In this episode, Jason Hartman is joined by professor and property investor Michelle. She talks about driverless technology, Capitalism.com podcast, and the end of privatized prisons in the U.S. Jason and Michelle also discuss useful property tools such as the Evaluator app, Property Tracker, and Property Fixer, which would help investors evaluate properties, manage portfolios, and analyze property flips.

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 0:12
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. Real estate investors.

Jason Hartman 1:03
Welcome to episode number 716. And thank you so much for joining me today. This is your host, Jason Hartman. And we are we are getting up there in the numbers, I tell you a 716 Thank you for being with us for so many years, so many listeners have been with us for a long, long time. And I hope you’re one of them. If you’re new to the show, then dig in and feel free to go back and listen to what we call the back catalogue. There’s a lot of very useful information and, and look, it’s just a small assignment. It’s only 715 episodes. So dig in as much as you like. I’ve got with me, Michelle Hawkins back on the show she was on several episodes ago. She is going to be teaching part of our upcoming event in Phoenix on September 10 and 11th. It’s a first time for this event, where we’re going to be talking about using software to become a better real estate investor in terms of evaluating your investments. That’s the first step right, knowing what you’re getting standardizing data, and then also tracking your investments on an ongoing basis. software can really make the whole thing so, so, so much easier. It’s amazing. Michelle, welcome. How are you?

Michelle 2:23
I’m great, Jason, thanks for having me.

Jason Hartman 2:25
Good. And give our listeners a sense of geography. Where are you located?

Michelle 2:29
I’m in Santa Clara, California, which is the heart of Silicon Valley,

Jason Hartman 2:33
Silicon Valley, a famous place where they don’t make any silicon anymore. By the way. I don’t think I actually I think Intel Intel has, is that a fab that Intel has their I mean, you may not know this, I don’t know it. But they have an office there. Of course in Santa Clara. Silicon Valley is a bit of a misnomer nowadays. Because that manufacturing is mostly done somewhere else. But it’s, it’s certainly the high tech capital of the world, isn’t it?

Michelle 2:58
It is well, it says Designed here in this area usually Yes, exactly.

Jason Hartman 3:03
You know, it’s kind of that American philosophy of we think and they sweat. In other words, the idea being that we outsource manufacturing offshore, to more friendly, more business friendly places that don’t have OSHA and the EPA and all that stuff to deal with. And then you have this whole group of people that actually thinks that, you know, China can be polluted, but we got to have really strict environmental regulations here is if we don’t, as john F. Kennedy said, very fittingly, he said, we all breathe the same air, you know, as if it doesn’t circulate around the world, but less we go on a tangent how Michelle? Right. Yes, this may be a tangent. A little alert a little bit. Yeah, a little bit. Oh, gosh. Well, hey, before we dive in and talk about the upcoming event, which I am so excited about. Since you are a professor You’re probably going to be, you’re just going to totally out organize me, I just know this. So this event is probably going to be very organized and very nicely done, folks, if you’ve been to our events before, and you know, you kind of felt that a little bit of it was kind of off the cuff. Well, you’re right, it was this event will probably be much better organized, at the very least, for Michelle’s part of it, maybe not my part, but for Michelle’s part. So we’ll dive into that in a moment. And also, it’s a Buying Event. So we’re going to have several of our teams there are local market specialists as well. But Michelle, before we jumped on the air today, you mentioned Pittsburgh, something big is going on there, isn’t it?

Michelle 4:46
Well, there’s just that new article that came out talking about autonomous vehicles. Yeah, somebody I know likes to talk about those.

Jason Hartman 4:57
Yeah, that that would be yours. Truly, and I tell you folks, this is all coming so much faster than many people think this announcement that Michelle’s mentioning is is an LA Times article. And of course, it’s spread all around the media because all syndicated Luber is about to start giving rides in self driving cars. Yes, the robot cars aren’t coming. The robot cars are here. The article says a fleet of Fords and Volvo’s capable of driving themselves is fully equipped and ready to hit the streets in Pittsburgh within not months, not years, not decades. But within weeks. Yes, within weeks, these cars will be deployed by Uber, the ride hailing company, gosh, I guess that’s a new way. Oh, that. You know what, Michelle, that’s interesting. They use that phrase, the ride hailing company. We used to call this ride sharing And I guess, if there’s not a driver in the car, which is eventually where it’s going, obviously, it’s a ride hailing company where you’re hailing a machine. You’re not sharing a ride with a person. So that’s an interesting distinction, a change in vocabulary there. Experimental robot cars already Prowl streets and highways. But in this case, Uber customers will be in side. Wow. It’s an amazing time to be alive, isn’t it? Yeah,

Michelle 6:33
definitely. I think it’s really exciting because actually, one of the things I don’t like about Uber is that I don’t know who I’m getting in the car with. And if I’m traveling by myself, that’s always made me feel uncomfortable. So this actually, I think, is fantastic.

Jason Hartman 6:49
Well, just in comparison, though, you know, I always like to ask compared to what I mean compared to some stinky dirty taxi. As a woman. You didn’t feel a little more company In an Uber x or Uber black car than you did in some dirty, stinky taxi, the old case, I don’t know, maybe, you know, maybe I mean, look, taxis were marked cars rightly so. I don’t know. You know, that’s an interesting question. I, I as a guy, I felt safer in an Uber. But tell me what you think about that?

Michelle 7:19
Well, I don’t know, the taxi system was just had been around forever. And, you know, who knows how much those folks are vetted and supposedly Ubers drivers are also vetted, but it just seemed like it was more of a company. You know, it just seemed like it had more structure behind it. Whereas an almost anybody could be an Uber driver.

Jason Hartman 7:39
So yeah, fair, fair point. Fair point. Yeah, that’s interesting. So last night, as I mentioned to you, I went to see Star Trek with Fernando and his family, and he’s got two boys, ages 12 and 14. You know, one of the things he says that’s really a burden as a parent is showing referring the kids around to various activities and so forth. And I said he didn’t know the answer to this. I said, you know, okay, can you just, you know, one of the younger boys doesn’t have a smartphone, the older one does. I said, can’t you just have them download the Uber app and jump in an Uber? I mean, I would have done that as a kid. If we had Uber. We didn’t, obviously, but I went all around on my bike. My mother had no idea where I was most of the time. But that was a different era. You know, five years ago when I was a kid. 10 years ago, actually, it was 10 years ago, I think, I don’t even know if that’s legal. Like, would you get arrested? And would your would your kids be taken away by child protective services if you allow a 14 and a 12 year old hail an Uber? I don’t know if the Uber driver or the Lyft driver would pick them up I you know, they they probably have their own requirements, but I’m just kind of wondering, do you your parent, do you know the rules on that?

Michelle 8:57
You know, I don’t know the legal rules. I do know that I know of of a specific child. I think he was around 10 years old who his parents sent him on an Uber to a rehearsal. So I know it’s been done. And I know that there are companies that cater specifically to, you know, driving children around. But

Jason Hartman 9:16
yeah, what I know about those, I

Michelle 9:18
don’t know what they’re called. I mean, they’re usually they’re attached to a specific program, where, you know, if you want your kids to have the after school tutoring, they’ll pick them up from school, take them to the tutoring center, and then maybe even take them to your house. I’m not sure there’s there. You know, there’s always an entrepreneur out there. Yeah, coming up with these ideas, but, but I have two daughters. And so as much as I hate to say it, it, it feels different to have daughters.

Michelle 9:45
And I would not stick them in a car on their own. Just how old are your daughters? They are seven and 10.

Jason Hartman 9:53
So when they’re 16 with me, okay, or I you know, I’m sort of wondering what’s the What’s the rule on that? parents out there, chime in if you want, give us some feedback told

Michelle 10:05
I told the older one I said, when you turn 16, you are getting your license, end of story because I don’t want to drive around anymore.

Jason Hartman 10:13
Right. So maybe it’s safer to be driven than to drive themselves. That’s a strong possibility, you know, because there are other factors with driving themselves, right. But that’s, yeah, definitely interesting. I tell you, if I ever have a daughter, I will lock her up in the house until she’s 35. But she won’t be able to go anywhere. Just kidding. But yeah, it’s this is really amazing. The article goes on to say that Uber is accelerating its plan to replace its 1 million. Wow, that’s insane. Talk about talk about job creation. And then as Joseph Schumpeter, the economist talked about creative destruction First of all, the creation of 1 million jobs. That’s that’s what Uber is created. That’s, that’s incredible. And then, you know, we’re not even talking about Lyft and the other ride sharing companies LY ft, by the way, which is great. I love Lyft I absolutely love Lyft and I think the drivers like Lyft better, but less we get on a tangent on customers. Yeah, and customer Oh, you do like it better to write.

Michelle 11:22
And I’ve heard from my millennial students, they like it better.

Jason Hartman 11:25
Yeah. Lyft is kind of a friendlier company. I think, you know, it’s just a different culture. So I tried to take Lyft whenever I can, because as much as I love Uber and the innovation, I want Uber to have a competitor. So the market has competition. And Uber is obviously much, much bigger than Lyft. So that’s important. But you know, they’re they’re accelerating. It’s accelerating. It’s planned to replace 1 million Uber human drivers with robots as quickly as possible. Uber chief executive, Travis Callen ik I think that’s how you say that said it. It said in a Blog Post Thursday, he also announced a partnership with Volvo to work on driverless car development and the acquisition of auto that’s Oto a driverless truck technology company. I was just reading an article about them the other day. What they do is they retrofit big trucks, like semi trucks, big giant trucks, and make them driverless or self driving. And they said, they are going to be close to the point pretty quickly, where the truck I’ll say in quotes driver can be sleeping in the cab, just taking a nap as the truck a semi truck drives itself. And they said there’s never been any mishaps with their system. So it really is obviously very amazing. It’s why I purchased a Tesla last December, there has been one fatal Tesla accident that their technology I believe was at fault for and that’s that’s when a tractor trailer pulled in front of the car and car didn’t recognize it because the the for the three or four feet below the trailer was open. But it you know, the sensor didn’t sense that hey, you know there’s the whole car’s got to clear the space here, obviously. And the driver was just I’m sure decapitated. It’s pretty terrible, but he was watching a Harry Potter movie. So he probably shouldn’t have been doing that either. But yeah, while he was driving, so, so why are we talking about this, folks because it has a huge impact on real estate. As I’ve said before, the three primary rules of real estate have always been always throughout history. Back to the cave days when we were living in caves have always been location, location, location, and driverless technology, autonomous vehicles make location less meaningful than it’s ever been in human history. And there’s another huge factor obviously, because we just talked about 1 million Uber drivers being replaced by robots. There is the whole question of employment or unemployment, and what AI, robotic technology, all of these incredible technologies that make it an amazing time to be alive. What do they mean for jobs? Will your tenants have jobs? I just did an interview for a new podcast that I was actually hired to host called for capitalism calm. It’s my friend Ryan Moran’s kind of passion project to save capitalism for Generation Y. He’s a generation wire. And he believes that they’re leaning towards socialism. I did a show for them recently. That was about the destruction of capitalism through artificial intelligence. And I you know, I don’t know how this is all gonna play out. It’s it’s pretty weird but a huge industry globally. Is transportation, as so many of our listeners have pointed out? If we’re going to have rental properties, our tenants probably need to have jobs. Well, you know, if you’re renting to section eight tenants, a lot of them don’t have jobs. They’re just on, quote, disability, unquote. It’s amazing how many young people are disabled nowadays because the government pays them to be disabled. But you know, that’s what gets rewarded gets repeated. Right?

Michelle 15:23
Definitely.

Jason Hartman 15:27
Have you noticed I’m doing all the talking here?

Michelle 15:29
Yes, but you you’re really good at it. Jason.

Jason Hartman 15:33
Sorry, Michelle. Here, I asked you to come on the show with me and then I don’t shut up. Hmm.

Michelle 15:40
I would say I would say we’re more than leaning towards socialism,

Jason Hartman 15:45
or galloping Gordon.

Michelle 15:46
Yeah, with full speed ahead.

Jason Hartman 15:48
As Howard gruff says we’re galloping toward it. And I love what you said to me when we first met. You know, of course, you’re a podcast listener to the podcast and a client of ours. And then you’ve gotten involved with our real estate. Tools company, and you’re doing some great work with real estate tools. And that’s why you’re teaching part of the course coming up in Phoenix in September. But the greatest line ever was what you said to me. Do you remember? Do you know what I’m going to say, Michelle, about that?

Michelle 16:15
I do. It’s lonely being a libertarian in San Francisco.

Jason Hartman 16:23
It really is. It’s lonely being a libertarian in San Francisco. How many of them are there? Is your husband a libertarian?

Michelle 16:32
Yes. Okay.

Jason Hartman 16:33
So there’s two at least

Michelle 16:34
there’s two that I know of. Yeah.

Michelle 16:37
have met in the Bay Area. I know one other. Actually. Actually. Well, I, I do actually belong to a very tiny book club. There’s four of us in there for ladies who are all objectivists.

Jason Hartman 16:52
So wine Rams? Yes. So so we get together and we talk about books and novels and politics and blah, blah. So there’s at least five that I know of and you probably contemplate the question the somewhat rhetorical question. Who is john Galt? Your club, right? Yeah, where is he? Where? Yeah, that question nowadays is where is john Galt? We certainly need some john Gold’s in the world, don’t we? But very interesting stuff. Tell us about the event coming up in tell us some of the stuff you’re going to be covering. You have See, you actually know how to educate people. Unlike me who just rambles on and on. You have some great ideas for how to present this information. I love some of the stuff we talked about a few days ago when I was in Jackson Hole, Jackson Hole, Wyoming, share some of that with listeners.

Michelle 17:45
Well, I’m going to be doing two different presentations. The first one will be on our iOS apps. The most relevant one to your listeners is probably the evaluator app. And what we’re going to do is we’re going to take an actual proform that you might get from any provider, maybe if you’re out shopping on your own, and you get a pro forma, and it tells you certain information. But a lot of times it doesn’t tell you the whole story. It doesn’t answer every question that you might have. And so origin map,

Jason Hartman 18:16
left something out. Yeah, imagine Can you believe it?

Michelle 18:19
So, so we’ll go through the exercise of actually plugging in the numbers and filling in those gaps. And along the way, just explaining, you know, why certain things are important to know and what types of things you can be thinking about and evaluating as, as an investor. And then we can also, you know, take a look at that, and also, some of the variables, you know, we can play around with them and do you know, conservative or more optimistic scenarios so that you can ask yourself, you know, if even if it’s under, you know, sort of a worst case scenario, is this still a good deal for me? And if the answer is yes, Then why wouldn’t you go for it?

Jason Hartman 19:02
Absolutely. That’s great. You know, Michelle, when I got into this business back in 2004, and what I mean is not the real estate business, of course, I was in back in that in like, I don’t know, 1911 or something. It’s a long time ago, but into the nationwide investing business. Two of the decisions that I think I was very fortunate to, to make and make good decisions on this right away. Or number one, I knew who my customer was, it was the investor, not the provider of the property is not the seller. And number two standardizing data data standardization is a critical critical thing as an investor because as I was shopping around trying to do this myself, and I’m basically I got into this business and created these, these companies that that do this to become my own customer because it was so difficult to buy properties nationwide, the the the level of absolute incompetence out there was mind boggling. And the kind of junk that you would get from these different sellers of property in all of these different formats. It’s like you had to be a detective every time to just analyze a property to underwrite a deal. And the the amount of questions back and forth in the emails back and forth and the the detective work, it was beyond the beyond. I just couldn’t believe it. And so that back in 2004, that’s really one of the first things I did data standardization. So you standardize your data. And you’re a lot less likely to make mistakes when you’re choosing a property. And so you had this great idea, which is to take some different performance from some different companies out there, and then put them into our software and standardized them and see if they even have the complete info there for you to standardize in the first place. Right, right.

Michelle 21:05
Well, yeah, a lot of them they leave out maintenance or they leave out vacancy. And they just have a little note at the bottom saying, Oh, you should take that into account as well.

Jason Hartman 21:16
Right, you might want to think about those extra cost. That changed the whole dynamics of the bill. And maybe it’s not as good as it looks. Exactly.

Michelle 21:23
Yeah.

Jason Hartman 21:24
Yeah. Amazing. Amazing. Okay, good. Good stuff. What else are you going to be talking about?

Michelle 21:29
Well, we other presentation for me is on the online software, which is property tracker. And that software is designed for really managing your portfolio once you’ve purchased it. You can also evaluate the purchase beforehand through that software, but then afterwards, it helps you to manage them on an ongoing basis. And so we get a lot of questions just around you know, how do I input all the information? How do I, you know, input the data as it’s coming in, you know, on a monthly basis. This. So we’re just gonna walk participants through that step by step and show them how to do it.

Jason Hartman 22:08
Now, what about home flippers? We’re not really into flipping as a philosophy. We’re into the buy and hold stuff. Are we going to talk about our other app? property flipper?

Michelle 22:18
If we do have time?

Jason Hartman 22:20
Yeah. A fixer. So he changed the name of it. Yeah, right, right. Yep.

Michelle 22:24
Yeah. If there’s time, sure, we can definitely take a look at that app as well. Yeah,

Jason Hartman 22:28
so we’ve got a little app that makes it really easy. And I know we’re not talking to most of our audience here. But there are a few of you out there who are into the flipping thing. We’ve got a little app for your iOS device, iPad, or iPhone, that helps you analyze flips really quickly, and see if they make sense and see how much money you might make on that deal. So we can do a little short demo on that one, hopefully, too. So good stuff. And then we’re going to have our providers there from three or four of our markets, that we’ll be talking about the different properties they have. And and Michelle, you had a good idea for that to take some of those properties and kind of analyze them in some different ways, right? Yes. Well, we thought we could take some of the properties that they’re going to have for sale and put that into property tracker and take a look at it. Try different scenarios. And, and see if it’s see if it’s a deal. be critical of them, right. be critical of them. Yeah, yeah, that’s great. It’s so nice to have the freedom of not being attached to any one property or any one market to be able to be property agnostic and area agnostic, because we have this variety of inventory that people can buy. So it doesn’t have to be in any specific market or it doesn’t have to be any specific local market specialist or type of property or anything like that, right?

Michelle 23:49
Yes. Can I tell you Jason, one of the things that I really appreciate about you and your company, is actually the level of transparency that you have that you can go on your website and you can really see the inventory that your company is has gathered. But you’re very honest that it’s not perfect. It’s just better than anything else. So as the investor, you know, you’re not just being sold this really rosy picture, you know that you have to do your due diligence, you have to do your own evaluation.

Michelle 24:24
And I just really appreciate that.

Jason Hartman 24:26
Yeah, thank you. I appreciate that. And no, you can’t tell anybody that. You just did. Yeah, no, I appreciate that. Michelle, and thank you. You know, we’re just here. Our big goal is help people move their money away from the modern version of organized crime known as Wall Street, they, the modern mafia, that that does a great job separating people from their money. We want to help people become direct investors so they can be in control. Since my head is getting really fat right now and I can barely fit through the door, can I read two nice testimonials we got this week. Of course, real quick. These were on iTunes and they were reviews for the podcast and I, I so much appreciate any of you listening, please go write a review for the podcast. We really appreciate that. We try to read them on the air as much as we can. But there were two nice ones this week. One from Mark Cropper. Thank you, Mark. Appreciate that. It says great insights. It’s a five star review from a man who practices everything he preaches. Well, just so you know, that’s not really true, but thank you. I don’t practice everything I breach. Sometimes my my own worst enemy. But thank you for saying that from the man who practices everything he preaches. Very interesting and informative talk about real estate investing and beyond keep producing these helpful podcast Jason, they are valuable. Thank you, Mark. I appreciate it. And then the next one was great straightforward advice, information and knowledge. This one. It’s not they don’t really say the name. So I don’t I think it’s Evan. But it might be a typo there. I’m not exactly sure. But it’s a five star review. And it says Jason has grown and evolved over the years. And his podcast mirrors this. Jason, I love your podcast. If you want to learn about real estate, politics and life, listen to this podcast. Jason is a knowledgeable fellow, a funny dude. And if you can get beyond his rants, which I particularly get a positive kick out of, then you have to listen to this podcast. Thanks again, Jason. So thank you for that. I appreciate it. We will keep churning them out until we get to Episode 30 562. That’s when we’re gonna quit. I think 3562 Do you think that’s a good number to quit on Michelle? No. Okay. All right. All right. Hey, um, in other news here real quickly, just I want to actually give some credit. Yes. redhead I want to commend and pat on the back. Our president, Mr. Obama, who I don’t usually give any credit to. But I think he’s done like four good things in office. And this is one of them. And it is. And this is a Business Insider article, but I saw it in a bunch of places. And the media says, the debate over private prisons is masking the real problems with America’s prison industry. So you can debate that all you want. But the Obama administration has said that they are going to move away from privatized prisons, in terms of the federal government, and I hope states will follow because as much as I love capitalism, I don’t think capitalism works in areas where you incentivize people to take away people’s freedom or to kill them and what I mean by killing them I mean, the war machine, the military animal Real complex. These are areas where capitalism, it doesn’t work so well. Don’t at least that’s my opinion. You know, when I first heard of privatized prisons in the 90s, I thought they were good idea. I thought, yeah, let’s outsource this to private industry, they will do a much better job than the government, you know, they’ll be more efficient, it’ll be less expensive. But unfortunately, as that great book I’ve talked about in the past, the greatest management principle in the world, probably written back in the 80s, by Michael lebeau, or Michael above. And the the thesis of the book is what gets rewarded gets repeated, and the prison population has skyrocketed and laws have become more draconian, they become stricter, because there’s this whole industry that is incentivized by finding reasons for people to break the law so they can be imprisoned. There’s a whole nother industry, the military industrial complex that finds reasons to go to war, because it’s very profitable. And that’s the central bankers, of course, are in on that deal. They have been for a long time. So yeah, I don’t want to see prisons privatized. I want to let that one go back to the government. Am I crazy? Michelle, what do you think?

Michelle 29:13
No, I don’t think so. I mean, even as a libertarian, we recognize that there are certain areas where we do need government. It’s not a no government philosophy. It’s just limited. But there are certain functions that are the primary responsibility of government. And I would definitely say, you know, law enforcement and incarceration would be some of those things.

Jason Hartman 29:34
Yeah, yeah. And like Iran says the government has to maintain the monopoly on the ability to inflict violence, because occasionally you need to, and that needs to be only the government that does that. And in a way privatized prisons are inflicting in a sense of violence. You know, the government needs to maintain the court system. And these are things that even Iran says, you know, what? Government needs to do. So I agree. And, you know, infrastructure in general needs to be the government’s responsibility. But please get the hell out of everything else in our lives.

Michelle 30:12
That would be great. I mean, talking about the prison population exploding, you really have to talk about our drug laws. And I know that’s a tangent and a whole can of worms, but it’s just really a national travesty, I think with

Jason Hartman 30:24
what’s going on. It is it really is, you know, drug addiction needs to be treated as a social and a medical problem if he asked me, yeah, we got to stop incarcerating people for that. So you know, I’m gonna give Obama some credit. He’s hardened a lot of nonviolent drug offenders. Now, I haven’t looked at individual cases. I hope I’m not sorry for saying this. This move by the DOJ away from privatized prisons, I think is a good one. And, you know, it’s we’ll put it up there with you know, the five good things Obama’s done in eight years. I’m not exactly a fan in case you haven’t noticed, but I’ll give him credit where it’s due. I’ll never forgive him for Obamacare for disaster that’s already falling apart. So it’s just epic disaster. Yeah. Yeah, we can talk about that on another show. But I know we got to wrap it up. So Michelle, thank you for joining me.

Michelle 31:16
Know. Thanks for having me. Yeah,

Jason Hartman 31:17
a couple another quick announcement, folks. We’ve got a great event coming up just in about, I guess what is that about 10 days away in Seattle, our venture Alliance weekend. That’s on Labor Day weekend. And if you’d like to join us for that, check out venture Alliance mastermind calm for the software and buying event, which is the next the following weekend, September 10, and 11th. Go to Jason Hartman calm, click on the events section and join us for that. There’s still the second tier of early bird pricing for that event. And I know some of you missed out on the first early bird tier and you were kind of bummed about that, but the room is filling up. You got to register ASAP Jason hartman.com slash events. And we look forward to seeing you there. Michelle, thanks again for joining me.

Announcer 32:06
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This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.

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At the start of the show, Jason Hartman is joined by a long-time real estate investor, Drew. They talk about the pitfalls of trying to time the market, bulletproofing your properties when you first purchase them, and what happens when you over-diversify your real estate portfolio. Then, Jason plays a recording of the self-management expert panel to answer questions such as the difficulty of finding tenants when self-managing properties, best communication tools to use with tenants, and how to facilitate move-out inspections and handle legal infringements.

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 0:12
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 we estate investors.

Jason Hartman 1:03
Welcome listeners from around the world. Thank you so much for joining me. This is your host Jason Hartman with episode number 731 731. We are going to have the second half sort of a q&a session that I think you’re going to get a lot of information out. This is a meaty high content q&a session from one of our live events. We’ll have that coming up in a few minutes. But first, I wanted to do a kind of a roundup circling back with one of our prior investor case studies from several years ago, you might remember the young gentleman in his 20s, who was on the show, back maybe I want to say about five years ago, maybe four years ago, I’m not sure. He was talking about how he had his own business and how he was buying rental properties in Indianapolis and then in Memphis after that, and over the years, he’s had some definite bumps in the road. It hasn’t always been easy for sure. But he left me a nice Vox message about two weeks ago. And he said, You know what? I know I’ve complained now and then but overall I’m really happy because I just checked the value of my property on Zillow. And he was super happy. And that was drew and drew is a new father. Well, relatively new father, since he was on the show last he got married and had a kid. And he talked before about his warehouse in Laguna Beach. And that’s where I am. I’m with him at his warehouse, because he was kind enough to take in some boxes for me, and I’m picking them up out here after being in San Diego for a couple of days. And so we are in Laguna Beach, California.

Drew, welcome back. How are you?

Drew 2:42
Hi, welcome. Thanks for having me. Yeah, sure. Beats being 106. England. It’s a, it’s a little cooler here. A little cooler, but still pretty hot. So we’re in the canyon right now. But yeah, thanks for having me on the show.

Jason Hartman 2:56
So what’s been going on with you the past few years with your investments business has grown dramatically. So congratulations. Yeah, yeah, great business.

Drew 3:04
Yeah. So I mostly sell stuff on Amazon. That’s kind of that business has kind of exploded for me and you sell printer cartridges. That’s your main thing, right? Yeah. So when I started, I kind of focused on customers that were small businesses and quickly learned that really where the money is, and where the least amount of complaints are, are the people that have the deep wallets, who buy larger cartridges that go in commercial machines, and mercial printers, commercial printers that do banners and blueprints and that sort of thing. So I sort of focused more on that inventory, you know, then the $20 cartridges so these cartridges might be $250 rather than $20. So I’ve kind of explored that, you know, built my website, so if you have a plotter, feel free to go to my website.

Jason Hartman 3:50
I didn’t know this was gonna be self promotional, but Go For It Ain’t Safari.

Drew 3:53
Yeah, ink safari.com. So Ink safari.com and it’s a small

Jason Hartman 3:59
He’s a shameless self promoter here. We wanted to talk about your real estate investing.

Drew 4:04
But yeah, so my, my real estate investing was kind of interesting. I had bought four properties and in Indianapolis, and that kind of gave me the money to, here’s what happened really, I wanted I’d save a bunch of money to buy a house in California. And since I’m self employed, once the economy fell out, I had probably about 50% of funds to put down on a house in California. And I found that since I’m self employed, and I’m really self employed, I’m not, you know, stated income self employed, that a lot of issues I was having was no everyone laughed when they wanted to lend me money.

Jason Hartman 4:43
Hey, they don’t want to let you qualify for loans. So your investments actually on the investment side, I mean, that’s kind of what kept you from buying a house for a little while. Yeah,

Drew 4:51
you know, so I ended up buying a house I bought a house in 2013. And we bought a house in Old Town orange, which is a smaller All area walking or walking to the sir. You know, like the

Jason Hartman 5:03
university there’s,

Drew 5:04
there’s like, you know a bunch of antique shops and restaurants it’s a cute area but we moved from Laguna Beach inland because you can’t buy anything. Yeah. And Laguna Beach you know, if you want you get crap shack for a million dollars and now they’re it’s 1,000,005. Now they’re Yeah, now they’re about 2 million so. So we bought a house out there and actually did really well even we probably would that was the luck.

Jason Hartman 5:25
That was it. It was up to us about your investment property. Okay, so those are the sensible cash flowing properties. And here’s one of the things I wanted to say about that. I just met one of our other clients who many of you have met. He’s also my partner in a couple of properties. We own together some large properties, a mobile home park and an apartment complex. And many of you met him his name is Steve at some of our events, maybe at our meet the Masters he was at the one last year but the year before last. And I pointed him out in the audience and I know several of you listening may have talked to him. But here’s one of the things he said drew and I think that’s kind of interesting. It goes was in line with your story. He said that he was talking with a real estate expert who compared buying a property in San Jose, California in 1986. Okay, like before that well before, a lot of the Silicon Valley boom, I mean, certainly there was some of that going on back then. And then comparing it to buying a property like St. Louis and some other of these linear markets, and how much more money you would have made on that property. But I said, Wait, Steve, are you really doing the math right? Because the Silicon Valley property in San Jose, back in 1986. And listen, I remember 1986 and I, I remember, actually, I was dating I this gorgeous Canadian girlfriend from Vancouver, and I dropped her off because she came down to visit me in Southern California. We drove up the coast and went to San Francisco and stuff like that, and I dropped her off at the San Jose airport. And I remember that’s the last time I saw so remember how I was

Drew 6:59
feeling leaving Long Distance short term.

Jason Hartman 7:01
Yeah, well, it wasn’t that short term here. But anyway, here we go on another tangent. Right. Okay, back to real estate. But I remember consciously thinking of, you know, how San Jose was and the Silicon Valley market back then. And it’s, you know, for a long time when a high flyer of markets, right, but even back then your rent to value ratio was only point 4% versus 1%. So, yes, you would have made a lot more money in appreciation on the San Jose property, but you would have been feeding in all these years, okay. Because, you know, you you would have received six tenths of a percent less money and income every month for all those decades, versus what you receive on a St. Louis property, for example, or a Chicago land property or a Memphis property. Yeah, that’s the

Drew 7:55
more I think a lot of it comes down to timing. I think there were more a longer period. of opportunity possibly in these other markets that you recommend. Then maybe in California, like I’ll give you a perfect example, when we lived in Laguna Beach, we were living in a four Plex that they bought in 2010. For 810,000. we’re

Jason Hartman 8:13
renting it you’re renting, okay. And

Drew 8:15
they had an eight, an eight, four Plex for $810,000. They probably put, you know, 50 grand into fixing it up. So all together, you know, let’s say they were in there for 850. The house next door to me in orange, that’s a two Plex sold last week, basically, for 830. So about the same amount of money. So a four Plex at the beach versus a two Plex inland. So the price is that same place in Laguna Beach is probably worth 2.5. And they bought it for 810. So but nobody,

Jason Hartman 8:49
there’s two things though. Nobody knew that was gonna write right it was speculative. Yeah. This is what I always say, look, lots of people get lucky and these high properties, they don’t view them right, their brain gets all cloudy and foggy and turns to mush because the property basically becomes because the cash flow is so crappy, it becomes a forced savings program where they for, you know, 10 years are supporting that property, either by not getting the the cash on cash return they should have received. You can’t hear the dogs that don’t bark or nobody, nobody looks at the profound impact of what didn’t happen. And what didn’t happen is they didn’t have a self supporting property or a cash flow positive property with good return on invest. Yeah, I think that that’s what didn’t happen what they didn’t notice. They had the forced savings program, and they think, Oh, God, the value went way up. But you know, and that’s great. And they got their their windfall, but they’ve been supporting it for a long time in a forced savings program, which in a way look at for undisciplined people at the very least. least some real estate is a four saving program, right? It’s like, Look, you don’t have a choice, you have to contribute to Social Security. Now we know that’s a big Ponzi scheme, of course. But if it were a legitimate savings program, as it was designed to be originally, that’s what sometimes your real estate can be, because it’s not easy to pull the equity out and spend it like in a checking account.

Drew 10:21
Yeah, I think what’s there is there’s a couple factors here. I mean, when I bought my properties in Indianapolis, you’re looking at, you know, a house that I bought for 50 grand, and I probably put 10 grand into it, you’re gonna make everybody very jealous, because you can’t repeat that nowadays.

Jason Hartman 10:38
No, you can, but it would not be a property like what he got,

Drew 10:42
yes, I I bought in these clustered neighborhoods where they were all built fairly, you know, 2005 2006. And so they’re all new builds, and boom, bust, boom, bust time, so everyone that got in there bought at a bad time. So there was a Since most people paid put nothing down, there was an incentive to walk away, because they had very little skin in the game. So since there was such a gluttony of inventory, you know, I sort of was able to buy something below the cost of construction. So I’m buying it, I’m probably getting close to like a 1.7 return on investment of the RV ratio. Whereas like, probably if I bought in Laguna Beach, my RV ratio would be point seven. And if I bought it the best time ever, ever, ever, ever,

Jason Hartman 11:32
it’s the best time ever and we’re gonna beat you would have been point five probably like, Yeah, no, no. prices were the lowest Yeah, most depressed and the rents were the highest as a ratio.

Drew 11:41
Yeah, probably. Yeah. Between. Yeah, I think that, okay, something like that. So, you know, and the thing is, I wasn’t I couldn’t buy a house in Laguna Beach, and I couldn’t get financing. So the ability of me being able to buy a house was how much money I had as cash in the bank. So I sort of was doing this thing every six months. I would just scrap And save and do as best I could.

Drew 12:03
With cap, I know you buy finance, I bought a rental property with cash and then the rent that I was getting from those rental properties paid for my rent in Laguna. So, you know, then I grew up and moved to move to a house

Jason Hartman 12:18
and got married, got married. So

Drew 12:20
I think the one lesson that I learned along the way that I would just encourage people to do is that when you buy the property, make sure you have a buffer to add improvement value to the property when you purchase it. So I’ll give you an example. A lot of these houses that I bought, they needed carpet replaced, and I hadn’t saved up quite enough money to the only thing I could do is just put in kind of the cheapest carpet you could get to get a renter. But let me just

Jason Hartman 12:48
because one of the things we may actually have that on this segment, I can’t remember. But one of the things, folks and I talked to this Steve about this at lunch, I want you to start bulletproofing your properties In the long run, it’s gonna be a lot less expensive in the short run it’s gonna cost only a little more yeah so the example being vinyl plank flooring and eggshell or low sheen right throughout small difference, but it can it can make those turns a lot less expensive and

Drew 13:17
I don’t think Jason Jason we haven’t talked about this so I’m this is not on the air. Yeah, this is this is not this is not a coordinated effort, but I completely agree with Jason. I went and every single property once the property management company said this carpet needs to be replaced. Here’s the bid for you know, here’s the bid to replace $1 square foot it costs you know, 1500 dollars to replace the vinyl. Replace it with carpet. I went with vinyl plank flooring 500

Drew 13:46
Yeah, vinyl plank flooring, you

Jason Hartman 13:47
know, and it’s well it’s it might

Drew 13:49
be more than that. But yeah, it’s it’s it’s way worth it because if it’s two times or at the most three times of replacing cars anymore, okay, well the thing is, you can Buy vinyl plank flooring now for about the same amount as carpet well,

Jason Hartman 14:03
little, little,

Drew 14:04
little little more because of the installation. We did.

Jason Hartman 14:06
We did the comparison on the last show Fernando and I were at a on the Wednesday show not the flashback Friday. But Fernando and I were at a real estate Expo and the prices we got there were you know decent rental type carpet a buck 20 a square foot vinyl plank $2 Yeah,

Drew 14:24
that’s what wasn’t quite double. And yeah, that’s that’s true. You can get the cheap stuff for a buck but I wouldn’t recommend that spend $2 get the nice stuff. So it doesn’t you know, and the thing that’s nice about vinyl plank flooring, it has a residential warranty usually lifetime. It’s extremely simple to install. You could do it yourself, but you’re probably not there. And what’s also really nice about it is it’s waterproof so it can seamlessly go from the bathroom to the kitchen to the living room and just try and just do one flooring throughout your house. Don’t have tile here and vinyl plank. Bear and just have it all the same, it looks much better. It doesn’t cut the house up. And it’s a lot simpler when you need to do a replacement and take the exacto knife and cut out one of those pieces of plank

Jason Hartman 15:11
to put another one in.

Drew 15:12
Yeah, so I kind of systematically went through each one of my properties and replaced it and kind of upgraded as I went and added, you know, added value to the house and added you know, what would be rental, a little bit more rental income to cover the gap because people it has a nicer appeal inside. And so I call it you call it What did you call it? I call it baby proofing. I call it a bulletproof baby proofing.

Jason Hartman 15:38
Yeah. So that’s our babies, aren’t they?

Drew 15:41
Yeah, and I think it’s actually really helped in the rehab in the, in the in the rent ready beds. You know, so I recently got a rent ready bid, and it was probably half of what it would have been if I had carpet.

Jason Hartman 15:54
So. So look at as the next time any of you have a make ready that you need to do Then, you know, just do get the eggshell paint in there. And that’s the finish, not the color. That’s just the finish the the good paint that you can, you can wipe it off with 409 are fantastic. And it’s clean, it doesn’t scuff up very easily or anything and get the get the vinyl plank type floors and make your properties more bulletproof. So that’s a good lesson. But Drew, look, we got to get to our segment. And it’s funny because you said you didn’t have anything to say. It’s been 16 minutes we’ve been talking right. Okay, so but here’s what I wanted to tell people is, I think one of the big lessons from your experience as an investor. I mean, you’re excited about investing again now, but you had some years where you were getting pretty discouraged where you were looking at it like this and I remember talking to Katie, your wife about it, where it’s like you can make so much more money focusing on your business than screwing around with these little rental properties. You know, that was kind of the attitude for a while. But what you don’t notice a lot of times and this is the thing investors is what is kind of happening happening behind the scenes. Yeah, there is some real wealth being created for you there. Because the properties are like a big cruise ship. It goes very slowly. You know, the business is like an airplane, if you’ve got a successful business, okay, and it’s going from place to place really quickly, the cruise ship is just chugging away real slowly. It’s only going 20 knots, but it gets there, you know. Alright. So I think that’s the lesson I kind of wanted to share.

Drew 17:25
Yeah, so I, you know, there’s, there’s, you know, there’s obviously active income and passive income, if you want to call it that, and my

Jason Hartman 17:33
bubble wrap. Yes.

Drew 17:34
Yeah. So there’s plenty. There’s plenty of that here. Your injuries were on. But, you know, and so I kind of have changed my tune a little bit. And, you know, you need to focus on both because, you know, one is going to pay the bills now, and one will probably pay the bills later. That’s kind of what I’ve focused on. And, and so yeah, I am interested in investing in the future and Jason always tells me Not to time the market but it seems quite frothy. Well I

Jason Hartman 18:04
mean depends on where you live in California it’s

Drew 18:08
crazy but but yeah I’m I’m sort of waiting for the where the smart money will go and trying to sort of see I gosh I wish I bought some silver back when it was 14 but I know you’re not a gold bug but

Jason Hartman 18:21
precious 20 now Yeah, yeah precious metals are overrated But hey, silver was at 46 that’s truly $7 and they all said then it was going to 75 but it never did

Drew 18:31
yeah it’s I don’t be a speculator

Jason Hartman 18:34
cashflow investor, folks. That’s that’s really the rule and and you know, I know you’re trying to time the market, but I’m telling you, I’ve never seen a market timer win in the long run.

Drew 18:45
No, and honestly, the thing is, is I think I was pretty good at timing the market last time. Oh, you

Jason Hartman 18:52
back then. And that’s 2020 hindsight is 20 in the Ruby, and of course you made a fortune

Drew 18:58
yet. So I think I time the market. Well, but here’s the here’s to your point is that my plan of buying a house in California at the bottom was I got blindsided by some unknown factor. And I couldn’t buy a house at the bottom I wanted to but I couldn’t because they were lending money out. So I kind of had to change my change my plan. So, you know, now I’m trying to figure out where to throw the dice now and I don’t know what do you think

Jason Hartman 19:25
don’t throw dice invest for cash flow. That’s what I think. But here’s, here’s one of the things you got to realize about that. You were trying to buy property when nobody was buying, and you did that with some rental properties. You got what you got seven or nine rentals, ultimately, yeah, I have a eight Okay. And then you’ve got your house in which you live. And the reason it’s the bottom of the market. One of the reasons is that the the lending just contracts dramatically and the amount of available financing. It just evaporates from the market. The banks got very conservative Obviously, they were very scared to land. And people were very scared to buy. So that’s that’s what goes on in a contraction. And we got to wrap this up. But did you have one final comment there because we got to get to our segment Actually, we always go too long. You know what I’m going to do? I’m going to never announce that we’re going to have a guest or a segment and I’m just going to go on and start talking and if I shut up soon enough, we’ll play the segment but that’s what I got to do.

Drew 20:26
Yeah, so I don’t know if I have any other thoughts for you but I’m I’m interested in keeping my eyes open I had a friend send me a property in little rock that looked beautiful that I’m

Jason Hartman 20:36
little works pretty great, most landlord friendly market in the country.

Drew 20:39
Yeah, that was that was interesting. That perked me up, you know, I was looking at Was that your friend Aaron?

Jason Hartman 20:44
Yes. Yeah. Aaron Colson and I was looking at us at our last event.

Drew 20:48
And I you know, and I was looking at some properties in Indianapolis again, and I kind of was actually gonna put an offer in on a place recently and come to find out it was in a bad area, so I kind of ended There was a place in Memphis I was looking at so I’m still kind of keeping keeping the pulse on things, but I’m waiting for the next next downturn whenever that

Jason Hartman 21:08
don’t try and time the market. I’m telling you, there, it probably is another shoe to drop, folks, I have said that many times the economy is pretty weird. There’s a lot of crazy stuff going on out there. But remember, our philosophy if you’re following it, and I hope you are, is linear markets, which will be far less affected by whatever happens in the economy. Yeah, they’ll be affected but far less and I think not as

Drew 21:36
they’re not as volatile. You know, and the other thing too, is like I we bought in a time that’s completely irrational The other way you know, it was completely crazy. Everyone was, you know, jumping out of the ship. So I think some of the deals now are, you know, if you look at these houses, I mean, I can’t believe you can buy a house for $100,000 and

Jason Hartman 21:55
rented for 1000 a month.

Drew 21:56
That’s That’s pretty good. You know, and, and one other thing and I’ll just kind of leave it at this is I think it’s really important that when you look at an area that you’re going to invest in, I think, you know, Jason has kind of come around to this that that you buy in, I buy in four packs. So like, if I buy in an area I’ll buy, I’ll try to get a crew, a couple of them. So I just don’t get diversified to into non existence like I want to buy in packages. So you want to

Jason Hartman 22:25
have a little chunk here.

Drew 22:27
Yeah, you know, and, and, you know, I call the property management company recently. So I was having a problem getting a hold of somebody. And I said, Hey, I have four properties with you guys. If I don’t get a call back today, I’m gonna start looking for another property management company. So

Jason Hartman 22:39
you have some leverage. That’s good. Yeah.

Drew 22:41
So you know, and then I get a call from the owner and he explained that, you know, I didn’t get your call at five o’clock on Tuesday, and I’m sorry, and you know it, we worked it out. It was fine. But

Jason Hartman 22:51
you have some leverage. Yeah, it’s a good thing. Yeah. One of the things I freely admitted is that I the one of the mistakes I made is I over diversified. So three to five markets at least three ultimately, no more than five. And of course, depends how big your portfolio is. So let’s do we got to get to our q&a. Okay, one more, you know, he has one more

Drew 23:10
comment I can tell Well, yeah, I will kind of in wrap up is that I’m sort of trying to find where the next places that people want to be. So where do people want to live? I say like, does this tap does this city have cancer? Or is it in the infancy? Is it blighted? Or is it? Is it a place that’s attractive? Is this is this place? Does this place have cancer? Or is it in its infancy? And so I’m trying to find, you know, the next Austin, the next Portland, the next Seattle try to see where this where the money is going to go? And so I think that’s kind of what I’m gonna look into.

Jason Hartman 23:48
Yeah, interesting stuff. All right. Well, hey, our panel. Let’s finish that this is actually the q&a portion. And I think you’ll find this to be very interesting. You may actually hear Drew’s friend Erin on This because I think he had some of the questions that you’re going to hear here in a moment. And let’s just jump to that. And in the meantime, check out Jason hartman.com for our properties and some of the areas Little Rock is on there that drew mentioned Indianapolis, of course, and Memphis where he owns properties. We will look forward to talking with you on the next show. We also are about to make an announcement it’s not too far away. Now Drew’s climbing up his shelves here to get boxes. That’s funny. By Drew, we will be announcing our meet the Masters event pretty soon here. So stay tuned for that announcement.

Let’s get to the rest of our panel session. And the all important QA Any questions? Yes, name and city,

Recording of self-management panel session 24:49
larger Union City, Michigan. I just wonder about finding tenants when you’re self managing because when we were at meet the Masters, it sounded crazy to self manage, but the short time later, it’s Sound, we can do it.

Recording of self-management panel session 25:01
Because we’ve learned a lot from our managers for sure. Let me tell you one

Jason Hartman 25:05
self management pitfall, I don’t want to forget to say this Okay, then we’ll have him answer the question is, be careful, you know, when that property is vacant number one, insurance will make this difficult for you. Because some insurance companies will not give you insurance certainly not give you a reasonably priced insurance if you don’t have a manager, okay? And they also limit the amount of time they will insure a vacant property unless you pay a fortune. So if it’s vacant for a long time, it can start getting costly. I had

Recording of self-management panel session 25:35
to I had to educate an insurance company just the other day

Jason Hartman 25:38
you had to educate an insurance company. Well,

Recording of self-management panel session 25:40
I could manage properties across the country. Yeah. You want to get me going? You know, I just okay here all the different companies in the business. I gave them like 100 things that they probably didn’t care about. But they were asking they were wondering the same thing you know, you know, is this for real, you’re living somewhere in the property. Is there somewhere else in the capture about this? But you know, people will catch up? You know, it’s a What was your original question though? He said some tenants?

Recording of self-management panel session 26:11
Sure, there are many, many ways that you can actually find tenants without having a property management company. For one, you can actually hire a property management company, you actually hire 2345. Exactly. You just tell them up front, I’m not looking for property management service, I need to find a tenant, they may be a little more inclined to actually provide tenants to some of the properties that they currently have. But for example, like James, they turned out 100 potential renters last month, you know, they definitely have a need. So you know, they would charge you probably a bit of a higher lease fee than what they would charge their their actual clients. But that’s one way. Another way is, you know, you can actually post you know, there’s obviously Craigslist and you can put your stuff on Zillow and whatnot. And I think through cozy now they actually have a plugin where you can screen we can actually post your your your your property and have it on some of the some of the different outlets they have available. That’s obviously an extra feature and added costs. But yeah, those are definitely some of the ways

Recording of self-management panel session 27:09
at folio works. Similarly the one that I’m using for the Atlanta properties, they have a feature where you can syndicate you, you they make it easy for you to create a web page with the property for marketing purposes, and then you syndicate that through all of the you know, rentals COMM And Zillow and

Jason Hartman 27:29
it’s basically like it creates a little website for you on your property. Right. Oh, one other thing about that is make sure you have good photos of your property. Okay. And this is probably going to happen the best opportunity is when you buy it, okay, so get a set of good photos, make sure they’re properly labeled in your computer so you can find them and I think it is well worth hiring a literally This is a specialty a real estate photographer to take photos for you because they will come with a wide angle. And you know, you need a set of really good photos of each of your properties. That’s super important.

Recording of self-management panel session 28:06
There’s a company called z inspector calm, Jason, you probably know about these. I’ve heard of that. That’s what they do. Okay?

Jason Hartman 28:11
Yeah. What, how much does it cost? I don’t know.

Recording of self-management panel session 28:15
Okay. Do your tenants have your phone just from Scottsdale? Do your tenants have your phone number? Or do you create a separate phone number just for the property management side,

Recording of self-management panel session 28:23
what I do for the Austin tenants, they have an email address, I just created a Google email address with the name of my company. And they’ll send an email through that we also created there’s a company called grasshopper. And grasshopper is a company that allows you to create your own phone number. And you can then give that phone number to the to the tenants. And then through the website. You can have all these options on what happens when somebody calls that number. Your messages are forwarded to your phone or whatever. So I have both

Jason Hartman 29:00
So here’s one of the things I want you to think of too. One of the things Fernando could do with that is he could set up an email address for maybe all the properties in one geographical area. And if he had a relationship, and he probably does with like a handyman in that area, or a TaskRabbit person or someone who’s just a, like an assistant that you pay, just pay for play, that email could go to you into that person like Austin, Prop, Austin, you know, Fernando’s, Austin properties@gmail.com, right? And that address could go to multiple people, right? voxer could be another great tool for this to know. So lots of ways you can distribute the communications and guess what, they’re free. These are free tools. A lot of

Recording of self-management panel session 29:48
grasshopper I think, charges a nominal fee. Yeah, 1015 bucks a month. You can have like five different extensions. So you can actually have the same phone number and five different properties,

Jason Hartman 29:57
four or five different states. For Indianapolis, please press two for Quad Cities you know if you need, you know service for your quad cities property press two, you know exactly.

Recording of self-management panel session 30:09
If ever you do add your tenants onto boxer, you can actually do so with just using your email address. You don’t have to give them your phone number. Just

Recording of self-management panel session 30:16
an FYI. To answer your question directly. No, I don’t give out my phone. I hate getting calls. Kevin from Indianapolis. Just want a quick question about the assistant side of things. Have you hired that person? And if so, what kind of what did you look for? Who did you look for? And was that person experienced at all? Or is that something that you’ll be looking for? What kind of things would you be looking for? So the assistant that I hired in Atlanta had property management experience, and he’s an accountant. He’s an older person, and he was with a financial it’s kind of a special case is what I’m going to get it. He He knows how to deal with tenants. He thinks like a landlord. So it’s kind of the right person to handle high stress situations and But the decisions are mind at the end of the day, he just pre filters a lot of stuff. And as I mentioned in the beginning of the talk, when he brings up an issue he already thinks of, you know, solutions to it. And it’s not just the dispatcher, so that makes a huge difference.

Recording of self-management panel session 31:17
Kelly from Washington DC. So I actually have several questions. So I’m gonna have the mic for a second. How do you handle move out inspections when the tenant leaves?

Recording of self-management panel session 31:28
So the last house we had a move out inspection on what we did what the assistant did is there’s a company called vineyards calm, which we’ve I think we’ve mentioned that before in the meet the masters and they specializing make readies, getting property ready for the next move out. So they coordinated with the tenant a time for them to go to the property, inspect the property in part of their services is to provide a list of repairs that are needed. So that becomes Our move out inspection and then you can feel it we have forms that you can pull from the web or move out forms and then those forms can be sent to the tenant later on with whatever deductions are present

Jason Hartman 32:14
in Fernando vineyards, we discovered them at the note conference it no worthy, right. CG. CG Okay, all right. Okay,

Recording of self-management panel session 32:22
good. Yeah, he just yeah, just to elaborate a bit on vineyards, they provide a fantastic service. So you may be thinking, Oh, how do I get a make ready done? How do I turn the property over? How do I get a painting and everything else, then yours is fantastic company, they actually do all of that for you. Or they’re ripping out floors and doing full paint jobs. Even if you want to put a new roof on if needed, they’ll actually do the whole thing for you. Just bear in mind that if you do use an ala carte service like that, you will be paying a bit of a premium. It’s pretty obvious, but just get ready for that.

Recording of self-management panel session 32:57
I don’t remember how much I paid sorry. Yeah.

Recording of self-management panel session 33:02
Yeah, yeah, they’re expanding fast. But that’s one option. I use Angie’s List quite a bit. Angie’s List, you know works well in many markets, they have specials all the time. And you can hire a plumber for 200 bucks and they’ll go and take care of whatever that issue is. Sometimes those work really well also gives you a chance to filter out some providers, some contractors that don’t do a good job.

Recording of self-management panel session 33:30
And the importance of using some company like Angie’s List is that they come somewhat pre qualified. There’s, yeah there’s reviews on there and everything else and oftentimes they have specials but the biggest factor with that is if you were to just find someone off Craigslist or awesome website and you don’t really know who they are, and you provide them with the lockbox info, everything else they can easily go in there, steal all your appliances, everything because they know the property is vacant, and then just head off and you never hear about them again. So just be careful.

Recording of self-management panel session 33:58
Amazon is also getting into To that service provider business, if you search for a particular appliance, you know, they’ll

Jason Hartman 34:04
suggest and they’ll do the installer and installer. So if you need a new ceiling fan, you can buy the ceiling fan on Amazon and get it installed. But I was super excited about that idea, but the prices are too high. You know, like are now yeah, hopefully it’ll really start to become competitive. No.

Recording of self-management panel session 34:21
Okay, second question. There are so many legal aspects to management, how do you handle things like evictions or giving 24 hour notice for a contractor to get access and all of these aspects of of, you know, legal, legal things.

Recording of self-management panel session 34:36
I haven’t had any interesting talking about self management that I haven’t had any horror stories. There’s the wood here is what on my self management properties, so I haven’t had to choose what to do. But one well, you know, we Jason just interviewed Novick. Nationwide eviction expert that can handle part of that process. That would be one option. But if I had to do it, I would proceed the same way with everything else, I would just search for companies that specialize in that particular part in hire them all a cart for that particular job.

Jason Hartman 35:19
Half of the time, we don’t know how empowered we are, and how many resources are out there. It’s amazing how a lot of the time the property manager, all they do is call an eviction service. You can call them direct, they’d be happy to have your business that’s why I did that podcast about it. So you know, some some property managers actually go to court and do the evictions themselves. But a lot of them just outsource it. You can just do it.

Recording of self-management panel session 35:45
Yeah, sure. I mean, the eviction notices and things like that are certainly one part of it. But I was thinking of like, okay, the plumber is coming in tomorrow and you have to give tenants 24 hours notice notice post on the door kind of thing. I don’t know if that’s what

Jason Hartman 35:59
you do. I don’t think there’s a requirement to post it on the door. No, there maybe there are inside it might depend where

Recording of self-management panel session 36:04
Yeah, we just sold a property in Phoenix and the amount of notice, you know, official formal received verified notice that we had to give to tenants just in the process of selling it was. Well, you can do that by email. Okay. If they confirm that they’ve received the email, yeah. But if the tenants not, you know, checking, then you have a problem. Okay, do you ever worry about veil lifting suits if the tenants have information about you personally?

Jason Hartman 36:32
In other words, piercing the veil of if you have an entity like an LLC, that’s what you mean, right? That’s a veil lifting suits. losses. Yeah. So that shouldn’t matter legally, if you’re managing your entity, right?

Recording of self-management panel session 36:48
Yes. And no, I mean, I’m aware of it, but I’m not. I don’t think I treated any differently because it’s self managed versus not. You know, we have life liability insurance. I mean, that’s kind of the first level of protection. And the LLC is set up for asset protection, and I do the best job I can with, you know, keeping accounts separate and, you know, not giving any ammunition for any potential lawsuit. And that’s the best I can do, I think for now, without going to extremes and complicated anything else.

Recording of self-management panel session 37:24
One last question. Do you find that you’re managing enough that you qualify for the real estate professional material participation time?

Recording of self-management panel session 37:32
I do, but I’m not. I decided that for 2014. It didn’t make sense for me to become a professional. I didn’t have enough losses in order for you to capture the benefits of real estate professional needs to have losses,

Jason Hartman 37:46
passive losses

Recording of self-management panel session 37:49
in your real estate business and real losses, passive losses.

Recording of self-management panel session 37:54
And

Recording of self-management panel session 37:56
so the answer is yes, I do qualify. I have enough I qualify. from a legal perspective, but it’s not to my advantage, at least it wasn’t 2014. I’m doing 2015 taxes in the next month or so. And preliminary discussions with the CPA didn’t seem like that would be also helpful. In as times go as time goes by, at least given my current situation, as the rents keep going up and depreciation stays steady. I’m not going to see losses from that perspective, unless I have lots of repairs and that sort of thing. But if things just go as, as they have been in the data that I’ve shown, the tendency is for me to have increasing incomes steadily, which again, goes against capturing the benefits of being a real estate professional. So you know, right now, I’m not, you know, not qualified. I’m not going to be checking that box in the in the tax return.

Jason Hartman 38:55
Last question over here from Tempe

Recording of self-management panel session 38:59
awesome. And, Oliver, you’d mentioned in vetting your property managers asking the questions, what is the one question that I should definitely be asking?

Recording of self-management panel session 39:12
That’s almost like asking a potential mate. What’s the one question the one thing I should know about you?

Recording of self-management panel session 39:19
Is there one question you standardly? Ask

Recording of self-management panel session 39:21
every single or I mean, I don’t sure

Recording of self-management panel session 39:23
how many. Yeah, man, what an interview what I would definitely ask. It’s not just the one question asked a slew of questions. But amongst one of the most important ones is how do you vet your tenants? And what kind of questions you ask them? What’s the criteria that the property management company has to actually bring tenants into into the some of your homes? That’s one of the most important factors some tenants I mean, some companies only look at like the three X Factor so does the rent is the rent Elise, you know, a third of the overall gross income that they bring in every month. If so, is yes, and you’ll get that check mark, and they allow the tenant to potentially rent your home. Whereas other property management companies will actually draft up a budget with the tenant. And that’s more of a specialized service. And only few companies really do that. But if anything that provides a heck of a lot better property management, in my opinion, because then you actually get a qualified tenant that knows exactly where their accounting is, where their budget is, and they know what they can really afford. And if they can’t afford the specific property that they’re looking for that property management company will actually give them something else that they can.

Jason Hartman 40:35
And that’s kind of a service that is more likely to happen in the lower end C class properties where they’re going to do that budgeting thing.

Recording of self-management panel session 40:43
You know, actually one of our providers, James actually does that for all of them ABC. And that’s included, not a service added but some of their property management companies probably do that as a bonus thing. Good stuff.

Recording of self-management panel session 40:58
So one thing that I would just say Add to that it’s a question but you have to answer that yourself by looking at the project property manager and the contract and so on. You really want to know that they are aligned with your interests. It goes back to what Jason said before. If they’re going to make money when you do make money, then it’s to their best interest to to do the best job they can. So if they have a lot of fees that have to do with that are easy for them to abuse without you making any money off of that, then that’s a red flag.

Jason Hartman 41:32
Thank you so much. That was just a wealth of information.

Read More...

Jason Hartman is joined by Investment Counselor Sara at the beginning of this episode, where she shares her experience closing on three properties in Memphis. Jason and Sara talk about the competitiveness of the real estate market, rate locks, and the commodities that make up a house that is independent of any currency. Afterward, Jason interviews Dr. David D’Ambrosio. He talks about his experiences with the 1031 Exchange on properties in the Orlando and Indianapolis markets. David asks Jason if it’s feasible to do a cash-out refinance if you can get a sizable amount of cash, then they proceed to discuss the deferred down payment option and equity stripping.

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 0:13
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 1:03
Welcome to the creating wealth show. And thank you so much for joining me. This is your host Jason Hartman with episode number 738 738. Again, thank you so much for joining us listeners from around the world. We are going to give you a client case study today. We love it when our clients come on the show. And here one of our many doctor clients is on the show, talking about his investing journey, the past, present and future. And we’ll talk a little bit about equity stripping. We’ll talk a little bit about 1031 exchanges. We’ll talk a little bit about the investing mentality with Wall Street with other investments with doctors and other professionals, and just a whole gamut of things. So I think that’ll be interesting to you. But first, for the intro portion. I invited David who is our client case study today Dr. David D’Ambrosio. I invited his investment counselor in two Talk with me a little bit about him and help introduce him. Sarah, welcome. How are you?

Sara 2:04
Hey, Jason. Great. Thanks for having me. It’s good to have you back on the show. And you

Jason Hartman 2:08
just closed on three properties of your own, I think, right?

Sara 2:12
I did. Yeah, I went with properties in Memphis this time around, and I was super excited and eager to get them closed. I want to get them leased up before the holiday season comes around and things are looking promising there. So, yeah, I bought two with one provider and one with a different one. So I’m going to try out two different property managers so I can compare and contrast and, you know, keep them honest.

Jason Hartman 2:38
That’s good. That’s a good plan. Yeah. We always like to try and have that customer experience. You know, I purchased a couple properties in Memphis last year, a couple more this year. You know, we’re we’re practicing what we preach and having those same experiences that you’re having. Interestingly, you would think and this is oddly to me. You know, it’s just sort of interesting that this doesn’t really seem to be true. You know, you would think we are insiders, Sara, you and I would get like special treatment from these local market specialists. I don’t think we do unless, I don’t know. It seems like a pretty normal experience. You know, I don’t think they they bend over backwards for me. They probably consider me to be a pain in the ass. Oh, I said the word the a word. Yeah.

Sara 3:30
Well, it’s funny because I feel the same way. In fact, we probably get a little less attention because they expect that we know what we’re doing. So it’s kind of like you’re signing the contract, you’re on your own. counsel yourself, you know, but, you know, funny enough when I was, you know, ready to pull the trigger and I had my financing lined up and I was starting to look at inventory. I was looking at a few different markets and it really my decision just came down to what was available, and I actually lost out on two properties to my own clients because I didn’t pull the trigger fast enough. You know, someone came in from under me and asked for the contract before before I did. So, yeah, I would definitely didn’t get any special treatment. If anything, I learned how to make a quick decision.

Jason Hartman 4:15
Yeah, your your shame on you, Sarah, that your clients are more decisive than you

Sara 4:22
are maybe, you know, maybe they just saw the deal before I did. I you know, I don’t know. But the third one that I that I finally got. I remember seeing it hit our website in the morning. And I hadn’t even gotten out of bed yet. You know, I’m, I’m notorious I, I don’t follow the rules. And I you know, check my email first thing in the morning, which I know you’re not supposed to do that. Right. I do that. So yeah. Guilty. So I was checking my email and I saw this awesome house. And I’m like, oh, I’ll just call you know, I’ll just call the LMS. local market specialist, after I take my kids to school. And then I thought, you know what, I bet you This one’s gonna sell so I call them right away. I hadn’t even got out of my PJs yet. And sure enough, right after I asked for the contract he got an email from somebody else that was interested. So you know, it’s it’s a little competitive right now to you know to find that that great deal.

Jason Hartman 5:15
No question. It definitely is in listeners. That’s maybe one of the biggest things you learn from this episode today. Did you catch it? What Sarah just said, Sarah Where’s PJ’s to bed? That’s the big that’s the big takeaway from today’s episode, PJ’s?

Sara 5:32
Is that is that a problem?

Jason Hartman 5:34
Yeah, I don’t know. You know, whatever. But we want you to post a picture of your PJs on the Jason hartman.com blog. Okay. Wait, we should put it in the show notes. Because you know, who really says PJ’s anymore. That’s not a kid or a parent talking to a kid. I guess you’re a mom. So okay, that’s

Sara 5:56
if you’re lucky enough to be one of our venture Alliance members. You might me walking around the halls in my PJs searching for a water bottle.

Jason Hartman 6:05
There you go. Yes. As Alliance members, we’re kind of a more intimate group for sure. That’s no question about that. But that’s what I love about it too. It’s great. Good stuff. Well, hey, Sarah, you wanted to share a an opinion that you have on rate locks on when someone should lock in their mortgage? Or if they should at all right, when they when In other words, when they apply for a loan to buy a property? Should they lock the rate? Or should they let the rate float and you had something you want to share on that? Right?

Sara 6:35
I do because I had some clients come up against this and then it happened to me and and the problem was, so I put the properties under contract before the rehab was done, and that’s happening more and more these days. And so the property was still being renovated and the lender said, you know, when do you expect these to close? Okay, you know, the rate locks good for 30 days. So based on the closed date, you know, they lock the rates. I said, you know, that’s Fine. Well, what ended up happening was that, you know, and this happens all the time, the rehab took, you know, just a little bit longer and, you know, you have to schedule your inspection and then and then things come up on the inspection report and then you got to send the construction crews back and then you got to send the inspector back out. And that all adds time to your, your, your closing process. So, so that happened to me and I was pushing up against that rate lock exploration, which kind of forced me into a situation where I was like rushing to close and it made me like a little uncomfortable with my closing because I ended up having to get the local market specialists just to put in writing that, you know, they’re going to provide me with a clean inspection report after I close. Ideally, you want to clean inspection report before you close. So it just I think it just caused a little unnecessary rushing around and stress to the process. And what I learned is that if I would have just not locked the rates, I probably would have Still gotten the same rate, if it only closed a few days later, I probably would have ended up closing, you know, maybe one week later that I did, and everything would have been fine.

Jason Hartman 8:09
So of course, of course, the risk though is if rates are climbing, you could end up paying a higher rate. If you don’t lock right.

Sara 8:17
You could but but you could also be paying extension fees on the rate lock. That’s what I you know, they charge like a daily rate. So, you know, you get the, you get the lower rate, but then you’re paying a fee and I, you know, I take the time to like, do the math and figure out what’s the, you know, what the best way to go because the rates didn’t go up anyways for me, but yeah, that is the risk, the risk is, you know, your rate might go up a little bit. They go up and down a little bit every day. So right.

Jason Hartman 8:45
And then basically what’s interesting about what Sarah just said, is that you see how in essence, when you pay for a rate lock, you’re in essence renting the money, or you’re optioning that money because that money has has to be available at that rate. And that’s why you pay for it, you know, you pay a certain amount, and then you pay a daily rate for extending it after that interesting. Yeah, just wanting to have you know, and really, that goes to kind of my broader point. And we’ve talked about this on past episodes, listeners, but the concept of, you know, money just like anything else, and it shouldn’t even be called money. In our case, it’s currency. Right? But it’s just a commodity. It’s just like coffee beans or soy beans or copper or anything, any or lumber, you know, everything’s just a commodity, okay? And that’s how I want you to look at the world and just understand that all those commodities have a price and those prices fluctuate and there’s a certain amount of demand for those commodities and there’s, there’s a whole supply and demand market for them and, and when I talk about commodities that are the ingredients to a house, or an apartment building, copper wire, glass, steel, lumber, concrete, petroleum products, etc, etc, etc. You know, these are not they’re independent of any specific currency, whether it be the dollar, or the Euro, or the yen, or the real or whatever, right? They have intrinsic value. And we think that’s a good thing. So just lest we get off on a tangent, but I just wanted to kind of bring that up again. And, and by the way, I think this next episode for flashback Friday is going to be the Donald Trump episode. There’s so much controversy about that guy. Right now. I think I’m gonna do the Donald Trump episode on the next flashback Friday. Okay, so listeners Be sure to catch that one.

Sara 10:36
Do you know how many times I’ve like typed on my Facebook and then just deleted my comment is that you just can’t even

Jason Hartman 10:45
it’s kind of not worth all the hate, you know. So anyway, but I’m Gary Gary Johnson is looking awfully good. The Libertarian candidate, folks, if if we’re ever going to have a third party, I know everybody’s always concerned. I’m gonna wait motorboat you know, but we got to do it. Someone’s got to do it at some point. Okay, we you know this two party system is just a total scam I mean look at both of these clowns we have running It’s crazy. But one one’s worse than the other and I would happen to say that that’s the clinton clown. But they’re both. They’re both Yeah, they’re both pretty cloudy for sure. All right, so in addition to rate locks and politics and commodities, and PJ’s, anything else before we get to your client and share this case study, Sarah?

Sara 11:37
Oh, well do i do i go on another rant about Obamacare. I mean, I took my son to the urgent care yesterday and I didn’t even stay and get him seen. I couldn’t get it a same day appointment. So I went to urgent care. I cannot believe how overcrowded and understaffed Kaiser was. It was unbelievable. And that was the rant that I took. And then I just said, You know what, forget it.

Jason Hartman 12:02
Not gonna post it’s only it’s only gonna get worse. I mean, my insurance cost has gone up about 35% since Obamacare, look at if you if you regulate or tax something more and you know, in this case regulation but regulation is just a form of tax, okay? Because it’s a burden, right? If you burden something more, you’re gonna get less of it. And so this means we’re going to have a lower supply of healthcare in all its forms, whether it be equipment, pharmaceuticals, actual practitioners, you know, doctors and so forth. And it’s interesting, we’re interviewing a doctor right you know, he’s gonna have a lot of opinions about this our case study today. It’s Obamacare is it’s it ain’t gonna work, folks, even even even good old slick Willie, Bill Clinton said Obamacare was a mess, so that I thought that was interesting coming from the same side of the aisle, even Bill Clinton so what do you Sir,

Sara 13:00
I just said that it’s just my one of my biggest fears is you know, the healthcare industry and it’s it’s a scary it’s a scary thing. You know, when you take your, your kid into the ER, I mean this was last year I remember taking Alissa into the ER with shortness of breath, and she has a history of asthma. But back in the day, when you take a child into the ER, and they have shortness of breath, they get seen right away to decide, you know, if, if they needed urgent care that moment, or they can wait 20 minutes, I had to wait 30 minutes just for the initial, you know, triage I guess they call it. So it’s really like, it’s really scary to me with, you know, with kids and a family and I’m sure it’s scary for a lot of other people. But what does this have to do with real estate? I don’t know. I just,

Jason Hartman 13:44
you know, it has to do with the cost and political issues and, and people that say politics, you know, I get these, like I got this review. I thought this was funny. By the way, Mr. reviewer, I’m sure you’re listening, who posted a review on iTunes and said Fox News for real estate investing. I thought that was totally creative. So, thank you for the review. You know, it’s kind of a half hearted compliment. I understand that. But you know, this is not I mean, I don’t I’m not a fox news guy. I don’t even have TV. So number one, I don’t watch Fox News. Except when I’m maybe in a hotel room I watch mostly cnn because that’s what they have political stuff, you know, influences. It’s a big part of real estate investing, folks. So, you know, this is not irrelevant stuff. I know, most of you understand that. It’s relevant. But a few people think it’s irrelevant, and it’s not. It’s very relevant. Obviously, it’s an election time right now. So we won’t always be talking about it that much. But, you know, it matters. It’s something that definitely matters. So anyway, without further ado, let’s get on with our show here and shut up and quit rambling before people write me more. More reviews about Fox News for real estate investors was hilarious. And that was very creative, I must say. Very creative. Check out Jason hartman.com we’ve got the new website up, it does have several bugs it launched just yesterday, the property section, we’re going to dramatically improve that, by the way, that’s on our roadmap here, and dramatically improving a bunch of other things and functionality and so forth. And doing a lot of things with the website. So look forward to that. We’ve got a really good web development company helping us nowadays. Check out the educational products in the store there or at Hartman education COMM And then we’ve got another venture Alliance meeting coming up at the beginning of December. So check out venture Alliance mastermind comm we’re pretty sure that’s gonna be located right here in beautiful Scottsdale, Arizona. So that’s an easy easy trip for most people. I know a lot of you out there have been asking me about the venture Alliance mastermind group and, and considering joining and I tell you, it just keeps getting better and better. The comments from our last meeting in Seattle, people said to me, Jason, you really up leveled this one. The speakers were great. We Had some awesome speakers come in and, and we’re just gonna keep trying to make it better and better. There are some really big names in real estate here in in the Greater Phoenix metro area. So for our Scottsdale event, I’m going to try and get a couple of them to come in and talk with us. These are people who have been on the show who you’ve heard of, you’ve probably read their books. They’re quite famous. And nobody is confirmed yet. So I can’t mention any names, but I just tell you, I’m working on it. Okay, folks, I’m working on it. All right. So Sarah, thank you for joining me for the intro. Let’s get to our case study and talk to your client, David, and hear about his investing journey.

Sara 16:36
Yep. Thanks, Jason.

Jason Hartman 16:39
It’s my pleasure to welcome one of our clients to the show. It’s David D’Ambrosio and he is located in New Jersey, and has an interesting story about his journey as an investor and some of his next plans and talk a little bit about his recent 1031 exchange and so forth. David, welcome. How are you?

Dr. David D’Ambrosio 16:58
Great, Jason. Thanks for having me on. Good. Hey, thanks for coming on.

Jason Hartman 17:01
It’s great. How long have you been listening to the podcast?

Dr. David D’Ambrosio 17:04
Probably a little bit over a year. So I’ve listened. I went back, though, when I listened to the older, the older ones that I could get my hands on as well. So I’ve probably listened to me, I would say probably about 300. Wow.

Jason Hartman 17:19
And you’re not sick of me yet. Well, thank you. That’s great. Good stuff, good stuff. Give us a little bit of your your background and, you know, tell the listeners what you do for a living and kind of let’s just dive into your journey as an investor. Sure,

Dr. David D’Ambrosio 17:34
sure. So, I am a physician, I’m a I’m an oncologist, a radiation oncologist specifically, and I’m the son of an immigrant. So I feel like I’m living the American dream, or as long as that’s gonna last who knows, but I always have had an interest in investing in general and educating myself about different types of investing. And I’ve always kind of come back to real estate in general because of all the things We, we discuss on your podcasts all the time. And I read you know a lot of real estate books and I think a lot of people probably talk about that Rich Dad Poor Dad book which opened up some some new thoughts in my head especially the actually the 1031 exchange they mentioned in that book. And my medical partner, Jolla, Tansy is the one that actually turned me on to your network because he, he had invested with you. And that’s how I came specifically to see your podcast. I spent a lot of time educating myself before diving in. And

Jason Hartman 18:40
the method that I hadn’t started my investing with you was was through this 1031 exchange. So you were interested in investing and you had a great immigrant story. I love that and, and by the way, just to comment on your American dream as long as it last comment, I think we all unfortunately and it really is no laughing matter. Seeing the country taking the road direction in so many ways. But, you know, at the end of the day, it’s all a game of comparison. Right? It’s not a question of whether America has gotten better or worse. Yeah, you know, that’s that’s part of it. But it’s just, you know, compared to what is always the question. It’s always a relative thing. Where’s your family from, by the way?

Dr. David D’Ambrosio 19:17
So we’re all we’re from New York City. Originally, my father, my father came over on a boat into Brooklyn. And then I grew up in Queens, and I live in Jersey now.

Jason Hartman 19:28
Yeah, but we were originally like you say the immigrant story. That’s why I asked

Dr. David D’Ambrosio 19:32
what part what part of Italy My father was from a little town north of Naples.

Jason Hartman 19:36
Good stuff. Well, fast forward. Now. You You learned a lot about investing and listened to 300 of my shows or so. So thank you for that. And you did a 1031 exchange now. So what did you sell and what did you buy in that

Dr. David D’Ambrosio 19:51
exchange? Sure. So so that story, the story with that was that actually the house that I had grown up and my parents had retired A few years ago, and they were looking to sell the house. And my original plan was they were selling it to me. Obviously, I was getting a son discount. But my plan was actually to keep that house and rent it in New York City. And I would have had maybe a little little bit of cash flow, if I had done that. But that’s when my eyes were opened, kind of at the same time, I was listening to your podcasts. And I realized that if instead of renting out long term, if I sold it and did a 1031 exchange, that I would, I would greatly improve my cash flow. And also my overall investment by instead of just having one switching that over to multiple properties.

Jason Hartman 20:43
So so you sold that property, and when did you sell it

Dr. David D’Ambrosio 20:47
the end of last year, towards the end of last year,

Jason Hartman 20:50
and you did a 1031 exchange on

Dr. David D’Ambrosio 20:52
that, right? Correct. So I transferred that into four properties in Orlando that I bought with You know, the the cash that I got out of that and put into those four new houses was enough that I was able to put even more than 25% down. So it was really it was really a very good deal for me. Obviously not having to pay the tax on it was a big thing too. Right right. Yeah,

Jason Hartman 21:23
good good stuff. So all in Orlando now, it’s interesting you didn’t you didn’t want to split those up and get like get into two different markets there. I know you’ve got some other properties. Where else do you own or did you feel you were diversified enough already? You

Dr. David D’Ambrosio 21:37
know, I have I have four properties in Indianapolis as well. I really, really like the Orlando market because I feel like they’re we’re in a unique situation there that the value is so good for for cash flowing. And I think there’s a lot of upside potential. For appreciation. I ascribe to your philosophy I’m not an appreciation investor, but thought that it was a good idea for me to try to split split myself up by putting more more of my portfolio there. I think I’d like to get into one more market. But I’m things are still settling down with that. But that was my thought process with Orlando was, seemed to be a nice, a nice combination of good cash flow, but also the potential for some appreciation down the line.

Jason Hartman 22:25
Right. Absolutely. And I think that’s a good decision. You know, one more market get into three total, you just be super nicely diversified. So yeah, that’s definitely a good idea.

Dr. David D’Ambrosio 22:36
The other you know, the other issue with that, too, is these 1031 exchanges, when you’re doing in general are a little complicated, but when you’re trying to go from one property to multiple properties, it can get pretty, it can get pretty hairy. And if I was trying to if I was trying to make sure that I had placed the setup in more than one more than one location, I think I really would have complicated things for me with all the deadlines that are involved.

Jason Hartman 22:58
Yeah, that’s true. Through with the exchange. Did you have any trouble fulfilling your exchange? Were you worried at any point? I mean, the last two I’ve done I did. I did. Well, I did two of them last year. Actually, I shouldn’t say the last three exchanges. I’ve done two of them last year and one this year so far. It’s it’s been kind of difficult. I’ve been worried, you know, coming down to the deadline on those exchanges. I, I did make it on all of them, thankfully. But I was worried that I might not because it was a little bit hard to find properties.

Dr. David D’Ambrosio 23:29
Yeah, I was definitely worried about it. But what I did was you’re allowed to you’re allowed to name I don’t remember the exact rule. I think you’re allowed to name 250% more value of additional properties, not just the ones he takes. So when I’m when I made my list, I picked about 10 properties, six more than the ones that I actually wanted. So in case any of them fell through for whatever reason I could, I could still pick up the other ones so I didn’t have to lose out on any of it.

Jason Hartman 23:56
Yeah, I know. They keep you the IRS won’t let you just hide them. To find the whole world, you know, I wish you could just give them a big list of properties. But they’re, they’re too smart for that they, they only let you I think it’s 200%. Possibly it might be I don’t know, it might be 250, I can’t remember. So in other words, if the value of the exchanges, say $500,000, just to use a semi round number example, then you could identify $1 million worth of property if the rule is 200%. By the way, don’t quote us on that, because neither of us are sure we can remember. And then you only have to close on 500,000. In other words, to to meet your requirement. So in other words, half of the deals could fall through, and you would still meet the requirement and make the exchange without paying any capital gains tax, and you would have that nice deferral in there. So

Dr. David D’Ambrosio 24:48
yeah, right. Because you only have 45 days to do the identification, which you have six months to close so you could cast a wide net and then narrow it down later. Exactly. The other thing, the other thing I did realize about the exchange was I thought that it the cash that you had to reinvest, I thought it was only the capital gains, but it’s actually all the cash that you get from the sale. So I had put some money into renovating that house while I was renting it. And I know that it was a big deal, but I just for your listeners, you you have to spend all the cash, you can’t take any cash out from that sale, you have to spend it all even if it’s not a game, and you have to use at least the same amount of debt that you had on the initial on the initial sale.

Jason Hartman 25:32
Well, it’s pretty awesome tax advantages. What do you see in your profession with with other doctors and so forth? Are they are they really into real estate? You know, this is something that I mean, highly paid professionals like yourself have just got to build real estate portfolios because obviously you have a giant tax problem. And, and, you know, thankfully you have great income, but I see a lot of professionals, doctors, lawyers, well lawyers don’t even make Not much money anymore a lot of times unfortunately for them, but they’re just not really doing this. They’re not they’re not getting tax breaks for themselves and, and given 40 some odd percent of their money away to the government. It’s just tragic, really,

Dr. David D’Ambrosio 26:12
it’s extraordinarily frustrating to try to educate people because it’s, you know, these, these are people, men and women that devotes such a large amount of their time to educating themselves and helping people but they don’t really have any, any real financial IQ. I can’t tell you how many times I hear people talking about, you know, I call my stockbroker, and this market crash, and I just sold a bunch of stock. And, you know, I feel like half the time I’m on a soapbox telling them you have got to invest in real estate at least two or three times a day on talking to people about it, trying to get other people involved, it really, you know, it really is an absolute no brainer with the tax advantages. You know, not to mention, these returns that you’re getting on your cache when you leverage it or just, they’re better than anything else out there. And particularly Okay, sure, yeah.

Jason Hartman 27:01
lever leverage can become very addictive that’s for sure. Yeah, it’s it’s really incredible. Were you one of those people though because you’re your partner in your business the other doctor you work with approached you and said hey, you should be real estate investing. Are you really open to it? Or were you were you one of the skeptical doctors out there?

Dr. David D’Ambrosio 27:20
Oh, I was I was always open to it I just wasn’t sure how to go about it. And he’s really he introduced me to the concept of of your model where you don’t invest locally. I was always thinking I would buy some some houses near me and you can’t cash flow in New Jersey or New York. It’s there the the property taxes here are ridiculous. tell tell us

Jason Hartman 27:42
about that for a moment. Yeah, your taxes in New Jersey are some of the high I think it’s the highest property taxes in the nation, don’t you?

Dr. David D’Ambrosio 27:51
I’m embarrassed to even say how much my property taxes are my property tax on my house that I live in is a mortgage payment on Boy it’s it’s it’s a mortgage payment on probably six, six of my houses all together. Wow. Yeah, yeah, it’s bad. Crazy.

Jason Hartman 28:11
That’s crazy. Yeah, it really is. Anyway what were you saying before I got you on the tax tangent the property tax Tim,

Dr. David D’Ambrosio 28:17
I was just talking about how a lot of you know a lot of physicians are just not educated, educating themselves about finances and you know, I try to I try to talk to friends and colleagues about getting involved in this and all I think you were asking about how I got interested specifically. I was so i was i was saying I was always interested in in real estate but I wasn’t sure how to go about it because you can’t cash flow here. And my partner, my partner Julia Tansy told me you know, check out this Jason Hartman guy so I you know, I started listening to your podcasts and I, I haven’t stopped but the whole you know, go into buying houses in other cities where they make sense Just well first of all I was on I was when I first looked at it, I couldn’t believe how much cheaper it is to live in other parts of the country growing up in New York and living in New Jersey, for the some of the houses that I that I own in Florida would, you know, would probably be four times the amount if they were here.

Jason Hartman 29:17
Yeah, it’s it’s really incredible. I always wonder why doctors have that rap. You know, they, they say doctors are notoriously poor business people. And I think it’s because they’re, you know, is it is it like the science, you’re a scientist? And scientists just don’t think Usually, I mean, some of them do, obviously, like yourself, but they don’t think you know, in the world of finance and money, it’s just a kind of a different it’s kind of a different thought process or something. Right.

Dr. David D’Ambrosio 29:44
Yeah, I think that’s part of it. But I think the other part of it is the whole the whole way. Doctors typically think which is that we, we it’s it goes on, unsaid and understood that we have a fiduciary obligation that we do the right thing for our patients. And I think We assume that people that are trying to quote unquote, help us invest our money are looking out for our best interests. And they don’t have the time or the inclination to really delve into that and educate themselves about it any better than, you know, then they do. Unless they have somebody that turns them on to it.

Jason Hartman 30:18
Yeah, that’s an interesting point and Wall Street, just as such a better job of marketing than the real estate industry does. I mean, my industry is terrible at marketing they have, they have the most historically proven asset class, you know, the real estate people, they’ve got the best asset class, and they’re just lousy at marketing it and Wall Street has a really mediocre to terrible asset class, and they’re fantastic at marketing it. So I think that with professionals and with highly educated people, the Wall Street world kind of it just appeals to them because it’s, you know, you can go see a guy wearing a nice suit and you know, he’s got a degree from a good college. Whereas a lot of real estate people, they didn’t go to college or they’re certainly not dressed professionally A lot of times, and you know, it’s sort of like a mom and pop industry, but it’s, it’s such a good investment. It’s such a good asset class. It’s just a strange part of our society. It’s always baffled me to some extent, you

Dr. David D’Ambrosio 31:16
know, it really, it’s, it’s not, it’s not sexy, like the, you know, the the guy on Wall Street, you know, spending $1,000 on a bottle of champagne. But I bet you if you look at his account versus an account of one of your clients, you’re gonna see a lot more wealth in there,

Jason Hartman 31:30
agree with you, unless the guy buying the thousand dollar bottle of champagne on Wall Street is an insider. Now he probably has a pretty good bank account, and he probably owns a lot of real estate. That’s the irony of it. You know, the irony of these insurance companies that sell annuities and products like that is that they’re all investing in real estate with that money. It’s just it’s just such an irony to me that they take their insurance premiums and buy real estate, you know, especially office buildings, they seem to love it. office buildings, you know, large institutional investors, obviously. And I just thought that was really kind of kind of just a total irony, you know, the way that that works, but it is the way of the world it is the way the world. Do you have any questions for me that maybe you know, some of our listeners might want to want to get answers to as well?

Dr. David D’Ambrosio 32:19
Well, you know, I think a big question for me is, where do I go from here? You know, I’m almost at my limit with traditional mortgages. And I know that there’s some, you know, there’s we always talk about or you always talk about, and I read about how there’s these portfolio lenders that will lend you above 10. But it’s almost like this kind of blackbox where, how bad are the rates when you go above 10? Should I just stop at 10 and wait and just do keep doing 1031 exchanges? That’s kind of what I’m struggling with right now is where to move from here?

Jason Hartman 32:55
Yeah. So if you’re at your 10 limit if you’re married and your spouse can qualify If your spouse has to have income and so forth, then you can do 10 more that spouse can do 10 up to 10 more, which is which is great. But whether or not you can do that, and you get to 20 properties that way, there are still some pretty good portfolio loan options out there some community banks that will finance you and I tell you the rates aren’t bad. I just talked to one this morning, actually, that will finance pretty good rates. Now, it’s it’s only fixed for seven years in their case. And I think there’s somewhere in the in the high fours. I mean, I don’t know that’s not bad. Okay. And it’s certainly not as good as 30 year fixed at four and a half percent. I know, but it’s certainly not bad. I mean, have a seven year fixed and maybe by the end you do a 1031 exchange or there’s a refi opportunity or if the rates are insanely high and you have cash, pay it off, you know, what should we you know, I’m not a fan of paying things off, but There are some times when it can potentially make sense. So

Dr. David D’Ambrosio 34:04
well these these local lenders though it’s my impression is that they they really tend to want to lend to local people like would they went, let’s say, for instance, I wanted to buy a property in what is it the Quad Cities there? Would they lend to someone living in New Jersey, but was buying property in the in their state? Well, no,

Jason Hartman 34:22
you’re gonna you’re probably gonna go to the bank in that market. Okay. You were you’re buying Yeah, and these are these local community type banks that make really a lot of some big really sensible loans. You know, they do financing. That’s just logical. It’s not dictated by the government and, and, well, the government sponsored entities Fannie Mae, Freddie Mac, you know, that sort of pseudo governmental entities, I’ll say, it’s not dictated by them. In that sense, you know, they’ll they’ll do some really logical loans with usually 25% down and they’re not going to be 30 year fixed. Because they can’t sell them off on that secondary market, but seven year fixed maybe 10 years if you’re lucky, and the rates very reasonable. I mean, I think this is a very good option. And then after that, you can decide, do you go to a B to R or Lima one, we had a representative from Lima one at our last event in Phoenix, they do some really logical, sensible loans too. They can do some good things for you as well. And there, there are some good options out there you just it takes it takes a little more digging, and they’re a little more fragmented, if you will, in terms of the choices and and making decisions, but but they’re not too bad at all. Not too bad at all. Still still good.

Dr. David D’Ambrosio 35:40
When you say seven year fixed, it’s still a 30 year amortization,

Jason Hartman 35:44
yeah, 30 year amortization and it will become adjustable rate in seven years. And the reason they have to do that is because they’re not selling it off to the secondary market. There. They’re probably keeping it on their books or they’re selling it to a Another investor not rather than this big secondary market, Fannie Mae and Freddie Mac that has very specific guidelines.

Dr. David D’Ambrosio 36:08
So let’s say you did something like that, right? And you wanted to do a refinance of that into a more, can you do something like that where you refinance into a more traditional loan? Are you still constrained by that same 1010 property limit?

Jason Hartman 36:22
Oh, no, because we don’t know what the rule will be in four years, or seven years, or five years or six years or anything in there, right. So the lending climate may become more liberal by then, or it may become more conservative by then. But the nice thing is, you’ve got seven years to watch and evaluate. And you’re hopefully going to get a really nice return on your property for those seven years. You could sell the property, you could refinance anywhere in between there. You know, when in the old days, you could get an unlimited number of Fannie Mae and Freddie Mac loans, but post financial crisis, they first cut it down to four and then they raised to 10. And they’ve stuck with that 10 number for quite a while. But who knows that may become liberalized, you just never know what the future will bring in terms of financing options. And the other you do have a risk, though, obviously, I mean, you know, goes without saying, but I’ll say it, you have interest rate risk, right? So the rates could go up, and then you’ll be paying a higher rate. But if they do, and, again, there’s always lag time in here. But if they do, you’ll probably see substantially higher rents, and lower inventory of new housing being built. The problem is there is an adjustment period, there’s a lag time to this. So for example, if rates spike up tomorrow, it’ll take a couple of years for rents to adjust inventory to decline. And that’s the part that kills investors. And this is why the prudent investor in the long run I believe always wins the game because they can Write out those adjustment periods, those storms were the people that bought high rise condos in Miami or San Diego or overpriced property in California or the Northeast, you know, they don’t have that luxury, that they can ride out that adjustment period that that storm that lag time when everything is adjusting, but but it ultimately always does adjust, it just takes a couple of years to see it happen.

Dr. David D’Ambrosio 38:26
Do you think that it’s prudent or sensible to do a cash out refinance, if you can get significant money out through due to the debt paying off or it appreciates a little bit? If that means you’re going to take away your cash flow on a monthly basis? Or is that more of a personal decision? I guess? Well, I’m

Jason Hartman 38:45
probably gonna say absolutely, yes. But here, here are the questions I would have. What is the rate on that underlying mortgage you’re refinancing, compared to what are the rates today, on the new loan you would be getting You might well get a lower rate or a similar rate. And then I would say definitely take the cash out, because the point is not. And this may sound really odd, and it takes you kind of got to get your head around this listeners, okay, because I know a lot of you are going to say this is imprudent, and it doesn’t make any sense. And what are you talking about? I’ve heard it all before, but in a way, in a way, it’s not really about cash flow. Oddly, what it’s really about is rent to value ratio. Okay. So for example, if someone told you, you could control 100 million dollars of real estate tomorrow, that had very good metrics, very good rent to value ratios, it rented for 1% per month, but because of the financing on it, it was fully encumbered and had zero cash flow. Would you So want to own $100 million worth of real estate? Absolutely, yes, I hope you’d say that right? The reason you’d want to do that is because you have other multi dimensional things that will make you wealthy with that real estate portfolio. You don’t have to get monthly cash flow, what you really want is a good rent to value ratio. And this is going to be a bit of a long answer as my usual answers are I know I’m never been accused of being short winded, but in the old days, when before the Great Recession, you know, some some would say I was imprudent recommending this strategy. But we used to talk about something that I called the deferred down payment, okay. And the reason there would be a deferred down payment is number one, the market was appreciating very quickly, and rents take a while to keep up and adjust to the appreciation there they lag appreciation which always seems to happen faster. And you could buy properties with no money down. Okay, so the question was, and this equation I used to show this at my seminars on a spreadsheet, I use, you know, and I don’t have it in front of me, and I don’t remember the exact example. But the concept is this, that, you know, if you put 25% down, for example, the property could yield you, maybe $300 per month in positive cash flow. But if you put nothing down, you would be zero cash flow, or you might even have negative cash flow. Now, the lenders won’t even let you do this anymore. But in the old days, they would, and a lot of people listening will say, well, Jason, isn’t that the reason we had a crash? Well, not exactly. Not on these types of properties. That wasn’t the reason. The reason was, is that people were using this strategy to buy stupid properties in Southern California or elsewhere. That never made sense. Anyway. Because they had bad rent to value ratios, that’s how you can tell if the deal makes sense not by the cash flow, but by their rent to value ratio. Okay, so the the time horizon on this equation, this deferred down payment equation was that it was basically about nine years. So, if you get your $300 a month, or you get zero per month, in the in the difference in the amount of money you put down if you just kept that money in the bank and drew on it at a rate of $300 per month, and I you know, I don’t remember the exact number. So you may be doing the math and saying, well, Jason, that’s not nine years, but the example I used to show it was nine years based on the interest rates back then, and based on the rent to value ratio back then, and based on the down payment options back then, it was basically a nine year breakeven point. So I would rather have my 25% in the bank. In other words, your cash out reef You have control of that cash, then how that $300 a month in positive cash flow. I mean, that’s an easy decision for me to make in that way. I would rather have the property more leveraged with less cash flow, but more money under my control in in the bank or giving me the ability to buy more and control more real estate. Does that make sense to you? Or do I sound like I’m crazy

Dr. David D’Ambrosio 43:24
now that that makes that makes a ton of sense? Absolutely not answer the question. Sure.

Jason Hartman 43:31
You always really want to lean in favor, and it depends on the climate in the market. So no answer is ever completely simple. But you always want to lean in favor of the idea of equity stripping, pulling the money out of the property, having control of the cash, and still having control and ownership of the property. That’s the beautiful thing about real estate. You can acquire the asset, put some money down to acquire it, and then later get on Hold your money back out in still own and control the asset.

Dr. David D’Ambrosio 44:04
I mean, can you do that?

Jason Hartman 44:06
Yeah, and you don’t have to pay tax on that borrowed money that you took out? It is a absolutely beautiful, beautiful asset class I absolutely love it for for not just that reason, but many others as as you know. So good stuff. So what are your plans? Next, you’re gonna get into the third market. It sounds

Dr. David D’Ambrosio 44:22
like right? Um, yeah, I’m gonna, I’m gonna think about it. I’ve, I listen to the podcast on the Quad Cities. So I’m looking at that a little bit. I’m probably gonna pump the brakes, pump the brakes, since I did so much this year, and maybe, maybe do something early next year, but I don’t want to wait too long because I know the interest rates at some point are going to start going off.

Jason Hartman 44:42
It seems like they would have to doesn’t it? It’s just, it’s just

Dr. David D’Ambrosio 44:46
I’ve been saying that for five years. I’ve been saying it for 10 years.

Jason Hartman 44:49
So I’ve been wrong on my interest rate predictions, but I tell you interest rates are very, very difficult to predict because they’re basically They’re basically set by Fiat, you know, by Federal Reserve and government policy overall, the best place and I want to get them on the show. I don’t know if it’s the best but you know, it’s it’s well known in the world of interest rate and banking is a newsletter called grants interest rate observer. And I want to get a representative from that group on the show. haven’t done it yet, but they seem to have some pretty good insights into interest rates. But again, it’s a roll of the dice. Nobody really knows not even Janet Yellen at the Federal Reserve. She doesn’t even know what she’s gonna do next quarter always so we shall see. But David, thank you so much for being on the show and just sharing your story with our listeners and in your experience, and we appreciate your business and just want to wish you continued success and happy investing.

Dr. David D’Ambrosio 45:47
My pleasure. Thanks for having me on.

Jason Hartman 45:50
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 media.com 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.

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At the start of the show, Jason Hartman talks about the Americans not saving money. He explains how inflation and deflation are directly related to the real estate market and that your investment in income properties will pay dividends for years to come. Afterward, he interviews Eric about the Macon, Georgia market, which ranks #2 out of 20 for highest residential rental returns. Eric discusses the employment opportunities in the area, typical rehab costs, and the average rental home price in the market.

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 0:12
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. Real estate investors.

Jason Hartman 1:03
Welcome to the creating wealth show. This is Jason Hartman, your host, thank you so much for joining me. We have so many listeners from around the world and we appreciate all of you so much. I am once again on the move today. Do you know that the United States is the most mobile society in the world? I was talking to a friend about this at dinner last night when I was in Aspen, Colorado. I flew up there and hung out with some friends and kind of relaxed a little bit. Well, actually, I I am not telling the truth there. I did not relax much when I say that because I ended up doing quite a bit of work actually from my hotel room. But I went up to Aspen, Colorado beautiful place, of course, totally massively overpriced, because why why would that be? Well, it would be because the environmentalists won’t let anybody build anything and everything’s very highly regulated. So it’s super expensive. You know, salad for lunch and Aspen is $26 for a salad that would be $15 at any other restaurant, maybe even 12. It’s Um, so that’s how it’s been for you, you know, the NIMBY syndrome is well, it worked. There were everybody who’s got theirs who, who has their expensive real estate there. They don’t want to let anybody else in or let anybody else build anything because, well, that would just ruin their neighborhood. And it would, it would decrease their values. So this is the NIMBY syndrome. It’s that like that riddle I always say and by the way, listeners, just so you know, tangent alert, we’re on a tangent here. So it’s like that riddle that I share at my seminars. What do you call a developer? Someone who wants to build a house at the beach or in the woods? What do you call an environmentalist? Someone who already has a house at the beach or in the woods. And that’s pretty much the way it works all around. In the US, if not around the world, I coined the phrase when I had Thomas Sol on my show quite a while ago. We did play him on a flashback Friday. And by the way, if you are one of these I know I know I understand it’s a very small number of you. Here’s a tangent within a tangent, double tangent work who sometimes maybe you’ll admit it maybe you don’t you skip the flashback Friday episode. Ah Shame on you don’t do that. Don’t do that. Don’t do that. You must listen to those on hand picking those episodes for you. And they are from many years ago sometimes. So do not miss flashback Friday. Very important. Anyway, when I interviewed Thomas Sol, on flashback Friday, and on the original episode, we were talking about this issue. I think we may have even mentioned Aspen because it’s kind of the poster child for it. But irvine california my old hometown is like that, too. I coined the phrase environmental racism. Yes, environmental racism, spread that one around. It’s a pretty cool term. If you want an explanation of that search, go to Jason Hartman comm search that episode and check it out. It’s interesting idea. Okay, what was I talking about? At dinner with a friend last night in Aspen. And we were talking about I don’t know, we talked about a lot of things. But anyway, that’s size it up Aspen beautiful place. I love it. But you know, it is what it is. You just got to understand the kind of hypocrisy that goes on in these communities. Of course, there is a john Denver sanctuary there. I did not know was there last time it was an aspirin. I wasn’t aware of that he had already died. I really died back in 1997. That was a sad day for sure. I love his music. And the lyrics especially, you know, very meaningful lyrics. I love songs with meaningful lyrics, because they tell such a great story in such a great way. Much better than a poem when it said to music, right? But I went to the john Denver sanctuary and check that out and you know, That was very moving. very peaceful. Very nice. Anyway, I am headed driving to Santa Fe, New Mexico now. And it’s beautiful drive, you know, they just thought to build some more houses along these beautiful places. So more people could participate and live here and enjoy it enjoy the beauty as well. I mean, there’s got to be some balance to it. I don’t think you should totally overrun the land, of course. But let’s just be reasonable, folks. That’s all I’m saying. So that’s where I’m off to now. But today, our guest is going to have a market profile for us on one of these small and again, you know, I don’t love small markets for a variety of reasons. There aren’t as many resources of course, but they can be good because they’re limited in terms of the inventory, which is good once you own inventory there for sure. And the prices have been pushed up so much in some of the larger markets. So what why I should say that is iral larger markets, of course, that you’ve just got to constantly hunt for these markets that make sense that properties work that the rental market is strong. And they’re under the radar. Hopefully they didn’t have the influence of the institutional investors during the beginning of the boom cycle. And so one of those markets is a nice city that I like a lot. It’s Macon, Georgia. And it’s a little less than an hour outside of, well, it’s a little less than an hour, I should say, from Atlanta airport. So we’ll have our local market specialists that we’ve worked with for many years in Atlanta, who has now been busy in Macon, Georgia, because he just can’t make anything work in Atlanta anymore. I mean, you know, and when I say anything, that’s a figure of speech. Okay. There are some things that work in Atlanta. Okay. Don’t take me too, literally ever, because, you know, might make a mistake. doing that. But inventory is very scarce in Atlanta put it that way. So he has expanded his scope. He’s done business in some other markets too. Over the years. We’ve been with him a long time. So anyway, you’re going to hear about this market for a few minutes. And what else did I want to just talk to you about before we dive into this? Of course, keep on the lookout, we’re going to announce our next event here fairly soon. So that’ll be coming up on a future episode. And I am just stunned and amazed again, with these articles that are coming out that the depict the the real tragedy in the American savings world. How so many Americans just don’t have any money saved up. Oh, hey, by the way, I remembered just now, because you’re not here to remind me like when it’s a live audience to keep me on track. I remembered what I was talking about. And that was our mobile society, comparing it to Europe. In other places, I’ll be back to that in just a moment. Anyway, the massive lack of savings. This represents a huge part of the rental market that needs to be served by us along with the millennial generation, along with all of the other things I’ve been citing over the last several hundred episodes that make the the demographics coming at the rental real estate market over the next 10 years. nothing short of phenomenal, probably the best they’ve ever been in history. And how far does history back? Go back? Well, I don’t exactly know. You can decide for yourself. If your feminist listening. I know I hope that word does not offend you. We can call it her story too. We don’t have to call it his story. Yes, you know, His story is Why do the men get to dominate with the stories from the past? We’re going to have stories to so history. Yeah. History and history, coexisting harmony. Yeah, that would be good. Oh, Jason, you’re getting a little punchy. See, I just had this Americano. And whenever I drink coffee, it’s just right away this punchy sort of thing goes on. So what was I talking about about the mobile society before? Yes, America, one of the most mobile societies, it really the most mobile modern society in the world. So we travel all the time. We, we go around every place. It’s amazing. But we move so much to I remember taking an international real estate course several years ago, I remember I was in Tennessee, taking this course, for a designation, something I can’t remember the certified international real estate specialist or something like that. CISSP or something like that. First of all, I want to comment, I couldn’t believe how elementary it was. A huge part of the course was spent converting square meters to square feet, you know, just roughly just divide by 10. Okay, or I mean multiply by 10, depending on which way you’re going, of course. So, you know, 150 square meter homes about 1500 square feet. You know, you really don’t have to be a Brainiac to know this stuff. I couldn’t believe the number of hours they spent in that course talking about that. Anyway, there’s another tangent. Here’s my point. In Europe, there is so little real estate business. I mean, Europe’s a great comparison, right? Because I’d say it’s the second. Well, Asia Of course, too, and I don’t know much about the Asian market. But certainly in Europe, there is so little of a, like real estate is almost a cottage industry there compared to what it is in the US in terms of people moving the traditional real estate industry, because people just stay in these homes forever. They just do not move. So another reason you have a decline in what is it called velocity of money. Velocity of Money is very important to an economy. And that’s why deflation is something that the government and the central banks around the world will do whatever they can to prevent, because deflation not only has all these terrible side effects and direct effects on the economy, you know, in terms of r&b stops, production stops, decisions stop because everybody waits, and the velocity of money just massively declines. Because people postpone buying decisions. We’re in the inflationary world. And this is why the Fed has a target inflation rate, which I think is kind of epically stupid overall. Philosophically, I do but, you know, I’m not gonna, I’m not going to be a slave to my philosophy. And as an investor, you shouldn’t be there. You should. You should understand the philosophy of things, but At the same time, be a realist be a pragmatist, be pragmatic, and just align your interest with the powers that be. So they’ve got a target inflation rate, they’re going to make it happen come hell or high water. That is around 2%. That’s the old Phillips Curve thing, the relationship between inflation and employment. So we need to align our interests and keep them aligned with those powers to be the most powerful forces the human race has ever known central banks and governments with standing armies. Anyway, that is probably enough of that. I just got on sort of a rant here. It is my birthday. So please, excuse me. And by the way, thank you for all the birthday wishes. I really appreciate it. It’s amazing how quickly time passes, isn’t it? Yes, it is. I know. We all know that. And that’s why, again, most people, they’re really upset and discouraged and frankly rather depressed about the passage of time. And that may be true as far as aging and the fact that our body won’t do what it used to do and doesn’t have the kind of energy and flexibility but hey, listen to my longevity and biohacking show and know there are some workarounds. There’s some amazing things coming our way in that world. So definitely check out my longevity and biohacking show if you’re not listening to it already. I know a lot of you are but the the passage of time when you’re a real estate investor is just a wonderful thing. Because you put everything on your side, bad government policy. Father time, Mother Nature, I’ve talked about that in terms of natural disasters, as we have this huge hurricane approaching in the southeast. All of this stuff. Some of it good some of it bad, some of it tragic, I get it. It’s I’m not making a commentary on it. I’m just saying it is. It is What it is our interest is served when all of these things that most people are the victim of. They benefit real estate investors if you’re doing it right, because you’ve aligned your interest with reality, not the way you wish it could be. So I guess that’s it for now. Let’s get to our guest today and get a little quick profile on Macon, Georgia, check out properties at Jason Hartman calm check out educational products at Hartman education calm, and I look forward to talking with you after this brief market profile and on the next episodes. As you investors know, the market has been very, very hot for the last several years. And that has caused a challenge for investors to go outside of some of the bigger sort of flagship markets, whether they be Phoenix or Atlanta, or Dallas or Austin or whatever, we’re all of these markets have had big hedge fund activity, big private equity group activity. And there have been run ups in prices, as investors have just gobbled up every property they can find that makes the least bit of sense. Of course, this problem is even more pronounced and worse, in the cyclical markets, whether they be South Florida, the expensive East Coast markets, and the expensive Western markets. And you already know that so we won’t even talk about those markets. They are an absolute joke. They are a speculators dream. They are based on the greater fool theory of no matter how much I pay some greater fool has to come along after me and pay more. And those people will get themselves into trouble. They always do on every cycle. So we’re not even talking about those markets. We’re just comparing the linear markets who have now become the markets, many of them have become kind of hybridized. And it’s a challenge to find properties there. And not only investors have gobbled them up, but just regular homebuyers as well.

So we’re going to talk about a smaller kind of boutique market today, as this sort of, we’ll call this investor sprawl. You know, they call this urban sprawl in suburbia, right? where people have to drive further and further away to buy a house and get a decent property for the price. But we also have this in the investment community, where you have a little bit of investor sprawl. And so we’re going to talk about a very nice place but it is a boutique market. It’s one of our smaller markets. And a comparison would be say Little Rock, Arkansas. beautiful city, great place, but a smaller size market. And today, we are talking about Macon, Georgia. Eric, welcome. How are you?

Eric 16:49
I’m doing great. I appreciate you having me on.

Jason Hartman 16:51
Good. So we’ve done a lot of business with you over the years in the Atlanta metro area in Atlanta has just become really challenging. It’s hard to find deals there. prices have gone up quite a bit. Tell us a little bit about your interest in Macon, Georgia, which is a little less than an hour from the Atlanta airport. Is that correct?

Eric 17:09
Exactly right. Yes. It’s just south of Atlanta, actually. So yeah, I was obviously very active in Atlanta, and I was even acquiring properties for some hedge funds here. And the returns that you’re getting here did not make sense, in my opinion for the average investor, and actually zero meaning Atlanta, correct? That’s correct. Yes. So I started looking around at different markets and studying some areas like a gusto which people have probably heard of, because of the Masters in some other areas within three or four hours of Atlanta. And I was fortunate because I have actually family in Macon, Georgia suddenly, kind of watching that market over the last couple of years. Notice that some of the price points are appealing with regards to the rent to price ratios and more I studied it more I found it interesting. And so we ended up buying properties over the last year or so down there, kind of testing the market to make sure that the vacancy period wasn’t going to be too long because it is a smaller market. And also make sure that the rent rates that I was being told are accurate by various property managers down there and kind of understanding the whole market. So when you say down there, you’re talking about Macon, Georgia, right? That’s correct. Okay, good.

Jason Hartman 18:24
Got it. And when you say here, you’re talking about Atlanta, because you’re in Atlanta. Right? That’s right. I thought I should clarify. Okay. The listeners don’t know that. So you gotta be clear. Okay, go ahead.

Eric 18:33
Yeah. So we’ve done kind of a trial run on a market down in Macon, Georgia, and it’s been really successful. Our vacancy periods have not been overly long which has been very pleasing. So I just was a bit unsure a small market how that would work out. But we’ve we’ve had a lot of success. Most properties that we have had once completely renovated actually, all of our properties have been rented within 45 days. We do a bit nicer renovation. So that probably helps. But we’ve been we’ve been happy with the occupancy thus far that I’m making. And because I have family down there, I’ve watched the the revitalization of the whole downtown area down there. It’s really improved in the last four or five years, like many places have kind of come around on that concept. But it’s done a great job, a lot of new, new improved restaurants and things of that nature to basically keep the appeals of making around as opposed to people wanting to head to other places and live elsewhere. So we’ve been really happy with the progress and growth of the naked market and it continues to do better the university there. Mercer University is expanding and it’s just added a football team, for example, and just add new, more entry in hotels and other things that surround that type of a product is an exciting thing for making so we’re growing Moving in there and looking forward to continue to find good opportunities there.

Jason Hartman 20:05
Tell us about the economy and and you know, what every investor should be concerned about is weird is their tenant work? Who are some of the employers for these tenants? What kind of what’s kind of that profile tenant? in the areas of that market? You’re you’re doing business in?

Eric 20:22
Sure. Well, I can speak so we’ve got around 20 properties in the area between my group and other groups that have found properties for a good bit of our tenants are in the 900 to 12 50% range. So we’ve got several actually got a couple police officers. We’ve got a couple of teachers. We’ve got actually some college students at Mercer who occupy a couple of our properties. And I would say distribution and manufacturing centers are definitely a decent size in Florida. They’re Mercer employees. Get bit and then you’ve got more small business atmosphere down there, there’s going to be a massive employer that kind of employed that attack the whole town. But there’s,

Jason Hartman 21:12
that’s, that’s good for diversification for sure. I mean, when you have over the one horse town concept, you always need to be concerned that maybe that one horse doesn’t do so well. You know, they get into trouble with the various economic cycles. So diversification of the employment base is good.

Eric 21:28
Yeah. And that one Robins, which is a little bit south of Macon is phenomenally employed by the Air Force Base there. So that market can be a little bit scarier a little bit appealing to whomever bases it around military bases, I guess it depends on your political stance but making itself is is a diverse market. And that regardless is smaller. There, Ivan my, my family actually commutes to Atlanta who lives down there. So there’s going to be some of that because the price points of making are so much more appealing than Atlanta, especially Now since we’ve gone straight up for the last four years, so I feel comfortable with the diversity of making and again, the fact that it’s growing so much in the downtown pocket as a lot of appeal to the area that was not there five to 10 years ago, because it was a little bit more rundown and some people are, who are graduating from Mercer, for example, they always just come back to Atlanta. Well, now there are more more and more college students staying and Mercer for various jobs, which is an appealing aspect of the community.

Jason Hartman 22:31
Okay, good. Tell us about the target property that you’ve been buying and what you’re doing in terms of rehab and, and you know what that property will cost for any of the investors listening?

Eric 22:40
Sure, I’d say your typical cost for an investor is going to be right around the 1% mark of rent purchase price. We’re looking in the A and B areas. I could I could buy you know C and D areas in Atlanta that would be comparable to a small town like this, so the advantage would not be there for making if I’m buying low rent stuff. So I feel like the advantages, you’re buying areas that are better schools, low crime, better tenants overall, but you’re still getting much better returns and you would an Atlanta market. So we’re looking at typically, maybe a 50 to 1250 in rent range. And then for those properties, you’re going to be looking at somewhere between 80 and $125,000 on a purchase price for the investor, or Rita. So that’s that’s a nice one. That’s a nice 1% then right, correct. Yeah. And taxes and insurance are going to be a little bit lower and making versus an Atlanta. So the returns actually are a little bit better because of that as well. But, yeah, rehab scopes, we tried to replace the roof, Cicero’s older than about 13 years. It’s kind of my mark for one to replace the roof. And he kind of just depends on the condition. I don’t necessarily have an age where we’ll replace it. But what I’ve started to do in order to save on turnover, Cause for investors that’s a vinyl plank and all of my Living room Kitchen kind of areas that they don’t already have hardwoods and tile. I hate to break it to you but this is almost becoming cliche

Jason Hartman 24:11
a vinyl plank we’ve talked about so much it’s it’s well you know I’m just giving you a hard time but no you’re exactly right i mean it really is the answer. So many investors are quite happy with that type of flooring you know about two bucks a foot somewhere in that range installed you know if you have to replace part of it is real easy to do. So that’s great and and I want to make sure we get to talking about this realty Trac article housing wire article that says Macon is one of the best markets so we’ll get to that but continue on the rehab if you already I interrupted you there

Eric 24:45
but yeah, sure enough, I really try to focus on turnover costs because ultimately, management and turnover costs are what can be detrimental invest to investors after we move forward with our with our sales process. And I always try to make sure that people want to keep coming back and buying more. So you know, typical kitchen I typically if I’m going to do 1100 or 1200 dollar rent, I’ll put granite and stainless then for the rents below that it doesn’t necessarily make as much sense. So I’ll typically do a laminate countertop so stained stainless steel appliances we’re talking about right? Yes, I’ll do a black appliance package for things that are lower than 1100 nine, I do that because if I want to sell retail for example, or if the investor wants to retail on the back end, it’s obviously going to help a lot more to to have that granite and stainless clients package. Maintain value. So I try to think long term because if we don’t sell it to investors, obviously we’re gonna own it so I would do get carpet in the bedrooms. Obviously we assess cosmetics on all the bathrooms and kitchen furniture. At least reasonably updated, depending on the rent range, but the house that I recently did we put 32,000 into it. And that was a 1250 rental property. And that was, again, a nicer rehab. But I’d say on average, we’re looking anywhere from 15 to, to about 30. in rehab, depending on the prospects with

Jason Hartman 26:23
1616 to $30,000,

Eric 26:26
right? Yes, that is correct. 15 to 30 total rehab here a great renovation? That’s correct. Yeah. So 16 to 30,000 on our renovations, and then there are some older homes making, like one of the ones I bought was an old, true historic Craftsman style property. And so obviously, we look at the electrical and plumbing on properties like that, to make sure that they’re, they’re up to par. But so that’s a generally speaking, that’s about our average rehab. I, my wife is a designer so I try to stay on top of kind of what’s more appealing these days. With regard What about property management? Yeah. So there’s a that I’ve seen who are very active and settled. There’s their six property managers down there. And making. I interviewed several of them, I found one that I feel really good about. I think what you’re best at is saving money on turns. His rehab costs are very low. And so I’ve been very Appleton thus far there’s, there’s others that I’ve heard good things about, but I, once I started with him, and the process was seamless and everything he said, What happened has happened, which is sometimes, you know, up or down in that particular arena of property management. So I’ve been really happy with him. The manager that I use down there, it’s been it’s been very good. He charges 10% of the gross rents, but he does not charge a renewal like some property managers. So I feel like you’re, you’re getting about what’s the least update half, one half months, one and a half months round. Yeah.

Jason Hartman 28:01
And see, you know, this is the this is the reason and folks, I’ve talked to you about this on many prior episodes. When I talk about this flat fee style of management, that’s great that, for example, this manager, and I’m not picking on this manager, but you know, it’s, it’s fine. It doesn’t charge renewal fees. But some investors will argue that, well, then they like it when the tenant moves out. So they can charge a lease up fee, but you know, that’s really a lot more work and, and 50% lease fee really isn’t too bad. I’ve seen a lot higher than that, for sure. It’s all about the alignment of incentives. And this is why folks, I really am pushing this idea. Well, I guess I’m not really pushing it that hard, but I’m still talking about it. I’ll put it that way, at least have this sort of flat fee management where everybody’s interest is aligned. For every dollar that comes out of that property, whether it be a lease up fee, monthly rental income, whatever it is, the manager just takes a percentage and they will have to take off higher percentage because they won’t have these, what I’ll call affectionately garbage fees in their, you know, their fee schedule will just be completely flat, it will be totally uncomplicated. When $1 comes in, the manager gets a certain cut of it, you know, whatever you negotiate, maybe, maybe it’d be 12% or something. But there’s no other fees. That’s just it. I don’t know what that number is. I got a few managers finally interested in this idea. I certainly got some clients interested in it. I don’t know. I just kind of think it’s worth a try. But that’s just me. So I don’t less we go off on one of my famous tangents on this. I will, I will refrain from more discussion about it, but just wanted to throw that in there. So top 20 markets for residential rental returns. Number two, Macon, Georgia

Eric 29:48
really, I know that a part of that article honestly made me think well, maybe I need to take a harder look at this market. And yet, the price points are so low down They’re for a really good quality house in an area that just makes the rent to price. An absolute bargain compared to other big markets.

Jason Hartman 30:11
Fantastic. Fantastic. Well, what else do you want people to know about the market? The management, the properties, the tenants, just anything else in closing that I didn’t ask you.

Eric 30:23
Yeah, and I would just say, you know, initially, a smaller market was something that I was just apprehensive about. So that’s why I wanted to test out the market which I’ve done over the last year. I feel good about it. I feel good about the city. My my family loves it there. They’re not going anywhere. There’s there’s a good job base and making. It seems to be slowly but steadily growing. One of the thing that I like about it is, you know, if you look at 2010 the markets and the big cities are obviously hugely down we’ll make an is is kind of just Stable market, it doesn’t go up or down. So when you’re in a hot market, like we are now where you can take advantage of a solid stable market like make and then you know Atlanta were to come back down to reality at some point here in the future, that’ll be a potentially a good time to look at Atlanta, the market. But I like in a hot environment is trying to take advantage of some of these secondary markets. And so we feel good about the areas we’re buying in. Again, these are nicer areas and then what I’ve done in the past in Atlanta and some other markets just because you can get the best bang for your buck there. So something we’re excited about, and hopefully we’re putting out a good product that investors will be interested in.

Jason Hartman 31:37
Fantastic. Well, thank you so much for joining us and telling us about Macon, Georgia. I appreciate it.

Eric 31:42
Thanks, Jason. appreciate you having me on.

Jason Hartman 31:46
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.

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At the beginning of the show, Jason Hartman talks about a Gobankingrates.com survey that reveals 62% of the US population has less than $1000.00 in savings. Then, he interviews Gary Pinkerton. They discuss an article with 27 charts by Timothy Lee, which is about the 27 Charts that will change how you think about the American economy article. Each chart represents changes in the US economy related to productivity, demographics, or inflation. They also tackle the possibility that Americans may work well past the social security mandated retirement age, inflation-adjusted housing prices, and the growth in the service industry, which is a clear indicator of progress and a higher standard of living.

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 0:12
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. Real estate investors.

Jason Hartman 1:04
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 749 749. Thank you so much for joining me on this very last day before. And yes, next time I speak with you here on the show. We will know who the new president of the United States of America is. Wow. What election it has been? Probably, you know, is this the most entertaining election in US history? I think there’s a high likelihood of that. I don’t know how it was in the old days, but certainly in modern history. This has got to be the most amazing and I’m going to say entertaining election of US history certainly in my lifetime. So We shall see what happens. We shall see what happens as the continuing revelations come out about the clinton crime syndicate. It is doesn’t it just discussed you the way Wall Street people the way banksters bankers banksters politicians are just basically what we have, you know, when you look at those ratings of corruption of different countries around the world and and how corrupt they are, Ecuador is always up in the top of the list, you know, as a very corrupt country. They say, Russia would would be you know, certainly on the list. Many of these Banana Republic type countries, you know, are on the list, right. But in the US, our collection is different. Our corruption is what I call legalized corruption. It’s basically how many lawyers, accounting firms PR firm’s Spin Doctors. How many of those people can you afford to hire? Or can you become too big to fail, either as a person or an institution so that you can commit crimes. And and basically, the clinton crime syndicate is an example of this. And listen, I’m not giving Donald Trump a pass because he’s got his own sets of baggage for sure. You know, this Trump University thing. But, you know, Trump is just your typical greedy businessman, right. And he hasn’t had, you know, partnership and shareholder scandals, the way the Wall Street people do. I mean, the Wall Street people dramatically worse than Donald Trump. You know, no matter what side of the political aisle you’re on. I mean, you just have to admit, Hillary is a criminal. I mean, this Clinton crimes syndicate has gone on for decades. It is mind boggling to me it is truly mind boggling. And we shall see you know, it’s there’s a, this is a very, very close race. Certainly there lots of evidence that it is rigged as they say. And remember I want to do this documentary still called rigged movie. And the the tagline is, heads, they win tails we lose. Yes, it is a bit of a pessimistic headline. And if there are any people out there who could help me get this documentary project that you know, admittedly, I have not spent much time on this or tried very hard because I got so many other things going on out there. I would like to do a documentary on the rigged financial system how it is rigged against the little guy, the rigged legal system, how it is rigged against the little guy rigged elections, you know, as a documentary series, there. The pharmaceutical industry is rigged the Oh Roll healthcare industry is rigged. the voting booth is rigged. There are so many red things in our society. That is just it is just appalling. It really is that Yeah, and you know, I could see how this kind of stuff could happen. In the old days, when people weren’t connected and communication wasn’t phenomenal like it is today. It’s an amazing time to be alive. I always say that and it is certainly true. But But today when the world is so interconnected, and the secrets are out, the jig is up. The monetary system is rigged. I didn’t even mention that one a moment ago, as we often talk about the Federal Reserve and and fiat money and the way that whole thing is rigged. The episode, just the last episode number 748 Jim Cramer you know a well respected guy in the in the world of stock market again His own statements talking about how it is rigged the words from his own mouth, how he basically brags about fooling the SEC and and manipulating the market. It’s just mind boggling, isn’t it? Folks, it is absolutely, positively mind boggling. Now, I have talked many times before about how the next 10 years of demographics and psychographics In other words, people’s 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 is 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. 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 is the digital divide, there is 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 writing 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 gonna see that this segment is ginormous, ginormous. Yes, I know 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 video. 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 a 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 is zero dollars. 14% have hay. 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, I 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 huge market. It 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, Guedes, 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 look 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 vif 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, 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.com. 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 were 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 guest speakers and some fantastic, fun first class events. So be sure to join us venture Alliance 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. I 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 you 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 17:03
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 17:14
Yeah, yeah, that’s a 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.

Gary Pinkerton 17:21
So I’m in New Jersey, Belmar New Jersey, which, if you’re ever heading up the New Jersey Turnpike, you’ll see the term 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 17:42
Yeah, man, a 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 analytic 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 18:08
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 coyotes and surfers worship 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 18:33
Wow. That’s, that’s amazing. And, you know, 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. It’s just nothing. Right?

Gary Pinkerton 18:54
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 right. So eventually they’ll think I’m seeing I’ll be able to type answers. There you go. There you go. Yeah,

Jason Hartman 19:03
that’s how you’ll blow your security clearance. Okay. Got it. Got it. Well, he Gary, what got you interested in real estate? And how long ago did you discover my podcast and become a client?

Gary Pinkerton 19:15
So it was 2011. Just about mid 2011. I was I was leaving command I just taken over a position in a great job at the Naval Academy, a two year position there. And I 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’d 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, his prophecy 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 I started listening in the teens I think it was and I’ve certainly listened to all of them. And I just you can kind of become a junkie with that and your real estate guys radio, I listen to them quite a bit as well. And I you know, so for 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. And then what you’re referring to is the 10 loans for each spouse, the 10 Fannie Mae Freddie Mac loans for each spouse,

Jason Hartman 20:45
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 when you’re underwater so

Gary Pinkerton 21:00
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. So, 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 21:25
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 21:50
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, you know, number one is kind of an eye catcher probably on purpose, but he says nice 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 back up, 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 in industry anymore. And that’s somewhat true, because, you know, he talks about it, because it’s automated, right, right, the efficiency that companies, but you know, the bottom line is that America is still producing quite a few goods,

Jason Hartman 22:43
right, right. 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 paradox 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 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 24:15
So one of them is, you know, even just going to chart two 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 back breaking work that comes along with that. So I 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 24:59
you 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 it 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 wants 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 services 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 life is getting better. 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, do you you know, like service jobs are are a sign of prosperity, I think

Gary Pinkerton 26:47
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 of oral 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 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 27:40
No, no, very, it’s it’s an amazing time to be alive. Good. Okay. So anything else you take from chart number two, manufacturing employment is dwindling, while more and more people provide services?

Gary Pinkerton 27:54
No, 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 they’re jobs that, you know, you know, are beyond you know, and 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 28:54
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. 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 a middle management type of job? You know, the information work or 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 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 era 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 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 66 Seven. 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. And 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 31:17
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 company that’s large, but it’s not like it, I mean, it 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

Jason Hartman 31:56
that that’s one of the old how to lie with statistics, things. You show someone that 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

Gary Pinkerton 32:10
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. Yeah, that

Jason Hartman 32:48
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? 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 under 200,000. 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 they’re completely adjacent. So it’s hard to tell, but go ahead with what you’re saying.

Gary Pinkerton 34:22
Well, what I was going to say is that, you know, this really speaks to the the logic behind what you do and your company in 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 we’re concentrating on, they can still go into where that large growth is occurring for jobs.

Jason Hartman 35:00
Yeah, this I’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 and dramatically better Valley. Use. And I just think that the Uber high priced cities are I don’t think they have as good a future. It 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 36:19
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. All right.

Jason Hartman 36:43
Yeah. Let’s talk about inflation adjusted housing prices.

Gary Pinkerton 36:47
I see. So what I did Jason is I went back and looked at this and I 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 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 37:47
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. So the house in 1890, I’m just going to venture to guess I’m going to make a wild guess here is not as nice as the house in 2010.

Gary Pinkerton 38:33
Right, and by the benefit included the outhouse as part of how are you going?

Jason Hartman 38:38
Right, 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 He’s 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 it 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 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’s there’s more to everything than meets the eye, isn’t there?

Gary Pinkerton 40:04
Absolutely. there absolutely is. There 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 can that consistent climb that it shows from the 1970s on ironically, if you add 1%, like I said to the inflation adjustment, we’ll find 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 following inflation. Yeah,

Jason Hartman 40:46
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 and I was talking about why can I 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. All of the ways in which they understate inflation and that was that was fascinating. I got to find that one and play it 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 yeah, yeah, good stuff. It’s a 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. I was causing prices. have grown a lot faster than construction costs.

Gary Pinkerton 42:02
Right? 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. And 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. Some 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 42:39
Yeah, right. Right. So in other words, you’re talking about constraints on building, right, that cause housing prices to go up a lot faster than real construction costs.

Gary Pinkerton 42:48
Exactly. Exactly. So that’s, that’s one huge part about this, I believe.

Jason Hartman 42:51
Yeah. Yeah. And, and this is something by the way, just to tell the listeners what this chart shows is it shows from 1982 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 gotta go, you got adjusted twice, 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 underrated. 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 will 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, that’s another component. You know, I believe that delta will will compress. 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 the Latin the 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 the 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 and 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 46:08
Right? Right. It absolutely is. 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 46:16
that’s amazing. That’s amazing. Any others you want to share before we wrap it up, Gary?

Gary Pinkerton 46:20
Yeah. So 2424 is one that 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, 401 K’s IRAs, self funded, if you will, and then those that are covered by a 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 that 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 shifts 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 media And family has just $5,000 saved for retirement and those

Jason Hartman 48:04
that that is so scary. Yeah, it is just mind boggling when I hear those studies about how the average person in America has this, 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.

Gary Pinkerton 48:23
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. You know, less than 10% of 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 so security and also working probably longer than they originally planned.

Jason Hartman 48:58
Yeah, yeah, but You know, I mean, as terrible as 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. And as your next career. I’m sure you 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 50:06
I agree completely. I, you know, I think most people should Well, all of America should reevaluate what we think of as retirement. You know, 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 have 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 amassed enough and have the ability to retire. And if you retire after 30 years of work, well,

Jason Hartman 50:43
that’s if you’ve done it, right, right, you know, it’s semi right. Hopefully that even sooner, but yeah,

Gary Pinkerton 50:48
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 a 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 51:11
they’re 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. And 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 you know, 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 are some amazing charts here. Now, I

Gary Pinkerton 52:04
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 it it told a great story, you know, and I think it’s a eye opening story on a lot of charts.

Jason Hartman 52:34
It really is. It really is Gary, give out your website.

Gary Pinkerton 52:36
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 that covers 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 52:50
Okay, fantastic. Gary Pinkerton client, venture Alliance member and former submarine captain and hack economist. How’s that? I’m a hack 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 53:08
Thank you. It’s a pleasure.

Jason Hartman 53:10
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. He sort of 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 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.

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Jason Hartman starts this Flashback Friday episode by discussing The Future of the Mind, a book by Michio Kaku, and what he has learned from it. Afterward, he is joined by one of his clients, Fernando, where they talk about his background and his journey to financial freedom.

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. Welcome to the flashback Friday edition of the creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you to prepare you for the future by listening to the past. Let’s dive in.

Announcer 0:29
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 Get 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 1:19
Today we have a another client case study. Yes, we have Fernando coming on with us today. This one’s kind of long waited, because he’s been a client for about three years. And I started bugging him maybe almost a year ago now to come on the show. And he said, I will I will in time and and so he finally did it. So I’m really happy about that. And, and both David Porter and Fernando and the other guests that we’ve had client case studies that we’ve had on the show, over the years have done just a great job investing and they’ve been very good managers of their portfolio and, and managers of their property managers. I just love what I do. One reason it is a great thing to do is because I learned so much from you, I learned so much from our clients. And I look at it as a big part of my my job is to kind of gather and assimilate all of this learning that I learned from our thousands of clients, thousands of transactions that they’ve done in building their portfolios. And in some of the best practices. I really learned from them. You know, it’s not like I made all this stuff up or figured all this stuff out. And so today, again, just like on the last episode, that’s what we’re going to do. We’re going to learn from Fernando, and learn about how he acquired 50 properties that are 70 units, so 70 doors or units in those 50 different properties. And I met him about three years ago, shortly after he discovered the podcast and we just had a game plan and went to it and he’s just been doing a great job. So you’ll hear his story. Today, and he will also be at the meet the Masters event. And I think I’ve talked him into speaking at the event as well and sharing some more of this detail with you. So that’ll be a great thing. So you get some today on the podcast, but also, of course at meet the Masters with so many of our other good things. And by the way, we just confirmed one of my own attorneys to speak at the event and he is coming. He’ll be speaking on Sunday. He has just done a phenomenal job with IRA investing. He actually wrote the book on it. One of the best books on the topic about IRA investing and asset protection. He is speaking on Sunday at meet the Masters January 11. It’s the 10th and the 11th. you’re really gonna like what he has to say, as well as all the other fantastic speakers and I’m looking through a land contract deal that I’m actually doing myself I’ve been looking through that for the past oh three days or so, and kind of poking holes in it looking for potential. pitfalls, you know, kind of what, what are some of the possible problem areas? When we talked about all the stuff on the podcast several episodes ago where we talked about land contract investing, that was episode number 454. So I’m gonna bring that knowledge to you as well. And I sent an email to the seller of this land contract. It was really interesting yesterday to calculating my return because the face value of a land contract. I think on this deal, it was 9%. The overall return though, assuming the land contract performs, as the contract has stated, looks like it will be around 14%. But if they default, the land contract deal could actually provide a better return. So you know, it’s just funny how things work. When you set up and structure your deals properly. Regardless of the scenario you can win. You know, you can win if it goes well, and if it goes, seemingly what most people would be, would consider to be poorly, you can actually win more. And we’ll talk about that and meet the Masters in great detail. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. So be sure to register for that at Jason Hartman calm. We do have a few seats left unbelievably, I thought they’d all be sold out by now, but we’re doing this one kind of earlier than usual. So seats are left to go to Jason Hartman calm and take advantage of that and we’ll look forward to seeing you there. Now before we get to Fernando’s interview, I want to ask you do you want to know an interesting fact? Something I learned a few months ago I’ve been meaning to share with you and it has very little to do with real estate, but it does have to do with the incredible gifts we’ve all been given. I finished a book by Michio Kaku, And I know that’s tough name to pronounce. I want to get him on the show in the future. And he is just a really interesting futurist scientist, all kinds of things and he’s got many books out there. This one’s called the future of the mind. And one of the amazing things I learned about what he says, and I believe it, it’s probably very true, is the most amazing discovery ever and that is the human mind. And can you believe it? You already own one of those free and clear, that amazingly powerful entity, the human mind, we all own one free and clear, cool, cool concept there, isn’t it? So we own this great thing free and clear and we own a bunch of other things, you know, are in our body free and clear, which is fantastic. But the eyes Wow, the eyes are really an extension of the brain. Because they’re they’re basically brain cells in the eyes and the the largest nerve from the sensory organ to the brain is the optic nerve. So, you know, most of our data and perception is visual. And you know I’m not that’s not from the book that’s just what I’m saying there, but and from other readings and learnings I’ve done over the past but here’s the amazing thing from Michio Kaku, his book, The future of the mind, the scientific quest to understand, enhance and empower the mind. Did you know that your eyes, you think you’re seeing everything with your eyes, but you’re actually not. Here’s what I mean by it. All of our eyes actually have a small blind spot in them. Where you think you’re seeing we think I shouldn’t say we think we’re seeing an entire picture of what we’re looking at. But actually our mind is generating some of that it is fake, we’re not really seeing everything we think we’re seeing. So here’s what I mean. It is a physiological fact that the eye does not see everything in front of it, there is a small blind spot in it. So what our brains do is they actually create that image out of what it saw when the eye moved into that area, you know, as it’s moving around so quickly, and the brain actually creates that image on a computer. I think they call this rasterizing how the computer will rasterize the image that could be the wrong word, but I think that’s the word and put it up on the screen for us on the monitor for us to see it right. And amazingly, our eyes are not seeing everything that we perceive a small portion of that in each have our eyes and our visual field is blind, it is not seeable. Our mind creates it. That if you just think about that one, that’s a pretty amazing thing. So again, not much to do with income property investing there, but I just wanted to share it with you. Because I just keep thinking about how fascinating that idea is that our mind literally generates the image to fill in the blind spot. Wow. And you own that free and clear already. Amazing, right? Amazing. Sometimes we got to really appreciate that, you know, thanksgiving wasn’t that long ago, and talk about something to be thankful for the most amazing computer that can outdo any computer that has ever been created. We already own one of those free and clear pretty darn cool. Well, hey, let’s get to our interview our client case study with Fernando and you’ll hear about how he acquired his 50 properties and they total 70 units because He’s got some flexes in there. Here we go, Hey, I want to do a case study with one of our clients. And I’ve been asking him to come on the show for a while, and he said, He’s not ready yet. But then, to my delight, I saw that he requested a time to be on the show. And that is someone I’ve talked about before. And he was on just briefly a couple of months ago, when we were at a conference and that is Fernando Fernando. Welcome. How are you?

Fernando 10:25
I’m doing great, Jason. Thanks. Thanks for having the time to talk with

Jason Hartman 10:28
me. Well, it’s good to have you on and you’ve got quite an impressive story. And I think the clients will really, or the listeners and clients of ours will really benefit from hearing your story. So so thank you for sharing it. Maybe we’ll go back and kind of take a big high level overview here of how you became interested in real estate and maybe even in your childhood growing up in another country, talking about what you saw in terms of inflation and parents business and so forth, and we’ll lead right up to The present day and how you build your portfolio. So sure, Does that sound good?

Fernando 11:03
Yeah. Sounds Sounds like you plan.

Jason Hartman 11:05
So you grew up in, in Brazil. Right?

Fernando 11:08
Right. Yeah, I was born in San Paulo, Brazil in the late 60s. So although my parents are from European descent, I lived in Brazil, you know, when I was there, my childhood and, and as a teenager, and I actually lived through a period in Brazil, where high inflation was really making its mark there was there was a lot of people that were hurt by inflation in Brazil and some people that were making quite a bit of money with inflation at the time, we had annual rates that were over 100%. So it was it was kind of an interesting time. So

Jason Hartman 11:43
inflation rates of over 100% annually. Yeah, that is just crippling. I mean, what a way to do that just destroy, to destroy people’s savings, destroy their stock investments.

Fernando 11:56
Most people living there, even at a young age myself understood that money Left unused, either in the bank or even in their wallet would lose it as purchase power. Literally on a daily basis prices would be nothing for prices to go up by 1020 30% at a shot. I even remember living through a change of currency where the government decided or decreed that we would be using a new currency and they had to remove three zeros from the old currency because it was getting out of hand. You’d be 1000 Crusaders at the tire for a pack of gum. Yeah, it was that bad. Unbelievable.

Jason Hartman 12:30
Yeah, so if the currency was a crusade at attack, crusade crusade Oh, okay, and so 1000 of those for a pack of gum, but what was it before I mean, give us a comparison of how we should relate.

Fernando 12:43
Well, it went from being 1000 to one they took three zeros out of the currency and created a new currency with a new name. Until that, you know, it became more seen you wouldn’t be carrying millions of currency with you with just, you know, I carry a lot last It was amazing my father at the time he owned he was a shopkeeper. He want to bake pre daily. And I used to help him by working there and I was a kid and teenager at the time. And I remember vendors coming in just to you know to stock up and sell goods like cheese and ham and then they would tell him that you know, by the way, Mr. Aries the prices just went up by 20%. You know, my father he would have to pay for for these these products with money from his previous sales. But due to inflation, all these these price hikes he had to come up with this new 20% money to pay for products that he hasn’t sold yet. He was just getting into the business. And I saw this cycle repeating itself numerous times. It was just it was just sad to see. He was getting to a point where the net effect of his businesses you will never catch up. He was always behind the curve, always trying to come up with new money to pay for Other basic goods that he needed. He got to a point where he needed more and more money. He started boring money and get this Jason at a rate of 5% a month 5% interest per month

Jason Hartman 14:12
when you compound that, I mean that’s that’s just insane.

Fernando 14:16
Wow. Yeah, yeah, I took a look at some of his I did a spreadsheet with him back when, when I when I went back to Brazil to visit after living in the US and it just made no sense. It was absolutely crazy to live like that. But on the flip side, you know, this is this is an example of, of my dad was really struggling with inflation, but I had an uncle who was it was talking it’s always

Jason Hartman 14:40
say I know it’s always you know, that’s so funny because I recently listened to the interview that I did with my aunt Joan. And of course, you know, Uncle john, but he wasn’t there, but I did it with Pantone. And it’s always a rich uncle, right?

Fernando 14:52
Yeah, I don’t know how that one. But anyway, I had an uncle in he he was actually a business partner, my father and the only The butcher shop and they own you know, various different things and we lived in Brazil through the same time period went through the same inflationary issues. But that was one crucial difference. He managed during that time to buy a couple of commercial buildings and rent them out.

Jason Hartman 15:18
Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday.

Fernando 15:28
I remember that he used to live upstairs, it was a true story building one of them. He lived upstairs and rented the lower side of the building to a business and the rents would keep up with inflation. As a matter of fact, he would he would raise the prices of rents higher than inflation at times because the the, the the steps were quite big it’d be 20 to 30 to 40% change in, in price hikes. You know, you can you can you can definitely put a little bit more in you know, towards your your rent. Increase in go ahead of inflation. So he was able to make money and save enough money and ended up purchasing a small business in Europe, you know, move away from Brazil, before hyperinflation really took off, you know, this in the, in the 80s. You know, it went from hundreds to thousands of percent a year, it just became insane. So he, he basically left Brazil and then was able to continue with a decent, decent life in Europe. And that really, really stayed with me that learning the, you know, the way to get ahead and to get wealthy was what my uncle did, essentially, that is just amazing. So, when you were a kid, and you saw this type of inflation, I mean, you talked about what it did to your dad’s business and how it put him just behind the eight ball forever where he was just always trying to catch up. How did you feel how did other people feel around you that you knew, I mean, that’s just I mean to see this kind of ravaging of the currency devaluation firsthand is it’s just gotta be just amazing. I mean, it just changes your whole psychology doesn’t it? He doesn’t, he doesn’t. Because when you’re living in a situation like that on a day to day basis, you just thought that and you know, as a kid, I felt that that’s how the world was, you know, it was just prices kept going up and if you don’t keep up and if you you know, if you don’t do the right moves you you you’re gonna fall behind. And it’s just, it’s just the life that you live in. You don’t put too much thought into it. It’s just catching up trying to survive and but the net effect is a lot of people worked very hard and saw their life savings just going down being eaten up by inflation.

Jason Hartman 17:42
It would encourage people to spend sooner rather than later I would assume I mean, it you know it that’s really bad for an economy when you don’t have a way to encourage people to save money, and you don’t reward them to save money because if you don’t have capital formation That really limits progress. Big things are done with capital formation. They’re not done if you don’t form capital,

Fernando 18:07
there was very little credit available at the time. Like I said money was was so crazy. Inflation was so high it was, it was the credit was virtually non existent. So you saw a lot of hard money loans at these crazy rates. And people just being desperate to try to catch up and

Jason Hartman 18:24
most never did. That would be a very dangerous time to be a lender because one of the things I teach is how inflation transfers wealth from lenders to borrowers, and borrowers and are enriched by inflation and lenders are hurt. Amazingly, we don’t have more inflation in the US, which is I don’t know how long they can keep defying gravity, Fernando but they for the past year, they seem to be doing pretty well before that, you know, for the last couple of years. We’ve had some real inflation and you know, the government statistics are always understating it. Which by the way back to Brazil. I don’t even know if you paid attention to it. Certainly as a teenager, I didn’t but did you You notice anything about the way the government acted? Or do they understate inflation like we do here in the US? Or, you know, was there any awareness of that?

Fernando 19:10
I don’t think that they had, it was so obvious that I don’t think there was any way to to play these games. it you know, it’s just so high that people see it every day. And you know, it’s crazy, and it doesn’t really matter if it’s 130 or 150% a

Jason Hartman 19:26
year. It’s still just really, really high. Exactly. Well, amazing. Okay, so, what got you interested in real estate investing? When did that first happened?

Fernando 19:36
Well, as I said, You know, I was, I was learning as a child, what, what inflation would do and I saw how real estate helped my ankle. And, you know, basically, I guess I have to take a step back and give you a little bit of background of, of some of the deep realizations that I had while working. That led me to real estate in a more direct way as I was working in corporate America, you know, a few years ago I, I went through, I guess awakening deep realization that I was not going to become financially independent at the rate that I was going. My investments were basically tied to the stock market stock market and honestly, they’re mostly treading water. I tried to, you know, make a big, becoming financially independent from stock options by working on on startups. And I had to two tries to different startups that I that I worked for, but it didn’t quite work out. I didn’t make enough money to make me financially independent, but instead, it was certainly enough to trigger a huge tax payments to Uncle Sam. You know, I saw though 40 to 50% of my earnings being taken up by taxes. You know, literally there were hundreds of thousands of dollars in taxes to the federal government state of California. For the years where I got lucky enough to have options that were above water that actually made money on stock options, stock options. Right,

Jason Hartman 21:09
right, right. And we should say that you’re an engineer, a chip designer, you live in Santa Cruz. And so your career has been spent in the Silicon Valley area. Right.

Fernando 21:17
Right. Let me let me give you a little bit of background that I came to the US, I guess for, for permanently in 1984. I was an exchange student through the Rotary Club. It’s a service club, and I went to live in New York State. I attended high school there. And when I was in high school, I played soccer and I caught the eye of a soccer coach. There was a nearby State University of New York campus and the soccer coach offered me a small scholarship to study classical engineering computer graphics at the State University in New York. And after I graduated, I was offered a job with a company that no longer exists. It’s It was called Digital Equipment Corporation. And at At the time, it was a huge company it was I think IBM was the biggest one in the in the 80s. And digital was was second. Although like 15 times smaller than IBM is so big difference but it was a great company it had it had the top but technology. And I ended up going to work near Boston, Massachusetts in actually Hudson, Massachusetts to design computer chips. I don’t know if you recall their Vax line of computers. And then I went on to to work on their alpha computer chip blind is all with Digital Equipment Corporation. And in 1993, digital decided to open a design center in Palo Alto, California. This is where the when I moved to California moved to Palo Alto, the end of 1993. There was a design Santa that digital opened up. And in Palo Alto, they were actually designing chips for a project that Apple was developing called the Newton.

Jason Hartman 22:55
You might have heard that that it was I do remember that you do that Uh, but you know, if Apple didn’t have the Newton flop, we probably we might not have the iPhone if you ask me. But

Fernando 23:06
anyway, it was a predecessor, it was kind of a PDA and a personal assistant that it had some handwriting recognition software. But it was just before its time it was it was a commercial disappointment, to say the least. But I work for digital in that project through 1995. And that’s when I tried my luck with a startup. You know, being in Silicon Valley, I had to, I had to try at least one startup and I knew that this was one way to become financially independent. So I tried going to work for a company called Next Gen. In 1995. Next Gen. It was basically designing computer chip CPUs. It was a competitor of Intel, along with many other companies, that actually struggled quite a bit since Intel was a virtual monopoly for for the PC World at the time. So next gen. I was bought by Advanced Micro Devices, which is a much bigger company and was also a competitor of Intel. And they paid quite a bit for for the startup that I was in a paid $1 billion in 1996. And even though that was a great price, bottom line for me is I made very little money on the deal. I think I made less than 100,000. I didn’t have enough shares, and I didn’t have enough vesting,

Jason Hartman 24:26
and the government took all the money in taxes, right?

Fernando 24:29
Yeah, they took a lot of any taxes. And I was I was really, I was really lucky in a way but unlucky enough to not really make money out of the deal. So I worked for AMD, since they bought the startup. I wrote for AMD as a chip designer from I think 96 to 2004. And during that time, we went through the.com bubble and AMD stock actually reached its peak, it was over 40 bucks, and you know riding that bubble, but overall For for the time that I worked at AMD was about eight years. During these eight years, I was able to make a few hundred thousand dollars from stock options and I put some away some of it away as investments in the stock market. I worked after AMD for another startup since the first one, you know, didn’t really get me to financial independence, I went to another startup co pa Sammy, and PA Sammy was a startup that produced a line of power efficient CPUs. And this was quite revolutionary at the time. And it was to be used for gaming consoles and routers, internet routers, and that sort of thing. And, you know, I worked there for them through 2004 what I do remember even though I didn’t didn’t quite make it big with the startups is the work in the startup was very demanding. You know, I was having some difficulty seeing enough of my kids and family. You know, during the times I was working in the In a startup it was it was quite difficult. Fast forward a little bit, if you would,

Jason Hartman 26:04
to your work at Apple and how that came about, and then how you got interested in real estate.

Fernando 26:09
So Pac Man was acquired by Apple in 2008. They paid almost 300 million for for the deal. And honestly, for the four years that I worked there, the start off, I made about 350,000, probably from the sale, but the government again took over 100,000 in taxes, you know, in the interesting thing is in in California, the money that I made, and that money that I made from all of these years was not enough to even put down as a down payment for a decent house. Houses in Silicon Valley, you know, a million dollars is is common for a house here and then I couldn’t even put it down for I mean off down for a downpayment, it was said, but Apple did offer me a nice package, you know, as I joined them, but it required a four year vesting period. You know, you have to wait for your stock options to fail. And, you know, restricted stocks too vast, so we had to, you know, put your time through in order to reap any rewards. And I worked for Apple as a senior manager there getting doing chip design, doing program management and working on their intellectual property hardware. Yeah.

Jason Hartman 27:16
So we’re, we’re so now you’re working at Apple, and Apple, you know, Apple makes great products, obviously, we all love them, or most people do. But, you know, that’s hard work, isn’t it?

Fernando 27:28
It was hard work. And you know, as I as I mentioned, when I was going through some, some enlightenment or realization internally and in becoming disillusioned with, with, with how fast I was progressing towards financial independence, and especially the my stock market investments, you know, I went through the subprime and the financial crisis, you know, 2007 through 2009 that really took a dent on on my savings in I remember paying thousands of dollars for a financial analyst and an investment counselor Charles Schwab and Morgan Stanley, but my returns are absolutely terrible. It was just

Jason Hartman 28:07
come to Wall Street.

Fernando 28:09
Depending on the home on, you know, how I how I measure which account I used I, I lost 20 to 40% of my savings that, you know, my investments that I have worked on for many years, you know, that would mean mean that it would have to go up by 40 to 80%. For me, just to be back up to where I was, it was just, it was just sad.

Jason Hartman 28:30
You just don’t get anywhere you spin your wheels on Wall Street and the stock investments because even if you make a return on the deal, the government takes so much of the game. It’s just not a tax favored investment. Income property is the most tax favored investment in America. So how did you get interested? I mean, what did you do what you started searching for podcasts or what was your start?

Fernando 28:52
Oh, yeah, sure. So it was kind of an interesting story. Before I got to the podcast in Things 2011 I was watching late night TV at a lake in New York State. And I was there with my American family. And I saw a program from from a TV network called America auction network and TV. And they were sort of sounding newer homes in southwestern Florida in Lee County. This is where Fort Myers, Cape Coral Lehigh acres are, you probably know. And these new homes in their homes were built in 2006 2007. And there were $60,000 $70,000 in here being rent rented out for 750 dollars $850 a month. These were nice three bedroom, two bath, two car garage, 1500 square feet and higher. They were renovated, ready to rent. The guys that were selling them on the network were showing returns on investments are wise available. 13% I just could not believe it. I, you know, I, I could not believe the amount, you know, the prices for the season and the returns that you could get it was just a completely new idea for me. Although there were some caveats. You had to pay cash for the houses, you know, we had to close within a couple weeks. There were no contingency on inspection. And so one. And I think the network also made 10% off of the sale. But But still, it was it was a great deal for me living in Silicon Valley. As I mentioned, it’s not uncommon for you to find a house cost a million dollars there needs some work, and these homes in Florida were being sold in their entirety for less than a typical downpayment. For me, well, I studied it quite a bit. I put a spreadsheet together I analyzes and compare different properties that are being sold on the network for months and I thought about going to Florida during this time, and I think I spent in about three months doing this just just kind of trying to get over my fear of actually purchasing something in a market that I wasn’t familiar with, but I did decide to go to Florida and buy properties in his early 2012. I ended up buying a couple properties in Collier County, not not in Lee County. I found a real estate agent who was a colleague of a colleague and the agent knew some contractors handyman that couldn’t

Jason Hartman 31:27
So here it’s all fragmented and you’re just bouncing around. Yeah,

Fernando 31:30
exactly. Yeah. I actually had my dad go down to Florida for three weeks to get the house ready for rent. Oh, he helped fix it up. It was a hot hodgepodge of of items that I had to go through. In as of today I self managed, I still have the property itself manage it. And it was definitely not turnkey and I had quite a bit of difficulty finding support services around the area. That’s exactly what I found and so many of our clients have found Fernando is that they Just, you know, there just wasn’t any way to properly and prudently invest on a nationwide basis. So after that, you know, this was in early 2012. This is when I found your podcast, I found that creating wealth podcasts with with you. And I got to give you a little bit of background. I’ve always loved podcasts. So I, I searched and I listened to many different financial and real estate related podcasts, and especially a lot of these in early 2012. As I was getting into buying property, I had bought a couple properties in Florida. But honestly, almost all the podcasts and webinars and education out there had very little content that could make a difference in my life. There was it’s just lots of talk about the current real estate market and interest rates and a bunch of guesses on where things are headed. It was actually a real board. It was just very repetitive. There were some that were offering flipping, you know, buy how to buy cheap and do rehabs. But honestly, they sounded like a lot of work. Work Yeah. In most of them require you to be present in the city where the properties war, you had to scrub news, newspapers and county auctions to find the right do the right property and then you gotta go find a contractor to fix them up. I remember one of them. It taught you how to become something called a bird dog. You probably know that term, right? Yeah, sure. And, you know, it was just it was just so much work. I think what I was was was learning from from that process is, despite what they were telling you, being a bird dog or flipper, it’s it’s not as quick and easy for the novice guy that really doesn’t know the area or, or the contractors to get economies of scale. So you wouldn’t become the next, Donald Trump doing this. I think most of the successful ones, they spent years or maybe decades working around real estate and they develop their instincts about what properties to buy and so on. So I didn’t think it was that easy.

Jason Hartman 34:15
So Fernando, you started looking for podcasts out there and tell the listeners what you found?

Fernando 34:20
Well, I basically found creating wealth podcast by searching iTunes, and immediately resonated with your message, you know, the great return on investment, significantly significant reduction in taxes, steady income that could eventually replace my corporate job income. Also, what I found very powerful is along with that message, I was impressed by the high caliber of your guests and I remember listening to economist investors, lawyers, authors, basically people who could present their expertise and allow me to judge their response against your message. So as an example, When you talk about inflation, your your your ideas about inflation going up over the next few years, I could vet that message against your guests and, and be sure that what you’re saying made sense. So that was very powerful to me.

Jason Hartman 35:12
Oh, that’s an interesting point. So, in other words, you didn’t have to just take my word for it. You heard the guest, you know, saying, I mean, assuming they agreed, I certainly don’t always agree with the guest or they don’t always agree with me, but

Fernando 35:23
right, not necessarily agree but but understanding their reasoning and seeing how that compares against your reasoning. And if I was to follow your plan for financial independence, would it would it work according to the experts, and not just you? So basically allow me to solidify my understanding of the various facets of real estate income investment and you know, the multi dimensions that he has, and and listen to these top notch experts. So it just, I mean, it was just clear that after I listened to the first few episodes, in this is in early 2012 I went back and I downloaded probably one year’s worth of podcasts. And I went on a listening spree. I was gobbling up, you know, every podcast that I could get my hands on. And then at that point, I knew I was ready to sit down with you and come up with an exact plan on how to achieve my financial independence.

Jason Hartman 36:17
Good. Good. So you took a trip to Phoenix just kind of on your own. Right. I mean, I know that you you talked with a couple of our local market specialist in Phoenix at the time. And then you had contacted me and asked if we could meet. And I remember I remember our first meeting together. I just walked down from my my apartment and met you at a little bar there called canteen Cantina. And we we just had a beer and a bite to eat, right?

Fernando 36:47
Yeah. And you brought cocoa with you if I really Yeah, well, no, actually,

Jason Hartman 36:50
I think that was puppy. I had puppy back then. And you didn’t meet my old dog. So there you go on that meeting.

Fernando 36:59
Yeah, so That meeting was really key because I at that time, I had put together what I called my independence day plan spreadsheet. And this was a lot of my thoughts into what it would take, how much money would they count how many properties I would have to have in order to replace my corporate income. The goal to me was was clear that I wanted within a year to be financially independent. And that would meant that again, I’d have to have enough rental income to match my corporate income. I wanted to quit my corporate job and have the choice of live anywhere that I wanted. If I wanted to live in California I could stay or if I want to relocate, I could stay because I was I was not not tied to an office.

Jason Hartman 37:46
Yeah, I loved I love that you call it Financial Independence Day, and you were so organized. I mean, you know, we went over kind of your different assets that you could use. I know that you sold a bunch of your Apple stock and purchased income properties, with And, you know, we talked about the possibility of using Home Equity and all of the different things. And then you just started, you know, after you have that financial independence day outline, which was a great guide, you were you were extremely organized. Then you started acquiring properties, right. Where did you Where did you start? I can’t remember, you know, well, we

Fernando 38:20
Yeah, we talked about buying in Dallas, Atlanta, Phoenix, St. Louis. We made a plane in you know, at the time, there were different lenders that were offering incentives for different markets. So we made a plan, and I ended up going to Atlanta first. The idea was really to try to to use up my conventional financing spots. As you probably know, there’s a limit of 10 additional financing loans that you can have under under your name. And those are the 30 year fixed interest rate. mortgages that are just great. So we tried to use those 10 spots in Atlanta and and get those done and out of the way so I could purchase more properties with commercial financing after that point.

Jason Hartman 39:12
Right. Okay, so Atlanta was the first market then. Right,

Fernando 39:16
right. Exactly. Yeah, I bought several properties in Atlanta by October 2012. And then a few more by November 2012. In Phoenix, we we looked at some houses, I ended up making a couple of offers, but we didn’t purchase any the inventory was already getting pretty low and Phoenix at

Jason Hartman 39:34
that time, Phoenix Phoenix doesn’t work anymore. So well. So you know, but there will be time on it probably will soften a little bit or the rents will catch up either one. You know, it’s just a it’s just a question of either one, it can happen and once they do, then, you know, you’ll be in good shape to be buying there again, possibly, you know, so

Fernando 39:52
yeah. Okay, good. And then I went to St. Louis, St. Robert, in Missouri. As you know, the St. Louis that specialty there were the multi you know, the duplex is two, you know two unit and four unit buildings. The older buildings you know built 100 years ago I bought several of those also in 2012 and I bought new construction plexes in St. Robert, near the military school in base and that was completed by January of 2013. Okay, I after that I bought a few properties in Austin, Texas. Also, in 2013. I ended up buying a couple properties in Dallas as well. I started using my IRA IRA money for that I opened up self directed IRA. After going to one of your meet the masters. weekends, I learned about self directed IRAs and I opened up one in July 2012 and bought a couple properties under under the IRA as well.

Jason Hartman 40:56
So tell us what you know some of your biggest challenges we’re in Investing in these different properties. I mean, you would you went to a lot of the markets and really You worked hard at this. I mean, you you were not. You were not unambitious here you, I mean, you really jumped in and you did it. I mean, I gotta tell you, I was impressed.

Fernando 41:14
It’s funny people talk about being lucky and you know, how great your life is at any point, but what they don’t look at is how hard how many hours you put in and how much thought you put into, into the planning. Now, I was lucky enough that I was able to sell some of my Apple stock during the time that happened to be going up in a you know, strong clip. So I was able to reap the benefits from that and putting to the real estate. But the challenges were where I you know, I had a clear plan. As you remember from my financial independence, my independence day spreadsheet, I had a clear goal of becoming independent within a year. And it was very difficult to to accomplish that within that time period. Most of the because of what I call mortgage sequencing you know, it’s it’s it’s one thing to have the money and be ready to buy a lot of properties in, in try to achieve a goal but in reality, you have providers that might not have many properties available at any one time, it might be that they only have one or two crews that are doing rehabs at one time so they just don’t have enough inventory. Even if they have the inventory, they might run into snags where it takes longer to finish the rehab one particular property in you can’t buy what you thought you could buy at a time you wanted to buy. The interesting aspect of marching mortgage is sequencing because of what I just described is, is this the banks they want to take a financial snapshot of the applicant prior to close of escrow. They want to know where you are financially. They don’t want any new contracts, any change to your financial picture during the 30 or 45 days prior to close of escrow once you once you open a contract. You know, in essence, that means that I couldn’t just go down to Dallas, for example, and make an offer to buy a couple houses with one lender, and then go to Atlanta and make an offer and a couple houses from another lender, you know, the lenders, they all want to know about each other. I was at the time, I wasn’t lucky enough to work with a single lender that could take a holistic approach to my plan, and do it across the US and tell me Okay, I get what you want to do. Let’s, you know, let’s put a grand plan together. It was kind of a, it’s kind of an ad hoc type type of approach.

Jason Hartman 43:37
What’s interesting, I want to comment on something you said a moment ago, too, is you talked about how the different local market specialists wouldn’t have enough properties for you to buy. And by the way, just tell the listeners, how many how many properties Do you have now and we’re just talking income properties, not your own home. Are you at 57 properties now?

Fernando 43:55
I got about 50 properties 50 off 70 doors, there’s about 12 plexus, you know,

Jason Hartman 44:00
right. Okay, so you have some plexus. So yeah, how many doors total 7070 doors. Okay, so 70 units and 50 properties. All right, good. And, and so one of the challenges you had is that they just wouldn’t have properties for you to acquire. And, and this, by the way, is why Wall Street has a very difficult time being in our business, which is great because it keeps them out the institutional investors find it frustrating. Okay. Yeah. And, you know, they they want to just be able to go and deploy, you know, a billion dollars with a mouse click and a due diligence report, you know, and it just, they just can’t do it in our business. Can they? Not very easily at least Yeah.

Fernando 44:40
So So as I was saying, I really had a tough time, you know, hitting my goals within one year. I frequently got into a spot where I was getting purchasing two or three properties in and they’re all being rehabbed, getting ready for tenants. And what the Banks, you know, if I was getting the close of all properties to be done at the same time, the banks would want to make me wait until all properties were ready, you know, for their appraisal until we could close on all of them. So if you had one that had troubles rehabbing, it would delay the purchase of all the items, it would then push out the timeline for all the eventual purchases. Bottom line is I had to wait longer for for my independence day, Financial Independence Day, date, and he got pushed out from one year to two years.

Jason Hartman 45:33
Right. Right. So it took twice as long it took two years rather than when you’re ready to get to financial independence. And how did you feel about that? I mean, you know, it was just a problem of, of being able to get the properties, right. You just couldn’t acquire the properties fast enough.

Fernando 45:48
Yeah, it couldn’t be done fast enough. You know, I had to sequence my conventional financing backed by Fannie Freddie, early on and only after those are done Move on to commercial and portable portfolio landing. So even though opportunities were presenting themselves for, for commercial lending, I had to first get get my conventional loans done, because those are so much better terms than then everything else. So it just has, you know, the point is there’s a sequence that you have to follow. And it doesn’t just happen the way you want it to happen even though we might have I had a great credit score, you know, almost 107 87 credit score a great job, you know, paying over $200,000 a year. I mean, I had no problems getting credit financing for for these properties, but it just doesn’t happen as fast as I thought it would.

Jason Hartman 46:41
Yeah, that’s, that’s true. This is a fragmented business and you gotta you got to dive in. So let’s talk about more of the challenges. You know, you talked about some challenges in acquiring the properties Fernando, but what about managing them, you know, how difficult is it and, you know, I just want you to share kind of some of the the pitfalls And the challenges and then some of the good sides to you know, to give people an accurate sure

Fernando 47:03
it’s a you know, there’s bumps in the road, it’s it’s not rosy as as you might think is a passive investment, you have to be involved. As I was purchasing properties in Atlanta, the property manager was indicated by the local market specialist by the providing a planet was was becoming overwhelmed. She just had too many properties that were coming her way too many clients that were coming her way. And she didn’t have enough of a software backbone to her business to handle all these properties. And it became so bad that he got to a point where I fired her and I, I got involved with a new property management company and had to transfer all my leases over and make sure that the tenants were aware of it. So that took quite a bit of time to go through. As a matter of fact, the very first home I purchasing Atlanta we had to evict the tenet This was my first taste of my financial independence the Hey, Blaine started out with a big bump and you know it took took a while was over three months to get that ironed out mostly because the the property manager was was getting overwhelmed and just could not handle it properly wasn’t on top of thing. Okay.

Jason Hartman 48:21
All right. So you got that squared away and that took some time. What else what other challenges

Fernando 48:27
challenges in in rehabbing St. Louis was a perfect example. The rehabs in St. Louis are extensive in you’re basically looking at these hundred old properties that needed to be gutted in have new plumbing, new electrical, you know, sometimes they had to remove you know, bad plaster jobs and had to put sheetrock and sometimes had to repair the frame. And it was it was just, it was just a big rehab. It was not a cosmetic type of job. So these took a lot longer than planned. both, both because of this, and also because the provider was also getting overwhelmed with too many clients. And in just trying to do too many things at one time just didn’t have enough contractors and knocking on resources to, to address all of these clients. is it’s interesting that in the boom times there, we had some real challenges

Jason Hartman 49:22
in St. Louis, that was one of our most challenging markets for a time and they’ve mostly iron themselves out now, but it took some time, that’s for sure. Oddly, though, Fernando, as many challenges as we had in St. Louis, people benefited from the most of the time because well, they had huge construction delays and you know, people were anxious to invest the market was going through and so you know, even though it was kind of disappointing, to some, it really overall it had a pretty big financial benefit in a lot of ways. Yeah,

Fernando 49:53
if you look at the building prices now they definitely have gone up. So it’s a it’s a It’s quite interesting.

Jason Hartman 50:02
So, so with these with these 50 properties and 70 units that you have, you’re really good at keeping track of things. I mean, you’re an engineer, you’re a chip designer. So what what kind of gains Have you made? And what kind of returns if you had?

Fernando 50:16
Well, I was just looking at this recently and, you know, when I, when I set out to do my replace, when I set out to replace my corporate income with with with my rental income, I took a snapshot in the beginning of this year, in my corporate income after everything taken into account, all my expenses, all of the normal items that you would, you would see from from just working regularly, I would come up with about 8500 monthly of net corporate income. My net income from real estate rentals is now closer to 10,000.

Jason Hartman 50:56
And the difference is you have a huge tax advantage on rental properties, right?

Fernando 51:02
Right. This is this is already, you know, 15 to 20% more than my corporate income. And, you know, I do have equity building in all of these properties. And I do have the tax benefits going into this property that the nice thing about taxes, when when I look at my situation is I’m getting to a point where I have over 150,000 in depreciation every year. And what this means is I can make this much in cash flow income before I need to pay taxes on the rental income.

Jason Hartman 51:31
Okay, so say that again. So the depreciation for the few that don’t know is the most wonderful tax benefit in America. I mean, it is when you say depreciation, that’s a good thing. The way we’re talking about it now, because that’s what the IRS calls it. But the property could double in value it could appreciate in real life, but according to your tax return, you’re getting a big deduction as though you’re losing money. Yeah. So it’s a great thing because it doesn’t make any sense in a way That’s what’s wonderful about it. Okay, so say Say that again, what what, what are the numbers?

Fernando 52:04
Yeah, so I have over $150,000 in depreciation expenses as

Jason Hartman 52:11
tax benefits

Fernando 52:12
as a tax. Okay? And what this means is I can make this much I can make, you know, 100 up to 150,000 in cash flow before I need before I show any income and therefore need to pay taxes on the rental income because right I can deduct that 150 straight from my income. So it’s just wonderful. Yeah, it’s

Jason Hartman 52:34
just a great tax but if you calculated like your return on investment, you’re pretty good at using property tracker, and and keeping track of things. What does that look like?

Fernando 52:43
Well, I don’t have the actual numbers in front of me but it took a while. For me. I started in 2012 2012, actually 2011 but 2012 was when I when I got gained a lot of traction with you and the properties took a while to get to perform took awhile for the rehabs to be done, etc, etc. So my cash flow was was very little was like 5000, or something like that it was it was not very, very much. This is the reo cash flow where I think a lot of the noise out of the equation in 2013, it was much better the yearly cash flow was 60,000 as the properties came came to perform, and for 2014 the projection is about 120,000. And that’s, that’s where I, I come to the comparison of being able to replace my corporate income. When you look at taxes that you’re paying with your corporate income, you realize that you don’t need as nearly nearly as much rental income to to get to the same point because of the tax benefits. So you know, things will will only get better.

Jason Hartman 53:47
So let’s just talk about that for a moment. I want to make sure people understand that. I mean, if you have $10,000 a month in tax free income, depending on where you live and what your tax brackets are, of course, you know that that’s That’s about $6,000 per month at your corporate job, right, you know, so. So you’re, you’re really, you’re really, if you attended, I should say that the other way, if you have $10,000 in income from your job, you’re really only keeping about 6000 of that these are very rough numbers, okay? And they do depend on, on where you are, you can earn 6000 in, in rental income, if you’re able to take all those depreciation tax benefits and actually earn more. I mean, you know, it’s incredible. It’s just an incredible thing. Taxes are the single largest expense in anybody’s life. And, and we’ve got to learn about them. We’ve got to, we’ve got to manage and position our investments so that we can benefit

Fernando 54:42
in this way rather than being hurt by it. That’s exactly it. It’s interesting that I have you know, you gave your exact example, I can give you my exact example where my gross income with a corporate income was 18,000 a month in This is gross. But my net income was, as I mentioned before 8500 when I look at real estate, my total income it’s 10,000 a month, but my net income is about 10,000 a month because I get the depreciation to write off you know, this this the income that comes in so the comparison at the end of the day is in favor of of the real estate. rental income. It’s so much more powerful because taxes are such a big, big hit on your on your finances.

Jason Hartman 55:28
Yeah, yeah, for sure. That’s it’s just it’s amazingly important thing. It’s amazingly important. Okay, good. Well, just wrapping up here, Fernando, what else would you like people to know? What else should they know about real estate investor?

Fernando 55:41
Oh, there’s a lot to know. I’m always learning. I think it’s a I think there’s there’s different things you can do with real estate. There there are opportunities for using your self directed IRA for some aspects of real estate that provide short term returns that I’m interested in getting into, such as land contracts and notes and that sort of thing. So that’s definitely something for people to think about to tap into their IRA savings. The other point that I want to make is, for people that are thinking of buying many properties, financing is very, very important. Try to get as much financing as possible with the low interest rates that we have now, you know, I’ve financed over 80% of my properties and pretty small tried to, to do refinancing on some of the ones that I paid cash for your returns I just leveraged by so much when you get appreciation of three 6% multiplying by that leverage that financing allows you It really makes your total income be much, much higher than anything else you can do.

Jason Hartman 56:48
Yeah, it sure does. And did you buy into that idea initially, Fernando, because it’s kind of counterintuitive for many people. You know, they think that Oh, I’m too conservative. I don’t want to take on debt, you know, I want to own the properties free and clear kind of that old school mentality. And, you know, once you come around to the fact that the most conservative thing to do, I sort of, ironically, is to have as much financing or as much debt as possible on the property. Yeah. And the the riskiest thing is to own them all free and clear. Yeah. Which is counterintuitive, right? Did you buy into that right away? Well, I

Fernando 57:24
sometime I used to have that same line of thought the old line of thought that, you know, I wanted to pay off a lot of my investments, but I, from my learning over the last three years, and in my real life examples, I would like to leverage as much as possible and push all of the, all that, you know, equity onto the into the lender. And, you know, leverage is is probably one of the most powerful aspects of real estate income. So I’m definitely strongly on the side of leverage as much as you can see, especially with the current rates that we have,

Jason Hartman 57:56
yeah, yeah, good. And just to wrap the story up, What happened? I mean, you achieved your financial freedom day and you retired from Apple. And when did you retire from Apple in May? May May 2000 for a few thousand 14 2004. You know, it’s funny because I heard someone talking on the radio, and they kept talking about 2004. And I kept yelling at the radio the other day. It’s 2014 you’re talking about? We don’t realize it’s lighter than we think.

Fernando 58:27
Exactly. We went to coffee go back 10 years. Yeah, so I retired and I immediately went to Brazil for three months to spend time on the beach with my family and you took the summer off. I took the summer you saw the World Cup and all this other world cup. I was in Brazil, we had a great time. Just I could never even dream of taking that much time off when I was working for any of the tech companies, any of the tech companies that I worked for before. So we spent time there I came back and I absolutely love the freedom I have only my time and if I wanted to go to a conference which I have done with you even and I can do that and I really have the choice, I don’t need to worry about asking permission to go on vacation, or how long I’m going to be out for it interesting enough, you know, after being retired from corporate America, there are lots of opportunities for for me to get involved in I’ve been helping quite a bit of of people with their planes, being a coach and investment consular and trying to, to answer questions for people that work with me to Apple and colleagues that want to do a similar plan as I have done. So it’s just been incredible.

Jason Hartman 59:44
Yeah, yeah. Good. Good for you. That’s so good to hear what a great story and thank you so much for sharing it with all our listeners today. I really appreciate it and you know, what’s next for you, you’re gonna buy more properties. I know you’re looking at notes and land contracts, and I’m really excited about doing more In that world, too. I’ve dabbled in it for many, many years, but I won’t do it in a bigger way. And it’s not as good as the real estate. It’s better to own the actual property. But for simplicity sake and ease, you know, owning the paper is my second favorite,

Fernando 1:00:14
you know? Yeah, yeah, no, I think my plan right now is, is for me, too, I got enough properties that I need the help in managing the managers and just just some of the day to day tasks, so I’m not going to be buying more. If I can’t get more help to take care of them. I do want to get into contracts and notes. I do have a few properties that would lend themselves nicely to to two land contracts. One of them has an issue with Hoa and I would rather do a land contract with it. Also, with my self directed IRA, I have plenty of opportunities to buy notes. I think he lends itself very nicely to the short term income that notes providers there’s not as many tax benefits as you do with rental income. So I do want to get into that as well. So those are the next few steps that I’m planning on doing

Jason Hartman 1:01:11
it. Good stuff. Well, Fernando, thank you so much for sharing this today and keep up the good work, you are doing an awesome job as an investor. And it’s just really it’s really gratifying and great to hear your story. So thank you.

Fernando 1:01:22
Thanks to you. I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be. Really now How is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know I mean, how many people do you know not including insiders who created wealth with stocks, bonds and mutual funds. those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game from Most people, the typical scenario is you make a little, you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win. And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploited packaged commodities investing and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home. before it disappears and how to outsource your debt obligations to the government, and this set of advanced strategies for wealth creation is being offered for only $197. To get your creating wealth encyclopedia book one complete with over 20 hours of audio, go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker, Jason’s creating wealth encyclopedia series is for you.

Jason Hartman 1:03:40
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.

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This Flashback Friday episode is an impromptu show with Jason Hartman and his mother, Joyce, where she shares her low-tech approach to investing in income properties. Joyce also tells her journey from having a low-income job and a small investment to a $7,000,000 portfolio that generated a net income of well over $200,000 annually (and rather passively) at retirement. They also talk about creating wealth and passive income using modern strategies instead of old-fashioned ways.

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. Welcome to the flashback Friday edition of the creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you to prepare you for the future by listening to the past. Let’s dive in.

Announcer 0:29
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 Get 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 1:20
Thanks for joining me today. So today I’ve got a really interesting guest. And that is my mother. Yes, my mother, a successful real estate investor in her own right, I saw what she did growing up and how she built a lot of wealth through real estate just by doing it the old fashioned way. And there’s nothing wrong with the old fashioned way. But there are ways to do it a lot better than that. And that’s what progress is all about finding a better way. So you’ll hear her experience and I think this will be very valuable to you. I certainly saw her experience her real estate investing career through the years as a kid growing up starting at age 11. And then going on there and you saw her manager properties and kind of deal with it and buy different properties and so on and so forth. So I think mom will be an entertaining and interesting interview. My mother is a well a zany person, I’ll put it that way. She’s funny. She’s got a good sense of humor. And anyway, so we’ll get to that in just a moment here with my mom on the show for the first time, you’d actually think that with almost 160 shows behind us now we would have had mom on by now, but this is the first time So anyway, we’ll have that for you in just a moment. A couple quick announcements before we get into the interview with mom. First of all, we have got a conference call a free conference call coming up on Wednesday, March 3 at 6pm. Pacific time 9pm. Eastern Time, and this one will be a preview of our totally new creating wealth in today’s economy bootcamp online course. Now this is an online version of that course. And of course, that course is always updated. And we always say to people, if you’ve been bitten And we’ve had a lot of people Riad it and come over and over, you should come every six months, because it really does change substantially every six months or so we change with the times we change with what’s going on and constantly update you on what’s going on in the economy. So this will be a preview call, where we’ll give you a good update on the market on what’s going on out there. And then also tell you about the online course that will start the following week. So if you’ve been listening to our show, there’s a lot of stuff you don’t hear on the podcast on the show. And that’s because the show is more of an interview format and an educational format, but it’s not in sort of a structured way, the way the actual bootcamp is done. So we’ve got some special pricing where this is only $97 if you attend the call, so register for that, at Jason Hartman, calm, the call is free. That’s a preview call it will be valuable and educational. And we’ll also talk about what we’re going to cover in the course over the following six weeks and if you can’t be on the call each time or you You can interact with me and the different speakers on the call. If you can’t be we’ll always have a replay of that for people who sign up for the online course. Now the online courses in webinar format, so you have audio and visual with that. And we do have some special stuff that we give away for people that attend the online course. So don’t miss that. That’s well worth it. And we’ve had the request from a lot of you who say, I’d love to come to one of your live events, but it’s hard for me to travel and I just can’t get there. Or even if I’m local, we got the kids soccer game or whatever it is. So we designed this online course just for you. And the nice thing about doing it as an online course, too, is that we can get different speakers to come in and guest speak during the course from all around the country. And we’ll be doing that so I think that’ll be valuable to you. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday and of course the Masters weekend. Now, let me tell you, folks This masters weekend is shaping up to be so exciting. And the reason this one is really exciting is that it’s unique in the sense that we’re going to cover a little bit, I’d say it’s going to be about a two thirds, one third ratio, two thirds on personal finance and real estate and getting ahead financially through your investments, making your money work for you, but then one third on making technology and business and leveraging that stuff to work for you. So we’re going to talk about personal entrepreneurship, internet marketing there. Let me just go over a little bit of the agenda with you because I haven’t done this yet. And I know that several of you have asked, so we’re going to start off with financial self defense in a world you cannot trust. That’ll be Saturday morning, March 6, and I will be giving that talk then we’ll have Mark who’s been on the show before the author of the book, lawyers are liars talk about asset protection secrets on the cheap, and that’ll be a great presentation. He’s an excellent presenter. We’re going to talk about hot deals in the Lone Star State. Of course, that’s all about Texas. And then our next speaker will talk about secrets of credit enhancement and credit restoration. A lot of Americans are getting their credit beat up right now, a lot of them are doing it intentionally, as I’ve talked about on prior shows. And you know what, that is a bit of a risky game, but sometimes it actually makes sense to do it and that’s why people are doing it. Well, let’s talk about getting back in the game and repairing your credit. Then our next speaker will talk about incredible leverage on income properties and new construction properties. And that speaker is flying out from Missouri. So that’ll be a really interesting presentation. And that’s not Kansas City. That’s the st. Robert speaker. So totally new guests. We’ve never had any masters weekend and then our next speaker will talk about the Indy 500 property investment in rehab properties in Indianapolis. If you want cash flow Indianapolis is one of the best places around for that is you know, as a regular listener It’s not just about cash flow, though. So there’s multiple dimensions to a good income property investment, but cash flow is certainly one of them. And then our next speaker will talk about how to profit from the boom and bust cycles that are always occurring throughout our economy. So you want to buy low, you want to sell high, you want to know when the boom times are to understand it and to see it and I know that sounds easy, but it’s not that easy when you’re in it. fish live in water, but they never noticed the water. We live in air. And unless we live in LA or some other really swanky place, we don’t usually notice the air do we but it’s vital to our life. And we don’t always really notice when we’re in a boom cycle when we’re in a bus cycle. I know that seems simple, but there’s really a lot more to it than that. So we’re going to explore boom and bust cycles in depth. Then our next speaker will talk about the power of analysis. Now this is a repeat speaker who has spoken at every masters weekend and she just does a great job presenting this. So the power of analysis and really understanding what you’re getting into and why you’re getting into it. Our next speaker after that, we’ll talk about Rocky Mountain High. Now, I’m a huge john Denver fan. I’m not sure you know that. But that may sound a little geeky, but I know the lyrics to almost every john Denver song, and I got to see him in concert before he died tragically, a big fan of him. And of course, Rocky Mountain High is all about what Denver, Colorado we have 5280 reasons to invest in Denver. And so our local market specialists will be flying out for that. Our next speaker will talk about the power of exchange on residences, your personal residence and your rental properties and your income properties and how to defer gain and defer taxes basically forever. So pretty exciting income property is America’s most tax favored asset, and that’s what we’re going to talk about. And then Sunday morning, we’re going to pick it up with life is a marathon, not a sprint, the power of long term thinking Then I’m going to talk about the 10 commandments of personal entrepreneurship. And after that, we’ll have a speaker who will talk about internet marketing and how to make extra income with internet marketing. Our next speaker after that, we’ll talk about creative destruction, how innovation makes the rich poor, and the middle class and potentially the poor, the poor, who have a vision for their future richer. So that’ll be very exciting. And then our next speaker after that Lisa will talk about juicy marketing, creating income with conscious marketing. So we’re only at lunchtime on Sunday. Now, folks, can you see how packed this masters weekend is. And next we’ll have a panel of investors, our actual clients who have invested in properties who have had good experiences and bad experiences. We’ll talk about the school of hard knocks. We’ll talk about Tales from the edge, we’ll talk about overcoming adversity, which, by the way, is what a lot of this show is about that you’ll hear when when I interview my mother in just a moment here and then our next speaker will talk about investing in real estate with your IRA, and then we’ll have a segment on Roth conversions and whether a Roth conversion is right for you. So that’s a special opportunity that just opened up January 1. There’s a lot more to it. We did a prior show on that. But there’s a lot more to it. And you’ll be able to ask questions and meet the experts when you’re live. And this is the Masters weekend gathering of experts. And of course, I didn’t mention because we just booked him on the agenda. We just booked our expert on taxation. And you know, that’s one of my favorite areas, because I just love not paying Uncle Sam. That’s what’s so great about real estate saving money on life’s largest expense taxes. There was an article in Forbes on forbes.com and in Forbes magazine, and this was really interesting. It’s about how new home construction is not keeping up with population growth. And folks, I tell you something, I have been predicting this trend for about two and a half years now. Because when The market really took its turn for the worse the builders stopped building and our investors started buying property at or below or sometimes far below the actual cost of replacement or the actual cost of construction. And this is a huge opportunity. Now we’ve seen in the last couple of years, the population keeps increasing dramatically, both through people having kids through immigration, and also through demographic shifts. And what do I mean by demographic shifts? Well, Generation Y, who is just coming into their prime renting years is the largest demographic cohort in American history. Think about that. It is slightly larger that demographic cohort than the baby boomers, the baby boomers had 76 million Americans, well generation Why is 80 million Americans it’s the biggest one ever to move through American history. And guess what all of those people are coming Coming into their prime college years. So student housing is a huge opportunity. And by the way, we were really lucky. There was an investment group who was trying to buy some of those South Carolina student housing opportunities that many of our clients have purchased that had 30 of the properties tied up and they lost some of them. They weren’t able to go through with the purchases. So we had a couple new opportunities open up there. So call one of our investment counselors inquire on our website. Jason Hartman comm phone 714820 4200 to ask about the student housing opportunities. That’s just a little side note because Gen Y, very good cashflow there. So we’ve got this huge demographic cohort that’s moving into their prime renting years, construction stopped two and a half three years ago, populations increasing and the particular demographic cohort moving into their prime rental years is phenomenal. Folks, this is about to really turn in the favor of the investor, not to mention under the Obama administration in the tail end of the Bush administration, the disgusting amount of money printing going on, and what does that mean? Of course, it means inflation, which is great for people who own what packaged commodities investments and a lot of long term fixed rate debt. Remember that debt is a huge part of the asset, not a liability when it’s on an income property. It’s an asset. So we’re really moving into a very exciting time. In fact, I got to tell you, I’m getting goosebumps saying this to you, because the opportunity is starting to get so interesting. So lots of good stuff coming up. Be sure to join us for the upcoming conference call where we’re going to do the preview of the creating wealth Bootcamp, and also the Masters weekend. We’ve got a lot of people flying in from all over the country for that we got a deal with the Marriott $109 per night. It’s at the Marriott Hotel in Costa Mesa. And if you’re flying in for that, it’s five minutes from Orange County’s john Wayne Airport, which is a gorgeous airport. It’s just real easy. You can come in you don’t need to Rent a Car, we may be able to have one of our staff or investment counselors just pick you up at the airport take you to the hotel, you can check in, enjoy the whole weekend fly out, it’s just real easy. Also, we’ve got a couple more contest winners, we’ve been giving away a couple of freebie admissions, and then a couple of discounted half price gift certificate admissions. So Jason hartman.com, slash contest, I think we’ve got two more of those to give away before the event. And if you register and your name is drawn as a winner, we’ll just refund your admission. So that guarantees the best of both. So be sure to register Jason urban COMM And join us for all those two events. They’re going to be great. And here is the interview with my mother, real estate investor who did it the old way and I tell you, when you invest in these income properties, time is on your side. We can make this a little better for you with the new techniques. Now I have to tell you, my mom, she’s just funny. But my mom it takes a long time to convince her of something Think when it comes to friends and family, they don’t listen to us even if we happen to be the expert. It’s funny like a total stranger will listen to my advice and follow it lickety split right away. But my mother takes a long time to convince her. If she heard it from a total stranger, she probably just listened to it. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. And so lately, mom has been investing based on my plan the last several years where she’s using leverage. She’s using long term fixed rate debt, but on her other properties, she did it kind of the old fashioned way. She bought properties, rented them out, paid the mortgages off, and lately she’s refinanced them because she sees what I’m talking about here. What I’ve been teaching you on the show and through our other educational products and events, but mom did a great job. I mean, look, she retired, what maybe eight years ago, well over $200,000 a year in income from rents and $7 million in equity. You just accumulate these wonderful little properties over the years and you put time on your side you put irresponsible government spending on your side, you put inflation on your side, there is no better wealth creator than income properties. That is it, period point blank. It’s the best opportunity in America. And there’s no better opportunity as far as income creation than little sensible internet businesses. So we’re going to talk about both of those at the Masters weekend. Without further ado, here’s the interview with mom. We’ll see you soon. So I have an interesting person here in the studio. You’re laughing. And you know that is that’s, that’s my mother. So my mom Joyce is here with me. And she is really quite a real estate investor. And I’ll tell you something, before mom talks here and tells you kind of some of her real estate experiences. I remember that when I was a kid, we used to always play Monopoly You remember that mom?

Joyce 17:01
Best Game in the world?

Jason Hartman 17:03
Best Game in the world? Definitely. And I remember one time when we lived in marvista in that crummy little one bedroom apartment when you were saving money to buy your first house. And I remember I was losing you were killing me. And it was interesting because my reaction in monopoly was always to have as much cash as possible. I like passing go. I like collecting cash, cash, cash, and I would save the cash. And I wasn’t really I didn’t have the propensity to buy properties. Now, I was probably seven years old when this happened, right? I but I remember this. And I remember I was just getting so discouraged about it, and you just stopped the game. And he said, Look, Jason, if you want to win the game, you’ve got to buy more houses, so that every time I pass, you can charge me rent. Do you remember that

Joyce 17:50
was that best lesson for you?

Jason Hartman 17:52
It was a good lesson for me. And so I started buying properties and I started winning the game because I kept collecting the rent as you went by and the story Hear that my mom bought her first house when I was 11 years old, and it was in West Los Angeles. It costs $62,500. And it was a fixer upper on Kelton Avenue and tell the story, you started buying more rental properties and how did it all go, mom?

Joyce 18:16
Well, that was the first one and that is always the hardest one. It seems like the next one I bought was in the San Fernando Valley, and I bought it was on

Jason Hartman 18:25
Bassett Avenue on

Joyce 18:26
Bassett. Uh huh. And I bought it exactly two years later. Now, sometimes you have to go out and take several jobs in order to get that downpayment together, you

Jason Hartman 18:35
know, to support your real estate habit. It’s like a drug habit, right? But it’s one that really does pay off.

Joyce 18:42
Yeah, absolutely. And then it just seemed as though that this was really opening my eyes to how people should start running their lives. You’ve got to not live at the top of your income. You’ve always got to be Little frugal and start making some good investments.

Jason Hartman 19:04
And I will testify that when I was growing up you were frugal because I never got enough money. So you were executive director of the Leukemia society. And that was back in the days when you always said you felt there was a glass ceiling more than there is today. Right?

Joyce 19:23
Absolutely. Just and I had this boss like me are competent be brown.

Jason Hartman 19:27
Yeah, me Brown. I wonder if he’s gonna listen to this show.

Joyce 19:31
Who was the most conservative guy in the world? And of course, I had just moved to California. Well, not really just but he called it being in the lands of fruits of being in the land of the fruits in the nut that kind

Jason Hartman 19:45
of describes California fairly well.

Joyce 19:46
Yeah, but anyway, I had to just kind of circumvent having a very respectable job. I took a sales job selling space at the convention center. I worked as a waitress at norms

Jason Hartman 20:02
restaurant I remember you you worked at norms and, and you used to work there at night like after work to save money for a downpayment.

Joyce 20:09
Yeah, you just

Joyce 20:10
you just do whatever it takes. Because once you get that in your head that hey, this is really the way to make things go. You just put everything toward it.

Jason Hartman 20:19
You mean the way to make things go is what to invest in real estate home rental property?

Joyce 20:23
Absolutely. And you know, now I’m retired. But I’m so happy that I don’t have to get up and think about going to work all day long for somebody else, because my retirement investments in the stock market, probably moat for most people. They’re just cut in half. And it 401 k that came to 201

Jason Hartman 20:45
k Well, yeah,

Joyce 20:46
exactly. Exactly. Real Estate. It’s just a totally, totally always interesting profession or a way to make a living, because you meet all of these people. What you have to fix up a rental house. You meet everybody knew. you negotiate with them.

Jason Hartman 21:03
You always love negotiating. I strive to get a best deal. I will tell you, my mother gets the best deals on the planet on everything. Well, okay, so let’s just kind of tell the whole story here because the listeners don’t know. Okay, so I want to give a little biography of you. So yeah, sorry about this. So you grew up in upstate New York, and you grew up on a farm. You’re the middle of five children. And you grew up? I gotta say, very poor. I mean,

Joyce 21:33
fairly, certainly weren’t rich. Yeah. But then neither was anyone else. Yeah.

Jason Hartman 21:36
I mean, it was in upstate New York in the middle of nowhere. You were born in bliss, New York. And you You always say that the population is 300, including the cows and the cats and the dogs. And then as soon as everybody turned 18, all five of those kids, they moved to California. They just wanted to escape, right?

Joyce 21:54
Yeah, because there was nothing in that little hometown. And upstate New York was kind of a decaying area. Because they were highly taxed,

Jason Hartman 22:02
right? Yeah. So all the people were leaving upstate New York. So yeah, there was an opportunity in upstate New York and the weather was terrible. So all the kids laughed, and they moved to California. And your brothers and sisters mostly went to Northern California. But for some reason you went to Southern California and you before,

Joyce 22:19
yes, I came to a football game between University of California, Berkeley and UCLA. And I saw the climate down here. immediately decided once I graduated, I was coming here

Jason Hartman 22:32
you like the sunshine in the warm water. So that’s what a Floridian would say, from New York to So you went to Berkeley, and you graduated from Berkeley with a degree in social welfare. And Berkeley, of course, is a fantastic school, very good education and put yourself through college, right? Basically, I mean, I’m sure your parents didn’t have any money to help you.

Joyce 22:52
I work every summer. When I got out of high school. I went to business school for two years to become a secretary. Because that’s what girls did in those days, you became a secretary, or a teacher or a nurse, and most everybody became a secretary. But after I sat in an office and typed for eight hours a day, I thought this was a terrible, terrible profession. So I decided I had to have some higher education.

Jason Hartman 23:20
So you graduated from Berkeley? And then what?

Joyce 23:23
And I went to work in my chosen fields, social work.

Jason Hartman 23:27
Okay, so your social work, and what do you do with that job? Like, what’s that really mean? Really, all you did was go out and verify that those people who are still receiving their governmental checks from the government so you weren’t you were you were calling on people that were receiving welfare from the government?

Joyce 23:45
Yeah, you were an eligibility worker. And you had all of this psychological training. And all you did was look at the report cards and make sure that the kids were sleeping in that house. And

Jason Hartman 23:56
because they’d be a lot of like a certain amount of money. Yeah.

Joyce 24:00
According to the number of children, and it was just, it was a ridiculous type of career.

Jason Hartman 24:05
And and so did you actually discover though, you’ve told me this before that the people you were calling on some of them were living better than you.

Joyce 24:13
Actually, this was really the truth because they were getting all sorts of money under the table. Some of them, you know, some of them obviously, we’re not. But really and truly, that seemed as though they were living better than I.

Jason Hartman 24:26
And so Okay, so you were a social worker, and then what,

Joyce 24:29
and then we’ll skip a little time and I went to work for some charities, but always I just wanted this thing to have a business for myself. And I had a pioneer chicken store. I had

Jason Hartman 24:46
two small businesses and those were both crappy experiences. I know.

Joyce 24:52
Jason, it was fast hair and fast food.

Jason Hartman 24:55
Good like a Supercuts style franchise.

Joyce 24:58
One day what really happened? Is that I was in my pioneer chicken store? Oh yeah, the area that my store was in was that that was not very good. It was rather dangerous. And Previous to that I had bought a couple of houses from a real estate agent. And she said to me one day while I was sitting in my store, why don’t you become a real estate agent? She says, I shouldn’t say this, because I know I’m going to lose a good customer. And that very afternoon, when I left my store, I went to a real estate school lumbo that I

Jason Hartman 25:33
can never remember. For. Right? It’s

Joyce 25:35
very, very deformed.

Joyce 25:36
Uh huh. And I went down to lumbo a real estate school and signed up. It took me about three months to complete the course. And when I completed the course and passed the test, I invited Mary over to the house that she had sold me to to cook dinner for her. And she said, Well, what are you going to do now with your real estate license? And I said, Gee, I don’t really know. She said, What gotta come down to my office. And so I i traipsed right down to her office, I did exactly what she told me to do right and went to work. And I sold my first house in a week.

Jason Hartman 26:12
Thank you for listening to the creating wealth show. This is Jason Hartman, your host, and we appreciate you following the show. We have many, many episodes, hundreds of episodes, and some of the older episodes have been archived and placed in our members section. And that applies to this one. So we include a sample that’s about 25 minutes long. And then for the rest of the show, you can go to our members section at Jason Hartman comm many of the other shows are still in their full length complete version. However, some of the shows like this one are in our member section where you can hear the show in its entirety. And again, you just need to go to Jason hartman.com. And you can get the full show there in the members section plus a whole bunch of other great members benefits and resources, whether it be documents for forms, contracts, articles, other video and audio content just a great resource, so be sure to join as a member at Jason hartman.com. And thanks again for listening to the creating wealth show.

Jason Hartman 27:24
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own and the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.

Jason Hartman 28:02
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.

Read More...

Income property investor Andrew Baker joins Jason Hartman to talk about historical data, the future, and all things financial. They discuss capitalism and how it affects the US economy how it causes the sharing economy to develop, cryptocurrencies to exist, and blockchain algorithms to reinvent financial transactions. Jason also plays a Mark Steyn clip from his book After America. He also comments on the European versus US lifestyle. Andrew and Jason also share that investors should invest in the most historically proven asset class, the single-family home.

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 0:13
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 leet solution for real estate investors.

Jason Hartman 1:03
Welcome to the creating wealth show. This is your host Jason Hartman with number 870 870 164 countries worldwide. Welcome. Thank you for joining us today. We do a 10th episode show, every 10 shows, we go off topic, we talked about something of general interest. And today we’re going to talk about a lot of stuff about general interest. But first, we’re going to talk a little bit about real estate, because everything comes back to real estate investing and income property investing in the most historically proven asset class in the entire world. We’ve got a returning guests here today, one of our clients, and that is Mr. Andrew Baker. Drew, welcome. How are you?

Andrew Baker 1:45
Good. Thanks for having me back.

Jason Hartman 1:46
Yeah, it’s good to have you back on the show. You were on the show a few years ago, you talked a little bit about your young life starting investing in income properties in your mid 20s. Really, I guess or late 20s. And now you’re married and Got a kid you got Scotty and, and your wife Katie. And we’ve been friends for I don’t know, about 1012 years now, right? Something like that. Yeah, yeah. It’s it’s been just great to watch you grow and develop and accumulate more properties over the years and you’ve got 10 properties now. And you’ve got I think Memphis, Indianapolis and then your own home in the Socialist Republic of California. Is that correct? Sadly,

Andrew Baker 2:21
yes, I have a house in California. So, you know, we’re in a nice area. So we live in orange right near the circle, in an old, like, historic community, and I think it’s one of the oldest county like cities in Orange County. So yeah, it’s really nice here. But uh, you know, just seems like more people are moving in then or moving out. So it’s nice that the neighborhood kind of has are getting revitalized, but at the same time, it’s getting a little crowded. So you know, it’s funny how many people are moving out of state though. I’m just in orange. We’ve had half a dozen friends move to Texas. So it’s kind of funny. Yeah, just did a fair Well today for someone who’s going moving to Texas,

Jason Hartman 3:03
as I’ve often said, If Texas were to secede from the union, it would become the Hong Kong of the United States. And it says Hong Kong is to China, Texas, would be to the US. That’s my metaphor on that. You know, of course the freer the marketplace, the less government intrusion, the healthier the economy, and really the healthier society in general. And we’re going to, we’re gonna play a little clip from none other than Mr. Mark Stein today. He’s a quite famous New York Times bestselling author, radio and TV personality. Mr. Sarcasm, I just love his sarcasm, but he’s a truly intellectual guy, I love him or hate him. pretty controversial. He puts stuff out there that, you know, some people won’t like, he talks a lot about this free market stuff and some I what I love about his work is and I you know, I have my disagreements with him too, of course, is his counter intuitive way of looking at things. You know, most people just kind of in this is interesting, you know, I’ve read A lot of books about this and heard you know, experts talk about this how the brain is a cognitive miser, our brain is the biggest energy suck in our body. Okay? So our brain tries to be lazy on purpose, it tries to conserve energy and not think too much. Because thinking actually takes a lot of power, a lot of energy. And I’ve heard the stats, comparing, you know, how much wattage if you will our brain uses compared to the other organs in our bodies, and the brain is a man it’s a, that’s a, that processor takes a lot of power, it takes a lot of juice to juice your brain. And if you don’t believe this, whenever you’ve been engaged in a lot of thinking in a day or in a lot of perceiving and the one example I think is a good one, at least for me, that I think everybody can relate to because other intellectual endeavors or maybe harder and this is not exactly, quote, intellectual endeavor, unquote, but I’m gonna Put put it out there it’s the shopping mall so so the the reason the shopping mall at least for me tires me out is because my brain is just being stimulated with overload so many things to look at so many things to perceive. What’s the price of this? What’s the price of that there’s so many people there’s all these products signs colors, you know just wow in it just tires me out when I

Andrew Baker 5:25
go to the mall, you won’t have to worry about that because most of the malls now are going to be closing

Andrew Baker 5:31
retail Armageddon,

Jason Hartman 5:33
the retail apocalypse as it’s been called. And I think there is a potential us apocalypse I think there is certainly a European apocalypse going on. I just got back from from Europe. Two days ago, I and spent a day in New York and now I’m back, thankfully in Las Vegas. And yeah, it’s pretty interesting. But the thing I want to point out about that brain being a cognitive miser My point is Andrew, I think you’ll agree with me here is that most People, I mean, all of us to a degree, we want to conserve our brainpower. So we don’t try to think too hard a lot of times. And, you know, that’s what I love about a person like Mark Stein, because he really digs You know, he, I can tell he’s the kind of person and I’d love to have him on the show in the future. We’ve asked him once, and we didn’t get a response, but hopefully we will get them soon. We certainly had a lot of other more famous people than him, but he seems to dig deeper. You know, like when I can tell he’s the kind of person who when he thinks of something, he thinks deeper and then he thinks the layer deeper than that and peels that onion back. And that’s what makes him so interesting to listen to. But tell us

Andrew Baker 6:38
about that house down the street. I don’t know what you’re going to say. You wanted to talk about that to your point. It is funny because you know, your brain is a muscle and if you don’t use it, it’s gonna atrophy and you know, with her, and the more you flex it, the more you know, you’ll be able to use it to your advantage and we kind of laugh my wife and I because you know It had been awhile that we started going to this gym more regularly. And, you know, when you’re trying to figure out the weights to do exactly how much, you know, lifting you need to do. It’s funny how this grade school math you go, Oh gosh, I’m so bad because I haven’t had to exercise that part of my brain in a while. And, and so we had to just sort of laugh at it. But But yeah, as far as this house, you know, so we live in this little historic community. And I want to read a house description for you. This is about, you know, probably 10 doors down from our house. And it’s, I want I want you to both guess how much it’s for rent. And then and I think you might get a kick out of this. So it’s a four bedroom, three bath, Queen Anne’s Victorian style house. It’s 2200 square feet. And it’s for lease and it’s cute inside, you know, original dug for, you know, flooring and, you know, and so I’m just curious, what do you think a four bedroom, three bath house would rent for you might be pretty good at this in your neighborhood. It aren’t marked on our neighborhood.

Jason Hartman 8:06
Well, I don’t know. But I wish he would tell me one number because I can guess the other. And interestingly, I just a little quick sideline. Before we wrap this one up yesterday, I was in Uber car. And the driver, the Uber driver was from Bangladesh. And he told me that he had an apartment in Bangladesh that he purchased in 1998. Or maybe it was 97. Yeah, 9720 years ago, and he paid $100,000 for it. And he said it had skyrocketed, I think I think the city is called DACA. I think as the name forgive me if I’m wrong on that. But I had read that both Bangladesh and Sri Lanka had two really expensive real estate cities. So he said, and he we were talking all about real estate and he didn’t know I was in real estate, by the way. We were just talking about New York real estate and somehow it got onto this. He said today it’s worth $875,000

Andrew Baker 8:56
Oh my gosh.

Jason Hartman 8:57
Yeah. Can you believe that? 20 years later and hidden So the market there is skyrocket. And I said, How much do you rent that for? And he said, Well, I rent it for $1,000 a month. And I thought, oh my god, terrible. And he thought he was doing great, of course, and he said, but but the tenant pays for the maintenance fees, which are like two or 300 per month. So 12 1300 per month, really, right, whatever that means. But then he said he was looking at a place to buy because he rents in New York City, and I was telling him that not in New York City, specifically but Long Island, okay. And, and he said, he, he’s looking for a place to buy and he’s looking at a place but the downpayment is pretty steep. And I said, How much is the place you’re looking at to buy? And, you know, I said, How much does the house you’re worth you’re living in now, how much is it worth? And I can’t remember which number I think we were talking about the house he lives in now. And he said it was worth $430,000. And I said, Oh, well, I’m guessing you can rent that place for 2500 He said exactly how

Andrew Baker 10:01
do you know that?

Jason Hartman 10:02
I said, Because no matter where you go on planet earth unless it’s government controlled, in terms of the marketplace, the ratios are always the same. Okay, now on his Bangladesh apartment, he should be getting at $750 per month at 1% rent to value ratio, or RV ratio, which I told him, he thought that’s impossible. And I said, Yeah, I know. That’s why you should sell it and buy eight houses with them for 1000 a month each.

Andrew Baker 10:29
You’re a bridge. Which boy, isn’t it? That’s getting hard? Well, it is. Yeah, even the 1% which is kind of surprising. I would have thought that that was a metric that would be easy to obtain, but it’s the market the markets appreciated, it’s pretty hard to get 1% but you know, still haven’t be the target. get as close to it as you can with decent quality properties. Of course, if you go to crap properties, where it’s gonna be really hard to collect the rent, you can get 1% all day long, even better, but well, you can get it on the performer but can you get it in real life? That’s the question. Okay. So, so you got to give me one of the numbers on the house either what the rent is or the value. Okay, before I tease this out totally I want to read you this description because I think it’ll just bring more into light. So you’re gonna find this funny landmark 1905 three story Queen and Victorian with four bedrooms. Two and a half baths is rich with history and was the original set for the movie big momma’s house. So this is a house that obviously is nice, but you know, I think big momma’s house was with Martin Lawrence. And it was like, you know, Martin Lawrence dressing up in a fat suit and being like this kind of, you know, grandma with a spoon wanting to hit you or something? I don’t know. I don’t know. I you know, so I what I thought was funny is like, here’s a house that’s representative of someone who’s, you know, middle class, maybe even slightly, you know, lower middle class and this is the house that they picked, like, you know, how many times have you seen Commercial where someone’s going to the front door with an apple pie. And you look at the house and you go Yeah, that’s supposed to be the middle income, you know, middle class type house going next door asking if they have sugar. And today those houses are worth millions of dollars. And I just thought Boy, that’s funny that that stuff is like so unaccessible now to people who are even upper middle class you know and so this house is like they said a four bedroom two and a half bath they’re asking 70 $500 a month for Wow. And and that Yeah, and in fact, I thought that was so insane.

Jason Hartman 12:37
They’re never gonna get that or they I mean, that’s no way

Andrew Baker 12:39
you know, why don’t

Andrew Baker 12:42
you know it’s hard because the zestimate a house like this was selling for about has gone up. I’ve seen about 1.2 1.3 which is they’re not gonna get 70 which I mean in 7500 is what a house in Laguna Beach was selling for was renting for 70 $500 Maybe even slightly cheaper than that, like a nice house and Laguna Beach was at this rate, but I’ll tell you what, Jason, I’ve looked at other rentals and literally three, four doors down. a two bedroom, one bath $4,000 a small three bedroom two baths. $4,000 It’s just nuts. So,

Jason Hartman 13:25
yeah, that’s that’s crazy. That’s crazy. Well, interesting stuff for sure. So yeah, the point is having these smaller, less expensive houses diversified into many markets with good RV ratios are that’s the way to go. I mean, it’s just totally the way to go. So yeah. What what’s your next game plan with your real estate portfolio?

Andrew Baker 13:48
drew? You know, I’m not sure I think I have to. I think I would like to go into another market and you know, or possibly, I am looking in northern Indianapolis. Like fissure, Carmel, or Noblesville, I’m sort of looking into those areas right now. Because there’s a lot of investment going on there, some big companies are moving into that area. And, you know, you can get a nice new build for, you know, 225,000 and rented out for maybe, you know, 1800 to 2000 a month. And I think you get a better quality tenant, you know, you don’t have instead of having one renter that’s renting a place for 1000 bucks a month, and you have, you know, a utility utility bills and property taxes, you know, I don’t want to have everything. If I can, I’d like to find a place where, you know, it’s maybe a little bit more expensive, but you have a higher quality tenant, you have more rent, you don’t have you have less complexity, you know, you don’t have two dishwashers. So I’m kind of looking in that that that area, but since I own so many in Indianapolis right now, and I’m not sure I might tease it out and think about somewhere else. Interesting stuff. Let’s talk a little bit about the US and where it’s going and kind of contrast with some of the rest of the world a little bit. And then let’s talk about some technologies that are going to really impact real estate investing, and the world in general. As you all know, listeners, I think it’s an amazing time to be alive. But interestingly, I must have had a doctor in Jekyll, you know, personality, or Dr. Jekyll and Mr. Hyde personality, because, in some ways, I’m like this super optimist, right? But in other ways, you know,

Jason Hartman 15:35
I listened to a lot of negative stuff. And I don’t know maybe that’s the you know, I just try to balance myself out. I am a Libra After all, the sign of the scales. So maybe that’s the reason but you just got to hear both sides of the equation. And remember that everything is relative. The question to always ask ourselves, I think is Compared to what? I think that’s the magic question of life in every category, compared to what with a question mark, and as bad as things are around the world, as bad as things are in the US as mired in bureaucracy and political correctness, as we are in the US, and you know, it’s it’s better than Europe. I’ll tell you that I just got back from Europe and what a mess. So many levels in so many ways. But yeah, I don’t know. I mean, Drew, any any thoughts on that? I want to play a little clip from Mark Stein here.

Andrew Baker 16:39
Well, you know, it is funny. I think my actually my first time traveling outside the US in a major way, like I went to Canada and Mexico, but I think my first trip outside the US was to the Caribbean and I think when we traveled for a month together, and so it was interesting doing that trip with a group of friends and getting disturbed. That’s when you and I

Jason Hartman 16:59
traveled together. With a couple of other friends this was like seven years ago I think we bought the Jet Blue all you can jet pass and traveled around for a month everywhere JetBlue flew Yeah, that was pretty. I wish they’d bring that program but yeah, I think

Andrew Baker 17:13
I think they stopped it because of us. They were losing money. Yeah. But you know, it was funny when when I when we went and traveled over there getting the chance to see the contrast and I remember doing that trip, I think we went to St. Martine and Angola and then came back to you know, the boring Orlando Winter Park and going into the Walmart with those like blinding halogen lights and just seeing all the abundance just how much it hits you in the face versus going to you know, what basically is a third world country you know, a pig with lipstick on and, and seeing that contrast. So yeah, it is funny how much how much abundance we have here. When you say compared to what?

Jason Hartman 17:57
Yeah, compared to what exactly and I tell you how This morning I woke up at about 5:30am. And I went out I did a bunch of errands really quickly. I stopped at Lowe’s hardware store and I just could not believe the abundance the selection. Then I went to Trader Joe’s and I couldn’t believe the abundance the selection. And Trader Joe’s is a small grocery store. And I’ll never forget, I’ll never forget that time that I got back from my first trip to Latvia. Now I went to Riga Latvia, for my third time on this last trip. My country count still stands at 81 countries. I did not visit any new countries this time. I just repeated. And you know what they built this new Albertsons grocery store in Irvine, California when I lived there in quail Hill in Irvine, California, and I know a lot of listeners in Irvine, so they’re gonna be hearing this and saying, Yeah, and I walked into that Albertsons, and I just I was overwhelmed with the abundance of selection. how cheap the prices were, and how it’s just incredible. Like how, As Americans, we do not appreciate this enough. We’ve got to just constantly appreciate this, the standard of living, and I’m not saying everything’s about money, it’s certainly not. But it’s, that’s part of it. Okay, there’s no question about it, it means something. And that’s really true. But on the negative side, let’s just listen to a little clip from Mark Stein’s book called after America, get ready for Armageddon. It’s interesting Drew, because I played the Harry dent interview from a year ago on on the last episode of this show, and you didn’t hear that yet. But

Andrew Baker 19:44
tell us a little bit about your thoughts on your last Harry dent book that you finished? Well, I don’t know in the interview that he calls to have the duck to have the next 10 crashes or something. Yeah, he

Jason Hartman 19:56
made he made a lot of doom and gloom predictions and you know, I don’t know what this is about. about these guys, but in general, I think the doom and gloom thing just sells better. You know, there’s an old saying in the newspaper business, if it bleeds, it leads.

Andrew Baker 20:08
Why? Yeah, I think he, I think he believes what he’s saying. And I, for a while, I believed what he was saying, too. And I think what should happen on paper and what happens in reality are different things, you know, stuff takes longer to happen, stuff happens quicker than it should, you know, so kind of how it how it manifests itself. I think sometimes even though maybe he’s right, in philosophy, you know, it doesn’t always work out that way.

Jason Hartman 20:33
You know, that’s true. That’s true. But yeah, Harry dents got a lot of predictions that are just all over the board. And I don’t know, I don’t know what to think about them. But, but we’ll see. But let’s listen. Let’s listen next time for a minute. Okay. I think you’re gonna have some good, interesting thoughts on this. And I think our listeners will be fascinated. Pardon the audio quality. I’m literally just playing this from my iPhone speaker. So here we go. This will be about a seven minute clip, but we’ll probably interrupt it for some commentary. So let’s listen And Mark Stein from his book after America.

Andrew Baker 21:03
Okay, so where is it?

Andrew Baker 21:07
crescent moon. Half a century ago the future felt different. Take 1969 quite a year in the aerospace space. In 112 month period, we saw the test flight of the Boeing 747 the maiden voyage of the Concorde drf’s deployment of the Harrier jump jet and Neil Armstrong’s giant step for mankind. Buzz Aldrin packed a portable tape player with him on Apollo 11. And so Sinatra is ringing Dean recording a flight to the moon became the first human music to be flown to the moon and played there at any other nation beaten NASA to it. They demand the occasion with the Ode to Joy or also spread Zarathustra, something grand and formal. But there’s something marvelously American about the first human being to place his feet on the surface of a heavenly sphere, standing there with a cassette machine blasting our friend and the Count Basie band in a swing in Quincy Jones arrangement, the Susilo swagger of the American Century breaking the bounds of the planet in 1961 Before the eyes of the world, President Kennedy had said American ingenuity a very specific challenge and put a clock on it. This nation should commit itself to achieving the goal before this decade is out of landing a man on the moon and returning him safely to the earth. That’s it no wiggle room. A monkey on the moon wouldn’t count nor an unmanned drone nor dune buggy that can’t take off again but transmits grainy footage back to Houston as a rustle in the crater it came to arrest it. The only way to win the bet is with a real live actual American standing on the surface of the moon planting the Stars and Stripes. Even as it happened, the White House was so cautious that William Sapphire wrote President Nixon a speech to be delivered in the event of disaster. Fate has ordained that the man who went to the moon to explore in peace will stay on the moon to rest in peace in America did it. Fly Me To The Moon Let me sing forevermore. What comes after American yearning and achievement democratization. Everybody gets to go to the moon. That almost forgotten Jimmy Webb song from 1969 catches the spirit. The age isn’t it a miracle that we’re the generation that will touch that shiny bauble with our own two hands. Whatever happened to that? four decades later, Bruce childs and Professor of theoretical Medicine at the University of Buckingham in England, wrote that, that landing of men on the moon and bringing them back alive was the supreme achievement of human capability, the most difficult problem ever solved by humans. That’s a good way to look at it. The political class presented the boffins with a highly difficult and specific problem, and they solved it in eight years. telogen continued 40 years ago, we could do it for heatedly, but since then, we have not been to the moon. And I suggest the real reason we have not been to the moon since 1972, is that we cannot any longer do it. Humans have lost the capability. Of course, the sound of the line is that humans stop going to the moon only because we no longer wanted to go to the moon or could not afford to or something. But I am suggesting that all this is BS. I suspect that human capability reached its peak or plateau around 1965 75 at the time, of the Apollo moon landings, and has been declining ever since. Can that be true? Tell them is a controversialist gadfly in British entity. But comparing 1950s to the early 21st century, our time traveler from 1890 might well agree with it. And if you think about it, isn’t it kind of hard even to imagine America pulling off a moon mission now? The countdown the take off a camera transmitting real time footage of a young American standing in a dusty crater beyond our planet, blasting out from his iPod, Lady Gaga and the Black Eyed Peas or whatever the 21st century version of Sinatra and the baby daddies. And half lingers in collective consciousness as a memory of faded, grander, the way a 19th century date farmer in Nazareth might be dimly aware that the great ziggurat of Earth used to be around here someplace. So what happened? According to Professor Charlton, in the 1970s, the human spirit began to be overwhelmed by bureaucracy. The old can do spirit. Oh, you can try to do it, but it will toss every obstacle in your path. Go on, give it a go. invent a new medical device, start a company Go to the airport to fly to DC and find a patent. Everything’s longer, slower, more soul crushing. And the decline in human capability will only worsen in the years ahead. I think

Jason Hartman 25:09
this is one of the comments I want to make. I want to just stop that for a moment about the European experience. And, you know, Drew, I just I mean, you’ve been to Europe, I’ve been many times I was born there. It’s my ancestral homeland. It’s just shocking, that, you know, it’s like, what the US is becoming if we don’t fix this, hopefully, the Trump administration will fix it, who It remains to be seen. I don’t know Trump’s certainly got his share of problems and issues. You know, no one would deny that not even not even a supporter of him. But it’s like, there, it’s every obstacle is thrown in your path. You just try to do a simple thing. And the European response that you hear all too often is, well, that’s not the procedure. It’s not policy. But you know, at least in the States, you’ll have some creative thinking, someone will go out of their way to try and make the customer happy. But it’s just so just like bureaucracy is, is just ingrained in the culture. And everybody seems to look at the government is like their uncle that’s protecting them, instead of the Reagan era, you know, is, is that like the most dangerous words are? I’m from the government, I’m here to help, right? But I look at the government mostly as an imposition as something that gets in the way. And it’s, you know, that’s just, you know, when you’re in business and you live in the real world, and you’re not some Professor living in some college womb, or some student that just got out of that college womb. When you live in the real world you find out to be true. Yes, we need government. It provides some things that we need, you know, I don’t like anarchie But it just it just gets in the way it just stifles innovation. Mark Stein was talking about how, in the old days, all of these great new medical cures were invented. And now with the FDA, it’s just become this. This bureaucracy that’s corrupted by money and lobbyists and special interests just like everything else in

Andrew Baker 27:27
favor. Oh, no,

Jason Hartman 27:29
I don’t I say Yeah.

Andrew Baker 27:31
You know, it’s funny, I was having a conversation with someone about, you know, how the European mindset is, you know, buying your groceries that you need that day and like how that out, you know, in America, we just have this gluttony and how we have so much excess and like how the Europeans do it so much differently. They, you know, have five pieces of clothing that they would wear over and over again and sort of this minimalist lifestyle,

Jason Hartman 27:54
that’s why they some of the subways

Andrew Baker 27:59
some of that’s to be admired But I was telling the person I said, Don’t you realize that they’re doing that of necessity? Yeah, they can’t they don’t have that abundance. They don’t have that option. So they’re doing with what they can. So even though I think we can get a little out of hand, I just thought that was kind of amusing.

Jason Hartman 28:17
Look in the US you can you can say Americans are gluttonous, and you’d be right. Okay, that’s not that’s not untrue. Unfortunately, it’s a sad thing about the US, but at least, I’d rather have the ability to be a glutton and have to exercise my own self control of not becoming an out of control materialist or packrat or collector or out of control consumer or out of control. overeater Okay. Then the then the other way around, where I could be, you know, the person who is forced into, you know, minimalism, you know, like, yeah, let’s at least have the choice. Let’s have our economy and our culture and our legal system. Give us the freedom of that choice. Now we may well become our own worst enemy and not be able to control ourselves, right? The kid in the candy store metaphor. But, you know, that’s what freedom is all about. We with freedom comes responsibility, and that responsibility is self control. So let’s just finish up this mark Stein thing and then we’ll go on.

Andrew Baker 29:24
It’s not just access bureaucracy, but insufficient cash. Yes, we can drone the dopey Obama trans of 2008. No, we can says Talton. Not if you mean land on the moon swiftly win wars against weak opposition and then control the defeated nation. Secure national borders, discover breakthrough medical treatments, prevent prime design and build to a tight deadline, educate people so they are ready to work before the age of 22. Houston, we have a much bigger problem. To be sure there’s still something called NASA and it still stands for the National Aeronautics and Space Administration. But there’s not a lot of either aeronautics or space in the inbox of the agency’s head honcho. A few days after Charlton penned his elegy for human capability, NASA Administrator Charles Bolden appeared on Al Jazeera and explain the brief he’d been given by President Obama. One was he wanted me to help re inspire children to want to get into science and math. He wanted me to expand our international relationships. And third, and perhaps foremost, he wanted me to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contribution to science and math and engineering. Islam The Final Frontier to boldly go where no diversity outreach consultant has gone before. What format foremost Vanessa is to make Muslims feel good about their contributions to science. Why as recently as the early ninth century, Mohammed Al Parviz me invented the first universal horror quadrant. Things have been a little quiet since then, or at least since tacky. Alvin’s Observatory in Istanbul was razed to the ground by the Sultan’s janissaries in 1580. If you hear a Muslim declaring we have liftoff, it’s likely to be a triumphant animal. After lighting up his crotch, as far as I recall, the most recent Islamic contribution to the subject of space exploration came from Britain’s most prominent in Abu Hamza, in 2003, declared that the fate of the Space Shuttle Columbia was God’s punishment, because it carried Americans and Israeli and a Hindu, a trinity of evil against Islam.

Jason Hartman 31:18
Can you believe

Andrew Baker 31:19
that the likes of Abu Hamza, they’re not as easy as it should be not in Europe and Canada, where the state is eager to hold you into court for Islamophobia. But the last one is, NASA is the government agency whose acronym was known around the planet to every child he looked up at the stars and wondered what technological marvels the space age would have produced by the time he was out of short pants. Now the starry eyed Muppets or green boomers, the agency that symbolized man’s reach for the skies, has transformed itself into a self esteem booster is an operation. Is there an accompanying book, Muslims have amassed infidels are from Venus. There’s your American decline right there. From out of this world out of our minds and increasingly unmanned flight from real historic technological accomplishment to unreal a historical therapeutic touchy feely multi culti so we can’t go to the moon. By the time you factor in getting to the airport to do the shoeless shuffle in the enhanced pat down, flying to London takes longer than it did in 1960. If they were trying to build the transcontinental railroad now they’d be spending the first three decades on the environmental impact study and hammering in the golden spike to celebrate the point at which the feasibility Commission’s expansion up from the fifth floor met the zoning board’s expansion down from the 12th floor. Google and Apple and the other Latter Day American success stories started in somebody’s garage, the one place where innovation isn’t immediately buried by bureaucracy. Or at least in most states, not until some minor municipal functionary discovers you neglected to apply for not sitting around on my ass all day permit. Apple and company doing those garages they invented in refined home computers and entirely logical response to late 20th century America. When reality seizes up, freedom retreats and retrenches to virtual reality to the internal where once space was the final frontier. Now we frolic in the canyons of our mind. We’re in the Wilbur and Orville era of the internet right now but at the federal commission vacations commission and other agencies. They’re already designing the TSA uniforms for the enhanced cyber pat down. And wait,

Jason Hartman 33:06
you know what I’d call those. I call them the political correctness thought police at Google, Facebook and now Airbnb. It’s just absolutely scary. This is like the new Nazi book burning the new Fahrenheit 451 where these huge companies get to decide who rents a house illegally, by the way, based on total discrimination, shame on Airbnb, read about it, folks. It’s it’s, it’s in the news. Okay. And and Google and Facebook, the literally the morning after we heard about the Trump election, I’d never heard the word the phrase fake news before in my life. And suddenly fake news was everywhere. That’s how Trump got elected fake news, right. But yet, these big news media organizations have been engaged in fake news for at least four Read decades, it’s, I mean, CNN has been caught red handed the communist news network with their fake news propaganda. So many times it’s pathetic. I mean, it’s just it’s this is just pathetic. So yeah, the the thought police are here. I mean, it’s just unbelievable.

Andrew Baker 34:20
Yeah, it’s really funny that this whole article this whole, you know, essay is talking about NASA and you know, I remember this article that I read not too long ago talking about how how the social warriors the social justice warriors were really upset with target because apparently they hadn’t come out with a female version of a NASA shirt for little girls. And so they had a boys shirt but they didn’t have a girl shirt. And it was funny because target actually responded linking to the girl’s shirt because they had even gone that far of having both the girls and a boy shirt and, and so we’re so consumed with, you know, doing what’s politically correct. Rather than accomplishing anything substantial, you know, and that kind of leads into what Elon Musk is doing with his private SpaceX because NASA just couldn’t get anything done. He went on, you know, now Elan Musk, the world’s biggest crony capitalist. Yes. Well, I mean, you know, the thing is the government loves to give money to Boeing and all these other companies, you know, the industry, the war machine. And, you know, he does tap into that, but, you know, he has called for ending all the subsidies, which I guess is easy to say. But, you know, it’s the thing is, the rules are so skewed that you have to play by that game, otherwise, you’ll lose, you know, whether,

Jason Hartman 35:37
oh, and that’s, and that’s okay. So that same standard then should apply to Trump’s cabinet. You know, the guy who said he was going to drain the swamp, which arguably, he’s not draining the swamp. I don’t know. Yeah, maybe he will. Will, you know, the jury’s just out? I don’t know. I don’t know what to make of Trump. Yeah, it’s too early. But But, you know, all the liberals criticize Trump saying look at who he’s put on. his cabinet, you know, all these people from here and there? Well, how Who’s he supposed to put on the cabinet? Like, you know, I mean, how do you how can you not put people that are big execs and people who have power and connections on a presidential cabinet? I mean, who you supposed to put, you know, the homeless guy down the street? I mean,

Andrew Baker 36:23
yeah, no, don’t be a little

Jason Hartman 36:25
like an impossible thing.

Andrew Baker 36:26
Right. I agree with that. I mean, you know, he’s gonna put people that he knows and have some connection to and have some authority as he should. I think it is a little weird when he’s putting, you know, Trump Jr. and Ivanka on the cabinet, even though maybe I’m told nepotism. Yeah, I think that, you know, when you’re taking your staff from your reality TV show and putting it in the White House, I just think it. I think it’s poor form. And obviously they have no experience. Trump thinks the presidency is a reality show. That’s what’s scary about Trump.

Jason Hartman 36:54
Yeah, I know. But I don’t know. You know, maybe he’s actually a genius and we just don’t know it. Because you He’s controlling the news cycle

Andrew Baker 37:00
I, you know, well, according to Trump genius.

Jason Hartman 37:04
Yeah, well, yes. If you listen to him, one man PR firm,

Andrew Baker 37:09
which was, you know, when he got elected, he was beholden to no one. I mean, he kind of stumbled into winning, in my opinion, and, you know, and then, you know, because they picked a terrible candidate to run against them. And, and then, you know, he was he didn’t know anyone anything. And it seems like he had the ability to drain the swamp. But you know, I don’t know. I, it doesn’t seem like he is, but hopefully, you know, I guess we should give him a little bit more time to try to get something done. I know.

Jason Hartman 37:38
Well, we’ll see. We’ll see. We’ll see. But it let’s talk a little bit about some technology and wrap up with this. You know, as pessimistic as some of the stuff we’ve talked about today is and Mark Stein talked about, I do really think it’s an amazing time to be alive. I think technology could just rescue us all. Hopefully, the government will get out of the way and let it all happen. But you know, to some extent market forces are so powerful that it you know, it’s they ultimately win. Okay. Even in even in North Korea and Cuba, the free market wins. You know, even with massive government control, there’s always a gray market, a black market that’s underneath the government controlled market that always ultimately wins eventually, at least. What did you want to talk about that’s going on with like self driving cars and these amazing technologies that I think will change the real estate game significantly. And just to bring that back into focus, you know, I’ve said before, but the three primary value drivers of real estate have always been what location, location, location, and location or geography are less meaningful than they’ve ever been in human history. I’m not saying they’re not still meaningful. I’m just saying they have less meaning than ever before. through technology through communications technology through transportation to Technology, especially the autonomous vehicle. What did you want to talk about there? drew?

Andrew Baker 39:06
Well, first, on a pessimistic note, I think it’s funny that we’re talking about NASA. Because in light of that, you know, Peter teal had a had a very funny quote that he made a few years ago talking about how we all wanted flying cars, and instead, we got 140 characters with, you know, Twitter and how, you know, there’s been a bit of a stagnation in terms of, you know, technology, you know, in the, in terms of transportation. So, I think that we’re coming to the point now, where things are going to change dramatically. And we kind of talked about this in private, where, you know, I think what’s interesting is, you see Uber, kind of taking over the inefficiencies of the taxi system and sort of trying to dominate in transportation. And you see Airbnb, you know, sort of going after hotels and the, you know, the lock that they have on that and kind of offerings, inefficiencies. people having access, whether it be in their homes and putting that to use. So why don’t you let me just talk about that for a moment. So what you see is you see how the sharing economy is taking all of these formerly dormant, unused resources in the world. Okay. And it’s putting them to work, which is an amazing, amazing thing. And it’s funny because the last European country I was in was Norway, okay, Norway, becoming a disaster of socialism and immigration, even though Norway’s got tons of money in their sovereign wealth fund, I get it, you know, with the natural resources and so forth. But

Jason Hartman 40:37
I’m telling you, Scandinavia, is not looking good. Okay. You just just wait 1020 years, you’ll see what I mean. Okay. But the amazing thing is, when I was leaving the hotel, I was asking the concierge to go to the airport, should I use Uber or what? And she said, Ubers illegal in Norway, and I pulled it up on my phone and I said, No, I got it. Right here. And I already used it once when I was here and she’s Well, it’s illegal. Well, so what if people use it anyway? And who cares if it’s illegal? You know, Airbnb is illegal in New York City, but people use it Okay, is that you cannot stop the power of a great idea. And that’s what the free market is. That’s what capitalism is the most natural and most successful, quote unquote, religion ever in human history is capitalism. And and everybody wants it, it’s totally natural. And you can’t stop it no matter what you do.

Andrew Baker 41:33
Go ahead. Well, you know, I I completely agree. I think what’s funny is that you know, when you look at Uber and transportation and Airbnb with real estate, how it has changed the landscape and in terms of how people approach real estate, you know, a lot of these beach communities have had to just add a lot because it’s changed the dynamic so much there. My wife and I, we went and walked down on the peninsula in Newport Beach, and it’s just every other house on the on that board Walk is just, you know, a beach rental. And so now when you have what would be a, you know, a place that someone would live full time, and you’re competing against someone renting it with four families for, you know, for a weekend, the prices just have changed so dramatically that it has, you know, and think about all the congestion and just issues. So, you know, I know a lot of people have been trying to stop it. Because it does have unintended consequences. But, you know, again, yeah, right, when you have a good idea, and, you know, most people wouldn’t be able to rent a place right by the beach at night, you can, you know, there’s kind of a there’s kind of a give and take, as far as you know, whether it’s good or not, but obviously, it’s the government wants to stop it, because, you know, the hotel industry is probably petitioning them to, you know, get on it, so they don’t take away from their monopoly But well, you

Jason Hartman 42:53
know, they’ve got their lobbyists for sure. Yeah. So to the taxi drivers.

Andrew Baker 42:59
I you know, I think Just kind of I’ve been looking at kind of these trends in. And I think when you say the shared economy, I think there’s a more broader issue here, which like, is about how people are circumventing all this congestion in the UK, in government rules, like whether it be, you know, for example, just solar power, you know, having to be tied to a grid. And now, you know, if you could put solar on your house, and that becomes affordable enough in the foreseeable future, or if you have an old like, you know, electric car, that you don’t have to go to the gas station, and you can power off your, you know, roof panels. Now, I don’t know if it will quite give you enough power. And I know there’s a lot of government tied up in that. But, you know, I think it’s interesting that all these technologies are basically trying to work around the inefficiencies that the government has put there. And I think that’s why we’ve had such a reaction to, you know, to Bitcoin, because the government what they’re doing with money, has, you know, most people are rejecting I think that’s a bubble. But but maybe I’m getting off topic, but I, well, well, the whole cryptocurrency and alternative currency thing as I’ve said before, I would love nothing more than to be wrong about this, I just don’t think the governments and central banks around the world are gonna let it happen. I mean, they’re gonna let it play out a little bit, but somehow they’re going to find a way to control the money supply, they must do that it is imperative to their mission. Yeah, it is where the governments and central banks around the planet gain most of their power through the control of the money supply that is the one last very reliable Bastion that you know, they they can control. And so I don’t have a lot of faith in alternative currencies that aren’t controlled by the government. Now people confuse the Bitcoin thing and I know we’ve got to wrap up through because you’ve got to go, but

Jason Hartman 44:52
they confuse the concept of the block chain, which is part of the technology on which Bitcoin for example, is built And they they confuse that with Bitcoin itself. Okay, those are different things they have to be separated Yeah, well the lock blockchain is great and and you know, any government or the United Nations or whatever, or any central bank can create a digital currency that uses blockchain technology and that would be awesome for them, but they will still control and manipulate it at some level. And that’s how they can control the literally The Wealth of Nations to borrow a cliche from Adam Smith. Not a cliche but a wonderful awesome philosophy. No, you should read The Wealth of Nations by Adam Smith. It’s incredible. The Invisible Hand but government needs to control that they’re not going to give that up okay, they are not Mark my words. They will never give that up.

Andrew Baker 45:47
Now it’ll you know, it’ll be and they’ll, some government will outlawed because, you know, there’ll be some news story, whether it be contrived or real. where, you know, someone’s trying to protect somebody.

Jason Hartman 45:58
Yeah. Oh, somebody’s trying to launch Money and this is the terrorists are using this. So we’re gonna make it illegal and if you do any terrorist and the prostitutes and the drug dealers and the International arms dealers, that’s all it’s gonna be in there, you know? And then there’s gonna be some crash and some bitcoin wallet company. You know, it’s already happened a few times and you know, China’s really come down on Bitcoin, folks, do not place your bets against, you know, the old saying, never bet against the Fed. With my philosophy of investing, you’re betting with the Fed. You’re you’re using, you’re taking the two most powerful entities on earth governments and central banks, and you are aligning your interests with them. And that is the way to go. If you ask me.

Andrew Baker 46:37
Yeah, I watched something on device. They have some great stuff, even though they have an agenda, where they were talking where they were talking about, you know how drug dealers now they’re doing the they don’t deal in US dollars anymore. They deal in gold, because it’s completely anonymous. You can’t track it, and they basically will just and it’s, you know, valuable and highly portable. So It is funny how that how the original money is sort of being preferred now and I don’t know how that will interplay with gold. I know some people have talked about cryptocurrencies backed by gold, but that I just don’t think it’s ever going to work. I’m not buying it

Jason Hartman 47:14
away. Well, this has been an interesting talk. We’ve been all over the board, Drew, we got to wrap it up, especially for you because you need to go. But um, anything else you want to say to our listeners?

Andrew Baker 47:23
Well, I wanted to tease out that last point that I think we were talking about, or we were talking about self driving cars, because I think that that is going to be the next big thing. If we have time to talk about it. That’s going to be the next big thing. And I think I talked to you about how that will change the real estate landscape dramatically. You know, I think now it’s quite amazing how you know, I’m in a, I was in a foreign I was in Denver for the week and didn’t know the area too well. I got on my phone. I went on Uber Eats and I delivered something to the place I was staying in where I didn’t have a rental car. Then you know, the friend I was staying with did this five years. Dollar subscription thing where every ride that you take with Uber is $5. And you can just go anywhere within the town. So, you know, we’re spending, spending $20 a day on, you know, just driving around going to different places walking around the city and then Uber and back. And you know, just how going through all the, you know, insurance and paying the city taxes for renting a car and doing all this sort of stuff just now and sort of getting usurped. And I think that what’s going to happen in the future is people are just not going to, you know, retire couples, and even maybe young people are going to create a nomadic lifestyle where it’s going to be too expensive or predatory for them to be in one place. So what they’ll do instead is just have a vehicle or you know, like, let’s say a self driving motorhome, where they will be able to commute all around and go from place to place and have it drive at night. And, you know, their services can be both mobile and their You know, lifestyle can be in enriched because they’re not going to be in the same place at the same time. And if they can have a peel box in, you know, in Las Vegas, and have that be their primary residence, well,

Jason Hartman 49:12
have it be better yet have it be in Puerto Rico. Oh, yeah, there you go. Even better. But but this is the thing is see all of this concept of taxation is about Nexus tax Nexus, right. And the tax Nexus is always based on geography. And now that geography is becoming difficult, you know, in the old days, if you were a business owner, you probably owned a physical business, which was either a store or a factory, or something where it was definitely clearly defined as to where that was located, and what jurisdiction got the privilege of oppressing, I mean, taxing you, and now that’s become very fuzzy. You know, I think, you know, I think about these immigration laws, and I’ve often thought, Well, what if I want to go live in another country for a while just to have an interesting new experience, right? Say I want to move to Europe, right? That, you know, maybe even Eastern Europe, the land of the supermodels. The problem is, I can’t put up with a stupid bureaucracy in the small thinking European mindset, right. But that’s what drives me nuts. And that’s why I’m glad to be home. But if I did that, you know, the immigration laws that would let me potentially move to another country would say, you know, look that what they don’t want you to do, is they don’t want you to go take someone’s job, they don’t want you to go to take the job of a of a native of a citizen that lives there. But see, I wouldn’t have to do that. I wouldn’t take anybody’s job because I just work from my laptop and an internet connection. Okay. And, you know, do my podcasting, we’ve got this global audience listeners, and 164 countries, clients all over the world that buy properties, admittedly all in the US but in multiple states and jurisdiction jurisdictions. And so, you know, it’s just, it’s just a total New World, and people can be much more nomadic than they’ve ever been. So like my quote,

Andrew Baker 51:06
geography is less meaningful than it’s ever been in human history. I think that’s really interesting. I mean, so I’ll be curious to see how it plays out. Because, you know, the government is going to keep trying to make more rules to pigeonhole people. And, you know, it’s it’s funny how they always are trying to incentivize certain things rather than give people freedom. So it may be whether it’s, you know, telling people that we’re going to give you a tax deduction, if you have more kids to say, and if you buy a house and you have a bunch of debt, we’re going to give you you know, this reprieve or this benefit or incentive. And so, you know, when people book that system, and, you know, technology becomes your friend to basically get around those, you know, incentives. It’ll be interesting to see what happens, you know, where the incentive is, maybe up front But I don’t know how it’ll play out as far as in the long run.

Jason Hartman 52:03
I would say if if someone is a government bureaucrat, they are in a high insecurity position. Nowadays, the power has swung away from governments, and it has swung toward the people. Thankfully, that’s the way it should be. And it is much harder for the government to figure out how to tax people nowadays, you know, they’re trying to keep up with it. But the law and the government are always behind the trend. So we’ll see how that unfolds. And we’ll talk about it more on the show. But needless to say, you know, owning real estate, in divert in diverse jurisdictions is going to be helpful to you in this new world. So following my 10 commandments of successful investing, owning real estate that is not in the expensive markets, because transportation is getting much better and easier and communication as much better and easier. There’s a new app. Forgive me. I was listening to The Wall Street Journal just yesterday. When I was coming back from the airport last night, that basically the you know, some of the new social media stuff that’s taking place in communications is basically where it’s like this living room, very lightweight communication. And if you look at Amazon’s new, it’s not the Echo, but it’s the new one with video where people can basically just drop in, it’s not as formal as making a phone call, or sending an email or a text message or even a boxer boxers my favorite way to communicate, where they can just kind of you drop in and open a video chat, like, like they’re in the same room with you is, is improving communication dramatically. So there’s a lot of stuff that’s changing things and making geography so much less meaningful. So if you’re buying the point here is if you’re buying the typical type of properties that we sell through our network, these suburban type properties in these lower price markets, I think the value of those is going to be pushed higher. Expensive type properties is going to be pushed lower. Right. Yeah,

Andrew Baker 54:05
yeah, I think that that’s interesting. I think that the top plot properties are going to plateau, because they’ve gone up so much. And that will push downward pressure on the lower properties, the properties that are more the be, you know, Beast type properties a second second to your property. Second City. Yeah, absolutely. Because I mean, you think about it in the last decade, you know, we were talking about with my wife went to a baby shower, in Emerald Bay, which is probably like the most expensive real estate in Orange County. And, you know, she was looking at the beautiful house, it was huge and $20 million. Yeah, exactly. So we went looked it up, and it was, you know, $8 million. And that’s what we’re wondering what the Zillow was, and I said, it’s probably worth more than this. But, but it’s probably worth 10 million and they bought the property in 2000 for a million dollars. And it’s funny because you know, it’s gone up 10 times. So that can’t happen again. They can’t go ahead. Not gonna go up another sustainable. Yeah. So I think it’s more going to flatten. And you know, that’s going to put downward pressure on, you know, people what used to be a million dollar house now, you know, that’s going to be more in the B property zone as far as, you know, some more suburban, I think, yeah, that’s, that’s where the, that’s where the action is.

Jason Hartman 55:24
So it’s more than necessity type housing. That’s, that’s where the action is no question about it. And, you know, being in New York City yesterday, I just thought what is the huge attraction about living here? You know, I was there a month ago on my way to Europe, I spent a day there on the way back and you know, it’s just everything is just high on the hassle factor. If he asked me, I don’t get it. I want to get it. You know, I thought maybe I’ll go live in New York City this fall. I’m still kind of thinking about that. Because I’m, you know, very mobile, and I really want to experience some other places. I was stuck in Southern California, the vast majority of my life so I’m kind of one Do that. But it’s just very high on the hassle factor. Of course, it’s super expensive, everything is a fortune. And so I just think that the power is moving away from places like that to the second tier, and even third tier type places that just make a lot more sense life is easier. You can still communicate and have all the benefits of those places. You know, like one of the things New York City people say to me all the time is, you know, you can get food from any type of restaurant 24 hours a day. Well, you can do that with Uber Eats now to folks. Just

Andrew Baker 56:38
Yeah, he’s also when you talk about the hassle factor, I have to laugh because my metric for those sorts of things is how big of a hassle is it to get a case of water in your house? And that’s that’s kind of my metric for how it how easy some more places, so maybe you’re in you know, rural, you know, Montana and you have to drive you know, an hour to the grocery store to buy something and drive it back or you know you’re in New York City and you have to go down five flights of stairs and you don’t have an elevator and you know then you have to walk to the market and don’t forget in New York City and if you have a doorman in your building you’ve got to talk him a fortune because he will not give you will not get your packages if you do not tip your unionized incredibly lazy, greedy doorman in New York City, but yeah, go Yeah, I heard that. Like, if you don’t get him a gift for you know, $5,000 or something for Christmas, they’ll like not Yeah, it’s just something ridiculous. I don’t know. It’s ridiculous. Yeah, yeah. So

Jason Hartman 57:38
yeah, interesting stuff. Interesting stuff. Drew, we got to wrap it up. I know. You’ve got to go to lunch. And our listeners have been listening a long time. So let’s let them go. But we’ll have you back on a future episode. Thanks for joining me everyone. Happy investing Be sure you go to Hartman education comm slash contest and get your last chance in to enter the Amazon Echo. Amazing Technology love that. Also go to Jason hartman.com and get in on the early bird pricing for our upcoming meet the masters of income property event in Southern California, San Diego in January. A lot of you we’ve sold a zillion tickets for meet the Masters already so thank you for buying those and getting in on the early bird special. Anybody who hasn’t done it yet, Jason Hartman calm click on the events section and get your tickets for that, Andrew, thanks again for joining me happy investing everyone.

Jason Hartman 58:29
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 viewing the show. Please go to iTunes or Stitcher Radio or whatever platform are 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.

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To start the show, Jason Hartman hosts Drew as they discuss his journey of self-management and whether self-managing is worth it or not. Afterward, Jason revisits Kyle Bass’ speech about China. Later in the show, Jason explains how Commandment #3 (Thou Shalt Maintain Control) and Tesla’s current situation go together, as the company continues to make some poor business decisions. They compare that in real estate, you can fire someone and get another person to do the same job. With big companies like Tesla, you fire Elon Musk, and the company’s in trouble.

Investor 0:00
I really need to thank you and Sarah for being there for me, you guys could have easily said, This isn’t my problem. This is your problem. Your lack of due diligence is entirely your fault. And not done anything at all. But you guys have been there for me every step of the way. You responded on voxer at 342 in the morning, I know, it might have been 642 depending on where you were, but honestly, who works at that time. So just the fact that you guys were there for me. I appreciate it so much. 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. seven 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 1:22
Welcome to Episode 1194 1194. Thank you so much for joining me today. I’ve got a good show for you. As always, I hope you think that’s true. Always. You know, we cover a lot of stuff here. So it’s a variety. It’s a variety. Anyway, today I’ve got drew back on the show for a few minutes, because we need to talk about commandment number three of my 10 commandments of successful investing. And we also need to talk about something that my dog is always saying My dog is always saying this. She just constantly says roof roof. DREW Welcome. How are you?

Drew Baker 1:59
Woof woof. I’m doing great. Sorry, Jason.

Jason Hartman 2:01
Yeah, well, that’s actually roof roof. And, yeah, the reason I bring that up is because, hey, my dog can speak English. He can talk about roof. She’s into real estate. You just replaced one of your roofs on your self managed properties. Tell us about your roof deal, folks. The reason I have drew on the show quite a bit. Of course, he’s a client. Of course, he’s a great case study, but he’s also good at getting deals. Now. Some of you listening have had property managers give you crazy ridiculous invoices for a rent ready that is literally close to the cost of drew replacing a whole roof. I saw the pictures. It looks great. Drew, this is a Memphis property I think or is it Indianapolis whereas it’s an Indianapolis, okay.

Drew Baker 2:45
It’s one of the five or six places that I’m self managing in that area. You know I’m looking here at the expenses that I had. And last year I had in the Memphis area I had a roof replaced at their quote unquote cost because the property was basically what happened was the property manager did put a bandaid on a heart attack. And I said, Hey, this roofs a mess. Why are we doing patchwork on this roof? I wouldn’t have spent 1500 dollars to repair a leaky roof that’s 20 years old, I would have replaced the entire roof. So they offered to do the roof at cost, quote, unquote. And they did this for two different properties. In other

Jason Hartman 3:33
words, in other words, they did it at cost saying, hey, looked through. We’re giving you a great deal, right, but I’m guessing the deal wasn’t nearly as good as the deal. You just got.

Drew Baker 3:42
Yeah, so I don’t want to confuse the audience. But basically, they charged me their cost, quote, unquote, which was one of the roofs was 9200 Oh my god, the other roof was 7700 at cost, quote, unquote, because I had a 1500 dollar roof Repair build before this, that was done in a way that I would never have done it because why would I want to put 1500 dollars towards a bad roof to just do this piecemeal, you know, repair to stop one leak when the whole thing needs to go. You know, there’s that analogy of Houdini’s wand where Houdini has his one that he uses it and he breaks the tip while he’s doing the magic trick. And then they go and they replace the top of the wand. And then he gets the one back and he does another magic trick and breaks the handle and then replaces the bottom of the handle. And people say is that still Houdini’s one because it’s a whole new thing, right. I don’t want Houdini’s wand on my roof. If the roof is 20 years old. It needs to go going in there and doing 1500 dollar repair. It’s pointless. It’s not worth fixing. It’s worth replacing. So the point as the point is last year, you did two roofs get overspent this year. You got a beautiful new roof on one of your products. 40s and it was only can I say the price? Or do you want to? Do you want to say Hold on, I’ll set y’all up. So this actually has to do with the show and a lot of ways because I appeared on your show, someone reached out to me and wanted to ask me about self management. I started to talk to them and they said, I bought some homes in this property and have someone who’s a seasoned investor, and they gave me their vendor cheat sheet of all the people that they’ve used throughout the years and the people they liked and didn’t like, I traded in some contacts and he traded me for his contacts. So I reached out to this roofer who does 20 roofs like a week, and it’s kind of the inside guy that everybody uses. He usually replaces about two roofs a day, he went out and bid the job and he did the repair for six. He did the new roof for 1600 and $50. Okay, so as the saying goes and your wife’s name is Katie, Katie. Bye The door Wait a second, you said 1600. So only 1600 dollars. Now that was just for labor, you actually purchase the materials. But wait, there’s more when we get here 10 and getting you a discount, go ahead. So, the thing that was nice is the shingles that the builder used on the property, you know, in 2001, or whenever the property was built, they use shingles that were not resistant to when they’re the cheap shingles that you might find. So the roofer said, Hey, we should get these dimensional shingles that are more wind resistant, because we had an insurance claim on this property because of wind damage because of all the crazy Midwest, polar vortex wind issues. So I’m still dealing with the insurance company on getting them to pay for part of the roof. But the beauty of this was I had to Say in the color of the roof, tile shingles, the quality of the materials that were used. And then I made sure that he bought them at Lowes and the $3,000 worth of roofing materials. What would the beauty of this that’s kind of an irony that you would never know, unless you were self managing is my tenant works at Lowe’s. And she’s an employee there. And she said, Hey, if you leave your receipts with me, I can get you a 10% discount, and they’ll give it back to me on a on a gift card, and I can send it to you. So I got a $300 discount on my roof that will end up costing me about $5,000, which is at least a 50% savings. Jason, if not 100% savings off of what it would have cost me to use one of these other property manager vendors, right, because the thing is, they claim they’re doing this at cost. I agree. calling their bluff. Yeah, well, that’s Bs, I’m sure. Okay, so here’s the thing, just to wrap it up and make everybody understand that then let’s get on to commandment number three. This beautiful new roof. I saw the pictures myself. Looks great. cost you 1600 dollars for labor 1400 dollars for materials. It was probably about $3,000 worth of material. Oh, I thought it was 3000 total when you said that to me? Yeah, it was. It’s 40 $400 or 40 $600, then

Jason Hartman 8:30
correct. Okay, so it’s about half price. But wait, it gets a little better. Because your tenant who you now since you are self managing your property, you have an actual relationship with your tenant. Normally, this is this sterile thing. There’s no people helping people. There’s no sense of community. There’s nothing there’s no relationship. Your tenant said, Hey, by the way, you bought those materials at Lowe’s. I work for Lowes, send me your receipt. I’ll go and get you a 10% credit, because that’s my employee discount, right?

Drew Baker 9:05
Yeah, exactly. Unbelievable.

Jason Hartman 9:07
Awesome.

Drew Baker 9:08
Awesome. Yeah, you, you couldn’t make it up. So it’s sort of like building your own network. And I mean, this all came together because of your show, and talking to an investor in the investor talking to me and kind of that network effect of having a relationship with these people. And everybody’s happy at the end. Yeah. So it’s really, really turning a situation for the best

Jason Hartman 9:33
look at we talked about commandment number one, which is now shall become educated. commandment number two, you know, basically, thou shalt have a team, right? A network, right? That’s essentially commandment number two, we talked about investment counselors and so forth. And part of that network, part of your team. listeners, I want you to think of it this way. part of your team is literally your own tenant, your own customer. I mean, Look, take my business as an example, all of you listening, who are clients of our firm? You help us all the time we love you for it can’t tell you how much we appreciate it. Look, Drew’s a client. He’s not being paid to be on the show. He’s just helping out because well,

Drew Baker 10:15
I’ll share a good story. I’m gonna send you your bill.

Jason Hartman 10:19
You’re not sending me a deal?

Drew Baker 10:21
Well, you know, you’re totally right, Jason. And also, you know, my tenants are a valuable asset to me. And one of the properties that I have, it was a duplex. And so lawn care was my responsibility because it’s a common area. And I talked to the tenant, and she said, Hey, one of the trees is falling over in the backyard. I had someone out there the next day to remove the tree. I got a bid for them to do lawn care, and it was outrageous. And I said, No, thanks. So I talked to the tenant again, and she said, You know what? We’re having such crazy winds in this area. Since this is a common backyard. That sprawls because there’s no fences, I think you’ll be wasting your time doing a bunch of cleanup because the winds just gonna transfer all the neighbors leaves over to our yard or back and forth. So it’s better to wait for the wind to die down the weather to improve and then do the cleanup. So I said sounds great. So she texted me today and said, Hey, have you had anyone to find to do lawn care? So I said, Well, I I reached out to a couple people that I had, and no one responded to me. So would you do me a favor and keep your eye out for the next week and see if you find someone in the area that’s doing lawn care, and get their information, and I’ll hire them. So I sort of put the responsibility on the tenants to find the person for me rather than me cold calling people to see if they’ll come out and deal with it.

Jason Hartman 11:53
So that’s the point I was making. Look at. I want you to look at you know, every guru out there will say hey, if you want to invest in real estate and you want to be a big real estate investor, you gotta have a team, right? You’ve heard it before, folks, it’s not new part of your team is your own tenant, your tenants are part of your team. They are your customers. And they’re also a valuable asset, they will help you, you’re all moving in the same direction here. So look at your tenants as part of your network as part of your team. Okay, make sure you do that. That’s really important. And that’s a good lesson. And that’s another benefit of self management and of having those tenants on your team to be an asset. I can’t tell you the number of times through over the years that I’ve had my own tenants, repair things, fix up the house, meet contractors for me, you know, I mean, I’m not local, I can’t meet them. The tenant will meet them, the tenant will take their phone number and set up the appointment and just do the whole thing. In fact, I remember one tenant who was telling me that, you know, he was giving me his opinion on Which estimate we should go with? And he said, You know, I think this other guys overcharging you, you know that that’s too much, you know use the cheaper guy, these tenants most of them are just great people. I mean, I know we hear a lot about bad tenants here and there but the vast majority of them are just really nice good people that just want a good place to live and are happy to pay you the rent and help you be a better manager. Now drew one last very quick point on that. People listening and you’ve addressed this before in prior shows and it meet the Masters they’re probably thinking, Oh my God, he’s spending so much time on this. This is his full time job. Not really, you’ve got a very successful business that you run, got a new baby and and another kid as well. You’ve got lots of other things to attend to. So do you feel that this is worth your time given that you’re a highly compensated person, the self management or or are you doing menial work here? Tell us how you feel about that real quick.

Drew Baker 14:01
I think part of the performance of this asset is my oversight. Because if something is being managed by a third party, they’re not going to do as good a job as I am. So I don’t think it’s fair to talk about how much money I’m making per month, when once I’ve resolved all these problems, I have that compounding effect of you not having that accounting competency, you know, building up inside the property. So I think there’s a lot of unseen benefits that I’m going to get from this that I’m already starting on. Where the first couple months, it was a little bit more trouble than I would say it was worth if you were looking at on a monthly basis. But now the amount of work I’m fielding and the amount of projects I have has gone dramatically down here. And if you think these property managers are doing one or two things every month at your property, most likely they’re not

Jason Hartman 14:55
Oh, no, they’re just a lot of them are just overcharging people. So you know, we want to empower people. And I really recommend the self management if you have never tried it, try it once, try it with one of your properties, see how it goes, you’ll be surprised how little time it takes how overall your tenant turnover will be reduced, your expenses will be much lower, your whole experience will just be better. I bet. Yeah. Well, I mean, you know, now I’ll say that of course, and, and you know, someone listening will do that. And the first experience will be the bad unlucky, you know, experience that everybody’s going to have once in a while, but overall, I just think it’s a much better deal. Okay. Hey, let’s move on from the self management. We got two more things to cover and Drew, can we jump into Kyle bass and then we’ll talk about commandment number three? Sure. Okay. We promised last week, we would just wrap up this video that I played while I was in China. It’s quite interesting. So let’s just finish it. You know, we’ll have a couple comments on it

Drew Baker 15:52
to Gordon’s point and the thinking back to the fall of the Soviet Union, it looks to us like I don’t want to say fraud. But let’s say the The disingenuous nature of the exchange rate between the RMB and the USD. So he’s

Jason Hartman 16:06
talking about China manipulating the numbers, essentially between their currency, the RMB, or the one and the dollar, you know, saying it’s it’s disingenuous, the way it’s portrayed in the Chinese economy is not nearly as good as they would have you believe.

Drew Baker 16:24
Back then China is completely running out of dollars and raising dollars through Hong Kong. And Hong Kong is as levered as it is and running out of its own rainy day funds. If you have money invested in Asia, I would rethink that. And I’d rethink it very quickly. And if you have Hong Kong dollar deposits, you’d be foolish not to convert them in the US dollar deposits because the you don’t even earn 80 basis points more and in overnight rates. So I think this is multifaceted. You need to think about the nexus of Hong Kong and China economically. But then we go to the politics and I know a lot of you here are political animals. So if you’ve noticed in the last month or So China has actually floated a proposal through Hong Kong’s legislature that says they would just like to extra judicially grab people off the streets of Hong Kong. If China deems them to be a quote, fugitive and a future that means that they’ve broken a law. That happens to be a law in China and Hong Kong, let’s just use murder. For example, if President g issued a warrant of arrest and calls the Hong Kong Police and says, Hey, this person XYZ committed murder in China and he’s there in Hong Kong, we want you to ship them over to us. Hong Kong is going to be obliged to do that without due process. Now, that’s that’s not autonomous anymore. That is a that is a breach of the 1992 agreement that the US has with Hong Kong. It’s a breach of the 1984 agreement that the Brits have with Hong Kong. And so China believes over playing their hand in a big way in Hong Kong, and I think this legislation is about to become law. The most interesting thing about these agreements is the night 92 Hong Kong us Policy Act is ratified annually by the US president, the State Department as a report to the president and then it’s up to the president to decide whether or not Hong Kong is still quote, autonomous enough for us to give them the status that they currently have. So given the economic fragility of the region, and going back to Gordon’s point, China’s in a really bad place today, running out of dollars flowing with their economy, and the biggest credit binge in world history. Hong Kong is the most levered, developed nation in the world today, and they’re running out of dollars, we have them exactly where we want them right now. We should not sign a trade deal with them, we should go ahead and impose these tariffs, and then negotiate something much more meaningful with them six months down the road. So I think it pays attention you need to pay attention to both the politics and the economics of Hong Kong which for 36 years, has been a relatively stable place. In Asia, and I think going forward, that’s actually not going to be the case. So, Frank, thanks for Thanks for having me.

Jason Hartman 19:06
That’s pretty interesting speech by the very renowned Kyle bass, you know, very renowned in the financial world. Andrew, thank you for sending it to me. I played part of it on the show last week. Do you have any thoughts on that?

Drew Baker 19:20
Well, I mean, I think it shows that the prosperity and the Chinese economy is all based on debt. And it’s interesting that the way they transform their economy, as you might know, is sort of modeled after the American empire of printing money. I think the difference is, is that the Chinese do not have currency that anyone wants to hold, not even the people in their own economy. I mean, if you think about the robber baron era, you know, the JP Morgan’s these folks, when they were making billions of dollars in adjusting to current currency, they kept their money in the US economy. They weren’t going out and trying to get their money out of the system. If you look at every successful Chinese entrepreneur, they are trying to get out. Right? And people speculate that’s why Bitcoin went hyperbolic, because they could literally just dance between borders and cash out, you know, in speculated the same not not worry about the political risk. Yeah. And like you kind of predicted, you know, once these governments see a threat to their monopoly, they’ll just put an end to it. And so that’s why some people speculate that when China said no more, it was only a matter of a few days or weeks where Bitcoin then crumbled. Very, very interesting stuff. Now, the point is that China is hungry for US dollars, the reserve currency of the dollar is not going away anytime soon.

Jason Hartman 20:52
So all of this doom and gloom stuff you keep hearing from you know, Jim Rickards or Peter Schiff, or This stuff it’s super interesting to listen to, but they’re just always wrong. The sky never falls. And they’ve been saying that forever. I mean, I remember when Howard rough was talking about that in the 70s. And I had him on the show, I believe he passed away. But he was a super interesting guy. All of this stuff. It’s just always, it’s just always wrong, because they just do it by math only in the US is in a very good position. And all these Chinese people want to buy our real estate, they want to keep their money in our banks. And hey, listen, it’s certainly not perfect over here. But by comparison, it’s better than what else is out there and most places in the world. So that’s important.

Drew Baker 21:38
Kyle bass has some interesting strategies to prevent China from stealing our intellectual property by basically attacking the businesses that are trying to use sell their products here. The one thing I would disagree with Kyle bass and it might just be a matter of semantics is I think China is going to play the long game, and they’re just waiting for Trump to time And the thing is, is there’s a lot of bluster. There’s a lot of hyperbole. And I wonder, you know, if Trump has all this rhetoric but doesn’t follow through with it, China is going to call the bluff. So I think that’s what I’m in fear of. But what’s nice is Trump is at least trying, so I couldn’t do better than he is in that regard. Yeah,

Jason Hartman 22:20
there you go. Okay. Now, you talked about how China’s economy is built on debt. And, you know, everybody listening is rolling their eyes and saying, well, so is the US economy, so is virtually every economy, and they’re right. But let’s not look at economies for a minute. Let’s look at an individual company, a corporation or really a person specifically, who claims always not to be selling his stock, but he’s just leveraging his stock and borrowing against it. Now, folks, this all relates to commandment number three of my 10 commandments. Thou shalt maintain control. Because when you relinquish control and invest in a stock or a pooled money investment, you leave yourself susceptible to three major problems. Number one, you might be investing with a crook number two, you might be investing with an idiot. assuming they’re honest and competent. You got past those two hurdles, they take a huge management fee off the top for managing the deal. Let’s go to Tesla. Very much in the news lately. I owned two Tesla’s myself. First one i thought was good. The second one was a lemon. Tesla finally took the car back and gave me a refund. So I stopped pestering them so much and kind of just let it go and, you know, said that’s done that deal. But look at what’s going on with Tesla. No, Drew, this is crazy making what they’re doing. I mean, where do we start? You want to talk about Ilan leveraging a stock or executive overcompensation? Is this company going down and they’re just trying to steal all the money from it before it goes down the tubes or what?

Drew Baker 24:01
Well, there’s a lot of financial engineering that’s going on with the company that’s putting. And I have dubbed it Tesla math, because it’s its own thing. And everything is seen in the best possible light. When ever they come out with a number. It’s always tweaked in a way where it’s a manipulation. I mean, it’s even down to the trunk size where they’re adding the Fronk into the cubic square feet into the trunk. Right, the thing that Tesla has going on right now is the cumulative debt is exploding. They’re losing about a billion dollars a quarter. And the only reason they’re able to mitigate some of those losses is by selling end credits to other car makers, which will soon be disappearing once they all start coming out with their electric model. That’s

Jason Hartman 24:56
like Al Gore selling carbon credits. It’s kind of similar idea, huh?

Drew Baker 25:01
Yeah, yeah, you know, but you also look at the rate of their cash burn. And it has the same hyperbolic explosion as the stock based compensation for the executives, so they keep getting paid more as the company keeps burning through more cash. And so the financial engineering is just absurd. You know, Ilan talks about how he’s never sold a share other than to pay for taxes. This is his baby, and he’s going to go down with the ship if it ever goes down. And he’s a true believer in his word, but the thing is, is that what he doesn’t tell you is that he has leveraged his stock by almost a billion dollars, and it’s taken loans out against his stock. So sure, he hasn’t sold his shares and sure he keeps buying shares. But if you’re buying shares with money, you’re borrowing against your own shares just to get headlines. Is that really a fair assessment of what’s going on.

Jason Hartman 26:02
Yeah, right, right. Very good point. Very good point. It’s pretty ridiculous. What about executive compensation it? It seems like they’re just ravaging the company. They’re just taking all this money

Drew Baker 26:16
out of it at the wrong time. You are brave for being vocal about Tesla because they sure have their fanboys and I would even say that I was one and I think I may were definitely waited you I persuaded you to buy your Tesla I bought Tesla as far as the stock goes and made decent amount of money and I

Jason Hartman 26:35
bought two of the cars and you bought the stock.

Drew Baker 26:38
Yeah, I think I did better than you but

Drew Baker 26:42
I think you did do

Drew Baker 26:43
but the difference is is you know, I think a lot of Tesla fans are thinking this is the dream and don’t bother me with the facts have already made up my mind. The thing is, this persuaded me is the data you know as the stock market and equities rise and Tesla gets all the dumb money. They’re just pillaging that by giving themselves preferential stock prices before certain big moves happen, but I will tell you that that is wearing out, you know, days before Ilan came out with his quarterly was first quarter of the year 2019 results regarding deliveries. It was a disaster. It was dramatically less vehicles and more losses than any analysts predicted. And the thing is, is that Ilan came out and days before came out with a an autonomous investor day to try to get more interest in the stock to kind of distract those from this disaster. His numbers he expected to come out soon, right. So he’s wagging the dog. Of course, he’s a master at that. But you’re going to talk now about his he’s basically now go compete with Uber and Lyft and all the other ride sharing companies all of a sudden, is that what you’re gonna say? Yeah, so days before his whole thesis about selling half a million cars a year crumbled because demand is falling apart, he decided to shift the company’s strategy to get away from that thesis, to say that he’s going to compete with Uber and Lyft and design his own chip board for his car and wait,

Jason Hartman 28:27
all the Tesla owners can now make an extra $30,000 a year he says, if they’ll allow their autonomous vehicles to give rides to people 30 grand a year. I mean, that is crazy.

Drew Baker 28:42
It is crazy. I mean, no way. The lives just have to keep getting bigger and bolder and more outrageous. And it’s wearing off. I mean, days after this autonomous cars event. The stock just went down in price. People just weren’t buying it. What’s funny about it is You know, the idea that this car is going to come to you without anyone in it. And what’s going to be required is that people will have to sit in the driver’s seat with their hands near the wheel if they have to take over. And what insurance company is going to underwrite this by having a drunk person in the driver’s seat having to take control if the car accidentally is about to collide, in the center median as it’s done dozens of times seeing Ilan speak about it. He was just so absurdly dismissive. It looked like he was delusional. He was like, well, we’ll just take the steering wheels out, we’ll just take the gas pedals out, or you know, the pedals out, because nobody only does I mean, this is all coming. Of course, I’ve talked about autonomous vehicles extensively. I love it. I love it. That’s why I bought the first Tesla. I love it, but it’s coming next year. It’s not gonna be here next year. I mean, that’s just ridiculous. Yeah. So there’s a couple things going on in the Part of the problem is Elon is trying to do too much at once. I mean, the Tesla semi hasn’t been delivered. The Tesla solar roof hasn’t been delivered. Full self driving hasn’t been delivered. You just have tons of service issues and quality problems. Yeah. So yeah, I mean, this goes back to when you put your trust in one person, and you lose that trust, it becomes an issue and in real estate, you know, if we don’t like who we’re using, we can fire them and find somebody else to do the job. And the problem is, is with Tesla, if you fire Ilan, what’s going to happen to the stock? So it’s an issue?

Jason Hartman 30:37
Yeah, it sure is. It sure is. It’s it’s absolutely crazy. But again, commandment number three, thou shalt maintain control. You’re all listening to this show, because you want to control your financial future. So just buy some little houses. Ideally, consider self managing them, maybe not either way is fine, but be Control. Don’t relinquish control of your money to a company, a CEO, a mutual fund manager, a financial advisor, any of those people because no matter what they say, or how good they seem, they don’t have your interest at heart. You’re clearly seeing this now with a majorly newsworthy company. So that’s pretty interesting. Drew, thanks for joining us. We gotta wrap it up. listeners, we are getting ready to go to Savannah, Georgia for our venture Alliance mastermind retreat this weekend. And we will be seeing some of you there and we look forward to it. We’re focusing on tax lien and tax deed investing at this retreat will tell you how it went next week. Thanks for listening and happy investing to all. 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 media.com 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.

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Jason Hartman hosts Investment Counselor, Sara, to discuss her three new properties in Memphis. They discuss how competitive the market is and how one of her clients beat her to some properties in the area. Later, Jason does a client study with Dr. David D’Ambrosio who shares his experiences with 1031 Exchanges on properties in the Orlando and Indianapolis markets. They go through the tax benefits of real estate and why they think its the best investment.

Jason Hartman 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.

Announcer 0:15
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 1:05
Welcome to the creating wealth show. And thank you so much for joining me. This is your host Jason Hartman with episode number 738 738. Again, thank you so much for joining us listeners from around the world. We are going to give you a client case study today. We love it when our clients come on the show and hear one of our many doctor clients is on the show, talking about his investing journey, the past, present and future. And we’ll talk a little bit about equity stripping. We’ll talk a little bit about 1031 exchanges. We’ll talk a little bit about the investing mentality with Wall Street with other investments with doctors and other professionals, and just a whole gamut of things. So I think that’ll be interesting to you. But first, for the intro portion. I invited David who is our client case study today Dr. David D’Ambrosio. I invited his investment counselor in to talk with me a little bit about him and help introduce him. Sarah, welcome. How are you?

Sara 2:06
Hey, Jason. Great. Thanks for having me.

Jason Hartman 2:08
It’s good to have you back on the show. And you just closed on three properties of your own, I think, right?

Sara 2:15
I did. Yeah, I went with properties in Memphis this time around, and I was super excited and eager to get them closed. I want to get them leased up before the holiday season comes around and things are looking promising there. So yeah, I bought two with one provider and one with a different one. So I’m going to try out two different property managers so I can compare and contrast and, you know, keep them honest. That’s

Jason Hartman 2:41
good. That’s a good plan. Yeah, we always like to try and have that customer experience. You know, I purchased a couple properties in Memphis last year, a couple more this year. You know, we’re we’re practicing what we preach and having those same experiences that you’re having. Interestingly, you would Think and this is oddly to me. You know, it’s just sort of interesting that this doesn’t really seem to be true. You know, you would think we are insiders, Sara, you and I would get like special treatment from these local market specialists. I don’t think we do unless, I don’t know. It seems like a pretty normal experience. You know, I don’t think they they bend over backwards for me, they probably consider me to be a pain in the ass. Oh, I said the word the a word.

Sara 3:32
Well, it’s funny because I feel the same way. In fact, we probably get a little less attention because they expect that we know what we’re doing. So it’s kind of like you’re signing the contract, you’re on your own. counsel yourself, you know, but you know, funny enough when I was, you know, ready to pull the trigger and I had my financing lined up and I was starting to look at inventory. I was looking at a few different markets and it really my decision just came down to what was available and I actually lost out on two properties to my own clients. Because I didn’t pull the trigger fast enough. You know, someone came in from under me and asked for the contract before before I did. So, yeah, I definitely didn’t get any special treatment. If anything, I learned how to make a quick decision.

Jason Hartman 4:17
Your your shame on you, Sarah, that your clients are more decisive than you

Sara 4:24
are maybe, you know, maybe they just saw the deal before I did I you know, I don’t know. But the third one that I that I finally got. I remember seeing it hit our website in the morning. And I hadn’t even gotten out of bed yet. You know, I’m, I’m notorious I, I don’t follow the rules. And I you know, check my email first thing in the morning, which I know you’re not supposed to do that. Right. I do that so yeah. Guilty. So I was checking my email and I saw this awesome house. And I’m like, oh, I’ll just call you know, I’ll just call the LMS local market specialist after I take my kids to school. And then I thought you know what, I bet you This one’s gonna sell so I call them right away. I hadn’t even got out of my PJs yet. And sure enough, right after I asked for the contract, he got an email from somebody else that was interested. So you know, it’s it’s a little competitive right now. You know to find that that great deal.

Jason Hartman 5:17
No question. It definitely is in listeners. That’s maybe one of the biggest things you learn from this episode today. Did you catch it? What Sarah just said, Sarah wears PJs to bed. That’s the big that’s the big takeaway from today’s episode PJ’s?

Sara 5:35
Is that is that a problem?

Jason Hartman 5:37
Yeah, I don’t know. You know, whatever. But we want you to post a picture of your PJs on the Jason hartman.com blog. Okay. We should put it in the show notes because you know, who really says PJ’s anymore. That’s not a kid or a parent talking to a kid I guess you’re a mom. So okay, that’s

Sara 5:59
if you’re lucky enough. To be one of our venture Alliance members, you might catch me walking around the halls in my PJs searching for a water bottle.

Jason Hartman 6:08
There you go. Yes, that’s better Alliance members. We’re kind of a more intimate group for sure. That’s no question about that. But that’s what I love about it too. It’s great. Good stuff. Well, hey, Sarah, you wanted to share a an opinion that you have on rate locks on when someone should lock in their mortgage? Or if they should, at all right, when they when In other words, when they apply for a loan to buy a property? Should they lock the rate? Or should they let the rate float and you had something you want to share on that right?

Sara 6:38
I do because I had some clients come up against this and then it happened to me and and the problem was, so I put the properties under contract before the rehab was done, and that’s happening more and more these days. And so the property was still being renovated and the lender said, you know, when do you expect these to close Okay, you know, the rate locks good for 30 days. So based on the Closed date, you know, they lock the rates, I said, you know, that’s fine. Well, what ended up happening was that you know, and this happens all the time, the rehab took, you know, just a little bit longer and, you know, you have to schedule your inspection and then and then things come up on the inspection report and then you got to send the construction crews back and then you got to send the inspector back out. And that all adds time to your, your, your closing process so so that happened to me and I was pushing up against that rate lock expire ation, which kind of forced me into a situation where I was like, rushing to close and it made me like a little uncomfortable with my closing because I ended up having to get the local market specialist just to put in writing that, you know, they’re gonna provide me with a clean inspection report after I closed. Ideally, you want to clean inspection report before you close. So it just I think it just caused a little unnecessary rushing around and stress to the process. And what I learned is that if I would have Just not locked the rates, I probably would have still gotten the same rate. If it only closed a few days later, I probably would have ended up closing, you know, maybe one week later that I did, and everything would have been fine.

Jason Hartman 8:12
So of course, of course, the risk though is if rates are climbing, you could end up paying a higher rate if you don’t lock right.

Sara 8:20
You could but but you could also be paying extension fees on the rate lock. That’s what I you know, they charge like a daily rate. So, you know, you get the you get the lower rate, but then you’re paying a fee and I, you know, I can take the time to like, do the math and figure out what’s the, you know, what the best way to go because the rates didn’t go up anyways for me, but yeah, that is the rest of the risk is you know, your rate might go up a little bit. They go up and down a little bit every day. So

Jason Hartman 8:48
right. And then basically what’s interesting about what Sarah just said, is that you see how in essence, when you pay for a rate lock, you’re in essence renting the money or your optioning that money because that money has to be available at that rate. And that’s why you pay for it, you know, you pay a certain amount, and then you pay a daily rate for extending it after that interesting. Yeah, just want to have you know, and really, that goes to kind of my broader point. And we’ve talked about this on past episodes, listeners, but the concept of, you know, money, just like anything else, and it shouldn’t even be called money. In our case, it’s currency. Right? But it’s just a commodity. It’s just like coffee beans or soy beans or copper or anything, any lumber, you know, everything’s just a commodity, okay? And that’s how I want you to look at the world and just understand that all those commodities have a price. And those prices fluctuate and there’s a certain amount of demand for those commodities and there’s, there’s a whole supply and demand market for them and, and when I talk about commodities that are the ingredients to a house, or an apartment building, copper wire, glass, steel, lumber, concrete petroleum products, etc, etc, etc. You know, these are not they’re independent of any specific currency, whether it be the dollar or the Euro or the yen, or the real or whatever, right? They have intrinsic value. And we think that’s a good thing. So just a, lest we get off on a tangent but I just wanted to kind of bring that up again. And in by the way, I think this next episode for flashback Friday is gonna be the Donald Trump episode. There’s so much controversy about that guy. I think I’m gonna do the Donald Trump episode on the next flashback Friday. Okay, so listeners Be sure to catch that one. Do

Sara 10:39
you know how many times I’ve like typed on my Facebook and then just deleted my comment because I just can’t even

Jason Hartman 10:48
it’s kind of not worth all the hate you know? So anyways, I’m Gary Gary Johnson is looking awfully good the Libertarian candidate, folks, if if we’re ever going to have a third party I know everybody’s always concerned. I’m gonna waste my vote, you know, but we got to do it. Someone’s got to do it at some point. Okay, we, you know, this two party system is just a total scam. I mean, look at both of these clowns we have running. It’s crazy. But one one’s worse than the other. And I would happen to say that that’s the clinton clown. But they’re both. I don’t know. Yeah, they’re both pretty cloudy for sure. All right. So in addition to rate locks, and politics and commodities, and PJ’s, anything else before we get to your client and share this case study? 00

Sara 11:39
Well, do I do I go on another rant about Obamacare. I mean, I took my son to the urgent care yesterday and I didn’t even stay and get him seen. I couldn’t get it a same day appointment. So I went to urgent care. I cannot believe how overcrowded and understaffed Kaiser was. It was unbelievable. And that was the rant that I typed. And then I just said, You know what, forget it.

Jason Hartman 12:05
Not gonna post it’s only it’s only gonna get worse. I mean, my insurance cost has gone up about 35% since Obamacare, look at if you if you regulate or tax something more, and you know, in this case regulation, but regulation is just a form of tax, okay? Because it’s a burden, right? If you burden something more, you’re going to get less of it. And so this means we’re going to have a lower supply of healthcare in all its forms, whether it be equipment, pharmaceuticals, actual practitioners, you know, doctors and so forth. And it’s interesting we’re interviewing a doctor right and you know, he’s gonna have a lot of opinions about this our case study today. It’s Obamacare is it’s it ain’t gonna work, folks, even even even good old slick Willie, Bill Clinton said Obamacare was a mess, so that I thought that was interesting coming from the same side I’ll even Bill Clinton. So what would you say sir?

Sara 13:03
I just said that it’s just my one of my biggest fears is you know, the healthcare industry and it’s it’s a scary it’s a scary thing. You know, when you take your, your kid into the ER, I mean, this was last year I remember taking Alyssa into the ER with shortness of breath, and she has a history of asthma. But back in the day, when you take a child into the ER, and they have shortness of breath, they get seen right away to decide, you know, if, if they need or urgent care that moment, or they can wait 20 minutes, I had to wait 30 minutes just for the initial, you know, triage I guess they call it. So it’s really like, it’s really scary to me with, you know, with kids and a family and I’m sure it’s scary for a lot of other people. But what does this have to do with real estate? I don’t know. I just,

Jason Hartman 13:47
you know, it has to do with the cost and political issues and, and people that say politics, you know, I get these, like I got this review. I thought this was funny. By the way, Mr. reviewer, I’m sure you’re listening who posted a review on iTunes and said, Fox News for real estate investing. It’s like I thought that was totally creative. So thank you for the review. You know, it’s kind of a half hearted compliment. I understand that. But you know, this is not I mean, I don’t I’m not a fox news guy. I don’t even have TV. So number one, I don’t watch Fox News. Except when I’m maybe in a hotel room. I’ll watch mostly cnn because that’s what they have political stuff, you know, influences. It’s a big part of real estate investing, folks. So, you know, this is not irrelevant stuff. I know, most of you understand that. It’s relevant, but a few people think it’s irrelevant, and it’s not. It’s very relevant. Obviously, it’s an election time right now. So we won’t always be talking about it that much. But, you know, it matters. It’s something that definitely matters. So anyway, without further ado, let’s get on with our show here and shut up and quit rambling before people write me more. More reviews about Fox News for real estate investors was hilarious. And that was Creative, I must say, very creative. Check out Jason Hartman calm we’ve got the new website up, it does have several bugs it launched just yesterday, the property section, we’re going to dramatically improve that, by the way, that’s on our roadmap here, and dramatically improving a bunch of other things and functionality and so forth, and do a lot of things with the website. So look forward to that. We’ve got a really good web development company helping us nowadays. Check out the educational products in the store there or at Hartman education Comm. And then we’ve got another venture Alliance meeting coming up at the beginning of December. So check out venture Alliance mastermind.com we’re pretty sure that’s going to be located right here in beautiful Scottsdale, Arizona. So that’s an easy easy trip for most people. I know a lot of you out there have been asking me about the venture Alliance mastermind group and, and considering joining and I tell you, it just keeps getting better and better. The comments from our last meeting in Seattle, people said to me, Jason, you really applaud This one, the speakers were great. We had some awesome speakers come in and, and we’re just going to keep trying to make it better and better. There are some really big names in real estate here in in the Greater Phoenix metro area. So for our Scottsdale event, I’m going to try and get a couple of them to come in and talk with us. These are people who have been on the show who you’ve heard of, you’ve probably read their books. They’re quite famous, and nobody is confirmed yet. So I can’t mention any names, but I just tell you, I’m working on it. Okay, folks, I’m working on it. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. So Sarah, thank you for joining me for the intro. Let’s get to our case study and talk to your client, David, and hear about his investing journey.

Sara 16:50
Yep. Thanks, Jason.

Jason Hartman 16:54
It’s my pleasure to welcome one of our clients to the show. It’s David D’Ambrosio and he is located here In New Jersey, and has an interesting story about his journey as an investor, and some of his next plans and talk a little bit about his recent 1031 exchange and so forth. David, welcome. How are you?

Dr. David D’Ambrosio 17:12
Great, Jason. Thanks for having me on.

Jason Hartman 17:14
Good. Hey, thanks for coming on. It’s great. How long have you been listening to the podcast?

Dr. David D’Ambrosio 17:19
Probably a little bit over a year. So I’ve listened. I went back though, and I listened to the older the older ones that I could get my hands on as well. So I probably listened to maybe I would say probably about 300.

Jason Hartman 17:33
Wow. Three hundred, and you’re not sick of me yet. Well, thank you. That’s great. Good stuff, good stuff. Give us a little bit of your your background and, you know, tell the listeners what you do for a living and kind of let’s just dive into your journey as an investor.

Dr. David D’Ambrosio 17:48
Sure, sure. So, I am a physician. I’m a I’m an oncologist, a radiation oncologist specifically, and I’m the son of an immigrant. So I feel like I’m living the American dream. As long as that’s going to last who knows, but I always have had an interest in investing in general and educating myself about different types of investing. And I’ve always kind of come back to real estate in general because of all the things that we we discuss on your podcasts all the time. And I read you know, a lot of real estate books and I think a lot of people probably talk about that Rich Dad Poor Dad book which opened up some some new thoughts in my head, especially the actually the 1031 exchange they mentioned in that book. And my medical partner, Jolla, Tansy is the one that actually turned me on to your network because he he had invested with you. And that’s how I came specifically to to your podcast. I spent a lot of time educating myself before diving in. And the method that I hadn’t started my investing with you was was through this 1031 exchange.

Jason Hartman 19:00
So you were interested in investing and in a great immigrant story. I love that. And, by the way, just to comment on your American dream, as long as it last comment, I think we all unfortunately, and it really is no laughing matter. See the country taking the wrong direction in so many ways. But, you know, at the end of the day, it’s all a game of comparison, right? It’s not a question of whether America’s gotten better or worse. Yeah, you know, that’s, that’s part of it. But it’s just, you know, compared to what is always the question, it’s always a relative thing.

Dr. David D’Ambrosio 19:30
Where’s your family from, by the way? So we’re off. We’re from New York City. Originally, my father, my father came over on a boat into Brooklyn. And then I grew up in Queens, and I live in Jersey now.

Jason Hartman 19:43
Yeah, but we’re originally like you say the immigrant story. That’s why I asked

Dr. David D’Ambrosio 19:46
what part what part of Italy My father was from a little town north of Naples.

Jason Hartman 19:51
Good stuff. Well, fast forward. Now. You You learned a lot about investing and listen to 300 of my shows or so. So thank you for that. And you did a 1031 exchange now. So what did you sell? And what did you buy in that exchange? Sure, so so that story, the story with that was that actually the house that I had grown up, and

Dr. David D’Ambrosio 20:13
my parents had retired a few years ago. And they were looking to sell the house. And my original plan was they were selling it to me, obviously, I was getting a son discount. But my plan was actually to keep that house and rent it in New York City. And I would have had maybe a little little bit of cash flow, if I had done that, but that’s when my eyes were opened, kind of at the same time, I was listening to your podcasts. And I realized that if instead of renting out long term, if I sold it and did a 1031 exchange, that I would I would greatly improve my cash flow, and also my overall investment by instead of just having one switching that over to multiple properties.

Jason Hartman 20:58
So so you sold them property and when did you sell

Dr. David D’Ambrosio 21:02
it the end of last year? Towards

Jason Hartman 21:04
the end of last year? And you did a 1031 exchange on that, right? Correct.

Dr. David D’Ambrosio 21:08
So I transferred that into four properties in Orlando that I bought with the group. And you know, the, the cash that I got out of that and put into those four new houses was enough that I was able to put even more than 25% down so it was really, it was really a very good deal for me. Obviously not having to pay the tax on it was a big thing too. Right. Right. Yeah.

Jason Hartman 21:37
Good, good stuff. So all in Orlando now. It’s interesting. You didn’t you didn’t want to split those up and get like get into two different markets there. I know. You’ve got some other properties. Where else do you own or did you feel you were diversified enough already?

Dr. David D’Ambrosio 21:51
You know, I have I have four properties in Indianapolis as well. I really, really like the Orlando market because I feel like the We’re in a unique situation there that the value is so good for cash flowing. And I think there’s a lot of upside potential for appreciation and I ascribed to your philosophy I’m not an appreciation investor but I thought that it was a good idea for me to try to split split myself up by putting more more of my portfolio there. I think I’d like to get into one more market but I’m things are still settling down with that. But that that was my thought process with Orlando was, seemed to be a nice, a nice combination of good cash flow, but also the potential for some appreciation down the line.

Jason Hartman 22:39
Right. Absolutely. And I think that’s a good decision. You know, one more market get into three total, you just be super nicely diversified. So yeah, that’s definitely a good idea.

Dr. David D’Ambrosio 22:50
The other you know, the other issue with that, too, is these 1031 exchanges when you’re doing in general are a little complicated, but when you’re trying to go from one property to multiple properties, it can get pretty. It can get pretty hairy. And if I was trying to, I was trying to make sure that I had places set up in more than 111 location, I think it really would have complicated things for me with all the deadlines that are involved.

Jason Hartman 23:12
Yeah, that’s true. That’s true with these changes. Did you have any trouble selling your exchange? Were you worried at any point? I mean, the last two, I’ve done I did. I did. Well, I did two of them last year. Actually, I should say the last three exchanges I’ve done two of them last year and one this year so far. It’s it’s been kind of difficult. I’ve been worried, you know, coming down to the deadline on those exchanges. I I did make it on all of them, thankfully. But I was worried that I might not because it was a little bit hard to find properties.

Dr. David D’Ambrosio 23:43
Yeah, I was definitely worried about it. But what I did was you’re allowed to you’re allowed to name I don’t remember the exact rule. I think you’re allowed to name 250% more value of additional properties, not just the ones you take. So when I’m when I made my list I picked about 10 properties, six more than the ones that I actually wanted. So in case any of them fell through for whatever reason I could, I could still pick up the other one, so I didn’t have to lose out on any of it.

Jason Hartman 24:10
Yeah, I know, they keep you the IRS won’t let you just identify the whole world. You know, I wish you could just give them a big list of properties. But they’re, they’re too smart for that they, they only let you I think it’s 200%. Possibly it might be I don’t know, might be 250, I can’t remember. So in other words, if the value of the exchange is, say $500,000, just to use a semi round number example, then you could identify $1 million worth of property if the rule is 200%. By the way, don’t quote us on that because neither of us are sure we can remember. And then you only have to close on 500,000 In other words, to to meet your requirement. So in other words, half of the deals could fall through and you would still meet the requirement and make the exchange without paying any capital gains tax and you would have that nice to throw in there. So

Dr. David D’Ambrosio 25:02
yeah, right? Because you only have 45 days to do the identification which you have six months to close. So you cast a wide net and then narrow it down later. Exactly.

Dr. David D’Ambrosio 25:12
The other thing. The other thing I didn’t realize about the exchange was I thought that it the cash that you have to reinvest, I thought it was only the capital gains, but it’s actually all the cash that you get from the sale. So I had put some money into renovating that house while I was renting it and I know that it was a big deal but I just for your listeners, you you have to spend all the cash, you can’t take any cash out from that sale, you have to spend it all even if it’s not a game, and you have to use at least the same amount of debt that you had on the initial on the initial sale.

Jason Hartman 25:46
Well it’s pretty awesome tax advantages. What do you see in your profession with with other doctors and so forth? Are they are they really into real estate? You know, this is something that I mean, highly paid professionals like yourself, have just Got to build real estate portfolios, because obviously you have a giant tax problem. And, and, you know, thankfully you have great income, but I see a lot of professionals, doctors, lawyers, well, lawyers don’t even make that much money anymore a lot of times unfortunately for them, but they’re just not really doing this they’re not they’re not getting tax breaks for themselves and, and given 40 some odd percent of their money away to the government. It’s, it’s just

Dr. David D’Ambrosio 26:26
tragic, really, it’s extraordinarily frustrating to try to educate people because it’s, you know, these these are people, men and women that devote such a large amount of their time to educating themselves and helping people but they don’t really have any, any real financial IQ. I can’t tell you how many times I hear people talking about you know, I called my stock broker, and this market crash and I just sold a bunch of stock and, you know, I feel like half the time I’m on a soapbox telling them you have got to invest in real estate at least two or three times a day on talking to people about it. on and get on. people involved it really, you know, it really is an absolute no brainer with the tax advantages, you know, not to mention these returns that you’re getting on your cash when you leverage it or just, they’re better than anything else out there and particularly Sure, yeah.

Jason Hartman 27:16
Leverage leverage can become very addictive, that’s for sure. Yeah, it’s, it’s really incredible. Were you one of those people though, because you’re your partner in your business. The other doctor you work with approached you and said, Hey, you should be real estate investing. Are you really open to it? Or were you were you one of the skeptical doctors out there?

Dr. David D’Ambrosio 27:34
No, I was I was always open to what I just wasn’t sure how to go about it. And he’s really he introduced me to the concept of of your model where you don’t invest locally. I was always thinking I would buy some some houses near me and you can’t cash flow in New Jersey or New York. It’s there. The the property taxes here are ridiculous.

Jason Hartman 27:56
Tell us about that for a moment. Yeah, your taxes in New Jersey are so The high I think you have the highest property taxes in the nation, don’t you?

Dr. David D’Ambrosio 28:04
I mean, I’m embarrassed to even say how much my property taxes on my property tax on my house that I live in. is a mortgage payment on. Boy it’s it’s it’s a mortgage payment on probably six, six of my houses all together. Wow. Oh yeah, yeah, it’s bad.

Jason Hartman 28:26
That’s crazy. Yeah, it really is. Anyway what were you saying before I got you on the tax tangent the property tax.

Dr. David D’Ambrosio 28:32
I was just talking about how a lot of a lot of physicians are just not educated, educating themselves about finances and, you know, I try to I try to talk to friends and colleagues about getting involved in this. And I think you were asking about how I got interested specifically. I was, so I was I was saying I was always interested in in real estate but I wasn’t sure how to go about it because you can’t cash flow here. And my partner, my partner, Julia Tansy told me you know, check out this Jason Hartman guy. So I, you know, I started listening to your podcasts and I haven’t stopped but the whole, you know, go into buying houses in other cities where they make sense. Just well first of all I was on I was when I first looked at it, I couldn’t believe how much cheaper it is to live in other parts of the country growing up in New York and living in New Jersey, for the some of the houses that I that I own in Florida would, you know, would probably be four times the amount if they were here.

Jason Hartman 29:31
Yeah, it’s it’s really incredible. I always wonder why doctors have that wrap. You know, they, they say doctors are notoriously poor business people. And I think it’s because they’re, you know, is it is it like the science you’re a scientist, and scientists just don’t think usually I mean, some of them do obviously like yourself, but they don’t think in a in the world of finance and money. It’s just a kind of a different. It’s kind of a different thought process or something right.

Dr. David D’Ambrosio 29:59
Yeah, I think That’s part of it. But I think the other part of it is, is the whole the whole way. Doctors typically think which is that we, we it’s goes on, on set and understood that we have a fiduciary obligation that we do the right thing for our patients. And I think we assume that people that are trying to quote unquote, help us invest our money are looking out for our best interests. And they don’t have the time or the inclination to really delve into that and educate themselves about it any better than, you know, then they do. Unless they have somebody that turns them on to it.

Jason Hartman 30:32
Yeah, that’s an interesting point and Wall Street, just as such a better job of marketing than the real estate industry does. I mean, my industry is terrible at marketing they have, they have the most historically proven asset class, you know, the real estate people, they’ve got the best asset class, and they’re just lousy at it, marketing it. And Wall Street has a really mediocre to terrible asset class, and they’re fantastic at marketing it. So I think that with professionals and with highly educated people, the Wall Street world kind of it just appeals to them because it’s, you know, you can go see a guy wearing a nice suit and you know, he’s got a degree from a good college, or as a lot of real estate people that didn’t go to college or they’re certainly not dressed professionally a lot of times. And you know, it’s sort of like a mom and pop industry, but it’s, it’s such a good investment. It’s such a good asset class. It’s just a strange part of our society. It’s always baffled me to some extent,

Dr. David D’Ambrosio 31:30
you know, it really, it’s, it’s not, it’s not sexy, like the, you know, the the guy on Wall Street, you know, spending $1,000 on a bottle of champagne. But I bet you if you look at his account versus an account of one of your clients, you’re gonna see a lot more wealth in there.

Jason Hartman 31:44
You agree with you, unless the guy buying the thousand dollar bottle of champagne on Wall Street is an insider. Now he probably has a pretty good bank account, and he probably owns a lot of real estate. That’s the irony of it. You know, the irony of it. These insurance companies that sell annuities and products like that is that they’re all investing in real estate with that money. It’s just it’s just such an irony to me that they take their insurance premiums and buy real estate, you know, especially office buildings, they seem to love office buildings, you know, can large institutional investors obviously, and I just thought that was really kind of kind of just a total irony, you know, the way that that works, but it is the way of the world it is the way the world will. Do you have any questions for me that maybe you know, some of our listeners might want to want to get answers to, as well?

Dr. David D’Ambrosio 32:33
Well, you know, I think a big question for me is, where do I go from here? You know, I’m almost at my limit with traditional mortgages. And I know that there’s some, you know, there’s we always talk about or you always talk about, and I read about how there’s these portfolio lenders that will lend you above 10, but it’s almost like this kind of black box where, how bad are the rates when you go above 10 should Just stop at 10 and wait and just do keep doing 1031 exchanges. That’s kind of what I’m struggling with right now is where to move from here.

Jason Hartman 33:09
Yeah. So if you’re at your 10 limit, if you’re married and your spouse can qualify, your spouse has to have income and so forth, then you can do 10 more, that spouse can do up to 10 more, which is which is great. But whether or not you can do that, and you get to 20 properties that way, there are still some pretty good portfolio loan options out there some community banks that will finance you, and I tell you, the rates aren’t bad. I just talked to one this morning, actually, that will finance pretty good rates. Now it’s it’s only fixed for seven years in their case. And I think there’s somewhere in the in the high fours. I mean, I don’t know that’s not bad. Okay. And it’s certainly not as good as 30 year fixed at four and a half percent. I know, but it’s certainly not bad. I mean, Have a seven year fixed and, and maybe by the end you do a 1031 exchange or there’s a refi opportunity or if the rates are insanely high and you have cash to pay it off, you know, what should we you know, I’m not a fan of paying things off, but there are some times when it can potentially make sense.

Dr. David D’Ambrosio 34:18
So will these these local lenders though it’s my impression is that they they really tend to want to lend to local people like would they lent let’s say for instance, I wanted to buy a property in what is it the Quad Cities there? Would they lend to someone living in New Jersey but was buying property in the in their state?

Jason Hartman 34:36
Well, no, you’re gonna you’re probably gonna go to the bank in that market. Okay, you where you’re buying? Yeah, and these are these local community type banks that make really a lot of them big, really sensible loans. You know, they do financing that’s just logical. It’s not dictated by the government and damn well, the government. entities Fannie Mae, Freddie Mac, you know, the sort of pseudo governmental entities, I’ll say, it’s not dictated by them in that sense, you know, they’ll they’ll do some really logical loans with usually 25% down and, and they’re not going to be 30 year fixed because they can’t sell them off on that secondary market. But seven year fixed maybe 10 years if you’re lucky. And the rates very reasonable. I mean, I think this is a very good option. And then after that, you can decide, do you go to a B to R or Lima one, we have a representative from Lima one at our last event in Phoenix, they do some really logical sensible loans too. They can do some good things for you as well. And there there are some good options out there you just it takes it takes a little more digging and they’re a little more fragmented, if you will, in terms of the choices and and making decisions, but but they’re not too bad at all. And not too bad at all. Still

Dr. David D’Ambrosio 35:54
still good when you say seven year fixed it’s still a 30 year amortization.

Jason Hartman 35:59
Yes, sir. To your amortization, and it will become adjustable rate in seven years. And the reason they have to do that is because they’re not selling it off to the secondary market. They’re they’re probably keeping it on their books, or they’re selling it to a another investor not rather than this big secondary market of Fannie Mae and Freddie Mac that has very specific guidelines. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday.

Dr. David D’Ambrosio 36:36
So let’s say you did something like that. Right. And you wanted to do a refinance of that into a more can you do something like that where you refinance into a more traditional loan? Are you still constrained by that same 1010 property limits?

Jason Hartman 36:50
Oh, no, because we don’t know what the rule will be in four years or seven years or five years or six years or anything in there, right. So the lending climate may become more liberal by then. Or it may become more conservative by then. But the nice thing is, you’ve got seven years to watch and evaluate. And you’re hopefully going to get a really nice return on your property for those seven years, you could sell the property, you could refinance anywhere in between there. You know, in the old days, you could get an unlimited number of Fannie Mae and Freddie Mac loans, but post financial crisis, they first cut it down to four, and then they raised it to 10. And they’ve stuck with that 10 number for quite a while. But who knows that may become liberalized, you just never know what the future will bring in terms of financing options. And the other you do have a risk though, obviously, I mean, you know, goes without saying, but I’ll say it, you have interest rate risk, right? So the rates could could go up, and then you’ll be paying a higher rate, but if they do, and again, there’s always lag time in here, but if they do, you’ll probably see substantially higher rents and low Or inventory of new housing being built. The problem is there’s an adjustment period, there’s a lag time to this. So for example, if rates spike up tomorrow, it’ll take a couple of years for rents to adjust inventory to decline. And that’s the part that kills investors. And this is why the prudent investor in the long run I believe, always wins the game, because they can ride out those adjustment periods. Those storms were the people that bought high rise condos in Miami or San Diego or overpriced property in California or the Northeast, you know, they don’t have that luxury that they can ride out that adjustment period that that storm that lag time when everything is adjusting, but but ultimately, it always does adjust. It just takes a couple of years to see it happen.

Dr. David D’Ambrosio 38:54
Do you think that it’s prudent or sensible to do a cash out refinance? If you can get significant money out through due to the debt paying off or it appreciates a little bit, if that means you’re going to take away your cash flow on a monthly basis, or is that more of a personal decision? I guess? Well, I’m

Jason Hartman 39:13
probably gonna say absolutely, yes. But here, here are the questions I would have. What is the rate on that underlying mortgage you’re refinancing, compared to what are the rates today, on the new loan you would be getting, and you might will get a lower rate or a similar rate. And then I would say definitely take the cash out, because the point is not and this may sound really odd, and it takes you kind of got to get your head around this listeners, okay, because I know a lot of you are going to say this is imprudent, and it doesn’t make any sense. And what are you talking about? I’ve heard it all before, but in a way in a way, it’s not really about cash flow. Oddly, what did Really about his rent to value ratio. Okay? So for example, if someone told you, you could control 100 million dollars of real estate tomorrow, that had very good metrics, very good rent to value ratios it rented for 1% per month. But because of the financing on it, it was fully encumbered and had zero cash flow. Would you still want to own 100 million dollars worth of real estate? Absolutely, yes. I hope you’d say that right. The reason you’d want to do that is because you have other multi dimensional things that will make you wealthy with that real estate portfolio. You don’t have to get monthly cash flow. What you really want is a good rent to value ratio. And this is going to be a bit of a long answer as my usual answers are I know I’ve never been accused of being short winded, but in the old days when before For the Great Recession, you know, some some would say I was imprudent recommending this strategy. But we used to talk about something that I called the deferred down payment. Okay. And the reason there would be a deferred down payment is number one, the market was appreciating very quickly, and rents take a while to keep up and adjust to the appreciation there they lag appreciation, which always seems to happen faster. And you could buy properties with no money down. Okay. So the question was in this equation, I used to show this at my seminars on a spreadsheet, I use, you know, and I don’t have it in front of me, and I don’t remember the exact example but the concept is this, that, you know, if you put 25% down, for example, the property could yield you, maybe $300 per month in positive cash flow. But if you put nothing down, you would be zero cash. Cash Flow, or you might even have negative cash flow. Now, the lenders won’t even let you do this anymore. But in the old days, they would. And a lot of people listening will say, well, Jason, isn’t that the reason we had a crash? Well, not exactly. Not on these types of properties. That wasn’t the reason. The reason was, is that people were using this strategy to buy stupid properties in Southern California or elsewhere. That never made sense anyway, okay, because they had bad rent to value ratios. That’s how you can tell if the deal makes sense not by the cash flow, but by their rent to value ratio, okay. So, the the time horizon on this equation, this deferred downpayment equation was that it was basically about nine years. So, if you get your $300 a month, or you get zero per month, in the in the difference in the amount of money you put down if you just kept that money in the bank and drew on it at a rate of 300 dollars per month. And, you know, I don’t remember the exact number. So you may be doing the math and saying, well, Jason, that’s not nine years. But the example I used to show it was nine years based on the interest rates back then. And based on the rent to value ratio back then, and based on the down payment options back then, it was basically a nine year breakeven point. So I would rather have my 25% in the bank. In other words, your cashout refi, you have control of that cash, then have that $300 a month in positive cash flow. I mean, that’s an easy decision for me to make in that way. I would rather have the property more leveraged with less cash flow, but more money under my control in the bank or giving me the ability to buy more and control more real estate. Does that make sense to you? Or do I sound like I’m crazy

Dr. David D’Ambrosio 43:52
now that that makes that makes a ton of sense? Absolutely not answer the question. Sure.

Jason Hartman 43:58
You always really Want to lean in favor? And it depends on the climate in the market. So no answer is ever completely simple. But you always want to lean in favor of the idea of equity stripping, pulling the money out of the property, having control of the cash, and still having control and ownership of the property. That’s the beautiful thing about real estate, you can acquire the asset, put some money down to acquire it, and then later, get all your money back out and still own and control the asset.

Dr. David D’Ambrosio 44:31
I mean, can you do that?

Jason Hartman 44:33
Yeah, and you don’t have to pay tax on that borrowed money that you took out? It is a absolutely beautiful, beautiful asset class I absolutely love it for for not just that reason, but many others as you know. So good stuff. So what are your plans? Next, you’re gonna get into a third market. It sounds

Dr. David D’Ambrosio 44:50
like right. Um, yeah, I’m gonna I’m gonna think about it. I’ve, I listened to the, to the pockets on the Quad Cities. So I’m looking at that a little bit. I’m probably gonna pump the brakes, pump the brakes, since I did so much this year and maybe maybe do something early next year, but I don’t want to wait too long because I know the interest rates at some point are going to start

Jason Hartman 45:09
going off. It seems like they would have to doesn’t that it’s just, it’s just what I’ve been saying that for five years. I’ve been saying it for 10 years. So I’ve been wrong. My interest rate predictions, but I tell you interest rates are very, very difficult to predict, because they’re basically they’re basically set by Fiat, you know, by Federal Reserve and government policy overall, the best place and I want to get them on the show. I don’t know if it’s the best but you know, it’s it’s well known in the world of interest rate and banking is a newsletter called grants interest rate observer, and I want to get a representative from that group on the show. haven’t done it yet, but they seem to have some pretty good insights into interest rates. But again, it’s a roll of the dice. Nobody really knows not even Janet Yellen at the Federal Reserve. She doesn’t even know He’s gonna do next quarter always so we shall see. But David, thank you so much for being on the show and just sharing your story with our listeners and in your experience and we appreciate your business and just want to wish you continued success and happy investing.

Dr. David D’Ambrosio 46:14
My pleasure. Thanks for having me on.

Jason Hartman 46:18
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 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.

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