Jason Hartman plays a Flash Back Friday episode originally aired on Creating Wealth Episode 514. He starts the show by reading a letter from a client that discussed a great experience during the Memphis Property Tour. Later he introduces one of the network’s clients’, Philip. He discusses his real estate journey and portfolio. Philip explains how when he started he was hard-money lending. He gives us insight into some mistakes he has made along the way and some key lessons he’s learned.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Announcer 0:11
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:25
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:15
We have got a great story a case study, in an interview with our client who’s been a client of ours for many years. His name is Philip Sullivan. And he’s just a great guy and you’re going to hear his story. Quite literally, I think this is fair to say it is a rags to riches story. He has done an incredible job investing, starting out really just kind of looking dreaming wanting to get into this game, and he’s just done a fantastic job at it. You’re going to hear his story firsthand here in just a few minutes. A couple things. First of all, I really really appreciate listener engagement. So I love that we love to get emails from you. We love to get reviews on it. tunes and Stitcher Radio, of course, you know, we just appreciate engagement. So thank you for that. However, I do have a request. But first before I make my request, I will make a confession to you. I cannot type very fast I use the the hunt and peck method of typing. It’s been a really a huge handicap in life. Gosh, should I even admit this? I will. in eighth grade, we had electives. And one of the electives you could you know, you could choose for electives or the way my school worked in Los Angeles, California. You could choose for electives, and that throughout the school year, and they’d be you know, what, eight weeks each or something like that. Typing was an elective, and I took typing class, and I dropped out being an
Jason Hartman 2:49
idiot, because I thought that well, typing is for secretaries and I’m not gonna be a secretary. But little did I know, typing would be a very much in Man skill as the computer revolution took over. So yes, I am showing my age. Of course, you know, we had computers at my school, but not many people use them. I didn’t really use them. Yeah typing, I dropped out of typing class like a fool like a moron. Ever since then it’s been a huge handicap. In fact, I will bet you If I knew how to type Well, I probably would have earned a couple million extra dollars by now. Little design, no email would dominate the world and boy, it’s a huge handicap. It really is not being able to type well, and I do use dictation and I like it pretty well. However, if you’re using dictation on your smartphone, I use it on my iPhone or on your computer. I use it on my Mac. I gotta tell you something. You could really ruin a relationship with that dictation stuff. If you don’t look carefully, and I don’t always look carefully when I dictate things because it comes pletely misconstrues words and meaning sometimes. So, hopefully that will evolve and get better and better. So my request for you is this, instead of sending me an email, please go to Jason Hartman calm, or if you’re listening to not the creating wealth show and one of the other shows, say, for example, the show’s ever rebroadcast on another one of my shows, you can go to Hartman media.com, where all of my shows are either one either website doesn’t matter. And use the little send voicemail feature, it is super easy to use, and send me a voicemail that I can play on the air. And you know, it’s just rather than email me reading an email and then these issues are pretty complex. A lot of these questions that that you asked, it’s much more lively and better for the show. If the listeners hear it with your own voice and your own inflection. The meaning has a multi dimensional aspect to it It when it is voice rather than the written word. Please send me your questions. I love your questions. I appreciate your questions. I appreciate your comments so much. And please use the voicemail feature many of you have. And I just want to remind you, please do it that way. Okay. Also, you can schedule an appointment with me at Jason Hartman comm slash Jason, as a caller to call into the show, really, if we are able to have a dialogue. That’s the best form if you have a complex question, because anytime you ask a question, I may need to ask you a question. And we may need to drill down on a point further than we can in a asynchronous non real time type of format, where it’s either a voicemail or an email, but again, voicemail is preferred. Please leave your voicemails there, or schedule an appointment, call into the show and we’ll talk real time and I can answer your questions there. So that would be great if you use that awesome little feature. Well, I am off to Europe here in a couple of days. I am going to a conference there. And I’m also going to have a little fun little vacation time. Of course, I’ve been to Europe many times on this trip. I’m going to England, I’ve been to England before, so I’m not going to be able to claim another country stamp in the passport. I’m going to Croatia. And there are a couple of years ago as you heard on the show, but I think this time, I will get to at least one new country that will be Ireland possibly have not been to Ireland. There are a couple of countries around Croatia that I can probably visit to. So you know, want to get another stamp in the passport and be able to say instead of I’ve only been to 74 countries. Yeah, I know only that’s kind of a ridiculous statement. Maybe I’ll be back in a couple of weeks and I’ll be able to tell you, I’ve been there 76 or 77 countries who knows we shall see we shall see So I will be broadcasting from my Europe trip and telling you about some of the insights. I always love to get some real estate insights from these markets, as I did a lot a couple of years ago when I was in Croatia, Spain, a couple other countries talked a lot about that in the show and in thought it was pretty relevant and fascinating versus what we’re facing today in the US good perspective on investing. And so look for that. upcoming episodes. We’ve got some fantastic upcoming episodes. Some more case studies, like today’s episode, some more interviews with clients, just some great stuff. And that leads me to I want to make an invitation, Gary, I’m not gonna mention your last name. But Gary, you’re listening. I would like to invite you to be on the show. I want to read a little share a little note that you sent me about the Memphis property tour and thank you so much for your kind words and sending this note I just thought it was really good. I wanted to share it with the listeners, but I’d love to have you on the show as well. And I’m not sure if you’ve been on before. Maybe you have I can’t I just can’t remember. You know, we’ve only got like 500 and some odd episodes behind us. So it’s hard to remember all of them, even as I am the one recording them. But this note you sent me a few days ago about the Memphis property tour. It said, Jason, I had a great time last weekend, I always get motivated to get back on track with investing when I attend your events, so easy to get distracted with the other demands of life, my favorites, getting to know the two providers in other words, our local market specialist, the ultimate reason for going and it was more than achieved. Graceland. I have to admit I thought it was going to be extremely cheesy. And I’m Graceland of course is Elvis’s home that he’s talking about. But I was blown away. It was a spiritual experience walking through that mansion, immersed in his Elvis Presley’s life with my iPad storyteller. I had no idea how dedicated he was to philanthropy, and to being together with friends and family, enjoying life. Truly inspirational and a complete shock for me. Really enjoyed sharing the bus with your mom and reliving Elvis’s era through her eyes. What a gem Your mom is. And by the way, it happens to be Mother’s Day. So thank you, Gary. That’s a great thing to say and Happy Mother’s Day to all those moms who are listening, eating barbeque, my favorite in a car museum. My favorite could not have been better spending time learning from Fernando. What inspirational and giving individual By the way, Gary, I got to say so true. Fernando has been a wonderful client and a wonderful addition to our team. We’re so happy to have them, hearing the investing stories of others.
Jason Hartman 9:45
It is really helpful in keeping all the bumps of rental property investing in perspective, when you are reminded that it is not just your world, where evictions, leaky roofs and property damage occur. Thanks again, you provide an incredibly valuable service. Gary, Gary, thank you so much for the kind words and the nice note, really appreciate it. You know, folks, I just cannot stress enough. I know we’ve got thousands of people listening, and millions and millions of downloads of the show, and people in 164 countries around the world listening to this show, whatever you can do, you know, we’ve had clients fly in from Asia, Europe, South America, just all many places around the world to our events. Please make it a priority to attend one of our live events. Come and meet me in person, meet our team in person. And most of all, meet our clients, meet our clients, hear from their stories, hear from them, directly hear about their experiences, their triumphs, their tragedies, you know, this is hardly perfect. We have ups we have downs, but overall, the trajectory is up, because income property is the most historically proven asset class in America, if not the entire world. I’m just gonna start saying it’s the most historically proven asset class in the entire world. Because I think it is I’m pretty sure it is. And if anyone disagrees with me, call into the show, and let’s talk about that topic, because I’d love to hear some opposing viewpoints on it. But anyway, without further ado, go to Jason hartman.com. Check out upcoming events, check out the properties, check out the home study courses. There’s some great stuff there become a member so you can get on our monthly members only calls with Jason Hartman University. There’s just a lot of great stuff at the website. So that’s Jason Hartman calm. And without further ado, let’s hear from our client. A great story from Phillip Sullivan. Here we go. Hey, it’s my pleasure to welcome one of our clients to the show, and that is Mr. Phillip Sullivan. Remember, you’re listening to flashback Friday. New episodes are published every Monday and Wednesday. I met him several years ago, he was a podcast listener and came to one of our events in Southern California. And he’s just got an awesome story. And I gotta tell you, listeners and Philip, this is way overdue. We should have had him on the show a long time ago. Many of you have met Philip at our events before he was at the last meet meet the Masters event that we had in January. And you know, he’s just a great guy, and he’s got a great story. So, Philip, welcome. How you doing?
Philip 12:30
Hey, Jason, how are you?
Jason Hartman 12:31
Good, good. It’s a it’s great to have you on the show. Like I said it. This is long overdue. We should have done this. Two, three years ago.
Philip 12:38
I think I was The Reluctant podcaster. So
Jason Hartman 12:40
You were a little reluctant. I had to twist your arm a little bit, but I just hit you up today and sent you a note and you said yes. So I thought let’s do this. This is awesome. Well, a, you got a really great story. And I just wanted you to maybe take the listeners through it and let’s talk about some of the tips and tricks that you know you’ve learned over time. Yours as an investor and stuff like that. So it all started with you found my podcast right? Tell us tell us how it evolved.
Philip 13:08
Yeah, I discovered your podcast. I think back in the winter of oh seven so right before the crash and and so I started listening I think in December in a series I heard it I was like, Man, it’s good. So I I just started going through all of them and I’ve actually heard all of your podcasts every single one of them. Yeah, I think so. Wow.
Jason Hartman 13:33
So you 2000 2007 and you found you just what did you do find the podcast on iTunes just searching real estate investing or
Philip 13:40
no? What’s your first event in I think 2008 I think and and yeah, I went there to your crazy wealth. Show there and didn’t didn’t invest for a little while. Because with my work, I fix Hail Damage car. So I tried travel all over the US. So it was kind of hard for me to, you know, think about investing in real estate while I was traveling. So then I started thinking about hard money lending. And so I started doing that with your Georgia provider. In 2012, the 2011 Yeah, this fall oil. Right.
Jason Hartman 14:20
And I think I remember your first deal, you know, you didn’t start out with an actual real estate deal. You started out by becoming a lender on real estate. And I think your first deal if I recall, and you know, correct me because I’m may not remember this correctly, but I think it was like a small $40,000 hard money loan. And you probably got, I assume something like 12% on that deal. What was that about? Right? Was that your first first deal with us?
Philip 14:46
Yeah, I think it was, it was 12%. And then I quickly, there was another provider. There Phoenix who is doing 12% plus a $500 upfront fee, throwing back to The Georgia provider and asked for $500 up front plus 2%. And they matched it. So I stuck with them and did a bunch and alongs with them actually became one of their primary, you know, money sources at one point. And yeah, so that’s how I got started in real estate.
Jason Hartman 15:20
Yeah, fantastic. Good. And so how many loans did you do? Because most people would come to us they start out by buying properties. You started out by doing loans. How many loans did you do before you did your first real estate deal where you actually purchased our income property? Probably. I don’t know. Maybe like 10 or 15. Like that, that helped you just build up more and more capital and you have your own company. So you were working your business at the same time and, and when did you acquire your first income property?
Philip 15:50
Buy my first property was, I think, the spring of 2012. So yeah, yeah. Bye. property in a kind of east of Atlanta. And and that like first property actually turned out to be one I had I was forced to sell because the HOA we had gone over the number of real property. Oh, yeah, the neighborhood. So I had I had to sell it actually, they sued me actually. You Boy, that’s amazing.
Jason Hartman 16:19
And by the way, let me just explain to the listeners what happened on that deal. So this is another one of the reasons I really despise condos. But this is not a condo we’re talking about but it’s just, it’s even they get more strict. It’s unusual that we see this in single family homes, but you see it more in the condo townhome thing, but basically, an HOA can believe it or not dictate, you know what the rental requirements are, how long or short properties can be rented. And you know, some of our clients are toying a little bit with like the Airbnb thing or, you know, doing renting their properties on short term rentals and some Hoa is just completely won’t allow that some cities even have problems with it, you know, they can restrict they can say we don’t want more than, you know, 10% renters in the community or 20% or whatever the number they pick is. So yeah, that’s, that’s amazing. So, you sold that one was the market going in your direction by the way it definitely was an appreciating market and I made I think I made about 20,000 on that property. So, okay, so it turned out nothing to complain about
Philip 17:31
early. It turned out good. And after my first one, I am I quickly gain confidence. And I saw how, you know, basically simple it is the purchase properties. And so I quickly just started buying more properties after that. And since I was funding the deals, you know, I saw everything up front so I would pretty much just, you know, pick once I wanted to keep it or or just
Jason Hartman 17:56
land on it and it’ll be gone and gone out. Okay, let me let me mention something about that. So we we’ve had this kind of odd scenario happens sometimes, you know, in every product, there’s a supply chain. Okay. You know, with real estate, there’s a supply chain too, right? So did you I’m wondering, and we have this happen a few times and probably happened a few times with you, too. But I don’t know yet. We’ll see how you answer the question. Did you actually lend on a property to our local market specialist, and you were the hard money lender, they rehab the property, then you bought the same property on which you made the loan for them to acquire and rehab it. Did you do that? How many times did you do that one? I yeah. I did it most the time it was Oh, really? That’s that that was the way you did it most of the time. Hmm. So you really knew the ins and outs of that deal. I mean, you saw the margins that the rehabber or the local market specialists was making on the deal and, you know, you were the lender, so you got paid, you know, maybe somewhere in the neighborhood of 12% to loan the money. And then you bought the property and turned it into an income property and kept it Right. Right. Okay. Do you want to expand on that idea a little bit? Or is there more to
Philip 19:10
it? Well, I just think that if you can, and I kind of like doing this, basically, I like to, you know, concentrate at this point on one market mostly. And, you know, if you can do the lending, it’s nice, because you get to know the area, you can see the process, what’s going on. And you get to see, you know, these properties up front, and you get to pick the property that you want. And I just think if it’s, you know, an advantage, and
Philip 19:38
I think it’s a good way to go if you can do it.
Jason Hartman 19:40
So you started in 2000. And you met us in two, well, you learned about the podcast 2007. You came to an event in 2008. You started saving money building capital, and then you started lending and you did quite a few loans on properties, and then you purchased your first property, and it was one on which you lent so and you did it that way a bunch of times. So how many properties do you have now?
Philip 20:06
Yeah, well, I got my first property 2012. And then so I ended up getting seven in Atlanta. And these are these are like that little bit higher end houses in the 140 to 150 range. And then I got my eyes closed my first triplex in Kansas City. And that’s one of those nice ones. And then I’m under contract on three other triplexes in Kansas City. And two for plexes. And Little Rock, no fantastic.
Jason Hartman 20:43
You’re You’re becoming you’re building an empire. Congratulations. Yeah. So you mentioned on and this is really kind of one of the one of the tips you know, and one of the things maybe listeners want to hear about and we honestly within our company, we Really wrestle with this? Okay, and you know, for a long time Philip and you probably have noticed this the changes in our inventory of properties over the years because I’m sure you’re, you know, going to the website and looking at the properties we have listed online. Like when you first came in contact with us, we would do in pretty much all kind of class A maybe a little bit of class B type nicer properties. And of course, you typically get a much better tenant in those properties. But you know, typically also your numbers aren’t quite as good at least on the on the face of it. Okay. Have you have you stuck with you said, Atlanta, Little Rock, we’re all speaking in the City, Kansas City. Okay. So in those three markets, have you stuck with the higher priced income properties and when we say higher price, by the way, folks, we’re talking 150,000 it’s not that expensive as real estate goes. But you know, we do these you know, low priced cash flow oriented markets. And that, that is Sort of class A for our type of world that we’re in? Have you stuck with that? Or if you’ve done some of the lower end, like Class C type properties? And if so, you know, what differences have you noticed?
Philip 22:10
Yeah, I’ve only stuck with no class a type, you know, higher end houses. Because I was really trying to maximize my leverage, you know, per mortgage for Fannie and, and that was my main reason that’s God’s trying to maximize the amount of leverage I get. I wouldn’t be averse to getting a lower price houses, but that’s what I was trying to do. And that’s why I really went to Kansas City because the each mortgage was so high, basically a 400,000 for a family mortgage. 30 year fixed for five and a quarter is just great. And you really got me into the idea of going into debt. Fixed, right?
Jason Hartman 22:50
Yeah. Right. Exactly. Exactly. Know that long term fixed rate debt is pretty darn appealing. It really is. So with your first property That you, you know, resold rather quickly, you made $20,000 on that one. And you had some loans, you were making some money on the loans, you’re working in your business. How did the other properties go? As you went along, and I’m kind of wondering why you stuck with the nicer side, the class a type properties?
Philip 23:20
Well, it was mostly for the leverage. And I was thinking that the nicer houses might see better appreciation, and you know, the houses in the 141 50 range, and this is prices in 2012 2013. So they’re a little low at that point, these houses are now worth around, you know, 171 75 now, so I was looking for that appreciation, and then the good leverage, and I ideally having good tenants and for the most part, I have had good tenants, but I’ve had two that just walked off, you know, in just this last semester. So it can happen, it can Within the house, I guess,
Jason Hartman 24:01
right, right. So how did that go? Did you recover from the security deposit? Or was it? Was it over the security deposit? And if so, did you pursue a judgment against the tenants and send the collection? Or what happened with those? Well, you know, we want to hear about the bad experiences, too. It’s not all rosy folks.
Philip 24:17
Yeah, they had a property management, place a judgment on them, and hadn’t collected any money yet. But um, yeah, I got their deposit. And you know, that helped to fair. So it was it wasn’t too bad.
Jason Hartman 24:33
So when things like that happen, you know, what did you think Did you Did it ever occur that maybe this real estate thing isn’t really the right thing to do? And you know, you’re just going to give up are you still are you or did you just kind of keep the faith and keep going and moving forward.
Philip 24:47
I really just wanted to keep moving forward because I knew there were just bumps in the road. But you know, one thing that is one lesson that taught me a little bit with with the particular houses rehab, is, I think it’s worth getting an inspection on each property. I didn’t get inspection on any of them. And I think it is worth getting inspection home. I definitely
Jason Hartman 25:10
agree with that. You should get inspections, Philip,
Philip 25:14
for sure. I think one thing to look for is the roof. You know, what stage is that roof? And you know, how old is it? You know, how much life can you expect out of it? I think that’s, that’s pretty big enough. And it’s a big expense. It’s going to come on. Oh, yeah, no question. No question.
Jason Hartman 25:31
It’s going to come up eventually. In fact, I just sold one of my properties. That was a North Carolina property because, you know, I knew I wasn’t too far away from hearing about a roof. And you know, and then and then the buyer that purchased it from me and I did a 1031 exchange and bought two properties in Memphis actually, by selling that one. But the buyer that purchased it from me Of course they hit me up after their inspection and said hey, you know this gonna need a roof and I said thing that I know, that’s why I’m selling. That’s one of the reasons and, you know, I’m not I’m not giving you any more money, okay, you gotta just take it like it is us, you know, you you saw that the roof was old when you bought it. So you know, that’s a that’s that is what it is and they still went through with a deal and bought it. And I usually say, you know, keep your properties 27 and a half years, kind of jokingly because that’s the depreciation schedule. And if any of you listening have properties older or not older than but that you’ve owned longer than 27.5 years, you really really, really, really, really should consider selling them because you’ve run your depreciation schedule, and it just makes sense to get another property and start that schedule. Again. The property doesn’t need to be new, it just needs to be new to you. And one of the great things is you can do a 1031 tax deferred exchange and exchange it and not pay the tax you just defer the tax and definitely so I think the roof is a very good point because roofs are not Cheap that is one that’s probably you know, probably the most expensive item. I mean, I don’t know. There can be other things occasionally too but those are sort of surprise things the roof is one you know about two other things. One was definitely get termite treatment on each house. And that this is something I didn’t think about no one really talked about it. And I did that for all the houses you mean a preventative preventative treatment, right? Or like, Yeah, tell us about that. I mean, how much did that cost? What kind of treatment did you get?
Philip 27:30
I got a five year bond. And I think it was $500 is normally more I got to deal with the recommended vendor who does it. Eat tree eat cow so I got a really good price. And, and then it has $125 renewal fee per year,
Jason Hartman 27:51
after after the five years or each year during the five years each year during the five years you know that also depends on what area you You’re in. So you know, some areas are much more prone to termite issues and I think Atlanta would be you’ve got a lot in Atlanta. What are the age of your properties? You know, you’ve got these properties Little Rock, Atlanta, Kansas City, what what age range? Are they usually
Philip 28:15
they will be Atlanta houses are all in 1987 to, to like, early 2000s. And, and then the Little Rock properties with the two four plexes or the 1970s I think. And then the Kansas City multi units are all new construction. And some of them are getting started yet sir.
Jason Hartman 28:38
Right, right. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday
Philip 28:48
in which do you have a favorite out of the three markets that you’re in or, or maybe another market that you’re looking at? I’m not really the I like the appreciate Atlanta, you know, with the houses, that I’m gonna like the cash flow from Little Rock in Kansas City with multi units. So I think it’s just a nice portfolio all combined. Really?
Jason Hartman 29:10
Yeah, kind of diversify it and spread it around like that. Do you think you’ll move into another market? I mean, I think three is enough. But you know, I’d say to people, they could do up to five, or you gonna just keep kind of doubling down in those areas that you’re in?
Philip 29:24
Yeah, I think I’ll I’ll probably just double down there’s I mean, I might be tempted by some other market that something attractive comes along, but um, I would be okay with just staying in those three markets early.
Jason Hartman 29:36
How long have you owned in Little Rock? And the reason I asked you about Little Rock in particular, is because Arkansas is the most landlord friendly state in the country by by a longshot. And it’s really, really landlord friendly. So I’m kind of curious to see how your experience plays out there over the years. It’s probably too new to tell. But how long have you owned in there now? Have you been it’s been a year yet or More than a year now. I’m actually just under contract. I haven’t actually made the purchase yet. Okay, okay.
Philip 30:06
Yeah, yeah, I’ve got a lot of contracts right now.
Philip 30:08
Yeah. So what do you think about that market? I think I think it looks good. I mean, it looks stable to me
Philip 30:16
and I’m not really expecting appreciation much but do like it from a stability standpoint and with units that all have their full price so you know, I like the idea of having properties rented to people with lower incomes and more middle class incomes not not just concentrate on one income but have multiple income.
Jason Hartman 30:40
That’s it. So what we’re talking about there is you’re you’re not only Phillip segmenting, you know what I would say take the most historically proven asset class and diversify geographically because all real estate is local. And you’ve been to so many of my events and listened to every single podcast which by the way, you deserve award for that, you know, you’ve heard me say this stuff a million times, but you’re not just diversifying geographically because you know, all real estate is local. Right. But you’re also diversifying in terms of market segments by having those different income ranges in your portfolio. Right? There’s different types of tenant classes. Yeah. So it as the economy, you know, if it gets worse or better, here, you’re more covered that way. It’s more more say, I agree with you. And the other thing that people will notice if, if things do get really bad again, at any point, the thing that they’ll notice is they catch people on their way down. I mean, it’s not as positive of an environment but you know, you’re providing housing to people who are moving down the economic ladder, you know, in bad times, and in good times, you’re providing housing to people who are moving up the economic ladder. So you know that that’s why we like the properties that are below the median price in any given market. It. And by the way, I got a comment on your Atlanta stuff, because last year, I mean, it’s about 10% appreciation in that market. You’ve done phenomenally well. Yeah. Yeah. I don’t know, if you even know that. Do you keep track of the prices of your properties? Or, you know, I kind of tell investors not to worry about that too much, because it’s really a cash flow game. But Gosh, it’s nice when appreciation does happen, right?
Philip 32:23
Yeah. I don’t really but I did. Look, I did look a few months ago, really, for the first time. And that’s what I saw some of the houses were worth getting to 170 what I paid into 144 Mm hmm.
Jason Hartman 32:35
Yeah, that’s great. And are you leveraging your properties or you paying cash for them? I paid cash for them up front. But I did a cash out refinance on every single one of those. So Oh, you have you completed those cash out refinance? Yeah, okay. Good, good. And what what’s your thing with management? Do you always use the property manager or do you self manage or do you have a blend in your portfolio? Or you’re, you know, self managing and using professional managers.
Philip 33:03
Yeah, I use property management for all of them.
Philip 33:06
I’ve been, you know, I’ve been happy with it really. And I’m really kind of excited about the property management can see with your provider there, because I think it’s gonna be really good from what I’ve heard from other clients. Mm hmm. Good, good stuff.
Jason Hartman 33:23
As you know, I had some problems with the Kansas City property manager A while back. I think you know about that story. We’re working on that one. And I, I kind of try to wait till these things sort of play out completely before I talk about them on the show because I just, I don’t have enough to say really yet. But more to come on that one. Do you have any tips that you want to share is you know, in terms of how you manage your portfolio, how you keep track of it, how you deal with property managers, your philosophies on financing, just any part of it that maybe we haven’t discussed yet.
Philip 33:57
One day, I thought I was with an HOA
Philip 34:02
You know, we buy a property, you have to want to make sure you know who the HOA is, you know, a name or a name or a phone number. Because if you don’t, you’re definitely going to at some point by now,
Jason Hartman 34:13
yeah, I know what you’re about to say, I think Yeah, like I did. I did on a couple of properties, maybe even two or three, and got, like fees, collection fees and stuff. So let me explain that to the listeners. Let me just elaborate on what you’re talking about. And they interrupt me if I’m not talking about the same thing, but I think I am. And this has also happened to me. Okay. This is the reason we say everybody should go to the USPTO, the Post Office website, okay. And every I think it’s every year for $1 is all at cost where you can do it for free. If you just go to the post office and pick up the little paper form that it’s like a little postcard sort of thing that you you just put in a mailbox and they do it always forward the mail to yourself from every one of your properties, because it just invariably is going to happen probably with the homeowners association, the HOA, but it could also happen with the tax collector, or the insurance company or the lender, and you do not want this to happen is that they will send the statement to the property rather than to your address. Then they’ll say, Hey, you know, your association fee which you really only owe $300 in fees now, because you didn’t pay it and you didn’t even know it was due, right. You didn’t pay it, you know, you now owe a $650 because we’ve tacked on late fees and a legal fee and some of this kind of stuff. So really, really, really be careful of that. It’s it’s one of the little minefields that you’ve got to plan for. Do that forwarding address. Now, just understand to the forwarding address goes by name. So it won’t affect your tenant in the property at all, okay? But if you purchase the property in the name of an entity like say you set up an LLC, you should forward both your personal name. So in your case, you know, Philip Sullivan, or ABC LLC, right when you do that, because that will really, really help prevent this kind of problem. And one of the other things that some of our clients have been using very successfully is these virtual mailboxes. And there are several services that offer this where they, it’s really helpful to organize yourself and make it a lot easier. What they do is they receive your mail just like you know, a p o box would or the UPS Store would, but they open it and they scan it and they put it on to a web portal that is password protected. And you go in and you just look at your mail online. If there is a check in there, you can actually instruct them to deposit that check to, you know, whichever of any various accounts you might have. And they’ll actually deposit your checks. It’s pretty cool. Do you use something
Philip 37:14
like that? No, I know. That sounds that sounds nice.
Jason Hartman 37:17
Yeah, I can give you the names of some of them, you know, whose I’m using one. It’s really great. This is Fernando. He just loves it. And, you know, they deposit all his checks. He showed it to me. And the last time he was on it several months ago, when I happen to be near him on the computer. He said, Jason, you got to use this look, he’s just going through his mail. It’s just on the screen. You know, he didn’t want to open anything. You know, so it’s great, you know, and it’s sort of amazing. The whole postal system doesn’t work that way, frankly, because it should, but that’s a different discussion. Yeah. Let me give a couple names for the listeners on that. Okay. One’s called Virtual post mail. And that’s virtual post mail.com. Another one I did all I did is I searched it well while you were talking. Okay. ones called traveling mailbox comm traveling mailbox calm. And another one is called us global mail calm. And another one’s called post scan mail calm. There’s a whole bunch of them out there. So just you know, put it in a search engine. Notice how I did not say Google just my own personal thing, put it on being and in search it just search virtual mailbox, you’ll find a bunch of companies offering this service and it’s, it’s cheap, and it’s great and especially for someone like you who’s traveling a lot because your business takes you to all these different locations. So Oh, yes,
Philip 38:42
Yeah, that’d be very handy.
Philip 38:43
goodwill Philip, your
Jason Hartman 38:44
story is super inspiring. And I thank you so much for sharing it with our listeners. What’s next for you? What are you what are you planning? Where are you going to be buying your next properties you think?
Philip 38:54
Probably either a little rocker Kansas City, but most likely Kansas City. Maybe construction. multifamily.
Jason Hartman 39:02
Yeah, good, good stuff. And when you say multifamily, you’re talking about, you know, for plexes, triplexes. That kind of stuff. Right, right. Yeah. Well, again, thank you so much for sharing your very inspiring story. We appreciate your business and appreciate having you on the show to.
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Jason Hartman 40:36
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Jason Hartman plays a Flash Back Friday episode from November 2016. He hosts Gary Pinkerton to help breakdown the article, 27 Charts That Will Change How You Think About the American Economy. They discuss the US economy related to productivity, demographics, or inflation. Later they discuss the incredible opportunities that await real estate and income property investors.
Announcer 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy. Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:07
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 749 749. Thank you so much for joining me. I have talked many times before about how the next 10 years of demographics and psychographics. In other words, people state of mind, not just demographics, and also economics, how they Bode so well for us as real estate investors. How there is this tsunami, this tidal wave, this absolute avalanche of great news for us as real estate investors coming out the rental market over the next decade, maybe longer, really, really, maybe this is a 15 to 20 year, maybe This is a decade and a half, two decades of phenomenal opportunity for us as real estate investors. I don’t know, it remains to be seen, but certainly the near future, the next three to five years and I would even venture to say the next five to seven the next decade. It looks pretty darn sure that we are in a phenomenal, phenomenal position as real estate investors, investing in the most historically proven asset class in the entire world income producing real estate. Well, here’s a recent survey and I believe I shared a little bit of this with you on a prior episode. But I’m going to go into a little more detail this time, because we’ve got one of our clients coming on the show today. And that is Mr. Gary Pinkerton. Yes, Gary Pinkerton, the now retired Navy submarine Captain Yes, this guy can actually run a nuclear reactor. Pretty cool, huh? He’s gonna be back on the show today, talking a little bit about some different issues in the economy, some different data that I think you’ll find interesting, and a bit of his client case study as a real estate investor. So I think you’ll like that. But before we get to that, this is about the American savings rate. And again, this is one more piece of evidence, just proving how phenomenal The opportunity is, for us, for real estate investors for income property investors, and it is overall sad news. But you know, me, I am a realist, I am realistic about this stuff. I do think it’s an amazing time to be alive. There are so many incredible things going on. And at the same time, there is this divide There’s the digital divide. There’s the economic divide, there’s the concentration of wealth divide. There are a lot of problems, obviously at the same time, and this is one of them. But as the Chinese say, crisis is an opportunity riding the dangerous when every problem is an opportunity. In the Chinese language, the symbol for crisis is identical to the symbol for opportunity. So literally translated, crisis is an opportunity. Riding the dangerous wind is the way that works, right? And so this is a crisis, but it is an opportunity for us as real estate investors is an opportunity to serve a huge segment of the population. And when you hear a couple of these stats momentarily, you’re going to see that this segment is ginormous, ginormous. Yes. No, that’s not a word listeners. I know it’s not a word. It’s one of those made up words, but it’s ginormous. That would be gigantic and enormous. Put together. There you go. I don’t think you need me to explain that bit here. But anyway, I’m kind of a literal person. Okay, so 62% of Americans have under $1,000 in savings. And this is a survey who did this survey here? Well, it’s on go banking rates go banking rates calm, which I guess is website like bankrate.com It looks like and they’ve got some cool charts here, colorful graphs that illustrate all this stuff. But let me just share with you the first one before we get to our client, Gary Pinkerton and our guest today and talk to him. Okay, so 21% do not have a savings account 21% of the population mind boggling, okay? 28% have zero dollars, I guess they have an account but they have no money, or maybe no money to speak of in the account, maybe they have a nominal amount of money in that account just to keep it open. It’s counted that way as zero dollars. 14% have, hey, this is considered Great. Now I’m sure people listening will think this is you know, no big deal, right? But 14% of the population over $10,000 $10,000 or more in savings. Okay, let’s go to the bottom rung. Again. That’s the top rung over 10,000 10,000 or more, just the minimum balance requirement 9% of the population less than $1,000 in the bank. In savings 13% of the population 1000 to 40 $999 10% of the population 5000 to 9000 999 5% of the population 14% of the population with 10,000 or more. Can you believe that? That means that 62% of the American population now assume, of course, this is the adult population we’re talking about, you know, a little baby wouldn’t be counted in this right. But 62% of the population have less than $1,000 in savings. Do you think they’re going to be able to move into the homeownership pool anytime soon? Do you think they’re going to be homebuyers? Not likely, folks. This is a market is a market of opportunity. It is a market that needs to be served. Hopefully, our country will get its act together. And we will start moving away from these idiotic left wing policies that I would argue, because we’ve had five decades of left leaning policies in this country. Okay, forget about who the President is right? Just look at the Congress, the Congress has largely been controlled by the left for the better part of five decades. And in many ways, you can argue that this problem relates to our left leaning social policies, because it causes an anemic economy through government spending, through inflation, admittedly low in recent years, but overall over the last five decades, very high, especially since 1971. You know what happened in that year, of course, went off the gold standard. So this is just mind boggling. It really is showing once more, once again, that there is a massive opportunity and a massive market that needs to be served for us and by us as real estate investors. Okay, without further ado, let’s get to our guest today. Let’s talk to Gary. We’re going to talk about some charts and some data and a little bit of case study. Make sure you visit Jason Hartman, calm, make sure you check out our new website, by the way, if you haven’t done so yet, its newly revised website. If you looked at it too early, there were a lot of things that we fixed on it. So go take another look. Maybe you looked at it too soon. But take a look at it. Lots of great resources there some great products in the store, and also at Hartman education calm and we are planning a phenomenal venture Alliance weekend in very easy to get to Phoenix. One of the well voted actually the first Not one of the friendliest airport in the United States, which I would agree with. I love the Phoenix airport. It’s it’s real, real easy, really short lines really fast to get. Get in, get out. It’s a great airport. Love it there. So join us in Phoenix for the venture Alliance weekend. That’s the first weekend of December visit venture Alliance mastermind calm or Jason Hartman, calm click on events. And make sure you join us for that you can come as a one time guest, or you can join. We’ve got a couple of great new members and we got some fantastic speakers that we’re lining up for this event. One of them an excellent guest who’s been on our show before, I’m not going to tell you who he was. But he was phenomenal, really amazing insights on the economy and the markets. He will be speaking at our venture Alliance event in Phoenix, first weekend of December and we’re going to have some other fantastic guests. speakers and some fantastic, fun first class events. So be sure to join us venture lions weekend, first weekend of December. Let’s go to Gary. Hey, it’s my pleasure to welcome one of our clients back to the show. He is also a venture Alliance member. And that is Mr. Gary Pinkerton, who sent me a fascinating article on vox.com last week, and it’s entitled 27 charts that will change how you think about the American economy by Timothy Lee. And this is just a fascinating group of charts. Gary has picked out some of his favorites he wanted to chat about and maybe ask me some questions about sci fi, see if he can stump me on any of these. Always have an opinion, even if it’s wrong. That’s my disclaimer. And Gary, welcome back to the show. How are you?
Gary Pinkerton 11:53
Thank you very much. I’m doing great and I’m really looking forward to talking again, I always love being I think this is my third one, maybe second one. I think I did an intro With you, if I count that it’s the third one, but really enjoyed each time and certainly love talking about these topics.
Jason Hartman 12:05
Yeah, yeah, that’s it’s great to have you back on the show. And Gary, give our listeners a sense of geography. You’re an East Coast guy. Where are you located? Exactly. So
Gary Pinkerton 12:12
I’m in New Jersey, Belmar New Jersey, which, if you’re ever heading up the New Jersey Turnpike, you’ll see the the turn for six flags and 195 and it says shore points. And so we’re basically halfway between New York City and Atlantic City. They’re on the coast of New Jersey, just a beautiful place. And it was the epicenter for Hurricane Sandy a few years ago.
Jason Hartman 12:33
Yeah, man, massive, massive rebuilding project there for sure. But you’ve been a venture Alliance mastermind member from the beginning and I thank you for being involved in venture Alliance. It’s it’s been great to have you there. And you always contribute such great stuff and you’ve got such a good financial mind and, you know, very analytical. You are a recently retired Navy submarine captain. So you you know how to run a nuclear reactor in your spare time, right?
Gary Pinkerton 13:00
I do I’ve done a few of those. Yeah, it’s, it’s not the easy work, but it’s certainly challenging. And you know, very satisfying, you know, just a great, a ton of great memories. I just finished Actually, my 25th reunion at the Naval Academy saw a bunch of submarine buddies as well as you know, just pilots and surface warship guys and Marines and some great Americans that I’d kind of lost touch with so great times, but you did do some times in nuclear reactors.
Jason Hartman 13:25
Wow. That’s That’s amazing. And you know, the the sad thing about that whole deal with your, your naval career for me is that whenever I want to ask you questions about these nuclear submarines, you can’t tell me anything, because it’s all secret. It’s all classified. You know, you won’t tell me how deep you go, how fast you go.
Gary Pinkerton 13:44
It’s just nothing. Right? Well, the good news is that the longer I’m out the less relevant I become. And you know, I’m getting older like all this right. So eventually they’ll think I’m seeing I’m I’ll be able to type answers. There you go. There you go. Yeah,
Jason Hartman 13:55
that’s how you’ll blow your security clearance. Okay. Got it. Got it. Hey Gary, what got you interested in real estate? And how long ago did you discover my podcast and become a client?
Gary Pinkerton 14:06
So it was 2011. Just about mid 2011. I was I was leaving command I just taken over a position and a great job at the Naval Academy, a two year position there and had a lot more free time than I did on my submarine, as you can imagine, and I was searching for a way to shift active income into passive You know, I’ve read Robert Kiyosaki books over the years, I really just, I mean, they just spoke to me, Rich Dad, Poor Dad, and most of the others. You know, he’s prophesy it all just made a lot of sense to me. So I was looking for, you know, following his model of shifting and to, you know, passive cash flow income. And, you know, I’m a mechanical engineer, and the thing that made most sense to me, you know, not buying the coin laundry machine, although i think that that facility may be a great idea too, but for me, it was about real estate and buildings. And so, I was looking into that. You happen to have a great podcast and I started listening in the team I think it was and I’ve certainly listened to all of them. And I just kept gotta become a junkie with that and of your real estate guys radio, I listen to them quite a bit as well. And I, you know, so I first got my first property in the end of 2011. In St. Louis, I bought a few more there. I’m up to eight and my wife Susan is today In fact, we’ll we’ll get her first three and we’ll she’ll be at six by the end of this month. And hopefully if all goes well, we’ll have Susan topped out and then we’ll go back and start focusing on Gary again.
Jason Hartman 15:32
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. And then what you’re referring to is the 10 loans for each spouse, the 10 Fannie Mae Freddie Mac loans for each spouse, I got a question for you about living on a submarine and working on a submarine. Maybe you can actually answer this one and I have a feeling I already know the answer. Are you able to download my podcast or When you’re underwater, so
Jason Hartman 16:03
technical No, not very far underwater. You know, we consider periscope depth underwater. And, and we can actually do that nowadays, in certain circumstances. So it’s when you’re basically on training missions. You know, you’re not someplace where you need to be really covert to me, we do have satellite capabilities. And yeah, so I mean, we can get internet, we can, you know, chat back and forth with family members. Now, it’s totally different than it was 20 years ago when I started this process.
Jason Hartman 16:28
Yeah, that’s great to let all the people you know, in the military, be more in touch with their families and so forth. That’s, that’s gonna really be a morale booster. I’m sure. So that’s, that’s fantastic. Well, hey, these 27 charts are fascinating. This is just a really interesting article, you wanted to talk about some of them with our listeners, you’re an economics wonk, and you’re really into this stuff as EMI, which ones would you like to go over? And maybe let’s pick a few of them and talk about them.
Gary Pinkerton 16:54
So I think we should talk you know, just about the first few and then we’ll jump forward a little bit but the first one is, you know, number one is is kind of an eye catcher probably on purpose. But he says he starts things off here by saying that, yes, America still makes things and you talk, he’s talking about the manufacturing sector, real output, he shows, you know, a trend from 1987 to the present. And as you would expect, you know, it went down pretty substantially in 2008, and nine, but it’s backup, and it’s at the highest level of production, since they started recording in release. And so since the beginning of this chart in 1987, and I think that does surprise people. But I believe also that I’d be interested in your thoughts, but but I think the perspective is that, you know, no one works in industry anymore. And that’s somewhat true, because no, he talks about it, because it’s automated, right, right, the efficiency of the companies. But, you know, the bottom line is that America is still producing quite a few goods. Right, right.
Jason Hartman 17:47
So the if you look at the manufacturing job sector, it is suffering dramatically, but if you look at manufacturing output, it’s still very strong. So this is the this is the paradigm of automation and robotics and technology in general. And what it may be leading to, is the fact that, you know, even even some of my most and I shouldn’t say as the fact that but maybe it is a reality, a harsh reality that some of even my most libertarian friends are beginning to face is that maybe we are going to have a large segment of the population that is just permanently unemployed, or are massively underemployed. And maybe the government will have to provide a living wage of some sort to these people to keep the the world stable. But, you know, that isn’t as bad as it might sound because all of this technology makes goods so much less expensive, that you know, maybe you can do that for a lot less money. And and then it goes to the question of, you know, my investing philosophy that is, you know, I say inflation is The home run. That’s the best of all scenarios. But a lot of this is anti inflationary. The monetary and fiscal policy, very inflationary technology is its opponent, it is not inflationary. So we shall see which way it will go. But there’s a couple charts that actually relate to that as well. Right, Gary? That’s right. Yeah.
Gary Pinkerton 19:18
So one of them is, you know, even just going to chart to still talking about manufacturing. You know, it shows that the, the jobs in the service sector have been steadily climbing while the jobs in manufacturing are flat or going down a little bit. Even while you know, US population is growing. And my question was, is that really bad? You know, kind of back to your comment, I’m not sure it’s bad. You know, manufacturing jobs are not, you know, a dream in my opinion. I’ve done a few of them and they’re hard work and people don’t live really long lives and, and in general, they don’t enjoy you know, the back and be back breaking work that comes along with that. So, you know, people will often reminisce about The good old days I’m not sure they were good old days in the factories, you know?
Jason Hartman 20:03
Yeah, that’s a very good point and many experiments and issues and labor unions and child labor and the Hawthorne experiment and working conditions and so forth, speak to a lot of that point that you raised about manufacturing jobs. The other thing that says if you look at the other side of this issue, and you look at it not from the producer and the the job and employment side, but you look at it from the consumer side, generally speaking, manufacturing jobs to me represent needs, but largely not completely, but largely they represent things people consider necessities or needs, you know, having a car having clothing, having a house having all the all the goods that we buy, right, but services really represent once and they represent a higher level of lifestyle. So when it comes to massages and going out to eat at restaurants, You know, concierge type jobs and in all of these service oriented jobs, even the Lyft and the Uber driver, these are sort of higher level things. They’re, they’re things that really indicate a degree of progress in that life is getting better. And and people are more prosperous. I mean, I was talking to my mom somewhat recently about the obesity epidemic. And she says, you know, Jason, maybe it’s just the fact that just people go out to eat so much more often. I mean, when she was a kid, nobody ever went out to eat, you know, you just didn’t do that. It was way too expensive. And when I was a kid, certainly the restaurant world was not nearly as big as it is today. And so that represents a huge growth in the service sector. Right. I mean, would you agree with that, you know, like service jobs are are a sign of prosperity, I think
Gary Pinkerton 21:50
I agree. And, and it’s prosperity and a lot of those being typed elective, elective type services that you that you go for, like you like you mentioned, you know, Being able to ride around in an Uber, but they’re also, I think, an indication of longevity because I think there’s a lot of service industry coming from, you know, all of the retired baby boomers and for those older than the baby boomers that need those kinds or desire those kinds of services and have the ability to pay for them, you know, I mean, the the cruise ship industry right now is booming. Some of it, I think, is because of, of lower fuel costs. But I think a lot of it is the fact that the people who want to go and travel now are still healthy enough to do it, have, you know, service providers to help them through that and thankfully have the financial ability to do it. And you know, cruise ships are a service industry. So, you know, I think as you look around, it’s an indication like you said of a wealthier, healthier, happier society. I don’t think this is a bad thing.
Jason Hartman 22:44
You know, very, it’s, it’s an amazing time to be alive. Okay, so anything else you take from chart number two, manufacturing employment is dwindling, while more and more people provide services
Gary Pinkerton 22:58
now? I don’t think so. You know, there’s a, there’s a couple more that relate to that. And those are number 12 labor force participation rate. And then kind of lumped them together. And then like 15, you know, teen summer employment is and then both are, you know, are dropping off. And, you know, I think the labor force participation rate that’s somewhat to do with, you know, the the crash that we had in 2008, and nine and the one in 2000, both of them caused a significant drop. And clearly, we haven’t come back from that, but, but again, I think it’s about increased efficiency as well, right now, you know, in the industrial world, and I think people are struggling a little bit we have this impression that service jobs are lower income jobs, and their jobs that, you know, you know, are behind on beyond having to do that kind of a job. And I think that’s unfortunate. I think service jobs provide a great benefit, like we just talked about, and and I think if we could change the mentality on that and perhaps change the pay structure for that. Well,
Jason Hartman 23:57
I think one of the interesting things about that is You know, when you talk about service jobs, most people think of Oh, working in a restaurant or a coffee shop or something like that. They don’t pay very well, those jobs, certainly. But, you know, it’s not that we have have to just talk about this as though it’s two things. It’s either a service job or a manufacturing job. What about a corporate job? What about a management and middle management type of job? You know, the information worker, the people working in the offices, right? They don’t fall into either category, and those tend to be higher paying jobs, and they tend to be more pleasant jobs than manufacturing or service, I would say, you know, they’re using the brain more than the brawn In either case. Yeah, I agree. And, but, you know, regardless, chart 12 people have been dropping out of the labor force since about 2000 is a bit of a disturbing chart. You know, if you follow that arrow further, I wrote Greece at the end of you know, of that, that arrow where, you know, for whatever reason, the labor force, whether it be entitlement, whether it be disenfranchisement, whether it be Taxes are so high, they don’t bother. You know, that is the direction I think America is moving on this chart and the direction of Europe, where, for whatever reason, people don’t go to work. And that’s not a good thing. That’s very unfortunate. And, and folks, the labor force participation rate is far more accurate than the unemployment rate. Because as we’ve talked about, many, many times, and I’d say the guests that spoke to this the most was john Williams, the founder of shadow stats calm website, I would highly encourage all of you to visit shadow stats calm, which is, you know, sort of made its name on the, you know, the reality behind the numbers that the government is publishing. The labor force participation rate really shows you who’s working and who’s not right. Whereas the unemployment rate because people fall off the unemployment rolls. That is a very misleading number. So let’s just share some actual numbers here. Okay, in 19 Well, let’s take 1997 ish to 2000 It looks like we had a labor force participation rate of 67. And now it’s down to less than 63. And the last time it was this low was, you know, we’re in the era where the misery index was created in the 70s. In the mid 70s. Things were very, very tough back then, obviously. Yeah, it’s just interesting to look at this, isn’t it?
Gary Pinkerton 26:21
Yeah, it is certainly is. And hopefully we turn that trend. But the other thing to kind of keep in mind, and I learned this in, you know, in my master’s program, my engineering master’s program is you have to take charts with a grain of salt, meaning that you kind of need to know what’s behind them, like, you know, what the data set was, what the entering constraints were. But But the other part is that, you know, the scale on these things, you have to look at it and kind of evaluate it. I mean, this, this looks like a very dramatic scale. But I mean, a very dramatic curve. But if you look at it’s gone from 59 to 67%, which is substantial with a country this large, but it’s not like it. I mean, if you first look at anything, oh my gosh, we were at 10, we went to 100 and we’re back down to 50 or so. You know, it’s not But that’s one of the old how to lie with statistics things, you show someone a chart, and depending on the scale in which they did the chart, they can make it look much more dramatic than it really is. So that’s a very good point A to that are on real estate. Jason, I thought we ought to touch charts 18 and 19. Right back to back and 18 is the current recovery is an urban recovery. And it shows it breaks up the chart into four different groups, communities of less than 100,000, between 100 and 500,000, between 500 and a million and then over 1 million, and what it shows early 90s. The most of the growth was in the very low population areas. Hmm. You know, in 2000 2006, it was pretty flat and low across the board. But then now the trend from 2010 to 14 following the mortgage crisis, all of the growth has been, you know, in the larger cities.
Jason Hartman 27:52
Yeah, that’s, that’s interesting, you know, and this is a really complicated one to look at because one of the other issues that you have is some of these Actual cities have grown like growth begets growth, right? And so if you look at where I spent most of my adult life in Orange County, California, I remember when I first started selling real estate in Irvine, California, the population of that city was like 70,000. Okay, and, and those are misleading too, because the cities are contiguous, you know, they’re right next to each other and you go from one you go from Irvine, to Newport Beach to Irvine, to Santa Ana Irvine to Tustin or Mission Viejo or whatever, it’s like, you’re in the same place, you know, so, so some, some metro areas are isolated where there’s a distance between them, there’s a buffer of nothingness, if you will, and then there’s another metro area, right. But when they’re all clumped together, it really makes it hard to do statistics. But I would say I you know, and I don’t I haven’t kept up with it, but I guessing that the, the size of the urban population now is about 220,000, or something like that. So, and I could be wrong about that. By the way, maybe maybe under 200 I’m not sure. It’s interesting to look at this. Yeah. So this would would would lead one to believe that the the growth is in the cities, right? In the in the bigger wealth. This is county size, right? Yeah. Yeah. And, and, you know, if you look at it on County, like LA and Orange County are right next to each other, you know, you don’t notice when you go from one to the other, it’s there. They’re completely adjacent. So it’s hard to tell, but go ahead with what you’re saying.
Gary Pinkerton 29:25
Well, what I was gonna say is that, you know, this really speaks to the the logic behind what you do and your company, and that you pick areas that are surrounding major cities, where, you know, it’s it’s ruling up or outside the city enough that the numbers still work. But you’re close enough to the city to grasp this, you know, population and job growth. You know, people can still commute from where we’re buying properties around Atlanta, or you know, where I bought properties in St. Louis, or, you know, the other major cities that were concentrating on, they can still go into weather large growth is occurring for jobs.
Jason Hartman 30:03
Yeah, yeah. So they’ve still got the the the job opportunity without being in the inspect in the expensive market. And Gary, you know, I think this is like the ultimate formula. I don’t know how expensive it is where you live, but I know your property taxes are some of the highest in the country that I do know, in New Jersey, you know, when you can live in a place that offers a good economy, a good entrepreneurial environment, good entertainment options, good weather, and you can do that inexpensively. You know, I mean, look at the difference between like, and we were not doing anything in this market lately, because it just got too expensive. But relative to the comparison I’m going to make it’s incredibly cheap. And so I would compare Denver and Austin, right two cities that we’ve done a fair amount of business in both a little too expensive now to be recommending to our investors, but compare them to a place like say San Francisco, right. These are both called creative class cities. As is San Francisco is dramatically better values. And I just think that the Uber high priced cities are I don’t think they have as good a future is relatively speaking to the low price cities that have a lot of the same offerings, you know, and people are very mobile nowadays, as we’ve illustrated before, but you know, any thoughts on that?
Gary Pinkerton 31:23
No. And and, you know, over a million in a county is not a lot. Right. So this is not just York City. I think there’s great counties here that demonstrate again, that I just believe. I think you’re right, I think there’s a lot less opportunity in the super Uber rich, large cities. But I think this this chart speaks to, you know, the strategy that we’ve been using for many years with your company, I think it’s great.
Jason Hartman 31:47
Yeah, let’s talk about inflation adjusted housing prices.
Gary Pinkerton 31:52
I see. So what I did, Jason is I went back and looked at this and here’s a case of chart that includes tremendously more information. Right, so this one goes back to 1890. Most of them have been at 1980s or 1990s, maybe even 2000, very small sample size. This one is, you know, since they started recording this information 130 years ago, and I took inflation and adjusted it by 1% higher than they show here, and essentially this thing flattens out and the guy’s argument goes away. His argument is that, since you know, World War Two, the that housing prices have consistently climbed, and he even calls into question whether the 2008 2009 bubble was significant or not, I mean, you can even look on his chart and it was huge. So, that’s a kind of a weird argument to make. But, but even just, you know, his point is that you can see kind of an upward trend, but for that many years, you know, we’re looking at 70 years if you just add 1% to the reported inflation, it flattens this thing out completely.
Jason Hartman 32:52
Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. I tell you I have a lot of disagreement with Robert Shiller. And this is, of course, the Yale economist. And the Case Shiller index is named after him. And he’s written several books. He talks about irrational exuberance. He took Alan Greenspan’s famous quote, and talks about that and he doesn’t really give the whole picture on a lot of things. And I think that can be kind of misleading some of his data is great, of course, but the thing that is so misleading about charts like this, is that it assumes that the house is the same house see the house in 1890 I’m just going to venture to guess I’m gonna make a wild guess here is not as nice as the house in 2010.
Gary Pinkerton 33:49
Right and by the benefit included the outhouses part of the house.
Jason Hartman 33:52
Yeah. Right, exactly. So it’s not as nice a house for sure. I mean that the houses today are much more energy efficient. Well, they even have energy. My grandmother in upstate New York rest her soul. But when she was alive, and I used to go visit there, I mean, all the wiring all the electrical wiring was on the outside of the walls, you know. So you would see wires running around the inside of the house to an outlet. And because the house was built before electricity was wired into homes, and so the homes are obviously much better. But here’s the kicker. And if you look at like one one stat I hear a lot is that you know, American Americans are just living much more prosperous lives nowadays. And they’ll say the average house built after world war two in the baby boom was about 900 square feet. And the average house today is like 2200 square feet. Okay. But you didn’t talk about the density of that house. You didn’t talk about the fact that that house post World War Two was that a third of an acre or a quarter acre lot in you know, famous suburban places like I’ll take Lakewood California, as an Example, which is a long beach area, Long Beach, California where I went to high school. You know, you compare that to today. And yes, you might have more square footage on the interior of your home. But you’re living in a townhome or a high density cluster home with zero lot lines. So there there’s more to everything than meets the eye, isn’t there?
Gary Pinkerton 35:19
Absolutely. there absolutely is. And I thought that was a fascinating one. And you certainly cannot discount the bubble that shows even on on this inflation adjusted chart, but but I believe that that consistent climb that it shows from the 1970s on ironically, if you add 1%, like I said to the inflation adjustment, it’ll flatten that out. And what I meant by ironically, is that that’s where we started messing with the consumer price index, right? That’s where we started taking out volatile things. Shadow stats will tell you that it’s a couple of percent higher than that and when you add that in, you know it’s flat. It’s just following home price inflation is long term with the exception of you know, the 2008 bubble there. It’s just fine. inflation.
Jason Hartman 36:01
Yeah, fascinating stuff. You know, I A long time ago and I wish I could find that episode I did an episode on this where I, I played part of an interview that was on I believe on Bloomberg News. Tom keen on the economy. He’s interesting. Reporter I really liked his stuff. And I actually played part of it on there where they interviewed the Fed chair, who was who was it? It was right before? Gotcha. It was no it was before Greenspan and it was before. You know, the guy that broke the back of inflation of I was talking about I can’t think of his name right now. Volcker, Paul Volcker. Thank you. Little senior moment there. It was before paul volcker. There was a Fed chair in there for just a couple of years. And he was talking about how they started manipulating the numbers and how they started using weightings substitution. hedonic ‘s all of the ways in which they understate inflation and that was that was fascinating. I got to find that one in plate as a flashback Friday episode because it’s it’s really interesting to hear it right Right there from the inside as to what went on, but that, yeah, good stuff. It’s an old one. It’s up there somewhere. But finding it is another another challenge. Okay, so do you want to talk about chart number 20 at all, Gary? Uh, I was housing prices have grown a lot faster than construction costs,
Gary Pinkerton 37:17
right. So one of the things I was going to do is say that this is a tribute to I’m not sure. Jason haven’t really talked about yet. things changing in your life, but it came to mind to me the turtles. And you’ve mentioned this before in the past that, you know, some have actual masses around them, like geography mountains and things that cause prices to rise. Water around New York City song, we just manufactured them, like one that came to mind for me was Las Vegas where they have famous, you know, they have endangered turtles that we’ve decided that will prevent you from, you know, expanding and so home prices go up and places like that as well.
Jason Hartman 37:54
Yeah, right. Right. So in other words, you’re talking about constraints on building right? That cost As housing prices to go up a lot faster than real construction costs.
Gary Pinkerton 38:03
Exactly, exactly. So that’s, that’s one huge part about this, I believe.
Jason Hartman 38:06
Yeah, yeah. And and this is something by the way, just to tell the listeners, what this chart shows is it shows from 1980 to 2012. And you see during the bubble period, you know, 2004 to 2006. Ish, or while the run up started happening in 2000. But you see that house prices, real house prices adjusted for fake inflation statistics, so everything’s got a, you got adjusted price, right. But they went up dramatically faster than construction cost, right. And that’s what this chart shows, which is quite interesting. But that doesn’t tell the whole story. And I think that’s Gary’s point. You know, correct me if I’m wrong, Gary, but in places where you have constraints on construction, that’s what causes places like the Socialist Republic of California to have these incredibly high prices and my opinion that I’ve stated many times before, when I talk about the self driving car and the how geography is less meaningful than it’s ever been in human history, it’s still meaningful, it’s just less meaningful. I think this kind of thing will be under attack. It’ll still be there, it’ll still be a factor. Of course, everybody would rather have a home on the water in Newport Beach or La Jolla or wherever then England have it right. But I think that’ll pretty much be unanimous. But will the will the Delta be as large as it is today if transportation becomes a lot cheaper and a lot easier self driving, ride sharing etc. and and also technology like virtual reality, then that’s a that’s another component. You know, I believe that delta will will compress now I think you’re right, but this is a nice chart when you’re talking about the the concept of land value and, you know and cost of construction. It shows that those The laminate blue line, the real housing prices, essentially the changes in land value, right? I mean, you know, the people that will pay a premium for a specific location over what it costs to build on that location, right. But here’s, here’s the amazing thing about this chart, though that point is well taken until you get to the peak in, you know, according to this chart, it would be about 2006 or seven. I think it was really before that. But there’s always a lag in these stats anyway. And then you see the dramatic fall of real housing prices. But you see real construction costs increase during that same period, the red line versus the blue line. And I almost wish the listeners could see this, this is really telling. So you see that land prices, when there’s a bubble, just get this massive run up, and they’re, they’re artificial. It’s just built on a tulip bulb mania, you know, it’s built on a mob mentality of scarcity mentality that doesn’t Have any real intrinsic value? And this is why the Hartman risk evaluator i think is a very valuable lesson here, it took me 19 years to discover is that you should be investing in low land value markets because you don’t have that type of volatility. Isn’t that Isn’t that fascinating how you see the blue line dropped sharply and the red line continues to go up?
Gary Pinkerton 41:24
Right, right. It absolutely is. And it kind of drives it home. It’s such a visual chart. You know, it’s something to remember, I think, when you start looking at different areas to invest. Yeah,
Jason Hartman 41:31
that’s amazing. That’s amazing. Any others you want to share before we wrap it up, Gary?
Gary Pinkerton 41:35
Yeah, so 2424 is one that shows the way Americans retire is changing. And this one is not really probably news to most people, but it shows the difference between the percentage of Americans that are covered by defined contribution plans or you know, 401k IRAs, self funded, if you will, and then those that are covered by defined benefit, which is just a pension. system and this, this chart is really one of those things that I’m kind of dedicating my, you know, the next part of my next chapter of my life towards and with Patrick Donahoe paradigm life is trying to get people in a position where they don’t fall victim to this, because this is a tragic, you know, occurrence. And you can see that it’s been happening since we started, you know, since we made that shift in the late 70s, early 1980s. And it’s just getting worse and worse. And there’s a comment at the bottom, he says that, you know, this shifts a lot more risk and responsibility on to the employees. So back, you know, with a pension system, which is really just an annuity, that company would outsource to someone like an insurance company, the commitment to pay income to their previous employees in retirement for the rest of their life, and so that that individual had quite a bit of security there. But it became expensive to the companies and they found an opportunity they found that the Congress would allow or that the government’s would allow them to shift this over to the employee. And so I would argue that it doesn’t shift more risk. I think it’s just all the risk to the individual because, you know, recent studies, you know, in 2015, there were a couple really big studies that showed that and he talks about it in here as well. But now that actually goes over to the next chart. The median family has just $5,000 saved for retirement and those Wow, that is that is so scary. Yeah, it is just mind boggling when I hear those studies about how the average person in America has this. And I don’t know the amount but this tiny little amount of money in their in their bank account. It is just shocking. But you know what it means? It means they’re going to be renters for a long, long time. So you know, I find that to be, you know, pretty rough, pretty, pretty harsh statement about how many people are going to be completely beholden on the US security system. No less than 10% of the people right now that are over the age of 55 have more than 130,000 saved and 130,000 with today’s interest rates, if you’re planning to use you know, Spend down of your retirement money is just a couple hundred dollars, you know, a month. So it’s not a good plan. And it’s something that’s going to result in people, as we said, being really beholden on social security and also working probably longer than they originally plan.
Jason Hartman 44:14
Yeah, yeah. But you know, I mean, it’s terrible. That sounds and I agree with everything you’ve said. I don’t know that working longer is a terrible thing, either, though, you know, I mean, the concept of a 65 year old retiring, that really needs to be redone. Now, granted, you know, that’s a sign of how things aren’t going as well as they should be. Right. I agree with that part. But also, I just think in general, as I’ve said many times before, working is good for you. You know, it’s good to be a productive member of society. It’ll make you live longer, you’ll you’ll be healthier. And and you know, you should work longer I mean, you can Yeah, when when the when the arbitrary 65 number was created on average. I think they said, and Gary, you’ll know this better than I will, as your next career. I’m sure you’ve studied this a lot. But you know, people lived about four years in retirement, right? They live to 69. Now they live 20 years, 30 years. And, and that means we got a plan for that we got to invest for that, for sure. But also, you know, I think working is good for you.
Gary Pinkerton 45:21
I agree completely. I think most people should Well, all of America should reevaluate what we think of as retirement. And I think perhaps retirement is maybe a change in lifestyle, if you want to transition into, you know, a little bit more travel or, you know, I mean, to everyone, it’s different. But I think, you know, this process of today, you know, baby boomers have the ability, and many of them have done this, you know, the first 20 years of their lives has been consumed as obviously being a child and learning, going through education. You work for 30 years, and then in your mid 50s, you have a mass enough and have the ability to retire. And if you retire after 30 years of work,
Jason Hartman 45:58
that’s if you’ve done it right Right, you know, and it’s semi right. Hopefully that even sooner but yeah,
Gary Pinkerton 46:03
right. So 20 years not working 30 years working and the ability to do another 30 or 40 not working, if, you know, the advances in health care continue, that that’s just not a survivable model for our society, you know, to contribute for 30 and not contribute for 50 or 60. Plus, it’s just hard on the individual, like you said, you know, that, that the people who live really long lives in general, I think the studies will show are very active, right, you know, and both physically and mentally,
Jason Hartman 46:26
their their work, they’re always working on a project, you know, they’ve always got something going on. And I think that’s very, very good and very stimulating. So folks, look at if you’re listening to this, and you’re thinking you’re at retirement age, and you’re complaining about how bad things are, because you, you know, you have to keep your job as a greeter at Walmart. Quit complaining, No, I’m just kidding. I doubt any of our listeners are greeters at Walmart. But it’s, it’s good to work. I think that is just good for you. Maybe it’s part time hopefully it’s freelance type work where you can make your own hours and you know, you can take a month off here and there if you want, but people should be working a good year 10 years longer and by choice not by necessity just by choice, because they they want to be engaged and involved. So yeah, good stuff. Good stuff. Did you want to talk about any others before we wrap it up? There’s some amazing charts here.
Gary Pinkerton 47:18
Now, I think those are the highlights, you know, those that certainly covered, you know, the major trends, and I would say personal economics and real estate and, you know, the job market and, you know, I think they’re, as we said earlier on, there are some things that can sway studies like this, you know, he cobbled together some amazing charts from many different studies and locations and, and so it’s a challenge for him to put them all into one article. But I think if it told a great story, you know, and I think it’s a eye opening story on a lot of these charts,
Jason Hartman 47:49
it really is it really is Gary, give out your website.
Gary Pinkerton 47:51
So my the best website to find me is paradigm life dotnet backslash about and then backslash Gary Pinkerton and I just wrote an E book there. cover some of these topics and I’d love to pass that to anyone who would find abuse. Is that ebook available. There it is, sir.
Jason Hartman 48:06
Okay, fantastic. Gary Pinkerton client, venture Alliance member and former submarine captain and hack economist. How’s that? Focus on hacker economist. Yeah, absolutely. That was a very interesting discussion. Thank you for joining us today and we appreciate your business and appreciate having you on the show.
Gary Pinkerton 48:23
Thank you. It’s a pleasure.
Jason Hartman 48:26
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using. write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Jason Hartman hosts client Bruce Weyer for a client case study. Jason got a message from Bruce a few months ago after the pandemic started. Bruce gave an interesting update on the lumber market. Jason reminds us that real estate investing is an investment in packaged commodities. They go through the staggering numbers that his long-time lumber family business has never seen before. He explains the impact on the real estate market specific to new construction. He also gives us insight into his real estate journey and his experience with Jason’s network.
Announcer 0:09
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:00
Hey, it’s my pleasure to welcome a another one of our clients for a client case study. And that is Bruce weyer. It’s good to have him here. He’s coming to us from northern area of Florida. He’s in Jacksonville Beach right now in his office, you probably heard me talking about it. A couple of months ago, he was the one who was kind enough to send me the insider newsletter that I’m holding up right now, if you happen to be looking at a video version, the lumber Market Report, this is the random links newsletter, and this is kind of the inside of the lumber market. What does that mean for us as investors? Well, of course, you know, it’s all about packaged commodities investing, as I call it, and lumber is a huge component of housing prices and housing construction. So we’ll talk about that a little bit as well as his case study in his background. Bruce, welcome. How you doing? Hey, Jason, thanks for having me on. It’s definitely good to have you. You know, I almost was wondering, just want to tell the audience if they’re watching on video, we did not coordinate our shirt colors. No, we certainly did not worry about that. We’re both wearing red shirts by coincidence. Bruce, first of all, you’re in the lumber business now because that’s a family business. And I know you said your I think your father wants to retire. And he said, You lived in Southern California. Dana Point to be specific. And so that’s where I’m from that general area. And you were kind of in the movie business and the infomercial, business and all of that stuff. And and then you moved to Florida to get back into the family business. Tell us a little bit about your background.
Bruce Weyer 2:34
Yeah, sure. So I was out in Dana Point, California, as you just mentioned, and once I was out there, I was just kind of hanging out surfing and having a good time. And I started going to college and graduated from Cal State Fullerton and decided to go into the media industry. And I got really lucky, right. Right off the bat, actually our mutual friend Aaron Colson again, he introduced me to
Jason Hartman 2:57
it on the podcast. Yeah,
Bruce Weyer 2:58
yeah. He’s also been on the podcast. He’s a good buddy of mine from Orange County. He introduced me to a guy in the Teamsters union. And that guy was nice enough to introduce me to some people in production. And I got really lucky to work on some network television shows, like scandal, mistresses with Alyssa Milano and some feature films like fast and furious and McFarland and Horrible Bosses, too, and just a bunch of different stuff. But I got really lucky getting into that right out of the gate. So work there for about four and a half, five years in LA working in Hollywood, all the major studios. But once my wife and I decided to start having some kids and kind of settle down, that was a big rat race that I was trying to get out of, and that that’s what led me back into Orange County and kind of the infomercial, commercial production area. There’s just a lot more of that going on in Orange County. Where is the feature films and network TV shows is all happening right there in the Burbank Hollywood area.
Jason Hartman 3:53
Yeah, Los Angeles. So you did live in Los Angeles probably then move south to Orange County, Southern California. We’re talking Southern California here. Probably lived in LA before though, right?
Bruce Weyer 4:03
No, I didn’t. I was commuting the whole time since Well, I was I was doing production. So our call times were either really early in the morning or weird times in the day. So I wasn’t necessarily like finding that grinding traffic all the time, even though it was a problem. But I will say that was the only good part about commuting up there is I would go up there at that really some off times to work on shows whether they were night shoots in downtown or whether they were just studio shoots on the stage or whatever we were doing.
Jason Hartman 4:30
What did you do in the movie industry?
Bruce Weyer 4:32
I started off as a production assistant, which was just like the very entry level guy and then I started working myself up to assistant director and production coordinator and I kind of exited as a associate producer slash producer.
Jason Hartman 4:46
Good good stuff. Okay, so then you got into the infomercial side of the business. And you know, anybody in real estate has certainly seen enough infomercials. In fact, when I was 16 years old, I’ve told this story before but I I saw an infomercial. And it got me intrigued about real estate investing. So that that’s kind of funny now, if the company you worked at I don’t know if they did real estate infomercials, they did a lot of product. infomercials. I know. But I’m jealous about that business a little bit. And, you know, interestingly, I was at a conference last week and one of the speakers there was Ron Legrand infomercial Guru is you know, and that is a big risk, big money business potentially. Because a lot of shysters and scam artists, no question like in anything to give us a little insight into the infomercial business, if you would,
Bruce Weyer 5:35
yeah, it was, uh, you know, I worked with a lot of good people, they were very professional, I worked for a company called script to screen and we handled some pretty big accounts, you know, we were doing Gibson, headphones, they came out with their first bluetooth headphones. And those were, or I should say, wireless headphones. And that was a really big deal. And everybody knows Gibson because of the guitars. And we worked with shark Ninja, and they make all of those great vacuums and instapot cooking thing. So it was a lot of houseware items. And some of it was definitely pretty hokey stuff that we were doing, because they were infomercials, but at the end, they were we were starting to do like, you know, little 15 second, YouTube pre roll in advertisement clips. So we would do everything from a little 15 second ad to full 20 3028 minutes and 32nd full on half hour infomercial. And it was kind of nice, because we would have, you know, like nine months of writing the script and designing the sets and lining up our actors and doing all that and then we would go shoot it for a week. So that I like that a lot better because it got me off of just being on set all the time, when I was working in LA in Hollywood, it was just like, you know, 12 to 15 hours a day walking around, actually shooting doing production. Whereas on the infomercial side, you know, I was involved in the pre production, the actual production and then post production for a while and then we would even buy the media time to air the infomercial on wherever we were airing it. And for however long we were going to air it for and and develop the websites as well, because there’s a whole back end of websites and distribution that has to happen with all that. So it was very interesting to see kind of behind the curtain on that whole deal. Sure.
Jason Hartman 7:14
Yeah, it is. So you didn’t do any of the like guru type infomercials like Carlton sheets or anything like that. Did you
Bruce Weyer 7:20
know really, we worked a lot with shark ninja we did the I don’t know if you remember the ninja coffee bar was Sofia Vergara. She that was like a really big talent that they landed a few years back. We did all the creative and shot the production for that. So that was pretty cool.
Jason Hartman 7:35
Interesting. Good stuff. Well, hey, let’s move on to the lumber business. Because this obviously affects real estate investors. And I want to talk about your investing experience as well. How long ago did you find my podcast? Probably I was just about to move back to Florida. So this would have been 2016 summer 2016 maybe fall of 2016. Okay, good stuff. Good stuff. You probably heard me talk about you know, packaged commodities investing and stuff like that. And when when you sent over this, this fantastic report, just with some inside info on the lumber industry. I mean, it’s unbelievable what’s happening right now give us an update on the market and what’s going on.
Bruce Weyer 8:16
It’s unbelievable what’s been happening. It was everything It was so really cool to see the supply demand shock that you were already talking about from March but it hadn’t hit my industry yet. So we were just kind of chugging along and we’re going through this pandemic and everything was going really well and obviously Florida, the demand is huge. Everything that we do is his Southern yellow pine in the Florida market and that’s all of this specific pine that goes into the framing of the houses Southern
Jason Hartman 8:44
yellow pine it’s called
Bruce Weyer 8:47
if you’re driving around Florida, Georgia and you see pine trees in the lumber industry that is called Southern yellow pine. And that’s what goes into the trusses the floor, Joyce’s the panels that the studs and everything they do use some spruce pine for but just for logistical reasons and freight they use the southern yellow pine because that’s what’s here. And basically, you know, some of the mills they started having some employees come down with COVID and they had new policies and they just couldn’t be running like they were normally running. The efficiency wasn’t there so the supply that they were producing was lowered and the demand was through the roof with interest rates being very low and everybody leaving the major metro areas come into Florida. The prices just started to creep up first and then they just started to really skyrocket to the point where you know one of the largest lumber providers is called West Frazier and they took about five Mills completely off the market. I mean they wouldn’t even sell to us we’ve been buying lumber from them and paying them within 10 days taken a discount on every truck that we bought from them for 42 years and they just went completely off the market. Now they went off the market because they didn’t have supplier or their their Mills so they’re producing supply. They are producing supply they’re receiving the logs. And then they’re they’re milling those into two befores, two sixes, two bites and everything. And the reason
Jason Hartman 10:07
you wouldn’t think that would be like an effective business, though, I mean, they could continue to operate during the pandemic, right?
Bruce Weyer 10:12
I think they had people going down. And the other thing was is they had oversold their contracts. So instead of renegotiating some of their contracts, when people that are buying contract lumber and saying, Hey, we’re in a pandemic, we need to serve the open market, as well as service the contracts, they told anybody that wasn’t a contract, that, hey, we just can’t sell you right now. And then that really, the thing about that was, is that put the pressure on all the other smaller Mills that we also deal with that don’t have any contracts with anybody. So then those guys just got completely bombarded. And it really rocked the lumber market.
Jason Hartman 10:48
So I predicted and I think we’ve seen this just a little bit, at least I started watching the lumber futures market more closely after reading your newsletter. But that has abated a little bit, right? It’s a little better now. Right? Because that it’s a little getting a little more equal. I mean, it’s not equal, but it’s better than it was right?
Bruce Weyer 11:08
It’s better than it was they’re now starting to quote and starting to ship a little bit more, but still, the prices are, you know, so take a to before number two common 16 foot truck, right? people bought those all the time. Normally back pre pandemic, those were probably somewhere in the mid four hundreds, mid 500 per thousand board feet, they’re still up over $1,000 per thousand board feet right now. So it’s still double doubles. Yes, Double, double.
Jason Hartman 11:34
Okay, Wow, that’s amazing. So even now, as things are starting to get a little more semi normal, or they’re moving in the normal direction, there’s still it’s still double the price, still twice as much. Wow, no wonder the cost of construction has gone up. And the builders have been raising their prices like crazy. Now, you know, I talked a lot many years ago during the Great Recession, you know, back in 2008. So 12 years ago now, about what I call regression to replacement cost. where, you know, what I used to say is, when a piece of wood cost, what a piece of wood is worth again, meaning that, you know, houses were selling below the cost of construction for a short time. And that had to fix itself in regression to replacement cost is not the same thing as appreciation, because appreciation mostly takes place in the land value, not in the construction ingredients, or the packaged commodities. Now we look at the price of this. And it’s just absolutely crazy. I would assume that’s true with many other building materials as well, although I haven’t had time to do much research on it. But obviously, lumber is a giant component. So what do you see happening in the future, Bruce,
Bruce Weyer 12:50
I think prices are going to continue to hold at this level, especially in the two before market. So the two by sixes have started to decline. They’re nowhere near where their price equilibrium was months ago. But they have started to decline some but the two before market is still holding very steady. I mean, you can’t you call to get a quote on a truck of random length truck that’s like eight foot through 16 foot. And a lot of Mills still won’t even quote it.
Jason Hartman 13:15
Why don’t even have they just they just don’t have anything to sell. So why give you a quote right now? Wow. And why would there be a difference in two by sixes and two by fours? Any particular reason for that?
Bruce Weyer 13:25
They use in two befores? A lot more than the two by six.
Jason Hartman 13:28
Yeah. Okay. But I would suggest markets already set up. So it supplies more two by fours too, right? Because that’s kind of the basic ingredient.
Bruce Weyer 13:36
They do. But certain Mills cut for certain dimensions more some some Mills kind of cut towards the water links more. And that’s kind of their wheelhouse and some length some mills are cutting for strictly two befores. And we kind of that’s our job is to weave all that together. Yeah,
Jason Hartman 13:50
yeah. Wow. Incredible. Incredible. So is there any relief in sight for this? Or will it just continue to increase? And by the way, let me just hold up this chart. I’m just literally holding it in front of the camera. Pardon the low tech here, folks. But you know, you get it. There is the chart from the newsletter. That’s absolutely mind boggling. And you know, here, you know, I actually read this on the podcast before is the market overview, the narrative portion, but will anything give us relief from this? Or are we just looking at higher lumber prices for a long time? Well,
Bruce Weyer 14:27
it’s hard to tell. So I was also the guy that sent you the email about David Weekley with the homes going completely off the market, right you know, if they just completely stopped selling the home, so everybody’s buying, you know, 30 and 90 days out. Well, if we get 90 days from now and you have people and builders like David Weekley or Elon are saying, Hey, we’re not going to take a new order because they just can’t price in the increases fast enough to pass it along to their customer. Well then the housing starts and the permits issued will all fall and then the demand will fall just because they’re not entering a new order. So that could offset it. But I doubt that’s gonna happen because, you know, we’re in Florida and interest rates are low and people are getting the hell out all those towns and coming down here,
Jason Hartman 15:11
right but you don’t just apply to Florida Do you?
Bruce Weyer 15:13
Yes, we’re strictly Florida Yep. For your for your stuff.
Jason Hartman 15:17
So a homebuilder orders the lumber through you, or are you considered a broker?
Bruce Weyer 15:23
We’re wholesalers and we actually don’t sell the builders, we sell to trust companies we sell to distributors, so we’re selling to people that are treating lumber, like Great Southern wood or Boise or Robbins manufacturing, and then those guys are then selling to the builders. So we’re, we’re literally buying from the mills that are creating the product and Okay, you know, because the home builders, they want it in such a specific way that we’re not doing that we’re literally buying truckload quantities, and we’re shipping those to a distribution company or a trust company where then the builder is putting in an order with the Trust Company for a specific neighborhood specific home model that they’ve created. Okay, makes sense. Makes sense, with your investing since we’ve been talking about Florida, because that’s the lumber subject. But with your investing, you just purchased two properties through a network in Florida and you also purchased to out of state right. Tell us about your portfolio. Yep. So I originally started in Dayton, Ohio. And the only reason I’ve been listening to you for a while and I called up Sarah and I said, Hey, I know there’s nothing on your website and Dayton. But this is where my wife is from the Cincinnati Dayton area in between there. And I’m a big fan of Tom wheelwright as well. And he says, Hey, you know, buy somewhere where you can go and use it as a write off and all this other stuff. And I’m kind of keep my it’s a arm’s length away from me. So I went and bought a duplex in Dayton, Ohio. And that was the first thing that I purchased there, and then ended up buying a four Plex in Dayton. And then now I have two duplexes under contract and Palm Coast.
Jason Hartman 16:54
Good stuff in four we started today, you had talked about a bit of a strategy there. So why don’t you share that with the listeners?
Bruce Weyer 17:02
Okay, so part of my strategy is, you know, Jason, what you’ve taught me a lot is that part of what I’m purchasing, or one of the main things I’m trying to obtain, is the largest loan size, I can at the lowest interest rate for the longest amount of time I possibly can. So, you know, I started off with the duplex because it was really a low number, and I was just trying to get my feet wet. And then I moved up to the four Plex. And then now I’m going with the new construction duplexes, because I’m trying to get as many doors as I can, under the 10, Fannie and Freddie loans that I have with the highest loan amount. So if I try to go out and buy that single family home for $100,000, while while I think that’s a good deal, really I want those 10, Fannie and Freddie loans to be locked in at the biggest numbers I can,
Jason Hartman 17:52
I can handle? Absolutely, absolutely. So you’re doing you’re trying to do more of the more expensive properties earlier in the game. Because you want those really good loans. And we call this mortgage sequencing, by the way, we talked about this strategy years ago, but not lately on the show. And, and you want to get as many of those in the highest possible loan amounts for that first 10. Now, if your wife is working, you know, she can qualify as well. So you know, I don’t know if she is, but it’s 10 loans each spouse, so you’re not limited to 10, you can do 20. But yes, you know, both parties do have to qualify. So if if one isn’t working, then it’s not gonna work. But good. So um, so why Palm Coast?
Bruce Weyer 18:34
Again, that’s kind of close to my house at Palm Coast is only 40 minutes away from me. I feel like one of the hardest things for me in choosing all these is I’m looking at your website, I’m getting kind of Sarah’s hot sheet and I’m looking at everything. And judging my opportunity cost I feel like is, is really difficult because I’m like, Hey, I could do this deal here in Alabama, I could do this here over here, and I’m not really sure what to do. So really, I called them up and I said, hey, what what market Do you guys really like and you think has a good chance for appreciation? And, and then after they found out where I live, they said, Hey, man, just makes sense for you invest right down the street from you, you know,
Jason Hartman 19:08
but don’t be limited by that. Okay? I mean, you’ve got your wife’s hometown, or something, investments, and then not too far from you, you know, you don’t want to be excluded from a good deal, because the deals more important than the location. You know, that’s just something you want to keep in mind. Are you gonna do a third or fourth or fifth market? You know, we say invest in at least three, but not more than five. Are you going to put another one on there?
Bruce Weyer 19:33
Yes, definitely. Cash is becoming a little bit of an issue at this point, because I just did the two and those are routed about $300,000 apiece. So I got to come up with the downpayment for both of those. Yeah, I definitely plan on it. You know, I’m going to try to close on both of these Palm Coast in this coming spring. And then No, that was another thing that I was going to mention is the cares act. We talked a little bit about that beforehand. So now that I’ve listened to you for a few years I’m all chips in, you know, I’m not doing the whole, hey, let me just give money out of my income that I’m creating now into an IRA or 401k and put on a blindfold and hope I wake up and 35 years and it’s all good, right? I’m just not doing that. So we decided that philosophy good. Yes, I know. So it’s a little bit. It’s not really that scary. But I feel like when I talk to my peers about it, they’re going, what are you doing? You’re you’re listening to some guy on a podcast, and now you’re liquidating your IRA. And I’m saying, Yeah, that’s actually exactly what I’m doing. His name’s Jason Hartman. Here’s the link to one of these things. And that’s Amen. Yeah. Good. Good deal.
Jason Hartman 20:39
So to be specific, what you’re talking about there is are you borrowing money from your IRA, without penalty? Or what exactly is your your Kerouac strategy there or use your liquidating? Because, you know, Tom, Tom wheelwright and Garrett Sutton, both both of those authors are really just not fans of these plans at all. They’re not his I don’t hate them as much as they do. But I don’t think they’re great, either. Okay, so I’m like a little more in the middle than both of them are. But what are your thoughts?
Bruce Weyer 21:14
Yeah, I basically agree with Tom, we’ll right. And I feel like we’ve been fortunate enough. My wife is a registered nurse. And she has been for the last 15 plus years. And you know, she’s getting matched money. She’s working for these great companies. And it’s been building and all that it’s been great. But now that the cares Act came along, they said, Hey, listen, you can take out up to $100,000, with no 10% penalty, and you can also pay the tax on the income from whatever amount you take out over the course of three years instead of getting hit in the first year. Which that’s actually how I say that quadplex, you know, and I said, Hey, you know, if we’re going to be in a bad situation, with this pandemic, and everything going on, at least that’s a silver lining that’s coming out of it, and I’m just going for it.
Jason Hartman 21:57
That’s great. That’s a great deal, you’re gonna do much better in the properties, I am sure that is I’m sure of anything. And one
Bruce Weyer 22:03
other thing that I wanted to talk to you about, or at least mentioned to us, you know, you always say that these deals always look better in the rearview mirror. Right. So I’m trying to take a macro view on this. And even if I do take a little bit of a hit on getting my money out of these IRAs, on the sums that I’m taking out, Jason, once I’ve had that principle paid down, the appreciation goes up, and I have the cash flow coming in, you know, seven, 810 12 years from now. And I look back, I’m gonna say, Man, I wish I bought more of those things. Right. So I completely agree with you on that philosophy that I’ve heard you stayed on the podcast.
Jason Hartman 22:36
Good. Good. I’m glad you like it. Any other questions or thoughts or things you want to share about your own investing plans or experiences?
Bruce Weyer 22:45
Yes. So you had mentioned sometimes taking, acquiring these properties for as little down as possible. So I’ve actually been borrowing on the duplex and on the quad Plex, I own I borrowed private money. And I put down about 10 to 15%. And I held those for a few years. And then when the interest rates dropped as low as they did, I’ve been refinance them. So I was borrowing the money on the quad Plex it was at seven and on the duplex, it was at six and a half, and I just refinance both of those down to 4%. Hmm. And my question is, and I’m going to do the same thing on the two duplexes on the Palm Coast, I have a deal where I can get into both of those at 15%. Down. Mm hmm. So my thought is, is just, you know, hey, make the tenant do the work. If I can acquire an asset for 15% down? Yes, I get a little bit less cash flow each month. What are your thoughts on that?
Jason Hartman 23:39
Oh, I think that’s, that’s great, you know, the only thing you need to consider is the cost of any mortgage insurance that might be required, and the cost of any difference in interest rate, and that, or difference in points and points or just prepaid interest. So it’s the same idea, but that might influence you. To some extent, of course, always, we like as much leverage as possible, as little down as possible. But, you know, if you’re paying a giant premium for that privilege, then you may, you may want to think twice about it and put a little more down, it’s only 5%. So, you know, occasionally I’ve seen to where, you know, even I will say put that extra 5% down, you just have to analyze the loan and the opportunity cost of that money. That’s, that’s really,
Bruce Weyer 24:31
yeah, yeah. Well, that’s kind of the plan that I’m going with is, you know, put as little down as I can while I have the opportunity to do so. And if I need to, like as you say, you know, renegotiate the deal as I go along. Yeah, that’s it’s amazing. And oh, another thing I was talking to you about was my primary home you know, I bought in St. Johns County in 2019 and July of 2019 for 460,000. dollars, and then at 3.75. So but 20% down to 460 at 3.75 locked in for 30 years, I just refi. I did a cash out refi on that three weeks ago, where they newly appraised my property at $530,000. And I got a 2.875 rate for 30.
Jason Hartman 25:23
Awesome. That is phenomenal here. We need sound effects for that. That’s how good it is. Yeah, well, Isn’t that incredible? So you got a 30 year asset there on all of those properties, you know, acquire as many of those assets as you can. That’s the thing to do.
Bruce Weyer 25:42
And I got to thank you for that. Because honestly, I feel like I’m just like doing Black Ops stuff behind the scenes. I’m listening to a podcast, I’m talking to Sarah on the west coast. And I’m like pulling the strings and doing all this stuff. And the people that I in my peer group or my neighbors and other people I’m talking about, there’s not, they’re just really not doing what I’m doing.
Jason Hartman 26:00
Well, you know what, you don’t want everybody doing what you’re doing, because they’ll they’ll make all the great properties. So there’s enough real estate investors out there who get it, don’t worry about that. Sure, there are, but yeah, try to try to convince them and help them. But you know, some people just get at someone. And usually they won’t, in a conversation or soundbite they’ve got to be interested themselves. And they’ve got to not trust the current system we’re all hypnotized with, which is that you know, that 401k IRA Bs, the Wall Street Bs, you know, you got to make your own way. And that’s the that’s the only way to do it. And income properties is the best way to do that. As, as we both know. And probably everybody listening knows. So Bruce, this is, this is awesome. Thank you so much for sharing all of this. Anything else you want to share? It could be about anything, the lumber market, the construction market, your own story? Any questions as we wrap it up?
Bruce Weyer 26:58
No, not really. I think I’m just going all chips in on the lumber industry. You know, I got to thank my friend Aaron copal said, I’ll tell you a quick story. We were standing on the beach with our surfboards. We’re about to go surfing at the beach. And Aaron goes, Hey, I’m gonna fly out to Little Rock, Arkansas next week, and look at buying an investment property. And I had never really heard the idea of the philosophy at all. And I was like what and we’re literally putting wax on the surfboard feet in the sand and not to get a surfing and I just thought about he goes, Yeah, man, I’m just gonna buy a house and have a tenant pay off my debt. And I remember when he said that, I was like, that’s a really good idea. is a good idea. I need to check that out. And, and then it was just kind of all downhill from there. And here we are.
Jason Hartman 27:40
Oh, yeah, good stuff. Good stuff. That’s, that’s great to hear. And folks, just to elaborate on Bruce’s point there. Remember, I’ve said it before. But think about how significant this is, you know, a typical renter will spend 33 40% of their monthly income on rent. So literally, about 10 to 14 days per month. They’re literally working for you to pay off your mortgage. Isn’t that like what other? What other business Bruce? Is there? were some customer spends that high a percentage of their income with this business. There is no other business. It’s not Amazon. It’s not Apple Computer. It’s not not going to Vegas and spending money in casinos. I hope not, at least, you know, nowhere else do they spend as much money as they do is with their landlord. Their landlord is their highest. You know, it’s their it’s the big store. It’s where they spend most of their money. So that’s that’s fantastic.
Bruce Weyer 28:46
And I’ve been that guy I was doing that out in Dana Point California, we could either rent where we wanted to live, which was a block off PCH, and Dana Point and be able to go surfing and have a good time or own where we didn’t want to live which was out there in Riverside, Yorba Linda. And you know where I’m talking about? Yeah,
Jason Hartman 29:02
I definitely know where you’re talking about. And you know what, though renting a place in Dana Point probably wasn’t a bad deal, because the rent to value ratio was in your favor. As long as you own other rental properties to compensate for that rent you pay. So that’s, that’s the point. Awesome. Thank you so much for sharing the story. We really appreciate it. And thank you for your business too. And happy investing. Thanks again.
Bruce Weyer 29:25
You got to Jason, thanks for having me on.
Jason Hartman 29:32
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Jason Hartman starts the show with client Naresh to look at the beginning of his journey in income property investing. Naresh explains why he is also investing in the stock market and cryptocurrencies. He also gives listeners insight into his next rental property purchase.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the company LEED solution for real estate investors.
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One of the unique strategies I implemented a few years ago fit with my 10 commandments of successful investing, especially number eight, thou shalt borrow to accelerate wealth and reduce risk. And number 10 thou shalt only invest in tax favored assets. So my money grows tax free, and I can leverage down payments. My friend Pat Donahoe his team at paradigm life got me started, and I have a few accounts with him now. Check out this perpetual wealth strategy at be your bank.com
Welcome to the creating wealth show, Episode Number 925, nine to five. This is your host, Jason Hartman, thank you so much for joining me today for another episode. We have a few things on tap for you today. We are going to talk a little bit about the five year plan because you don’t have much time to enter that contest. But we have a client case study here with us who will touch on it His five year plan he’s been on the show before, we will talk a little bit about the GOP tax plan. We will talk about interest rates, where are interest rates going very impactful for real estate and the three dimensions of real estate, as I like to call it. And we’ll probably talk a little bit about the dollar and what it means to people around the world. So welcome back a returning guests no rush, how you doing?
Naresh 2:27
Doing awesome. Jason, pleasure to be back on and this time as a client? Yes, it was a client last time I was on I think you were
Jason Hartman 2:35
client last time, but I don’t know I could be wrong about that. You’ve got now two investment properties in your portfolio. And you are engaged to be married. So congratulations, nourish. How are you about 27 now
Naresh 2:48
now I’m turning 29 at meet the Masters coming up in January. Yeah,
Jason Hartman 2:53
I know. Isn’t it cool that you are spending your birthday with us and with Ron Paul actually. So that That’ll be pretty cool. That’ll be a good birthday present for you. We appreciate you coming out on your your big day. So good stuff. Well talk a little bit about your plan now you know you’re renting an apartment I last time I checked at least I don’t know if you change your housing situation. you’re renting and you’re buying investment properties. Now most people your age especially engaged to be married, would be thinking, wow, I gotta buy a house. I gotta buy a house without the proverbial white picket fence. Or at least a little condo or something. You know so the wifey and I can live in that. What are your thoughts?
Naresh 3:34
Well, Jason, I’ve been listening to you for many many years your podcasts I’ve read your materials. I live in Florida and Florida I know is a pretty good market, relatively speaking housing market and you do cover Jacksonville Orlando, New Port Richey or Port Richey. But where I live in the heart of Tampa Bay, the properties just don’t.
Jason Hartman 3:58
Yes,
Naresh 3:59
exactly. Yeah. Exactly, you run the numbers, you crunch the numbers. I mean, it’s it’s actually kind of crazy. A friend of mine bought a course it’s a waterfront penthouse. So it’s going to be overpriced, but cost about $600,000. And the rent that he would get out of that would be less than $2,000 a month.
Jason Hartman 4:17
But you he could get 2200 for that. I’m just guessing. I’m just guessing but those
Naresh 4:23
21
Jason Hartman 4:23
Yeah, it still does work. Yeah, yeah, you’re upset that
Naresh 4:26
let’s be conservative and say are liberal and say 2200. It still doesn’t work. Not that I want to move to a waterfront penthouse. But the properties the places that you want to live in and start a family. Those are right now overvalued. Now, that was not the case. Five, six years ago. Now, I didn’t live here five, six years ago, and I didn’t have any money. Five, six years ago, I was just out of college. Duke University. Right.
Jason Hartman 4:51
You went to Duke? Yeah, I was. I was finishing up my master’s degree, what, six years ago? Yeah, six years ago, five, five years, five or six years. So nourish To give a little background a little context for you, you got your masters at Duke, where’d you do your undergrad?
Naresh 5:04
undergrad was at Syracuse University. So you know
Jason Hartman 5:06
Syracuse and upstate New York and then Duke for masters good stuff. Good stuff. So what are you doing being our client and working for us? I mean, by the way folks nourish has been on the show before and just if you didn’t listen to those old episodes, no fresh books guest for the podcast and does some other odd things for us. In fact, I was teasing you the other day in Russia talking to someone else about you and and saying no, Russia, you know, because Andrew zetland, who you booked as one of our speakers that meet the Masters, he dubbed you as the fixer. I love fat. I just love that. When I when I had him on the show. He’s of course the Moneyball economist. He’ll be speaking at meet the masters. I said yeah, no rush is the fixer. And so I was telling someone else about you. And I said, Yeah, you know, you need to like smuggle arms and the North Korea, no rush. You need to
Naresh 5:57
you need to
Jason Hartman 5:59
get in Athlon on your podcast nourish you need to book them for meet the Masters nourish. You just got to do all these funny odd things, but you worked for a Gora financial and Porter Stansberry before a lot of our listeners now know him and know them. We’ve had a lot of those guests on the show over the years but really got an interesting background you’re very well networked. You’ve authored several books now maybe we’ll touch on one of them because it kind of is interesting for this conversation. But you don’t want another day job do you? I asked you that when I saw you recently I said hey nourished you ever want to get a corporate job again? And you said no way?
Naresh 6:34
Well, Jameson, I don’t know if you’re a member, but the first time we spoke, it was because I believe it was Brittany who your listeners know reached out to Stansbury which is where I was working. I helped launch the Stansberry Radio Network, which is now back in action and Porter Stansberry has his own podcast. I think I was a first person you had been trying for years to get in touch with Stansbury and nobody responded. And I was the first person who actually responded With my email address and phone number, and you gave me a call, and when I was talking to you, this was five or six years ago, when I was talking to you on the phone, you told me about your company, and you said, You used to have an office, you had to use to be a bit corporate, you had, you know, 30 some odd employees, but you cut all that, and now everything’s virtual, and you’re making a lot more money and you own all these real estate properties. And you’re traveled to 100 countries, or however many 81 you have
Jason Hartman 7:28
no rush you you’re just really loose with the statistics. So I had like, 60 Well, in my old company that I sold to cold, why’d like 64 people working for me 64 I think at the time of the sale, and that was a huge hassle babysitting job, I kind of hated it. But I love some things about it, too. Then in you know, the other iteration of this business there nationwide real estate investment business. You know, I had many, many people working for me in offices and so forth. And, you know, it’s just I felt like I was being like a facilities manager. too, I just, it was like, every day, there’s some new issue with a landlord or the office space or, you know, the tenant above us has a pipe that burst and it’s flooding our office. It’s like, these are all just distractions. You know, I just, I just want to do my work. I’m so passionate about it. I love it. And so yeah, we went virtual in 2012. And everybody likes a better and I remember the app Foursquare, this is just a commentary folks on how times are times they are changing, who said that Bob Dylan, I think, and we’ll get back to nourishes client case study here in just a second won’t be a long tangent. But you know, this is what I talked about. And this affects income property investing and it affects the way your tenants think, and the way prospective homebuyers think because I have talked about this before and it’s purely an anecdotal observation, and I’ve dubbed it the portable society. Okay. As we’re all living in the sharing economy, technology has enabled everybody to geo arbitrage as Tim Ferriss called it, I had dinner with Tim Ferriss about two months ago in Austin. You know, people can live anywhere they want now that it’s not about the physical space anymore. It’s about the intellectual property that’s going on between your ears, okay, that’s what it’s about. And it’s about the power of the network that you have. And those kind of resources. That’s what we offer to our clients. You know, having a big office is sort of irrelevant. Like, who cares? No, nobody really cares. And so this affects you as a real estate investor. Well, why Now this may sound minor, okay. But everything I said plus this one. So I have noticed that my own personal household, all of the stuff I have, you know, there’s this whole movement about called the tiny house movement and this movement toward minimalism and so forth. And I’ve noticed that all of my stuff is just getting smaller and smaller and more powerful. You know, in the old days, I mean, I’m, well, I used to be at least a bit of an audio file, right love music. Okay. And by the way, folks, I have excellent taste in music. Just so you know, you’ll hear that I meet the masters. You know, all of my like, electronics are so small. All of my computers are so small, they’re so portable. Now, you know, this stuff used to be big. I used to have a big rack of Denon components and big speakers. And now I can just pick up and move so easily, you know, and I can live anywhere, the stuff that I really need, even though I have way more than I need is really not that significant. You know, like you could fit it all in a pretty small space and it’s easy to move around. So this is the portable society concept. And it intertwines with the sharing economy concept with the Airbnb s and the VR beos and the Uber and Lyft and all of these sharing economy concepts, like if you live in many cities, He’s now you used to always own a bike. Now you don’t even need to own a bike. There are all these sharing economy bikes dams everywhere, where you can rent bikes, you don’t need to own a car. There’s all these really unique modern sharing economy or not even sharing economy, all of them. But just you know, like rental car options now where you can walk up to cars you can find on your phone, in virtually every neighborhood. This is very big in Austin. I can’t remember the name of it, but they got those little smart cars, you know what I’m talking about. You can just walk up to a car you don’t even own and, and your phone will open the door and start the car. And you can just rent it by the hour. And you know, do your errands and you’re done. Just park it anywhere. And someone else will just pick it up anywhere wherever you leave it. It’s an amazing time to be alive.
Naresh 11:46
Well. So five, six years ago when we spoke I didn’t know about any of this and Uber wasn’t around back then. For example, Airbnb wasn’t around, but you actually opened my eyes because you told me how you got rid of The office and your virtual. And you also Matt, I don’t want to be liberal with the statistics again, but you said something like, like you were the CEO of eight different businesses. And I was just like, what I was trained my entire life to, you know, go to school work for a company get a job. Yeah. And so it just kind of blew me away like, Whoa, you can live the dream in a penthouse, who I think you were in Arizona at the time, living in a penthouse, and it just opened my eyes. And five, six years later, I don’t want to say that I am up to your level by any means. But I bought my first income property a few months ago and looking to buy many, many more over the next couple of years. Yeah.
Jason Hartman 12:43
And you’ve got your other you’ve got your other one under contract now. That’s awesome. Yeah. And so let’s talk a little bit about your five year plan. But folks, the message here is that some of us really get like this. We just have old ideas. And the world is like changing all around us. And some of us don’t even realize it. You know, I’ll give you an example. I mean, I have many friends and I noticed this is right and they’re not much older than me. Okay, these but these are the younger baby boomers. Okay. Thankfully I’m a Gen X or barely okay, but I I’m a Gen Xer, okay. And in a rush, you’re a millennial. So these are the different demographic cohorts, but they just, they have very old fashioned thinking, like, it’s all about the big space in the status like nobody much cares anymore about status. You know, there are all these people that I know that are still talking about this, like these old paradigms. They’re just don’t apply the world just does not care. One of them and nourish Hey, listen, you spent a lot of time and money on this is the college degree paradigm. Okay? You know, you went to a prestigious school, you know, hey, You did it. It’s done. But you probably wouldn’t do it again today, I assume, right?
Naresh 14:04
Well, I’ll say when I have kids, it’s going to be a completely different scenario. And you’re absolutely right. I actually think that it depends on the personality. Jason, I think for people like you and me, college can be a complete waste of time. I mean, it’s great for partying, it’s great for, you know, other things. But when it comes to business, making money, the future doesn’t really add a whole lot of value, and 30 years, 20 years, 30 years from now, when you know, hopefully I have kids and they’re getting ready to go to school, it’s going to be a very, very different,
Jason Hartman 14:36
it’s a very different world, the world is changing faster than it’s ever changed. Geography is less meaningful than it’s ever been in human history. And what this means for investors, one of the many things it means is it means that rentals are becoming more and more and more attractive. And I want to talk about this in a moment after you finish Your comment, because I’m really good at interrupting you. Apologize. But one of the things this this also integrates with is the GOP tax plan. And I want to play a little video about that just a sort of a funny video that I think the listeners will enjoy. But yeah, just finish up on your thoughts. And then let’s jump into the GOP tax plan. And let’s talk about interest rates a little bit too.
Naresh 15:24
Okay. Well, I want to go back to the real estate thought really quickly. And then we’ll get into the GOP topic, but I’ve been investing for nearly 10 years now. I started investing when I was in college and it started with the stock market because that’s just kind of the norm here in this country. It’s oh you have money that you want to play around with invested in stocks. So I got started around the financial crisis time. And then I got introduced to new out newer asset or other asset classes like gold and silver precious metals, and then through you I got interested in real estate. And I can say as of right now I’ve only been a client for maybe six months, but I’ve been able to sleep much better at night with my real estate investment than I have been with the stock market with cryptocurrencies with, even with just putting money I’ve tried just putting money in a CD or a savings account. And I’ve just seen better returns with real estate. And I haven’t really lost any sleep maybe an hour or two during the buying process. But outside of that, it’s, you know, knock on wood, things have gone really, really well. And I think the problem in this country is in the education system, the financial, you know, the finance professors in college, for example, they don’t talk about real estate, I had no clue and go, you know, I’m a pretty qualified individual. I had never learned about real estate investing until I met you and started listening to your show. And it wasn’t until about three years after I met you and started listening to your show that the light bulb went off and I said, You know what, let’s stop paying so much. attention to the stock market. And let’s start looking at real estate. It’s really a really awesome way to get cash flow and to preserve wealth. So Wall Street now you know,
Jason Hartman 17:11
good good i got i had you with ROI. Like, yeah, give the Jerry Maguire movie you had me at hello? Had Yeah.
Naresh 17:21
And you know the money let’s say, you know $1,000 home, I could put that money in a CD and I’m getting 100 bucks a month
Jason Hartman 17:28
$100,000 home you meant to say,
Naresh 17:30
yeah, I’m sorry $100,000 home. And if you put that money in a CD, save 2% CD, that’s what 200 bucks a month, you can put that in the stock market and you have no idea what you’re going to be getting moving forward because stock market could crash or if you put it in a individual stock, you have no idea where the stocks gonna go. crypto currencies, I mean, I’d probably be
Naresh 17:54
looking at all gyration you’d
Jason Hartman 17:55
be you’d be up 1,000,000% and then down, you know 700,000 percent in like a day. Exactly.
Naresh 18:03
Like, it’s too much, you know, and and we’re not doing those, Jason to at the end of the day, I think all of us are getting into investing because we just want to be happy and live, live free lives and you’re not free putting $100,000 in cryptocurrencies and you’re seeing 40% swings every two or three hours. Yeah, you’re
Jason Hartman 18:23
gonna be you’re gonna be stressed. You know, I think people that speculate don’t call it investing because it’s not investing that speculate on cryptocurrencies or even you know, cyclical markets or anything, okay. There’s sort of a little it’s a risk of offending people. Okay, this is not like a slam, but look, we all have we all do this, okay. Every human being on Earth would love to get something for nothing. Okay, so, I’m not saying that I’m any different than anybody listening, okay, I’m, I’m just like you, you know, we’re all human. We all have the same Thinking about things in the same psychological makeup. Basically, it’s all the same. But you know, it’s kind of dishonest, right? To do something that’s just totally speculative. It’s sort of like waiting for your ship to come in rather than swimming out to, right. There’s not a legitimate capital creation that you know, has a multiplier effect of creating wealth in the world. It’s just gambling, okay? It’s just total gambling. That’s all it is. The other part of it is, is that you’re going to have, at some point, PTSD, post traumatic stress disorder, okay? Because one day and I don’t know when that day is gonna be, you’re gonna lose a ton of money. Okay, it’s coming, it will happen. It already happened with Bitcoin. Okay, people lost their shirt a couple of years ago. And now the bubble is much, much bigger. And the thing that interestingly, nobody He is talking about is how this whole thing becomes a super cumbersome disaster as it grows, because the electricity and the computational power to process a coin transaction or to mine a coin is unfathomable. It’s fake work. It’s environmental destruction. And look at it if someone was actually using this in commerce, I would believe in it much more. Okay. Yeah, I know overstock accepts it big deal. Naresh, you book, Patrick Byrne on the show. He’s great. Love him. And I’d love to be wrong about all this stuff. I’d love to be wrong. I’ve said that a million times. But the whole thing starts caving in on itself at some point because the weight of just processing a trade of me transferring a coin to you or vice versa. takes like a week of energy. That it would take to run a house for a week. That is totally unsustainable. Okay, it’s nuts, it’s nuts. And then to mine a coin, it takes even more. So this whole thing is just it’s craziness. It’s absolutely, folks we are living through tulip bulb mania. and to a lesser degree, we’re living through that in the stock market. to a lesser degree, we’re living through that in the cyclical real estate markets that you know, the high flying markets on the west coast in South Florida in the expensive Northeastern markets, expensive trophy markets around the world we’re living through that in the linear markets not so much those are the markets we like obviously so you bought your first two investment properties in Memphis nourish, and that’s a very linear boring market. So not part of bubble Ville. not part of bubble though you don’t have irrational exuberance Do you nourish
Naresh 21:54
I used to I suffered from that has two or three years ago And I’ve kind of learned maybe if my brains matured more and I am fine with knowing exactly how much and cashflow I’m going to be making every month, and like you say, appreciation, I don’t even think about it. There could be a real estate crash and as long as my tenants and they’re paying the rent, I’m happy. You’re planning to hold long, long, long, you’re happy as a clam and folks, clams are always smiling. So they’re very happy. Okay, bad humor. I’m just not good.
Jason Hartman 22:29
Okay, I will not be taking up comedy anytime soon, folks. Let’s talk about your recent trip to Colombia. There’s an interesting piece of education here for people who, you know, we got to get onto the GOP tax plan too. But the cryptocurrency thing or so you know, you got all these people that believe that the dollar isn’t backed by anything. I’m so sick of hearing that. See money. Well, what do you think cryptocurrency is? Total Fiat just because it’s not Fiat by decree or authority of any government. It is decentralized. I love that about it. Okay? It’s still Fiat nonetheless, because it has no intrinsic value what so ever. Now the dollar has intrinsic value because it’s got a long, long history. And it’s got a huge, huge military behind it and a huge brand called America behind it. The American brand is, is the world’s biggest brand. It’s bigger than Coca Cola. It’s bigger than anything, nothing is bigger than the American brand. No brand has more value than the United States of America brand. And I’m not being some kind of patriot saying that I’m just it’s just the truth. It’s reality, okay. may not be that way. In 500 years, we will see maybe the Star Trek Federation will have the biggest brand by them. But, you know, today, the United States owns the world’s biggest brand and its currency is the dollar. That’s the extension of the US brand. So you just got back from Colombia, you were in where meta gene as they say not meta gene meta gene. I think the gene meta Gene metazine. Tell us about it. So we’re there like beautiful women everywhere because I’ve never been to meta gene or Colombia at all. And my cousin married a Colombian girl. I’ve had a few friends that have like, moved down there and live down there, you know, single guys and, you know, I don’t know. Tell tell us about tell us about how hot the girls were before we talked about the value of the dollar. Well, you’re engaged, but I’m single. So I need to know this. Yes.
Naresh 24:33
I’ll be quite frank. This is no bias here. But I was a bit disappointed in the local women disappointed meaning kind of like a que I have several friends who moved out of the United States. They moved to meta gene. And they told me about how amazing it was it was paradise and you know, the women are cheap. It is a flu.
Jason Hartman 24:55
As long as you don’t get kidnapped, you’re pretty good. kidnappings are down. 72% in Colombia
Naresh 25:03
Okay, go ahead. And so I guess I might have gone in with with high expectations but I actually think that where I live in Florida, I found better looking women especially near the because I live near the water and that you know, pretty much on a beach. I found the woman here to be.
Jason Hartman 25:20
I’m moving to Tampa now. Okay, and before you know, every everybody listening is gonna think we’re totally shallow and stupid here. So, or sexist one or the other because God forbid everybody’s a sexual criminal nowadays, but some really are sexual criminals. So I don’t want to minimize that. Okay. And we just had the election with good old Roy Moore who lost I guess he hasn’t conceded yet. But that was yesterday, literally. So it looks like he was definitely punished for that. Maybe he is a bad guy. I don’t know really, you know, haven’t followed the story much. So what happened to your friend in Colombia, there was a robbery right Columbia is known for this. What was available to the robbers What was left? What did they take? What did they take? Tell us about that.
Naresh 26:04
So this is quite interesting. As soon as we got to Colombia or two, we had tour guides, and you know, you’d brought up the crime and the safety issues. So we had tour guides or essentially taking care of us, not necessarily our bodyguards. And so, yeah, there was one guy in our group who got robbed. He had his full, you know, he had electronics within he had his wallet, he had a lot of different things. But the only thing or the only item that was taken were US dollars. And it wasn’t even a lot of US dollars. It was, you know, maybe 15 $20 not even a $20 bill was like a 10 with a bunch of ones.
Jason Hartman 26:45
Okay, so the 10 five ones was taken. So $15 us is what they took. And what they had available to them was over whatever over 1000 pesos, I think, and it
Naresh 26:57
wasn’t, it was it was more probably more than that. 50,000 pesos maybe how much? What’s the version? I have no idea what the conversion is, by the way on the peso, you know, 50,000 would be about, okay. $16 and 50. Okay, so they didn’t take the pesos at all. They just took the dollars, no electronics taken, no pesos taken. Really nothing was the only thing was US dollar. So our tour guide, they warned us ahead of time and they said, the US dollar holds a lot of value not just in midday gene or in Colombia in general, but in South America as a whole. And they said it’s even worse in Venezuela. I don’t know
Jason Hartman 27:34
if I’ve ever even better or you should say maybe not worse. Is that not even the right word? But Venezuela Oh, my God, they’d love to have us dollars I’m sure but they’d probably love to have guns and bullets more than anything. And you know, food Venice. What’s happening in Venezuela is just absolutely tragic. It’s completely disgusting. So okay, nourish. So that’s an interesting story about the strength of the US dollar. That is the lesson the almighty dollar. This interviews run into Little bit long, so we’re gonna stop it right here. We’ll pick up the rest of the interview on the next episode of The creating wealth show.
Jason Hartman 28:13
Welcome to meet the masters of income property investing. I’m your host Jason Hartman. Join us in beautiful La Jolla, California on January 12 through 15th. This is your chance to meet the masters of income property investing. Learn from an amazing collection of experts all in one room. You’ll meet a ton of local market specialists, mortgage lenders, tax professionals and investment specialists such as Jeff Myers of Myers research, and john Byrne’s real estate consultant. Learn from Robert Kiyosaki Rich Dad advisors Ken McElroy, his real estate investment expert, and Garrett Sutton is attorney who specializes in asset protection. Find out what leading economists are predicting for 2018 including Danielle DiMartino booth, founder of money strong LLC and Andrew zachman. From Moneyball economics. hear from leading entrepreneurs how to maximize your income streams, you’ll learn unique financial strategies from Patrick Donahoe of paradigm life, and how to give birth to a brand from Brian Smith, founder of UK Australia brand. This year also features a very special guest, Dr. Ron Paul, former Congressman, presidential candidate, and staunch advocate of liberty. Right now you can upgrade your ticket to include VIP access and a dinner with Dr. Paul. Enjoy a fine dining experience and fascinating conversation. Seats are limited so upgrade your ticket today. Ask questions and learn why real estate is the most historically proven asset class. Armed with new information, you’ll have the confidence to take massive action as the saying goes, don’t wait to buy real estate. buy real estate and wait. Surround yourself with like minded People and build friendships that will last a lifetime. share strategies and tips with other investors and hear about their successes and struggles. Make 2018 the year you decide to achieve your dreams. Real estate is a proven way to create true wealth within your lifetime and achieve long term financial independence. Don’t wait. Join us in La Jolla. Reserve your seat today.
Jason Hartman 30:40
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own and if you require specific legal or tax advice or advice and any other specialized area. Please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
