:10)

Michelle: If you live in the North Texas area, you will. It is not if, it’s when. We just have hail and we just need to be prepared for it. The newer risks that we are seeing put on the house anymore seem to be holding up better because the new material is just a better quality. Some of these people are putting the UL hail resistant roofs on them that is helping with it. That is the only time that if you have a new roof and we have a huge hailstorm. If it is soft ball-sized hail, there is probably not anything that is going to live through that.

Jason: So are the reductions and premium… if they are to get a hail resistant type roof, are they getting a replacement?

Michelle: They have not done that on the rental side, they do that on the rent over home policies but they have not started the other. I would love to see them do that because a lot of the insurance companies on these landlocked rental homes policies are changing a lot of the hail resistant, the regular roofs. They are changing their stances on them and getting better wrights for different things so I see that in the future.

Jason: Okay, if somebody were to call you today, they were getting ready to buy a property and they needed quote for insurance. You worked different in ‘State Farm’ in that you were shopping multiple policies. (10:58)

Michelle: Correct

Jason: To kind of advise your client on the best fit for them.

Michelle: Right.

Jason: How many carriers would you say that…

Michelle: It goes through multiple. There are two of them that we use a lot but I have 4-5 that we can typically go to. just from seeing the address, that would guide me and give me the top 2. 

Jason: You will know the type of wright would be the best policy for that area.

Michelle: Right

Jason: That makes sense. A lot of investors as they grow their portfolio would own multiple properties. We were talking about the umbrella policies. What are the purposes of umbrella policies and when do you typically see your clients moving into that arena to give you an umbrella policy? (11:41)

Michelle: Okay, let’s say you start out with 2. We probably would put 500,000 liability on each policy.

Jason: Policy itself.

Michelle: When they are up to 4 or 5, that is when I really start encouraging them to go ahead and move into a general liability policy, which if we end up doing will be to split off the liability charge that is on the dwelling policy itself. Then, we would create a separate policy that would be a commercial general liability policy, which would give you the amount to 1,000,000 over 2,000,000. That would amount to whether they had two 1 million dollar claims in an annual term, that is when the policy will pay. Instead of just having the 500,000, then you will have the option…

Jason: Additional coverage.

Michelle: Of a million.

Jason: You are offering mainly more protection in that situation.

Michelle: Yes.

Jason: You mentioned it might actually save them a little bit on their actual premiums? (13:05)

Michelle: Yes, if you have just the regular dwelling policy, you will be looking at anywhere from $50-100 deleting the liability coverage.

Jason: Off the bat.

Michelle: Off the bat. And then putting it on to a regular commercial general liability policy for a million dollar coverage and that pricing starts. We usually can put 4-5 properties on it and it gets you $400 a year.

Jason: Okay.

Michelle: Then, if they continue to build that portfolio, I really encourage them to look for an umbrella also. The umbrella typically runs $400/million. Depending on what amount that you feel that you need, I would really encourage that once you get to the commercial general liability.

Jason: Okay, that makes sense. Say Joe is insured under you and a hailstorm came through yesterday and he knows he has to file a claim so he calls you. What is the process like moving forward from the moment he calls you to getting a roof? What is that process typically like and how soon does it usually happen? Obviously, it depends on if it was a huge area and you got a lot of insurance in the area. (14:10)

Michelle: Yes, if it was a huge hailstorm, I will just tell everybody to be patient, they are getting this type of care of as quickly as they can. Depending on if it is a huge storm, we will know the date of loss but a lot of times, the tenants don’t call and tell us when there has been a hailstorm in a certain areas and we might not find out about if for 6 months, the date of loss is critical. Usually, your roofers that will go out will know. So we will need that and whoever is going to be in the contract, whether there is going to be property management or directly to the insured and then we get I turned in. You will usually hear from somebody within a day or so.

Jason: An adjuster.

Michelle: There will set up a time to meet whomever and they will go out to do the estimate. I tell people, if it is an area where there has been hail, the chances are you probably have a totalled roof.

Jason: Okay.

Michelle: Usually, when go ahead and write the estimate, a lot of the adjustors email them to you now. You can look it over and the next day, they typically go ahead and send out a check minus the deductible. Sometimes, there is depreciation on it depending on how old the roof is. Once everything is repaired, then you can send the invoices in and if there is extra due to you from that depreciation, they will send you a second check. 

Jason: Okay so it will be prove that the work was done.

Michelle: Yes.

Jason: Okay, that makes sense. That covers everything that I have if somebody that is watching this has additional questions or they want to look into getting a policy with you, looking to get quotes. How do they get the contact with you? What is the best method? Email or phone number? (16:21)

Michelle: My email is and if you want to call my cell number, 214-212-6423 and I will be happy to answer any questions that I can.

Jason: We will link all that below and there will be a transcript of this podcast as well. Again, if you have any more question, reach out to us, reach out to Michelle. She has done great with my clients in the past so hope it creates some business for her as well. Thank you so much Michelle.

Michelle: Thank you.


Episode #007 - Do you want to know the in’s and out’s of property management? Well now is your chance! In this episode we visit with Jay Hartley. Jay is the Co-owner of Frontline Property Management.

Episode #007 - Do you want to know the in’s and out’s of property management? Well now is your chance! In this episode we visit with Jay Hartley. Jay is the Co-owner of Frontline Property Management and he has extensive experience in real estate investing/managing. Join us as we get to know Jay and learn key insights in the world of property management. 

Jay’s Bio: Jay is a seasoned investor and has been a licensed Texas Real Estate Agent specializing in rental investments for nearly two decades. He is an active and contributing member of the National Association of Residential Property Managers (NARPM) and has served as the Fort Worth/Mid Cities Chapter’s President, Treasurer and Secretary in recent years. He is a sought-after speaker for multiple Realtors boards & advisory panels, investment training seminars and several nationally syndicated radio programs focused on single family real estate investments.

Links from this episode:
Coffee purchased from Starbucks:
Frontline Property Management:


Episode #007 REN Podcast Transcription (Jay Hartley)

Jason: Good morning everybody. Jason Reynolds here with the ‘Real Estate Now Podcast’ and I have Jay Hartley with ‘Frontline Property Management’ he is the COO and co-owner of ‘Frontline Property Management’

Jay: Hey everybody!

Jason: How are you doing today Jay?

Jay: I am awesome, how about you?

Jason: I am doing great. Okay guys, so obviously, in the real estate business, we work in investments as well. ‘Frontline;’ is actually a sister company to ‘Vision Realty and Investments’. So I want to bring Jay in to talk a little bit about property managements and his role there. Let us get to know Jay a little bit, how long have you been in the area? (0:37)

Jay: I have lived in the DFW metroplex for about 20 years.

Jason: Okay. So quite a while then.

Jay: Yes.

Jason: Where are you from? (1:06)

Jay: I was born in El Paso, so Texas native but shortly after I was born, our family moved from place to place. I think the longest we ever stayed was about three years. Mom built shopping centers, they call then strip centers.

Jason: Okay.

Jay: Not to be confused with the other kind of strip centers. She built shopping centers and dad was in the military. Between mom and dad, we moved about every 2-3 years on average.

Jason: Is that how you got the bug into being into property management and around the business? (1:39)

Jay: Yeah. For as long as I can remember, my mom has been in some form of real estate. She is what they call an abstract officer originally, which is what we consider now as a title officer. Metes and bounds, when you want to buy a property, she is the one that pulled out a big book and figured out exactly what you were buying.

Jason: Okay.

Jay: How it measured and so forth. Then she got into really full-fledged real estate selling, leasing and property management and has been doing it for so long. I swore to myself, especially my brother and I. I swore to myself that we were not going to get into real estate because, it was the business that took mom away from us, late nights, weekends and all that kind of thing. But after I got out of college, I was in the hospitality industry and mom called me up one day and says, “Hey, I need some help. Please come help me in my office” as family does, you pitch in whenever you are needed. So I went into her office and kind of helped out. The first person I met was someone that needed a house and to make the long story short, it was an eye-opening experience for me because I was so energized by one person’s reaction to being able to get a home.

It just pumped me up. I was excited and I wanted to do it again. I wanted to replicate that feeling for somebody else and replicate the feeling I had. Then I got a check and I was like, “Oh! You make money at this”. Shortly then after, I got my real estate license and I was off and running.

Jason: Cool. Are you married? How long have you been married? (3:33)

Jay: I am married. Just over 10 years. My wife and I just celebrated 10 years. We have 3 beautiful dogs, we are doggy parents so my wife’s career is in real estate as well but on the other side of it, she does HOA management , she has got a blossoming career so we find time for the dogs, but that’s about it.


Jason: Cool. I know this but not everybody else. You have recently jumped in to ‘Frontline’ so how long have you been with this officially? (4:01)

Jay: I started January 1st actually January 2nd. I don’t think any of us work on January 1st. yeah, I started January 2nd, I have been in real estate for 17 years now. I had been running another company for someone else for 15 years. I decided to make a change and the original owner of ‘Frontline’ was somebody that I have done many deals with in the past. We decided to partner up and move forward.

Jason: That is Steve Fithian.

Jay: It is.

Jason: We interviewed him on the last one. I have got a bunch on miscellaneous questions that are in no particular order, these are questions that I have had owners ask.

Jay: Putting me on the hot seat.

Jason: One question is; a lot of people ask about the eviction process in Texas. It is pretty strict in California. Can you give a short version of what the eviction is like in Texas? (5:00)

Jay: Texas is a landlord friendly state so it is awesome. We do not want to have to evict anybody but if we are actually going it have to go through with the eviction process. It is great for it to be easy. I never really understood how easy it was in the beginning for us anyway. Until, I started working with a lot of out of state investors in California, New York, Florida and so forth. To actually find out the difficulties that they go through; time constraints, the issues that they run into is mind boggling for me because it is so foreign to me.

In Texas, it takes us about 23-25 days depending on how many weekends fall in there to actually get a tenant out from start to finish. There could be a little more of a delay if the tenant appeals it but that is pretty rare. Texas is pretty cut and dry with the tenant’s inability to pay being the primary reason for eviction. When you go before the judge with the case, it is pretty much cut and dry with the judges and the tenants. The tenants hadn’t paid and they can’t show that they have paid. It is pay to stay and if you can’t pay, you have to go.

Jason: So pretty easy compared to other states.

Jay: Yes.

Jason: Another one is, when people are doing the research of property management companies, you are going to see the fees range all over the place. One thing that I have noticed is some companies may have really low fees but then there is a maintenance fees on top of things, so they are making the same amount but just in different ways. (6:40)

Jay: They actually make more.

Jason: They actually make more?

Jay: Yeah.

Jason: Can you kind of dive into that?

Jay: Sure. There are companies out there that still do what you consider all inclusive prices. It is the way that ‘Frontline’ is set up. We do not charge for maintenance, coordination, answering the phone or whatever it might be. There are a lot of fee based structures that are out there. It is kind of that introductory rate if you will. The comparison is that 5% credit card that you can get also when it jumps to 20 or 25% after you introductory period so it is comparable to that. A lot of companies are switching to a low monthly management model because it is a set stagnant fee, if you will because the rate never changed. But, the variable fee is the one that they put on top of your maintenance coordination. If you have a toilet repair and it is $200 and they charge you 10%, that is an easy $20 that they made just for coordinating that and sending it out a vender.

That is not so bad one time, but if you are replacing a water heater and doing a roof, replacing a roof or a major remodel. Anything like that and if it is expensive, those fees can really add up. Me being an investor myself, it is hard for me to calculate a variable fee. I don’t want to have what-if’s. I know some things are going to break and I am going to have to fix and that kind of thing but I budget for that kind of thing. If I happen to budget and extra 10% on top of that or whatever that number is. I am not saying that everybody charges 10, I am not saying that it is but something on average like that. Then, you have to budget for those extra fees.

Jason: Right.

Jay: It is not a model I like, it is not a model that I am interested in pursuing. It works for some people and some investors are okay with that. If they are, more power to how you want to handle your business. I just think that all inclusive is a better pricing model.

Jason: Right. I think that is a good comparison. Let us say, John, a new investor comes into town and buys a bunch of properties and gets set up with a property manager and some of them are already vacant. What is the process that ‘Frontline’ uses to market those properties and get them filled as soon as possible? (9:10)

Jay: Good question. Initially, we are going to hope that John contacted us before we actually closed on the deals. I know you and ‘Frontline’ we work really well with investors. Introduction up front and putting together a deal and evaluating properties. We are going to hope John contacted us ahead of time so we can prepare and have a chance to put everything on paper and get it scheduled out. Once we get a piece of property that an investor has taken on. First, we are going to run the comps on it. Whether it is occupied or vacant, we are going to determine what the rate should be and compare it to what they are paying now, what they were getting before. From that, if it is vacant, we are going to hop to and make sure we are getting it ready for leasing, showing and make sure it is ready to show and ready to move in.

From that, get it on the market, out it is in MLS, start showing through our multiple different websites. Put a sign in the yard and pictures online and all that good stuff. Vacancies are the kiss of death for investors. I hate it when one of my properties goes vacant - if it is not my choice. I don’t want people’s properties set there because a house sitting in a ground empty is not making me any money so I am losing money. The passive of cash flow is…

Jason: Gone.

Jay: Yes, it’s gone. You have a month of vacancy, two months of vacancy, you lost everything that you were going to be making for the year.

Jason:  Jumping off of that, how does that look for the investor? Do they have any type of fees when a property is not leased out? (11:04)

Jay: No. we don’t charge anything for the vacancy itself. There I no handling fee or anything like that. Obviously, if there is anything that we need to do work on, we are going to pass that through… we will ask that they cover make ready cost or the rehab cost or whatever but we are going to know what those would be upfront before we dive into it. But let’s say you have one that a tenant moves out and you have to get it ready. Hopefully, we have stocked a little cash away in the reserve so that we can absorb that expense relatively easily. Once it is leased, we are going to charge you a fee once you have leased it because that includes all the screening, background checks and that kind of stuff. But, no fee while it is sitting empty like that.

Jason: I just realized my windshield is cracked.

Jay: Oh dude.

Jason: That is funny.

Jay: That sucks.

Jason: New car, new windshield.

Jay: I wonder if the warranty covers that.

Jason: I don’t know, I have to check.

Jay: I don’t see any.

Jason: Yeah, I don’t see a rock or anything. I want to jump off into that. You mentioned tenant screening. What does that look like for ‘Frontline’ once you find a tenant? What is that process for how they get screened? What are the parameters that you look for? Does the owner have any influence on anything there? (12:19)

Jay: We try to make the application process as easy as possible for the tenants. We want them to go online and fill out an online app. Complete the application relative easy and pay online for their app fee.

Jason: They do everything, it is pretty quick.

Jay: Yeah, they do everything online, they log in and we don’t want them to have the facts and all those other stuff. We make it as easy as possible.

Jason: Okay, now we have got our Starbucks fix and we are ready to go again. So back to the eviction, not the eviction question. The tenant screening process.

Jay: Yes.

Jason: So you got an online portal for everybody to do quickly and easily, which that is awesome because I have had people apply for properties. You have to print out paperwork, you have to try to and coordinate with the landlord and the property manager, I mean, it is just a mess. Then it all gets immediately process. What is the review process?

Jay: Once a tenant applies online, I am not saying ink is dead but we want to make it as quick as possible so the online process make it a lot easier. Once a tenant applies, it automatically goes to our background check, it runs credit check, criminal check and then they start the employment verification and the past rental and mortgage payment verification, the biggest delays that we run into is going to be… oh, hello, how are you doing? Is going to be the employment verification and then also the rental history. Those are the things that delay an approval. The credit checks is instantaneous. The criminal checks takes a minute. Those are relatively quick and we can look and see what kind of perspective tenant we are talking to. Of course, we want to make sure all the ducks are in a row, no skeletons in the closet. So we wait for the employment and rental history and mortgage payment history to come back in.

It usually takes about a day and sometimes 2 days to get everything in processed depending on the employment and the rental. From that, it’s basically a clear-cut point system that approves or declines a tenant. There is always a possibility that the tenant can be conditionally approves. Some of them maybe borderline, they fell just below the approval process. Sometimes, there is an opportunity for them to still lease the property and make an additional deposit. Maybe a co-signer, it depends on the scenario. If they fall below that then it is a done deal. Unfortunately, we have to decline them.

Jason: Say it is a popular property and it got a lot of attention and there are three applicants that are approved and there is really no difference among them. Is it based on priority, maybe whoever applied first? (15:32)

Jay: No, actually Texas is a great state that does not require that I take the first applicant. I know that is going to be a strange things from some of the California and Florida listeners because they are required to consider the first one. I am not, I would take the best applicant that we have. Let us say we have three applicants who have applied for the property, we don’t tell anyone of them that they are approved. We want to consider them all; we are going to run the backgrounds, we are going to check them all and I am going to pick the best one. I want the best candidate that we have available for our owners. There are a multitude of factors. How long have they been in the company? How much money do they make? Obviously. How good is their credit? A bunch of different factors. If someone is really questionable they went to the bottom of the pile automatically.

Jason: Okay, kind of going off that as well. How do you deal with pet scenarios with certain properties? Because I know some owners are asking, “Do we have to allow pets? Can we say we don’t want pets? Could there be a case-by-case basis. What’s that process like? (16:42)

Jay: I mean the easiest answer is case-by-case but I will caution anybody that says they don’t want to have pets. That the potential tenant pool just shrank remendously. The national average is 2.5 kids and a dog. I don’t know if the cats get left out of that one but that average is… a lot of people have dogs so. Little Timmy and his dog, you want them as a tenant.  Sometimes, they can be the ideal tenant not to say that dogs aren’t bad. This is coming from a dog lover but I know that there are bad dog owners out there, I don’t think any dog is bad, I think it is trained to be bad. Rottweilers and Pitbulls, they get a terrible name. The insurance company has now labelled them so that is a whole different story, they don’t allow those.

I think that there are bad dog owners out there. I know some owners of rental properties think that it would be better not to have dogs. We would have that conversation but we would allow an owner to say, “Look, no dogs” if that is the status quo then that is the way it would be. We want to caution them against that because we will diminish our tenant pool.

Jason: That makes sense. Once you have a tenant, how is the rent collected from them? I know they can drop it off at ‘Frontline’ but is there a direct deposit of it available? (18:24)

Jay: Yes, they can pay online, there are multitude of ways they can pay. They can pay online via ACH or direct deposit, which is probably the easiest E-checks and that kind of good stuff. We also have this ‘pay near me’ option. Let us say someone for some reason does not like using computer and electronic transfers of money or what have you. They can go to a bunch of different venues; convenient stores, check cashing place and they can take cash in there if they want.

Jason: Really.

Jay: Give it to them. They have an account number and everything is set up ahead of time so they know specifically where to go and who to sign to and so forth. But a tenant can go into some 7-Eleven and say, "Hey, here is my account number. I want to pay this bill" and we get a notification shortly after the payment is made that this account has paid the rent.

Jason: Is there a fee associated with that?

Jay: Yes. There is a fee. Obviously, there are certain services that..

Jason: I mean you are going to a 7-Eleven to pay your rent!

Jay: It is a similar fee amount if they went elsewhere and purchased a money order. I mean, it is comparable to that. We really talked about this option ahead of time and what it would cost and what would it look like to a tenant in utilizing this service. We wanted to make sure that it was relatively inexpensive but it is another option. If they are worried about their rent being on time, they can run over here and pay a couple of dollars in addition to the rent payment and the rent is tabbed in at whatever time they dropped it off or went and used this service. If someone is really scrambling to pay rent on time and they are waiting till the last minute. Procrastinators, you have got to love them. In that scenario, a couple of dollars hopefully won’t hurt.

Jason: From the owner’s side of things. Once they have a tenant. What kind of services does 'Frontline' have in terms of owner portals, being able to see their property? Obviously, they are in different time zones. A lot of clients are in California. Whenever they have the time, they have the access to look at their properties. (20:40)

Jay: They do. When they first set up the account. We would have what we call the owner portal access. They would be given a log in. They an look at their statements anytime. There are some history notes that are in there and are made available to them. Access to payment information and so forth. The most important thing is that it is stored in the cloud so they don't actually have to download their files or worry about emailing us or calling us and saying, "I need a copy of last year’s January's statement" or whatever it might be. They can easily log on to the portal and access those statements at any time. It makes it easy and every month, we get a new statement and a new log in, not log in. New statements and notifications that your statements are ready. A little bit of communication if anything has happened that month or if it is just status quo. You are going to get a note that all is good and here is your statement and your money is in your bank.

Jason: Yes. That is typically, what we get. Once a month, we get a statement that all is good and we go from there. If there is a tenant is on the property, how often do the property managers do property inspections? Like an actual walk through. (22:06)

Jay: Texas has a licensing for inspectors. None of our agents are inspectors.

Jason: Not inspections, just a work through.

Jay: Work through, we do them minimum once a year. Sometimes a property may warrant a more frequent visit. Pending a bad tenant or a couple of violations, HOA slap on the hand or whatever it might be. Minimum, they are going to walk it once a year. We encourage our  owners that if they want more frequent visits to the property. We offer a service where it is roughly $119 and they have a professional inspector go out there as often as they want and truly inspect the property. Take pictures, check the smoke detectors, walk through and test the HVAC or check the water heater and all that good stuff and negotiate a little bit for the special price for the inspection company to go out there and do it. They can do it as often as they want but keep in mind that having an inspector go by once a month, you are going to irritate your tenant.

Jason: I agree, and you’re eating up your passive cash flow.

Jay: Sure. We usually encourage them maybe once or twice a year and they have the inspection done. I do have a couple that had it quarterly in the beginning then when they get to comfort level they back it down. We don't want to inconvenience the tenant, but it is the owner's property I understand if they want to have it checked more frequently but once a quarter that is really pushing it.

Jason: Information for this new market, what do you see as the average for a property that has been made ready for the recommendation of the property manager? It is at the price that the property manager recommended. It is everything that 'Frontline' that has recommended. What do you see based on the market? (24:01)

Jay: Days, Literally 7-14 days.

Jason: Not long at all.

Jay: A week to 2 weeks is about the average. Some properties move within the day. Some properties move before we actually put them on the market. We would get neighbors that would see us working on the house and doing the paint or whatever. They’ll come and ask the maintenance crew, "Is this going to be for rent or is it going to be put back on the market?" Or what have you. The managers get those calls from time to time. Of course, they love them because they don't have to do much to them other the regular turnover make ready type of deal. Some of them may take a little longer and those are averaging about a week to 2 weeks. We are seeing them move really fast. We are seeing rents climb, which is great, but we have to be conscious about overpricing something. If you over price it and hope that someone is going to pay whatever you are asking. Sometimes those will shoot you in the foot.

Jason: Right. What is the leasing season? Just for a new investor. Typically in this area. When does it pick up and when does it slow down. Are there a few points during the year when it does that? (25:26)

Jay: Yes. Great question. The majority of our tenant base is going to be families. So kids that are in school and a majority of people that have children and want to try and plan their move, plan the move when the kids are out of school. So the busy time for us is summer. April through August is really rock and roll. We try to position the leases to where they come up during that period. Even if the tenants are going to stay, we want to renew them within that time frame and keep them on a one year basis. In the beginning,  we get something that is offered for lease. They bought it in December or what have you. We don't want the lease to come up in December every year so rather than a traditional 12-24 month lease term. We are going to try and position it to where it comes up in the summer. We do an 18 or 36-month lease so that when the first term comes around they are offered a renewal option and then at the point, they are going to be renewing on an annual basis or every 2 years. The more work we can do in the beginning to make it easier it is on the back end, the better.

Jason: Perfect. Jumping out of the property management side and more on the market. I know a lot of investor that come into town and they know ‘Frontline’ and ‘Visions’ we focus on the west side of the full metroplex. What areas does 'Frontline' like to cover? What area do they like to specialize in with the property managers? (26:57)

Jay: What do we cover? What do we specialize in? North Texas is what we like to cover. There are 6 counties around the DFW metroplex that we cover. Obviously it big ones are going to be Tarrant county, Dallas county and then we also have Johnson, Elis, Dimmit, Collin.  So allover. We are expanding our footprint as we kind of get bigger but. That is also really following the trend. Obviously, the big push originally was properties that were in the nucleus if you will. The metroplex itself for the short commuters. You also see a lot of suburban expansion. A lot of the commuters are going further and further out. Investment opportunities. You want to follow the opportunities. No house is too far as long as someone is willing to pay the rent that we need for it. We are looking at the entire metroplex as a whole.

Jason: What do you say to those investors? Because I know that a lot of clients that I have recently had. They came in and they were looking at Plano area. We had to coach them and show them that there are opportunities in other places as well that make them more money plus there is room for appreciation. We help them buy a home say in Granbury, Texas or in Weatherford or Azle Texas.  If someone is listening in from California you probably don’t know but if you do pull it on the map it is maybe a 40 minutes drive from downtown Fort Worth. What are your thoughts on those? Are those still good places? Are the tenants typically commuting in or is it a variety? Do they work in town too? (28:32)

Jay: The easiest way to compare it. Let us get off real estate entirely for a second. Let’s say you are going on vacation. Where do you want to go?  When you go on vacation. Obviously, you are going to a popular spot or what have you. The first thing that jumps into my mind is where do the locals go when they hang out. Where are the best bars? Where is the best dance club? Where is the best beach? The locals know that. Now, translate it back into real estate. What do the locals recommend?   Where are the locals living? Where do the locals go? Where do the local professionals recommend that you buy? That is first and foremost. The metroplex is expanding rapidly. What is the average? 1,100 people a week moving to the metroplex. We cannot for them downtown Dallas and Fort Worth. So everybody is looking... not everybody, but the majority are looking at the suburbs. There are a lot of opportunities. We want to try and make sure that we are capturing that. It is the commuters that are living further and further out of course our freeway system is just crazy. The rents aren't as high as Plano but the cost of purchase is comparable. It is lower price points, lower entry points.

Jason: Lower taxes.

Jay: Lower taxes. A little bit lower rent but that is all in comparison on ROI basis. When you show people that if you go a little further out you are going to pay a little bit less. They are going to get a little bit less but the ROI is just as good. Why wouldn't you?

Jason: Another thing for those listening that are maybe in California. If we are 40 miles away, it typically means 40-50 minutes. 40 miles doesn't equal 2 hours of a commute time because the freeway system is so good here. Usually, it moves pretty well, you just have your traffic hours. (31:17)

Jay: I thought we had bad traffic. I actually went to LA to attend an educational event to meet some people. Literally, it took me half-an-hour to go 4 miles. I could not believe that. I thought our traffic was bad. It is not. California is hand down some tough traffic.

Jason: Alright guys. We are kind of run up on our time. For those that are interesting in property management and have questions. Where can they go to and how can they reach you and contact you? (31:59)

Jay: is our website or give us a call 817-377-5190. I would be happy to talk to you an answer any questions or you an email me Happy to help.

Jason: Okay. Perfect. Thanks Jay.

Jay: Thanks Jason.

Episode #006 - What does investing look like in DFW? In this episode we visit with Steve Fithian. Steve has a wealth of experience in all levels of real estate.

Episode #006 - What does investing look like in DFW? In this episode we visit with Steve Fithian. Steve has a wealth of experience in all levels of real estate. Join us as we get to know Steve and dive into the world of investing with one of the best! 

Steve’s Bio: Steve Fithian serves as Senior Advisor and Managing Director for SVN | Trinity Advisors. With over 30 years of commercial real estate experience, Fithian specializes in selling and overseeing investment property sales that include multifamily, mini-warehouse, office, retail, undeveloped land and finished lots. He also organizes, manages, and acts as the general partner in property partnerships.

Fithian holds the designation of Certified Commercial Investment Member (CCIM) and is the former chairperson of the North Texas Chapter CCIM Membership Committee. In 2011, he was named a counselor to the Society of Exchange Counselors. The Society of Exchange Counselors is a marketing group consisting of approximately 100 investment brokers from various parts of the country who have proven their skills at solving clients’ problems.

Links from this episode:
Coffee purchased from Dwell:
Frontline Property Management:
SVN Trinity Advisors:


Episode #006 REN Podcast Transcription (Steve Fithian)

Jason:  Alrighty. Hello everybody! This is Jason Reynolds with the Real Estate Now podcast, and I've got the one, the only, Steve Fithian - broker of Visions Realty and Investments and also partner with SVN Trinity advisers here in Fort Worth. How are you Steve?
Steve:   Are we glad there's only one?
Jason:  Only one what?
Steve:   Steve Fithian. I'm doing great. It's a beautiful Friday afternoon.
Jason:  Perfect, perfect. Well, today what we're going to talk about- hey Don. Nice to see you. You know Steve, Don Lauer?
Steve:   Yes.
Jason:  Yeah, he just jumped on, he's watching right now.
Steve:   Super. Alright Don, hello!
Jason:  So what we're going to do is - I brought Steve on today to talk a lot about, or mainly about single family properties, he's been in the area a very long time. And so we'll be jumping on that, but before we do that I want to get to know Steve a little bit, so I researched you a little bit even though we've been working together a while. So you moved to Texas in 1990, is that right?
Steve:   Correct.
Jason:  Okay. So you are a certified commercial investment member.
Steve:   Actually that time I wasn't. I was in the process of getting a-
Jason:  But now you are.
Steve:   Now I am. 1993 I received that designation.
Jason:  Okay. You are a former chairperson of the north Texas chapter CCIM membership committee?
Steve:   Yes.
Jason:  Okay. See, I'm doing good! In 2011 you were named a counselor with society of exchange counselors. So what does that mean?
Steve:   It's a national organization, it's invitation only and it's a group of everything from developers to owners of real estate, brokers, and it's a way of getting together and trying to produce transactions amongst ourselves.
Jason:  Okay. Okay, awesome. Last thing I have here is in 2008 you received the Charles D. Tandy commercial realtor of the Year award?
Steve:   Correct.
Jason:  So did you have to do anything special for that? Was that for a certain transaction?
Steve:   That one was not, no. It was just voted on by my peers at the Fort Worth Border chairs. So...
Jason:  So there is an award that you won for transaction?
Steve:   Yes. It's in my office.
Jason:  What was that one?
Steve:  That was for a transaction in Arlington where we purchased an existing apartment complex in one phase, a condo complex in the second phase, converted them both to individual condos and then sold them off individually while maintaining it as a rental property for cash flow during that period of time.
Jason:  So a little complicated.
Steve:   It was pretty complicated. Also it was purchased from a wreath that kind of made it a little bit more complicated as well.
Jason:  Okay, alright. So we're gonna go ahead and do a coffee shop- Hey James! And in the midst there, I'll be asking questions. So Steve tell us a little bit about yourself. Are you married? How long have you been married? Do you have kids, grandkids?
Steve:   Been married for 35 years, have 4 kids. All of them are out of the home, so it's kinda lonely at home right now. And we have 2 grandsons, they are in North Carolina, and so unfortunately we don't get to see them as often as we'd like.
Jason:  Okay. Wife is Vicky?
Steve:   Vicky, yes. Like I said I've been married to her 35 years. She's a sweetheart.
Jason:  Okay. And now grandkids?
Steve:   The 2, the 2 in North Carolina.
Jason:  The 2, okay gotcha.
Steve:   Right.
Jason:  Well awesome. And so you've been in Texas since 1990, but where did you, were you in California prior to that? (3:34)
Steve:   I grew up in California, went to most of my schooling there including college and then worked there for a number of years until we relocated here.
Jason:  Okay. So then kind of using that segway, let's jump into the single family investment arena. So did you start that in California? Like when you graduated, did you go straight into working in real estate or were you in a different business first? (3:59)
Steve:   My first career was as a CPA, and so I was working for a big 6 accounting firm. But I had an interest in real estate starting in college, just didn't know how to make a living in real estate coming right out of college. I graduated with student debt and so you know I needed to have a good job and accounting provided me a good job. But I started investing- the first house I bought was 6 months after graduating from college.
Jason:  So did you go into that alone or did you go in with a partner for the house? (4:30)
Steve:  I got a partner. Again I was paying on debt, and was making okay money but I needed a partner to be able to do that, and found a good friend of mine who was same thing- graduated from college and we actually both stayed at home rather than getting an apartment after college. We stayed at home for a year. So in 6 months we bought our first home and then 6 months later we bought our 2nd property and that's when we moved away from home and moved into that 2nd property.
Jason:  Okay. So you still had the first one, and then you moved into the second property?
Steve:   Correct.
Jason:  When you moved out, did that become an investment as well, or did you...?
Steve:   Well I was living at home with my parents-
Jason:  Okay.
Steve:   And so we moved into the 2nd home that my friend and I purchased.
Jason:  Okay.
Steve:   And so we had one rental, and then we lived in the second home.
Jason:  So when you bought that first property, you leveraged it? (5:18)
Steve:   Yes, got a FHA loan at that time and investors to get FHA financing.
Jason:  Really?
Steve:   Yes.
Jason:  Okay! With favorable...what was the down payment of that?
Steve:   20%.
Jason:  Okay so you still had to do a pretty high down payment on it.
Steve:   Right.
Jason:  Okay. And how did it perform? Do you remember just- what kind of cap rate or return you were getting? (5:33)
Steve:  I don't remember the cap rate at that time, and I can tell you - I mean I was just in Southern California last week and that property - we bought it for $43,000 and I would guess that that property's worth is probably $400,000 now. Maybe 300,000-400,000. 
Jason:  Why didn't you keep it?
Steve:   Well, we did keep it for a while. We actually ended up buying a 3rd home, and moving into that. And so then we kept the first 2 as rentals and then we got 7 units. So it just got to the point where as we were, you know, continuing to expand we sold some of the earlier properties. I did keep it for quite a while. I'm trying to remember- it was probably about 1988 or so. So which would've been about 9 years hold before I sold it.
Jason:  Okay.
Steve:   And at that time I was- you know we were making the plans to move to Texas, and so I was starting to do exchanges, sell the properties that we had in California and exchange into properties in Texas.
Jason:  So when you bought that first property, so people that are- want to get into your mindset, were you looking to make x amount of dollars per month profit on it? Or were you just mainly wanting to get a property in your portfolio? (6:44)
Steve:  Coming from California, if you look at statistics there's a huge amount of people that have done extremely well with real estate. And so that was pounded into my head from an early age and in college I did a lot of research on it. And so I was just looking for gaining net worth through real-estate ownership.
Jason:  Okay.
Steve:  I was not flipping properties. I was strictly just wanting to accumulate a long-term portfolio of real estate.
Jason:  Okay. So did you eventually, was it 4 homes that you had in California before you moved to Texas? (7:26)
Steve:   Oh no, no. I partnered up with another and we bought a lot of houses. I mean... I don't know, 30, 40 houses and then started buying residential units, multi-family units.
Jason:  Okay. Did you self-manage first? (7:45)
Steve:   At that time I was still working in accounting. I had changed jobs and was controller of Coldwell banker. And so it's my job to locate the properties and then arrange the financing and then again due to my accounting background I purchased Yardi software and so I was doing all of the accounting. 
Jason:  Okay.
Steve:   And then I had a partner at that time that his job was to manage them in the physical leasing of the properties, arranging for the maintenance. He did all of that side of it.
Jason:  Okay. So was that- when you were in California, you had all those properties, did you ever hire out management or was it always between and your partners? (8:22)
Steve:   No, I never hired it out. When I left Coldwell banker at 1988 and started full time doing this, I did start self-managing other assets in addition to the assets that I had with this one partner, so the ones I have with that partner he was managing the other properties we did start managing at that time.
Jason:  Okay. So then what was the catalyst to come into California? Or to Texas, sorry. (8:49)
Steve:   The values in California were very high, the returns were low. The cycles were pretty short, and in the market in Texas at that time there was a unbelievable opportunity because the market had adjusted, and so there was some fantastic buying opportunities. And so I came strictly looking for the buying opportunities that Texas had. And originally, frankly I wasn't planning on moving there, I was just planning on investing there and I moved a management partner there to start managing the assets, and so my kids at that age, my oldest was 4. Wasn't in school yet, so we would go back there, spend a month, month and a half at a time. I would use that as a buying opportunity, meet with my management partner, go look at all the properties, etc.
Jason:  Okay. So how long was it before you started? Was it just a year or two before you started investing that you decided to move here? (9:44)
Steve:   We bought our first properties at May of 1990. It was on, we were here on a business trip in February of 1991., and on the drive back I mentioned that my wife and she was frankly astatic about the idea and so on the drive back we made all the plans, went back home, put our house on the market, and started making firm plans and by May of that year we were back in Texas.
Jason:  Oh, wow great! Okay, so pretty quick.
Steve:  Yes. 
Jason:  So then, over your period of time, when you moved to Texas and you started investing in single family here as well, what are the things that you used- what are the things you used to look at in an investment property to determine whether you wanted it or liked it, and has that changed over time or has it stayed the same or are there different factors that have played the part? (10:21)
Steve:   Well I need to back up before that.
Jason:  Okay.
Steve:   The very first thing that I do is evaluate the market. I mean, is there that a market that I don't even want to own the houses, so I don't buy houses just indiscriminately across the country. I do own property at other states, but I start with evaluating that local market- is it a long-term market, is it an opportunity just for the short-term. In Texas I did intense investigation into the market, and found out that in my opinion it had really long-range prospects. And in retrospect I was absolutely correct, and that's why I stayed because originally I thought I would come here and stay during the market cycle and move back to California.
Jason:  Okay.
Steve:   But that market cycle lasted far longer than any market that I've ever seen in California. And by then I was entrenched in the local market and believed in why they're creating the jobs here and was convinced that was going to continue. And so that's why I've stayed.
Jason:  Was there a period of time in the downturn of 2006, 2008 that you thought about leaving or was it still good at that time? (11:48)
Steve:   No, not at all. And in that downturn it was much more modest than what you saw, for example, on either coast or a lot of the other areas. And if you look a lot of the statistics, for example, the residential market in Dallas it did soften, but it was far less than any other part of the country, and again I attribute that to the long-term dynamics of this economy. The things, the pro business outlook with what Texas does and that that's carried through to the local municipalities as well.
Jason:  Okay. So then what are your, as you're here, you're doing a commercial side as well, what are you personally see the market being like in Dallas Fort Worth area over the next 5 years for both residential and for commercial? Just in your personal opinion. (12:35)
Steve:   I still think that we have an outstanding economy. I'm still very proud of it, I'm still investing here. I think that there are some areas that for example Houston- I'm actually investing in Houston but it's had the hurricane, the storms there, and then Houston has a little bit more of an impact from oil prices, but nonetheless I'm still in Houston because I know long-term that that market is going to do very well. And on a lot of their commercial markets like industrial, it's extremely strong because you have contractors that have relocated to that area to help in the rebuilding process. So long-term I believe that, I study demographics and the amount of incoming both from out of the country, from other states, people are coming here because of our consistent job row that's been consistent over many decades.
Jason:  Right, right.

Steve:   And it's still very affordable, even though we've had great price appreciation on residential, it's still extremely affordable when you compare it to other cities across the country and people with the salaries that they get here can afford not only a much better home but cars, and can play more etc. than they can't in another, a lot of other locations.
Jason:  Okay. So then when you started in California you self-managed with your partners, and then now you're, you have front line property management that you started. As an investor, what about property management made your life easier? What made you decide to get in that business and then, do you recommend that to investors and what does that do in terms of helping them maybe free up time to invest in more product? (14:16)
Steve:   Well I own a management company that I'm extremely proud of and I feel that we achieved some fantastic results, but on the other hand we cannot compete with somebody that is hands-on, that has the time to do their own maintenance that has the time to do their own leasing. But, the front line is not marketed to those types of people. There are so many people that have busy careers and are professionals, and they want a piece of real estate, but they don't have the time or want to deal with the headaches that come with management. So I would say it depends on who that investor is. If that's somebody that has the talent and the expertise and is willing to deal with the headaches, then they'll save the management fee and so that can add to the bottom line. But for most people, I would say that management is not the best use of their time.
Jason:  Yeah, okay. So then, if you were to come up with maybe just a few pointers of the biggest, some of the lessons you've learned in owning investment properties, is there anything that stands of that you think of when either purchasing properties, investment properties that you've learned over the years that has stuck in your mind? (15:51)
Steve:   Well due diligence is just up there at the top. And due diligence, that can be a very broad term so again that starts with selecting the right area, and then I would say it extends to the team that you have. I mean I was fortunate enough that I was doing this for a living, and I was trained to do proper due diligence etc. So when I was buying our houses etc, we always thoroughly checked them out and likewise on the commercial side as well. We checked them out professionally. So I would encourage everybody to do that, and so the other thing is you've got to have a great team whether it'd be everything from your broker, your financing, your attorney. That whole team is very, very important and I feel that I've been very fortunate that we have developed a good team and it's helped keep me out of trouble, you know? Then again some of the scars that I have, I would say legally, talk to an attorney as far as planning, the proper vehicle to hold title. Be properly insured. And so I would say those are some of the top tips that I would have. And then I guess I would also say that, do your homework but then don't be afraid to engage. I mean I meet a lot of people that are, I would say they're the gurus of the circuit. They go to the latest seminars, they get the latest tapes and the books and they just keep going over that process and spending more and more money getting more and more education, and they don't pull the trigger and buy their first asset. So I would just highly encourage people. Do your homework, but then engage. Go buy a property.
Jason:  So in terms of your personal journey, a lot of new clients that I work with have questions about "Okay, should I start in LLC if I'm purchasing 10 properties to put those into? If I only have a couple, should I worry about that?" Obviously they should probably talk to their attorney, but in your personal experience did you start out right with an LLC or did you with those few properties just have in your own, you and your partner's name? (18:07)
Steve:   We had them in our personal name and we had, what I refer to as a 'joint venture agreement draft' that was not recorded or record, but it was drafted. It, I would say it depends on the person's goals. It does get expensive to do entities like that, especially if you're doing one house, but certainly if you are planning to do this on a repeat basis, then I would get good legal representation and whether that advice- it would be cost prohibited frankly to put every single single-family home in a single asset entity, but certainly on the commercial property that's what I do. Every single one is a brand new entity.
Jason:  Okay. So, I had another question I was going to ask you but I just forgot. 
Steve:   Should I turn it around and interview you a little bit?
Jason:  No this is all about Steve Fithian.
Steve:   Well that'd be boring. Hopefully going to talk about some things that are going to interest the investors.
Jason:  So in your, I was going to ask you- in terms on investing now, I know we talked a little bit before we jumped on in terms of, you had more commercial opportunities that have been popping up so you've been selling out of your single-family investments due to appreciation. But, when you do purchase single-family investment properties and you're analyzing say cap rates, things like that. What do you factor in, your analysis for costs when you're trying to get an accurate picture about how the property performs? (19:59)
Steve:   Well I try to be as conservative as I can in forecasting what the accurate cash flow is going to be. So obviously property taxes, insurance. What if it's going to be managed, the management fee, and then your maintenance. You also have to factor in what the vacancy is going to be. But I will say for me, my goal again back to some people that are in some of these investors, a lot of that I see that read or some of the books and tapes or thinking "Well I want to retire in 3-5 years." And so, they, to do that they're looking at some very creative ways to do that whether it'd be extreme leverage or whether it'd be very lofty estimates of rental increases etc.
Jason:  Right.
Steve:   I don't do that. I'm more patient, I want to look about building a network over a period of time. I'm still working, I enjoy what I do and so I don't have to live on the cash flow. I want to build passive income and believe the passive income is there, but I'm more looking at rather than flipping properties, I'm wanting to accumulate properties and that cumulative cash flow from a lot of different properties and a lot of different sources in my opinion that gives me more of a stabilized and diversified portfolio income. And so that's what I've tried to do over my career.
Jason:  Okay. So I want to give you two different scenarios and tell me when you were just jumping in as a new investor, which property you would've picked then versus if it popped up now what would you pick now. So you say I have 1 property that was built in 1960 and both of these perform the same in terms of cap rates. So one is in the metroplex and, but was built in maybe 1960, and or you could maybe purchase another property that's maybe in Weatherford which for those of you that don't know Weatherford is about 25 miles west of Fort Worth. So say you had to go out of the metroplex but you got a newer product. Say it was built after 2000. What are you- or maybe you got a little bit of a higher cap rate on the older property. Would you take more risk when you're younger, or do you think is that a question you can even answer without seeing all the numbers? (21:41)
Steve:   No I mean if you go back to in California, part of what I was doing there was acquiring distressed houses through foreclosures and some REO's and so I was less picky about the houses, I was less picky about the locations. We got some homes that were fantastic value, but after doing that starting in 1979 and doing that up through about 1990. What I found was that, for example frame houses, so older houses that were, I would say inferior to new construction. And also I'll say not the prime areas, and so specifically like Riverside county, San Bernardino county as opposed to Orange county. During the cyclical downturns in California, I found that the less desirable areas, the values got softer decreased more, likewise the rentability of those was a little more challenging, and the houses that I had held in in Orange county, they survived those downturns better. So when I came to Texas, I tended to buy more quality homes, you know 3 bedroom, 2 bath. Brick homes, and better school districts, tried to look for newer homes. And so I kind of tried to learn from that experience and from my opinion there can be some differences between looking at strictly just the cap rate. When you're looking at holding two different houses over a period of time, the higher cap rate property in maybe a less desirable area, older property versus the newer property brick in a better area. The cap rate is a lot less on the better property but holding that property over a period of time from my expertise, I frankly would rather take the better property.
Jason:  Okay.
Steve:   And part of that, it's not just the return, it's the less headache. And so, and the appreciation potential over that period of time. So I've turned out to be a little bit of a different investor then when I started 30 years ago.
Jason:  Okay. So somebody, coming to this area, obviously there's a lot of appreciation going on in Dallas and Fort Worth so it's harder to find that type of product that's pulling in a good cap rate. But part of what I'm finding is, you can find still some good properties, say side of the metroplex in the town such as Granbury or Burleson or Weatherford. What are your thoughts, just yourself as an investor. I think some investors are maybe nervous about towns like that, they are maybe 25 miles away. What are your personal opinions on investing in a home or a duplex in Weatherford with it being a little bit further out of the metroplex? (25:02)
Steve:   Well I've had good experience with that here in Texas, and so I've been investing in Granbury for over 10 years. I've had investments out in Weatherford that have done very well. I guess the difference that I would make, and this is really going to only make sense to somebody from both California and Texas but San Bernardino and Riverside counties, those areas are not as attractive as say for example Orange county in my mind because of things like the beach, and the weather and smog. At that time when I was there, those areas San Bernardino and Riverside county, they were hotter they were a lot bigger, longer drive to the work centers. They had more smog, and so it wasn't just- I mean there were multiple factors why I think when the economy went down that people decided "I'd rather live in Orange county than make that drive from Riverside or San Bernardino." Whereas here the areas that I'm describing like Weatherford and Granbury and Burleson- those are very desirable areas to live. They have very good school districts. The weather is not any different in those areas so it's not a negative for a weather pattern. And yet you can commute into the heavy job sources. But there's also job sources in those local areas, and those are I would say up and coming areas where the growth rates have been phenomenal both on the residential side but also for commercial purposes, retail etc. So like I said I've done very, very well in those areas and have been glad that I've invested in them.
Jason:  Okay. So just jumping a little bit, I think we've talked about single-family and gotten some tips on that. But can you tell us a little bit about more of what you're doing now in what you're focusing on with your commercial business and what kind of opportunities you're jumping into and what your focus is? (27:26)
Steve:   Well I'm always looking for houses, but frankly most of my effort has been on the commercial side. So because of that I'm looking for very good deals with the houses. And they come far and few between. But if they pop up, I'm ready to jump on it immediately.
Jason:  So when you say a good deal, do you have a cap rate- I mean aside from the property meeting your criteria in terms of condition, location. Are you looking for a cap rate in your mind for a deal? (28:03)
Steve:   No.
Jason:  No?
Steve:   No I'm not.
Jason:  You're kind of-
Steve:   My parameters, Jason, have changed. I mean you know, when I was buying houses on the courthouse steps, I used to like to get properties 70% a value then it got to where you couldn't do that. And so increased it to 80%, and then when it increased past that, I quit going to the sales. Then as our market continued to improve and you can put almost any house on the market and have multiple offers, then if a deal came to me higher than 80% I was still willing to buy it because I knew the value of it was higher than that in the rental market was very, very strong. So for me it's not just kind of a formula that stays the same, it depends on what's going on in the economy and where I'm at.
Jason:  It always fluctuates.
Steve:   Right. So I am currently in the market for single-family, but I'm looking for deals. Really my focus is more on the commercial side, and the reason is is because I mean for what I've found houses right now if you were to buy it on a cap rate you're looking at 6% or maybe 5.5% cap. And I can find cap rates higher than that right now on the commercial side significantly higher than that. So I'm focusing more of my daily activities on the commercial market right now.
Jason:  Okay. So you have the Visions company that you started. Did you start that in 1990? (29:37)
Steve:   Well it was actually started in southern California in 1988.
Jason:  Okay. So then at what point did you start your own commercial brokerage?
Steve:   Well 'Visions Realty' in California did a residential as well as commercial. And then when I came to Texas in 1990 the focus was strictly on multi-family. And so we did multi-family from '90 to about 1993. And then the multi-family market, the deals started kind of evaporating so then we went into office and retail and self-storage. And so that play was ending by about '96 or '97 but the single-family still had opportunities. So that's when we started going into single-family and Texas was in the late 90's. And so then by the late 90's we were very involved in all factors of that. I mean 'Visions' was doing the residential side, and then we had the management business, both the residential and commercial management business and we were very actively involved on transactional brokerage business on the commercial side, and as well as on the residential side. It was more like about 14 years ago that we affiliated the commercial side with 'Sperry Van Ness' and really separated the two so that 'Visions' was doing the residential brokerage and 'Sperry Van Ness' was doing commercial brokerage. And then 'Sperry Van Ness' evolved into SVN.
Jason:  Okay. So are there any other tips, advice, anything like that that you can think of for maybe investors that are thinking of coming to Texas to invest their money and invest in single-family even though it's harder to get maybe even though it's still 5.5 cap, 6 cap. Do you think it's still a good area to invest in? You're still here, so… (31:20)
Steve:   I do and I'm still investing. When I go, I travel a lot and I travel for real estate and so I'm going to meetings across the country, seeing different areas, talking to investors in different areas and I still feel that our opportunities are really unsurpassed. And so I have no plans on leaving, have no plans- I mean I could say I am buying property in other locations but Texas is absolutely my first choice. And so yes my focus is here. Do I have anything to say? Yes, I would say that from my perspective real estate has been the best investment opportunity that I've been able to find. I mean with stocks and other forms I've invested in those, and when I look back consistently over my career I've never been able to do better than I've been able to do in real estate. And when I compare what I've done in other states, I've never done better than again what I've done here in Texas.
Jason:  Wow. Okay. Well that's all I've got, so thank you Steve for jumping in. If anybody has questions about maybe commercial investment or questions for you, how would they reach out to you to contact you maybe about opportunities? (32:50)
Steve:   Well either give me a call or shoot me an e-mail. Phone number is 817-288-5524. E-mail is
Jason:  Perfect! Okay, thanks Steve!
Steve:   Alright, thank you Jason!