Jason Sharon Author Of "Renters Make You Rich" Joins Me

Jason Sharon Author Of "Renters Make You Rich" Joins Me

Episode Transcript

Speaker 1 (00:02):
Hey, it's Michael Blaze. Thanks for tuning into Your Home
three sixty today, the show where we talk about everything
that has to do with your home. Joining me on
Your Home three sixty today, Jason Sharon, mortgage broker, owner
of Home Loans Incorporated. Jason's been on the show before. Jason,
thanks for taking the time to join us today.

Speaker 2 (00:20):
Man, I'm honored to be here, and it's so good
catch up with you.

Speaker 1 (00:22):
Goat well. Absolutely, and you're always such a wealth of information.
Congratulations on your new book. Let's start by talking about that.
So the new book is called Renters Make You Rich.

Speaker 2 (00:33):
It is so this is my fifth book. That doesn't
make me special. It's just I enjoy writing. I your sharing,
you're teaching, and you know, publishing a book is my
way to take all that and share it with others.

Speaker 1 (00:48):
Absolutely, So tell us what you delve into and Runners
make You Rich. We were talking a little bit before
we came on the air here about you're seeing an
uptick in people interested in operating rental properties.

Speaker 2 (01:02):
For two or three years, I've seen a trend and
it's really turning on this year. And I think it's
because reterest rates are have been approved for the last
twelve months, people are really looking at real estate as
another source of income. And what I what I'm teaching

(01:23):
the book is what is owning real estate means? How
do you predict yourself? How do you finance it? How
do you find properties? That kind of stuff? And I'm
not a real stagent goal one anything to do with
that used to be one. Don't anything to do with that.
I just did with the financing side of it. But
what I want to get, what I got into with
the book is how do you finance real estate? And

(01:45):
then once you finance it, how do you protect yourself right?
Because there's it's not a matter of if it's when
you're going to get sued. When you own property, you
then are a target for something, something breaking their ankle.
They call, you know, some attorney, and that attorney sees
that you've got to bet your equity and that property,

(02:08):
and then they see that as a right target for you.
So I get into a lot of that of how
to protect yourself and I'm not an attorney and don't
don't pretend to be one, but more of the financing
of it, and then how to try to protect yourself
with that.

Speaker 1 (02:23):
Well, I think risk management, and especially you know, I'll
tell you as a real estate agent, I mean I
kind of look at it like that is the cruxt
of the service that we provide is the risk management
side and how not to get yourself tangled up in
a mess that you didn't foresee before because you didn't
know how to protect yourself. So I think, you know,

(02:45):
that's that's very a very good thing to offer. There
is the advice on risk management, because not everybody can
have an attorney and retainer or a forward one, and
it doesn't even make the economic sense to do so
a lot of times. So you need somebody to help
guide you through and to avoid the mistakes that you
know can become land mines for you. But you know,

(03:07):
I find it interesting because I see the same thing.
There's more people that want to own rental properties and
they do see it as a source of income. And
I also think that that plays into the kind of
current market situation that we're in. And maybe you agree
or not that some people have the means to buy

(03:30):
another property when others don't, and so the rental market's
increasing and somebody has to fill that void, and it
can be you know, a big asset corporation, or it
can be an individual that has the means to pick
up another property and then start growing a real estate portfolio.

Speaker 2 (03:49):
I mean, there's definitely a couple of points I would
love to explore there. One is is real estate safe
is or a bubble? You hear that stuff all the time,
and I joe that a lot more people like to
have fun in the bedroom thirty five years ago than
like to swing hammers today. Right, So if economics, as

(04:12):
you know, economics is just the study of human behavior
based on money, and it's really driven by the kids
in principles of supply ers demand, So you look at
what's going to happen in real estate based on how
many people want to buy houses that are new to
the market, so new household formation versus how many houses
are builders building, and you know the birth rate, and

(04:36):
so the new household information is generally somebody about thirty
five years old that's once get married, have kids, and
you know, start a life in their own household. Is
the loose definition of new household formation. So if you
look at that medium age for that is about thirty
five years old. So then you go back to look
at what how many how many people were born in

(04:58):
nineteen ninety. Look at how many houses are being built
by Lenard or Hordan, you know, the small builders, the
big builders, all this stuff. How many housing permits are
being filed today, And there's such a big disparity for that,
and that disparity has been there for nearly a decade. Right, So,
the birth rate thirty five years ago, and I know

(05:20):
I'll get really detailed. I don't mean to be, but
the birth rate, you know, is three to four million people.
Of tho's three to four million people thirty five years ago,
one point nine million of them want to buy houses
this year. How many houses were building one point four million,
So we're five hundred thousand houses short just based on that.

(05:41):
Then you add into how many houses are too old, dilapidated,
got faid by a hurricane, flooding, fire, lava flow, and
a Hawaii whatever across the country. We lose one hundred
thousand houses a year. From that, we have one million
legal legal immigrants trying to get the flint up stuff.
We have one million legal immigrants coming in the country

(06:04):
every year. And then how many illegal members do we have?
Not trying to get to that at all. But you know,
the housing market has been stressed on supply demand for a.

Speaker 1 (06:14):
Decade now, so and I know you're getting there's a
housing bubble at all, right, No, I don't think there
is either, And I tell everybody that. And you know,
there's so many people like actually sitting on the sidelines
waiting for the market to crash. And I'm like, you're
going to be sitting there forever and you're getting further
and further away from your goal. Jump in there. But

(06:34):
and not to get too far in the weeds, but
we're talking about the housing deficit, and it seems like
the housing deficits growing. You know, why do you think
that is? I happen to think that a big part
of it is zoning.

Speaker 2 (06:45):
So there's definitely a lot of things that the government
could to build on the zoning question. There's definitely a
lot of things that that the government could do to
you help that. Like there's there's an office ability I'm
looking at to buy right now that's foot Offs building
it and it's sitting there empty and it's a used
it's on actually plastphate right out of the street. I

(07:05):
think that should be turned into an eight units department complex.
So going through the zoning, going through that stuff, if
the government wanted to I don't think there needs to
be any first time owned buyer incentives out there. We
don't need more buyers, We need more sellers, sellers, we
need more builders. If the government really wanted to help,

(07:28):
they would incentivise builders. And how I would structure it
would be that a builder, if they build a house
that's below the median price for the area unlet's say
many for insans three hundred thousand, they build a house
that was two hundred nine nine thousand, and they sold
it to a first time home buyer, that should be

(07:50):
a tax deduct or tax right off for the builder.
Vice the builders want is built six hundred seven million
dollar houses. That doesn't help the first time home buyer
that wants to.

Speaker 1 (08:02):
Buy, right, No, it doesn't. And you know, and the
thing is too is you run out of land and
we see it here now we're you know, I won't
say we're out of land, but you see, Charleston's pretty full.
So I always describe it as a mushroom. Right. You
have the peninsula and that's the stem and as you
come up by twenty six, that's the stem of the mushroom,

(08:24):
and then you get to Berkeley, Dorchester County and there's
the cap of the mushroom, and that's where the future
growth is going to be because you know, we've got
basins on either side of us here. We're running out
of developable land on either side of Charleston, so it's
going to have to be north and west of here.
But that aside, you know, there's this kind of I think,

(08:47):
you know, the government for whatever reasons, because of you know,
their constituents and people themselves are not in my backyard.
I don't want an apartment building going on over here.
And I'm one of those people. I mean, I live
over off of bees Ferry Road in Shatle Moss and
all we see are these apartment and condo towers going

(09:08):
up everywhere. I don't like seeing that, but I mean
there has to be the need has to be filled
for this housing. In some manner and in some states,
there's even a move to remove single family designations altogether
from zoning statewide. It would become state law. As far
as I know, none of those have passed yet, but

(09:29):
I know that there has been an attempt to bills
introduced in order to try to achieve that to lessen
the housing deficit that we're talking about. And I've talked
to economic developers, you know, Chamber of Commerce, and they
all seem to agree, and they all have to a

(09:51):
certain extent, people that are concentrating on working with city
leaders to try to kind of loosen zoning up so
you can get more multi family properties on the developable
land that we have.

Speaker 2 (10:04):
I mean, there's so many good points there to unpack.
The wood drives the housing market. You know, why is
Charleston great? The The basic thing that drops the housing
market is how's the jobs industry? How's the jobs culture
in that area? And obviously Charleston has a great jobs culture.

(10:26):
Fortunately the government has done a good job at inviting
and being attracted to industries to coming to Charleston. And
then to your point another point that you made of,
we have to grow west and a little bit north
because we can't grow east right unless people are going
to live in the house boats, right, you know, we
do have we do have a limitation. So the the

(10:50):
supply side is stressed in Charleston and the demand side,
the demand side is stressed in a good way growing
because the jobs market, which leads to increased prices on houses.
So then you get into do you buy rentals one?
Do you want to move into that? And if you do,
do you buy single families? Which I think is the

(11:11):
right move at the beginning. Once you get your feet wet,
you understand how to manage rentals. Then you get into
multi family like you mentioned, and maybe eventually apartment complexes.
Once you get a little bit further, you know, more sophisticated,
little bit more assets in the bank. But when I
think so many people fail to realize the content creator

(11:33):
is TikTok heres, YouTubers, you know, whatever, Facebook, reels, whatever,
all say. Oh, real estate is a is passing income.
It's easy, man. Those people are all idiots. They don't either.
They're just trying to make a quick buck. They're trying
to applicabate. They haven't done it. Real estate is a
contact sport. Whether you're a buyer, whether you're a seller,

(11:56):
whether you're an agent like you, whether you're a mortgage
guy like me, whether you're a private manure whatever it is.
Real estate is not push button get mortgage, push button
get money. It's a lot of effort. So if somebody's
thinking about getting into it. They need to really think
hard about how much effort, how much time do they
have before they get into it. And I totally loves

(12:19):
I don't want to bore people with the number of
properties they have, but I'm blessed beyond measure to be
in a position I am a man. It is. There's
a there's a good quote that I that I don't
know where I got it from, is you can tell
the number of problems a person has the number of
keys on their keychain. So every how you buy every car,

(12:40):
you have, every storage at whatever it is where boat Jesse, whatever,
every key you have in your keychain is probably going
to be another problem for you. So yeah, people if
they want to get in state, there's a lot of
intests with food for you have to have to get
into into rentals. But you know, the going back to
the book is renters make you rich. It's really understanding

(13:03):
the Hey, not only are you if you buy the
property in with the right price and you rent it
the right way, you're gonna make monthy cash flow from
that property. But I think that's the least concerning decision
to make. The house is is going to appreciate you know,

(13:25):
God's not making more land except volcanoes. God's make more people,
It's not making more land. So real estate's gonna go up.
So you're gonna have the appreciation you're also gonna have.
You're probably gonna leverage that property. If you don't, I
think you're silly. I think you should leverage property with
the mortgage, so the renter or is paying down your

(13:47):
debt every month. And the wonderful IRS I know, and
I would say that very frequently, but there's a wonderful
part of IRS code that allows you to depreciate that
opery over twenty seven point five years for residential so
you're writing off the profits from your cashlow. So it's

(14:11):
like win win win, and you're providing I guess dad.
In other ways, you're providing your residency to somebody that
needs it.

Speaker 1 (14:20):
Absolutely, And I couldn't agree more with you when you
said you know that the least of it is you
know the rent produced by the property, because I think
a lot of people don't realize there's going to be
some years where you don't make any money. So everybody's
looking at return on investment, and you can have a
year where your HVAC system goes out and say you

(14:42):
need a roof repair or whatever, and you can actually
have negative years where you're not making any money at
all from the rent, where your expenses exceed your rental income.
But the part of the picture they don't look at
at all are the things that you just mentioned, which
is appreciation and then also the uh, you know, the

(15:07):
depreciation of the property on your taxes, and those two
things combined, and then the ability to leverage. That's where
the power is for sure.

Speaker 2 (15:17):
Yeah. A buddy of mine, you know, discusses the debt
makes deals, and I think that's a very variant you know,
concept that he discusses, and it's you know, how to leverage,
you know, if you could, For example, I own I've
got a condo over in Goose Creek that's free and clear,
and it was silly. I think it was silly of

(15:38):
me to have a free clear for so long. Because
there's a what's called a cross flannelization leone. I don't
think you've ever you and I talked about this. You
probably know about it, and some of your your listeners
probably know about it. But you can use I use
the leverage. So I put one hundred thousand dollars lian
not alone a lien on that on that property in
gous Creek. And I use that one hundred thousand dollars

(16:00):
as that you know, I'm doing air quotes quote unquote
down payment on a five hundred thousand dollars quadruplets off
of ashiphosphate. So I bought four doors and I read
those for sixteen fifty about a month. I've got one empty.
I'm about to put it for seventeen fifty. I showed
it to somebody yesterday that wants to maybe seventeen fifty
for a month for that that two bedroom, one f

(16:22):
path on a shipostate. So I took one hundred thousand
dollars that was just equity not doing anything for me,
and bought four inco producing doors for me by leveraging.
And if I just sat there and rented the one
hundred and fifty thousand dollars condo in your creak, yeah,

(16:43):
I could make a thousand, maybe twelve hundred bucks a
month on that. But now I could have four more
units produced income and four more units depreciating on my
tax you know, depreciation of my tax office taxes. Now
I've bought that property. I think five or five hundred
five thousand dollars remember a couple of three years ago,

(17:04):
you know, I went south from less than six fifty today,
so I made a hundred I made hundred f two
thousand dollars just an appreciation by tapping into equity over
in a paidoff property. And I did something similar for
another borrower, another client that had a ton of equitiness house.
And this is how you or any other agent could

(17:26):
you know, could go back to provide value to their
their past clients. Is this particular client had a lot
of equittiness primary residence. I did a two hundred thousand
dollars helock for him. He paid two hundred thousand dollars
cash for property over at Saint James area in U Street.

(17:50):
And someone would think, like, why is that mortgage guy
telling someone to pay cash for for a property because
I was having no money, I cast here. It's actually
but he took two hundred thousand dollars equity. Is he
like a little bit of money in that you pay
cash for this single family residence over Saint James three
s G two whatever it is over there. But then
we did across the lasation note on him he bought

(18:11):
a triplex over in Dortscher's County and he's making great
and that was a great financial decision for him. So yeah,
the idea of taking your equity and leveraging it for
additional assets is tremendous.

Speaker 1 (18:26):
I think it's key. And that's one place where I
disagree with Dave Ramsey. Dave Ramsey is all about paying cash,
and I'm like, you know what I mean, to a
certain extent, I agree you shouldn't be leveraging your property
to go buy a new car and take fancy vacations
in all of that, But if you're leveraging for investment purposes,
it's key, and it's really one of the only ways

(18:47):
to get ahead and move up the ladder. And before
we run out of time here, why don't you give
us a quick scenario kind of of what it takes
to get qualified to buy a rental house. You know what,
So I think what would help our listeners is how

(19:07):
much of a potential lease can you use towards your
debt to income ratio? You know, how much money are
you going to need down, how much are you going
to need in reserves? How long is the term of
the loan. And you know, how does that whole package
kind of work if you can give us just a
quick synopsis overview of it.

Speaker 2 (19:28):
Sure, So, loans are a product, you know, just like
buying something on Amazon, buy something Walmart. Loans are product.
And the product that I like the most is called
a debt service coverage ratio and DSR for short. And
that's a loan that uses the rental income to qualify,
not your personal income to qualify. Now tho's products. Gener

(19:52):
I need twenty percent down. You'll get better terms at
twenty five percent down. And if the income of the
property exceeds the mortgage payment, you'll be fine. Now, the
more the greater the the overage of the income versus
the debt, the better your rate is, the better your
terms are. But as long as as long as the

(20:15):
rent exceeds the debt, then you'll qualify.

Speaker 1 (20:19):
So in this type line are interrupt But in this
type loan, so you can use one of your rental income.

Speaker 2 (20:25):
Yes, so it's the lower of the sores. There's an appraisal,
and the praisal is a little bit more extensive than
a normal appraisal that most people are used to the
appraisal will be both the value of the house plus
what the market will bear for the rent. It will
be the lower of the current lease or what the

(20:46):
market can bear, because let's say it's a two thousand
dollars a month rental, but you've got at least for
four thousand a month because your your uncle will signed something,
you know, So it's the lower of the lease or
what the market will bear. But yes, as long as
that exceeds it exceeds the payment p I t II
five and there are options to do no ratio d

(21:07):
S CR loans. But at that point you look at
you know, forty percent down which you know most listeners
are not going to be interested in a in a
property like you know that that's that way. But yes,
you're correct, is if the rent exceeds the payment, then
it will be fine.

Speaker 1 (21:24):
And then you need a twenty percent down payment. And
then how many years is that particular loan that we
were just discussing, how long is that amateurized?

Speaker 2 (21:31):
For? So most nine nine nine percent of my loans
are thirty or fix loans. You could get shorter loans,
shorter anmorizations if you want, but that obviously it fix
your cash flow because your payment's higher, So it's not
a not a a that loan product is not something
that's generally, you know, entertaining or attracted investors.

Speaker 1 (21:54):
Yeah, and one thing we didn't touch on is and
I know when you're you're writing the loan, maybe you're not.
You know that it doesn't matter to you what kind
of house it is or what neighborhood it's in, as
long as you know it's strictly the value of the
home and the rental potential. But I think a lot
of people are they look at homes that they want

(22:15):
to live in themselves as potential rental properties, and I
think they're making a mistake there. Sometimes you have to
look into and I shouldn't say sometimes, especially if you're
just starting, you know, homes that maybe don't fit you personally.
So in other words, you don't need an eight hundred

(22:35):
thousand dollars home to have a successful rental. A lot
of times you're better at the lower end of the market,
and you could have multiple properties for the same amount
of money. And at the end of the day, once
you do the math, you're going to find that each property, yes,
there's individual expenses for each one but you're going to

(22:56):
have a few at least percent advantage at that lower
end on each of those properties, and that adds up,
you know, so if so in other words, and I'm
just throwing some numbers about instead of an eight hundred
thousand dollars house, you buy four two hundred thousand dollar houses,
and in most cases you're going to end up with
at least a little bit better return on an investment

(23:17):
than you would with that eight hundred thousand dollars house.

Speaker 2 (23:21):
And there is very so very personal discussion is my
wife and I have this morning. We're talking about so
that common that I mentioned that's pretty clear. We discussed
would we pay two hundred thousand dollars to buy that
condo as an investment today? And if the answer is no,
if you would not pay the value of the asset

(23:45):
as investment today, why do you keep it? And if
you if the answers you don't keep it, what would
you do with that money? And what we're discussed today
is selling this content for two undred grand and they
use that two hundred thousand dollars as a down payment
on a multi family Instead of having one door, now
I've got three or four that are producing retalk for me?

Speaker 1 (24:09):
Yeah, absolutely, and you know, and there's there's insurance, taxes, maintenance,
so yes, you have that three or four times over.
But yes, but like I said, you, once you really
get in there and do the math, you're going to
end up at least a few percent better off on
each of those and then so collectively you're you're doing

(24:30):
better with four lower end properties than you are with
one higher end property. And I just wanted to stress
that because I see so many people that want to
go buy another house that's similar to the one that
they live in as their first rental house, and it's like,
I think you're making a mistake here. You know, thinks
smaller thinks. Sometimes it's powerful to think small mean.

Speaker 2 (24:52):
I think the term accidental landlord is a very powerful term.
And if you know, it goes back to you. If
someone's converting a primary to a rental, that's all fine
and dandy, but if you would not have paid the
current value for that property that was single family to
get into the position you're at, you probably ought not
be converting it to a primary. Should be intentional in

(25:15):
being a landlord, not next at a lanlord.

Speaker 1 (25:18):
Absolutely, and in man you know. I mean, we're just
about out of time here. We're gonna have to continue
this discussion and I'll have you back because there's so
much more we could talk about. But Jason, tell people
where they can find your book Runners make you Rich.

Speaker 2 (25:33):
So my book, all five of my books are available
on Amazon. Jason shares my name, so that's the author page.
Reg Is making Rich is the one that we're talking
about today. I've written books for the first home buyers,
for real estates, for own officers, for veterans. But if
you don't want to buy a book, you just want
to talk. I've got the easiest phone number that you

(25:54):
could ever think of. My phone number is eight four
to three low rate, superple aight four to three at
low rate.

Speaker 1 (26:02):
Eight four to three low rate. And and Jason's an expert,
and I go to him all the time, you know,
when I'm have questions about how I can best formulate
an approach for a client, a strategy for them. You know,
it's great to have a mortgage partner where you can say,
all right, are we allowed to do this? Or how

(26:23):
do we do this? Or how do we write this
into the contract? And Jason's that guy, So Jason Sharon.
He's mortgage broker, owner of Home Loans Incorporated, author of
the new book Runners Make You Rich. Jason, I appreciate
you time today and we'll have you back soon to
to continue this conversation because we probably only got about
ten percent of the way through the topics that you

(26:45):
cover in your book.

Speaker 2 (26:46):
For sure thoroughly enjoyed it absolutely.

Speaker 1 (26:48):
Jason always thanks, I'm out of time. Thanks for listening
to your home three sixty. You can catch the podcast
at ninety four to three WSC dot com or on
the iHeartRadio app. Enjoy the rest of your weekend and
I will talk to you again on Monday morning.