Mon, 30 March 2020
George Gammon interviews Jason Hartman about The Jason Harman Risk Evaluator. In Part I of this three part series, Jason describes his ‘aha moment’ after 19 years of experience in Real Estate. The story begins with a call from Jennifer, an insurance agent in Irvine, California that leads to the necessity and application for understanding the LTI (Land to Improvement ratio).
George Gammon shares an exhausting experience with lot subdivision and development. Eric, the appraiser comes out with good news prompting the question, “how would you allocate the new value between the two primary components, land and improvement?” Jason also shares a modern day story taking place in Seattle, proving once again the risk of investing in a cyclical market.
[2:20] “No such thing as a passive investment”
[4:03] The Hartman Risk Evaluator, LTV and LTI ratios discussed
[7:28] The call from Jennifer, the insurance agent
[9:45] What factors increase improvement value
[19:38] The ingredients of a house, labor costs
[30:06] The ingredients of a house, regulations
[33:20] The ingredients of a house, cost of energy
[35:05] “How do I know the land value vs the improvement value?
[47:45] The risk when investing is in high land values
[48:26] Three types of markets: linear, cyclical and hybrid. What market is a preferred market for investing?
[53:00] Low land value equals low risk, high land value equals high risk
[58:10] Human biases: recency bias, sunk-cost bias, and certainty bias can all distract an investor