This interview with Jason Hartman originally appeared on Authority Magazine: Al Hartman of Hartman Income REIT On Five Things You Need To Know To Succeed In The Real Estate Industry
As part of my series about the ‘Five Things You Need To Know To Succeed In The Real Estate Industry’, I had the pleasure of interviewing Al Hartman.
Al Hartman is the President, CEO, and Chairman of the Board of Directors at Hartman Advisors and the CEO of Hartman Income REIT Management. Hartman was established in 1983. As of 2021, the firm employed approximately 200 employees and managed more than 60 properties, comprising over eight million square feet, in Texas.
Thank you so much for doing this with us! Can you tell us the “backstory” about what brought you to the Real Estate industry?
In 1978 I started my professional career selling home improvement services to residential owners. Quickly, I saved up my money from sales and made my first hard asset investment, a multifamily duplex real estate property. It was during this time I learned how lucrative real estate investing had the potential to be. Over the next few years, I continued to acquire single and multifamily properties. Before I knew it, I was operating an entire portfolio of 12 houses and 16 multifamily units; having left my sales career behind with the hope of further pursuing this entrepreneurship venture
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or takeaway you took out of that story?
In 2017, Hurricane Harvey devastated the city of Houston, impacting the lives and homes of several of our Hartman employees and our Hartman properties. In efforts to help team members rebuild their homes, our commercial properties, and lodge those needing somewhere to live, our team members from other parts of the state came together. Team members from Dallas and San Antonio brought their families, churches, and other communities to Houston, and together we rebuilt from the ground up. During this time, I learned you can accomplish nearly anything you put your mind to when you have dedicated and loyal team members.
Do you have a favorite “life lesson quote”? Can you share a story or example of how that was relevant to you in your life?
Yes, it is a scripture that rings true for me time and time again.
Luke 6:38 “Give and it will be given you; good measure, pressed down, shaken together and running over will be put into your bosom. For with the same measure that you use, it will be measured back to you.”
I believe God has placed me in a position to bless others through charitable works. When you are given much, you should expect to give much back. Always search for ways you can impact your community, church, schools, and other institutions for the better. At Hartman, we have directly seen what can be accomplished by giving charitably.
Are you working on any exciting new projects now? How do you think that will help people?
Recently I’ve been taken by the idea of mentoring. In a book written by Regi Campbell on what mentoring means, he shares a model of mentorship called “upside” down mentoring. My takeaway was that mentors must take a more active role in the mentorship process. Instead of waiting for a young or learning individual to reach out to you for mentorship, you should seek them out. This approach resonates deeply with me because shouldn’t we, who have been blessed with great knowledge on any given topic, search for ways to share it? We should all strive to be missionaries in whatever roles we feel we are experts in or deeply believe in. Mentoring not only positively changes a mentee’s life, but it can lead to a domino effect of positive change for an entire community.
What do you think makes your company stand out? Can you share a story?
Our strategy to achieve excellence in customer service sets Hartman apart from our competitors. Our property management team genuinely cares about their tenants, which is reflected well in our latest NPS (Net Promoter Score) results. NPS is a market research tool companies use to measure the loyalty and satisfaction of their customers; in our case, that is our tenants. Twice a year, our property management team requests tenants complete an elective survey to rate their likelihood of recommending the company. In our latest survey, our firm notched up a score of 71.2, which according to industry averages, is considered “world-class”. This was a culmination of perfect ratings at fourteen of our properties. It also ranks us 41 percentage points higher than the commercial real estate industry average.
Our incredible attention to providing excellence in customer service also echoes itself in our winning the 2022 Houston Landlord of the Year award from REDnews, a leading commercial real estate publisher.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
At Hartman, one of our seven core values reads:
“We honor God in all we do by operating the company in a manner consistent with biblical principles.” I truly attribute all my success to God. I praise Him daily for the blessings he has given me. With every major decision I’ve ever had to make for this company or myself, I take it to the lord and ask him to direct my paths. My faith has guided me through both the easier and tougher of times.
Ok. Thank you for all that. Let’s now jump to the main core of our interview. Can you share 3 things that most excite you about the Real Estate industry? If you can please share a story or example.
The three things that most excite me about real estate would be, its potential for an above average return on investment, its digital transformation, and its ability to be an investment hedge against rising inflation.
Did you know that real estate investment trusts (REITs) have historically outperformed traditional investments such as stocks and bonds? If you look at the last 40 years, REITs in fact, out-performed bonds in every historical period.
As for real estate operating as an inflation hedge, during times of high inflation, like we are experiencing now, traditional investments become significantly less profitable as the economy inflates. However, real assets, like real estate do the exact opposite. If you think it through, inflation weakens purchasing power, causing the price of goods and services to increase. For real estate, this means inflation can increase the value of your property, rental rates at your real estate property can increase, and inflation in a way, can depreciate your mortgage debt. Leveraging inflation can be highly lucrative for a real estate owner or investor.
Lastly, as a result of the COVID-19 pandemic, the real estate industry rapidly adopted a digital transformation. The pandemic promptly made us realize the importance of having a strong digital presence when marketing our properties. The availability of virtual tours, smart and touchless building technology, digital communication with tenants, and improved cybersecurity are just a few of the initiatives we implemented at Hartman to better service our tenants and increase demand for our available spaces. Digital transformation in commercial real estate is only going to become more widespread.
Can you share 3 things that most concern you about the industry? If you had the ability to implement 3 ways to reform or improve the industry, what would you suggest? Please share stories or examples if possible.
There are a few threats that could hinder the success of a real estate owner or investor, but there is one that I believe to be the biggest threat, and that is the Whitehouse’s new tax proposal plan.
The tax proposal of President Bidens’ announced in 2021′ has one aim, to limit real estate earnings and gains by owners and investors. This includes capping 1031 exchange gains greater than $500,000, which would cripple an investor’s ability to reinvest their money. Secondly, a proposed increase to the long-term capital gains tax rate from 20% to 39.6%. This will negatively affect long-term and short-term capital gains for real estate investors and owners as they will be taxed as ordinary income in the highest tax bracket. Third and lastly, the proposed stepped-up basis change, which would mean the unrealized gains on property transferred from one owner to another by gift or at death, would require the new owner to realize the gain immediately and require them to pay the taxes on the realized gains.
Each of these circumstances is concerning for real estate owners, investors, and those who stand to inherit from them.
What advice would you give to other real estate leaders to help their teams to thrive and to create a really fantastic work culture?
My good friend and a board member of one of our companies, Horst Schulze, said it best in his book “Excellence Wins”: “Excellence is never an accident. Excellence is a series of careful decision-making and hard work. Smart, informed decision-making involved with or connected to those that are concerned. Again, it’s not chance that gets you through here. It is good decisions.” What this means to me is you make decisions and execute on them. These careful decisions will get you to the employee engagement, motivation, and overall fantastic work culture you are striving for. You keep your word and lead with excellence.
Ok, here is the main question of our interview. You are a “Real Estate Insider”. If you had to advise someone about 5 non-intuitive things one should know to succeed in the Real Estate industry, what would you say? Can you please give a story or an example for each?
1. Relationships are everything. The people you surround yourself with will forever impact your life. It is one reason I feel strongly about employees working from the office vs. at home. You can’t truly have a relationship with someone you don’t spend time with in person.
2. Trust in Yourself — you’re only as successful as you let yourself be. Many people doubted me when I first struck out in real estate, and guess what? There are still people who doubt me today. Not everyone will believe in you, and you must be okay with that. Don’t let their doubts make you doubt yourself.
3. Have a structured work schedule with focused work time. When growing your business, you must create a schedule that can be habitual. During times of high stress or unpredictability, having your set schedule to fall back on can be that one thing under your control that will allow you to feel organized and productive.
4. Never get comfortable — There will always be someone willing to work harder than you for what you have. Be grateful for what you’ve been given, and never stop striving to be the best.
5. Think outside the box — In 2021, following the pandemic. Many real estate firms struggled to get tenants back in the office and chalked up low occupancy to the wake of the pandemic. However, here at Hartman, we structured a long-term plan, something we had never tried before, and executed on it. Within a few months, we had reached a company record for spaces leased and were recognized as Houston’s Top Transaction Firm by the CoStar Group for 2021.
Because of your position, you are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger.
Find time to serve. Life is not just about making money and having fun. It is about helping others along the way and bringing them into Christ’s fold.
About the interviewer:
Jason Hartman is the Founder and CEO of Empowered Investor. Jason has been involved in several thousand real estate transactions and has owned income properties in 11 states and 17 cities.