Today’s topic is about opportunities presented by crises. Jason Hartman shares his thoughts on Elon Musk’s latest Bitcoin move, the crumbling institutions, central banks, and the government printing press. Then, he does a client case study with Chad Hewitt. Chad shares his real estate story and how he was inspired by Rich Dad, Poor Dad. They talk about the similarity of a scaffolding business to a short-term rental property and the several reasons why real estate is a wise investment.
Announcer 0:02
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 1000s 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 0:53
Welcome to Episode 1645 1645. Today, our main part of the show, well, you judge what the main part of the show is today, because I have some important things to share with you. We have a client case study another another new client case study that I think you will really enjoy. But first, I must comment. Are you amazed? I’m amazed, we are seeing some seemingly terrible things occur in the world. But at the same time, as the Chinese say, crisis is an opportunity riding the dangerous wind. I’ve been sharing that with you for many, many years. And it is an opportunity riding the dangerous wind. We have seen massive question marks about our last Well, can I say it Elysee te IO and you can’t say it anymore, because you might be censored. They installed. That’s the right word by the way installed, they meaning the powers that be installed a new administration. Now, nobody trust the system. And then we have seen this massive money creation. In fact, so much money was created out of thin air currency. I should say of course, of course, you know, you can correct me listeners. currency is the proper word not money. Money has intrinsic value currency does not. But admittedly the two things are kind of used interchangeably and hopefully everybody gets the difference. Hopefully they do. We saw so much currency creation last year. And we’re about to see so much more this year. That it absolutely boggles the mind.
Now today, well, maybe it wasn’t today, but it’s in the news today. Our friend Elon Musk, possibly one of the most famous people on planet Earth. Good old Ilan purchased one and a half billion dollars worth of Bitcoin cryptocurrency. Why does that matter? It does not matter. Because you want to become a cryptocurrency speculator, I hope you don’t. That is a very volatile, risky asset class. I own some, and you know, I’m doing a few bets here and there. I think it’s okay to speculate with a small portion of your net worth, but you better be prepared to lose it. Be prepared, be prepared to lose it. But on the other hand, you know, it’s a gamble, and it could be a big win. Nobody knows. Nobody knows. But what does that say about the systems? What does it say about the institution’s? Well, according to yours truly, what it says is that we are literally witnessing right now, at this time in history. Aren’t you glad to be here for it? You have a front row seat, ladies and gentlemen. Just like the cardboard cutouts at the Super Bowl yesterday. They had a front row seat do? Well, I don’t know maybe they don’t give the cardboard cutouts the front seat. You know, I was talking with Ashley last night about the massive amount of environmental damage the pandemic has caused. I mean, think about it. Do they really need to waste all that cardboard to make it look like these venues are full of fake people? I mean, this is like another example of desperate crumbling institutions. That the the idea that they would, first of all, cut down a whole bunch of trees, damage the environment, create a whole Bunch of pollution by making those cardboard cutouts by shipping them there by setting it up. absolutely absurd, right? If they want to social distance, why don’t they just have every other or every, you know, other to, you know, seats empty, big deal. We all get it. We all know that there’s a pandemic going on. And they’ve got to make it look like like our goody two shoes moron president, you know, always wearing his mask. He’s sitting there at the Oval Office, there’s nobody in the even in the Oval Office yet he’s got his mask on. I’m a goody goody two shoes, I’m sorting by your example. You know, right, whatever. This is the the last desperate gasp of so many big institutions. And it is a slap in the face to them. nobody trusts the media anymore. nobody in their right mind right or left on the political spectrum does not matter. We all know it’s fake. We all know, big tech is a scam. We all know social media companies are disgusting, pathetic, and awful and evil, no matter what side we’re on, you know, even those on the left, who benefited from it cannot be stupid enough to see that what is going on is wrong.
Right? It’s wrong, right? Yeah, that’s kind of how you got to look at it. So the institutions are not trusted. And now you’ve got all these multiple, this is like eating away at the banking system, at the central banking cartel at the treasuries and governments and you’ve got this whole population that is not tied to any geography. Think about it. Think about how it used to be in the old days, right? In the old days, you know, if you had a certain skill, and you were a factory worker, you might keep that factory job for your entire career. You know, back in the day when the US used to actually manufacturing things. Now we just outsource them to coal burning China, the biggest polluter on earth? Because somehow, all of the folks who are running the world seem to have forgotten what famous Democrat, john F. Kennedy said years ago, what did he say? We all breathe the same air. That’s what he said, we all breathe the same air. But somehow, it’s okay to pollute China, because the wind won’t blow that pollution around the world, I guess, you whatever. Absolutely. You can this stuff is so stupid, you can’t even make it up. But as we notice the institution’s crumble, we are witnessing a time when people can just vote with their feet so easily. Now, granted, it’s not as easy as it was before the cerveza sickness began. But it’s easy enough. And people are taking advantage of it. They are geo arbitrage, in the US on a state level in a city level. And then around the world. Some people are still even now even doing it with other countries. If you had a certain skill, you were an auto worker in Detroit, you couldn’t just move anywhere, you know, yes, when you move, you take the skill with you, for sure. But it wasn’t the mainstream thinking back then that you would just move. But even then, you could only go to a place that manufactured the thing that you had a skill in pretty much right, you weren’t just gonna, you know, get out of the automotive industry and go into another industry. And if you were a company, or a business, most of the time, you had a physical plant of some sort, you had equipment, you couldn’t just, you know, shut your laptop screen and move. Now you can.
So we’re seeing the institutions of socialistic, poorly run disaster areas like my home for most of my life, the Socialist Republic of California, and the Socialist Republic of New York and, and many others, both in the in the country and around the world. We’re seeing them crumble, people can talk all they want, in fact, they can vote all they want. But at the end of the day, everybody knows that the most important vote is where people choose to locate and how they choose to spend their money. And whether they’re spending their money on consumer goods, or housing, or taxes. Right. That is the most important vote. It’s not the vote that they’re making for the politicians. So That is a very important thing to see. Make sure you notice this week, today, tomorrow, every day, the whole month, the whole year, forever. Just notice how the credibility of institutions is just getting just decimated the university debt enslavement complex. college tuition ripoffs just decimated. disasterous Public Schools decimated the credibility of the pharmaceutical industry, decimated, just scam after scam after scam. We all now know the cat is out of the bag. Pandora is out of the box. We know that we cannot trust anybody. Resume notwithstanding, we know that wall street is a complete scam. We know that the new administration has been basically sold off to BlackRock it’s like a corporate takeover. That’s basically what the new administration is. It’s a corporate takeover of America. And nobody can trust the corporatocracy. So notice the crumbling institutions. But what does that mean to us as real estate investors? Oh, it means a lot. Because people are voting with their feet and their guess what they’re moving to the areas that we’ve been recommending that you invest in for many, many years now. And those of you who have listened, have benefited greatly. So Congratulations, congratulations. Now, let’s talk about the central banks. And the government printing press, not just the US it’s central banks all around the world. The ECB, the European Central Bank is in trouble. The Federal Reserve is a Ponzi scheme. Okay? I mean, look, folks, you can’t hide this stuff anymore. It’s so ridiculous. That it just we all know it doesn’t work. And now Elan Musk has basically slapped that system in the face and said, You know what, I don’t really trust keeping all of my corporate Treasury in dollars, or even in stocks, or other assets of whatever kind. I want to slap that system in the face. And I want to put $1.5 billion with a B billion dollars into a decentralized, uncontrolled trustless asset. That’s a pretty big statement against the institutions. So just keep watching them. crumble, crumble, crumble. crumble, crumble crumble. Yep, that’s what they’re doing.
Okay, before we get to our case study, and by the way, if I didn’t make that connection well enough, maybe let me just make one more part of that connection. elans move is a move saying he is very worried about Guess what? What word do you think I’m about to say? I’ll give you a hint. It starts with an AI. Not like I like I am saying it. The word starts with AI. The word is, of course, inflation. That’s the word. He is worried about inflation. And we as income property investors have aligned our interest with the forces who create inflation. And by the way, in all my rant about the institutions I didn’t even miss mentioned, the whole Robin Hood scam, GameStop issues and that whole thing from last week and Google deleting over 100,000 negative reviews, Google decided they were going to censor the negative reviews against Robin Hood. Because God forbid, Google doesn’t want the truth out there. I mean, folks, we are witnessing a massive shift in history right now. And it’s ugly, but it’s also positive in many ways. Okay, I have been meaning to play a whole bunch of messages that I have been saving for you for so so long. And I just haven’t had the chance to. So let me get a couple of these out of the way. Now. They’re random. There are a variety of different topics, but I think you’ll want to hear them. And we got to get through more of these maybe on Wednesday’s episode, and then we will get to our guests today. But let’s get through Have a few of these messages.
Listener 15:01
Jason Hi, good morning is Johnny from Arlington, Virginia. The weather is beautiful there 75 degrees.
Jason Hartman 15:12
By the way, this is an old message. So the weather report doesn’t doesn’t, doesn’t follow.
Listener 15:20
I was watching or I was listening to the show Thursday, and I gotta tell you, Jason I, when it comes to Bitcoin, I was listening to the guy. I tried to learn about Bitcoin for two years, to understand how it works, the value proposition of investing, I just still don’t get it, I don’t get how this can be treated as money, or an alternative form of money. I love the idea and concept and decentralized. Like, even if even if someone does go on, like Coinbase, or something like that, and buy bitcoin is still here. But these cases where people spend millions on Bitcoin, and then they get hacked, someone takes it, and then it’s gone. Or it’s on some laptop, and some 20 year old throws it away, and doesn’t realize that bitcoins on laptop, and then it’s in some landfill somewhere. And they hear about stories like that. And I just, I just don’t see how it’s any different than investing in some other speculative investment. And to your point, I know that that that your guest was talking about, Oh, don’t worry as much about the Federal Reserve fitting it down, but the Federal Reserve is a powerful force. And if they don’t want Bitcoin in the United States, they will make sure that Bitcoin does not in the United States, if they if the US government can physically compensate gold. By by forces law, certainly they can, they can turn off the lights for Bitcoin. So my impression, I just, I just don’t get it. I’d rather invest in physical things like real estate, where there’s title, there’s a building, there’s at least a plan of land that the one thing that I do worry about in the long run. People like AOC come into office more and more, or whatever like minded politician, they would be, if there’s a lot of agencies and the government wants to prevent them from increasing property taxes to confiscatory levels 345 percent, and saying, Hey, you guys can hold on to this property, but you got to keep paying taxes. Well, if we can’t afford to pay the taxes, and they start seizing houses, and boom, the federal government has basically nationalized housing stock and landowners are a problem. Property owners are the largest marginalised peasants. That’s not unlikely, but things are unlikely that have happened. So I don’t know, I guess is the one thing that I get concerned about. We’d love to know your thoughts on that. One, a flag off. Also, yesterday showed a flashback Friday was awesome. I really got a lot out of listening to that out of hearing something that you had published from 2008 I need to go back and listen to more older episodes. Because it kind of crystallizes thought from that period that maybe we forget about. Things that we had to think through as as, as investors from 2008 that you know, 2017, when the economy’s hot, we kind of forget that we had to think in those ways. It really was a good exercise. So just wanted to tell you, if anything, Thursday’s episode where the garrison or the more thankful that I’m investing in real estate, thanks.
Jason Hartman 19:08
Okay, so that was a big message with a lot of stuff. And I don’t really have time to dive down that rabbit hole today. But I will say is it since we are kind of talking about the cryptocurrencies and Elon Musk, big move, you know, I think there are problems and opportunities with it. And I just for for my main thing, you know, I think the income property is far and away the best asset class, the most historically proven asset class in the entire world. Because it’s multi dimensional, and for so many other reasons. It has such a big lobby behind it, but I just would love to be wrong about the crypto thing. And Ilan big move was pretty amazing. And it’s just a slap in the face to the institutions. So I think we all have to think about that. Just remember the main product of any Government. And of course, central bank is the currency they create. And like any business, look, you’re in business, you create a product. You know, even if you don’t have your own business, you work for a business, and they create a product. And nobody loves competition, okay for their product. So just always remember that motivation, you know, bet conservatively, if you’re going to bet on this kind of stuff. Alright, so tonight, by the way, I must say, we are revving up, I am so proud of our team. Lately, we’ve been just doing great stuff to property tracker, it has this beautiful knowledge base component that we’ve just been expanding and expanding for many, many months now. And it offers so so much. So be sure you check out property tracker, if you are not using property tracker, you’re really missing out, especially all of the educational components that we’ve added to it. And if you are not part of our unpowered, investor, inner circle, you are also missing out, because we’re having another one of our monthly meetings tonight. And we’re talking about a another technology tool. You know, I run those zoom meetings myself, everybody just says such great things about them. And also we have created a whole library that’s included in that membership of just fantastic video content. And we are really just just expanding that all the time. You know, there’s a lot of content that we create that we do not use on the podcast that you don’t hear on the podcast. So be sure you’re taking advantage of some of our other stuff, like the empowered investor network, empowered investor inner circle, I should say, and the the property tracker software as well. Alright, without further ado, let’s get to our guest and let’s talk about another client case study.
Hey, it’s my pleasure to welcome another client to the show. And everybody always loves these client case studies. This is Chad Hewitt. And he lives in the Seattle area. Actually, I think Everett, Washington, I believe, outside of Seattle. And Chad, it’s great to have you on. Thanks for joining us.
Chad Hewitt 22:13
Yes, great. Thanks for having me.
Jason Hartman 22:15
It’s good stuff. So you own a construction scaffolding company. Right?
Chad Hewitt 22:20
Correct. Yep, was taken down. And it’s kind of like having little rental rental properties, as well as projects being built to charge rental for the equipment. So it’s kind of like having, you know, little apartment buildings that we’re renting all over Seattle, but I’m just on the scaffold.
Jason Hartman 22:34
That’s cool. That’s interesting way to look at it. I I like the way you you look at that just like a real estate investor would. So that’s, that’s awesome. That’s awesome. Well, you and your wife, were interested in triple net leases on commercial property. And, you know, I guess you were looking at like a common one is a drugstore or Walgreens. And you were looking at that deal. And just for people who don’t know, a lot of times investors will buy these triple net properties. And triple net simply means that all the expenses pass through to the tenant. So these are liked by some people, because they’re sort of considered the most sort of hands off form of real estate investing, where you just make everything the tenants responsibility. You own the property, of course, but the yields are pretty low on most of these, you know that people people trade simplicity for low yield. And what I would think is that on the Walgreens, CVS type model, because all of those triple net lease type deals is and I didn’t say this to you before when we were talking off air, Chad, but I think they’re over built. And I think Amazon is just going to pillage that business with their they purchased a prescription company recently. And I think that’s the next wave is Amazon zation didn’t say it right. And I think that’s really going to hurt these these drugstores. And I think they’re already pretty overbuilt. I mean, you know, you go down any city in America and it’s like you go a couple of main streets. And you got a Walgreens on one corner, diagonally across. There’s a CVS like do we need this many drugstores? I don’t think so. But tell us what got you interested in that. And your your story about getting in real estate? You read Rich Dad, Poor Dad, and I guess that inspired it right there. So I’ll let you talk.
Chad Hewitt 24:27
Yeah. So yeah, I was inspired. The rich dad poor dad read that book when I was in my early 20s. And, and the light bulb went on about, you know, using leverage and other people’s money and the type of gains that you can the minimum gains you can expect versus what you can expect on Wall Street. And then it just didn’t make any sense to me to start pursuing a 401k or anything like that. So as I began to build my staffing company, the goal was a cash flow vehicle to have money to buy real estate. So my wife and I had acquired a number of small properties locally. But then what I found is my wife is very hands on very frugal, she likes to go and do the move and move out, cleans the toilets broken, she wants to go fix the toilet. So that was fun. But that gets kind of old fast if your salary is spent, you know, changing washers and dryers and unplugging toilets, it’s really a bit of a downer, right? Yeah, oh, then I started looking at a different vehicle, that would be the most hands off form of real estate, from the Rich Dad Poor Dad angle, they don’t really have a big, you know, they’re not a big, really big fans of single family homes or more shouldn’t be drafted for multifamily. So for a lot of years, I was looking at, potentially, how would you get into a big apartment building. But that seemed kind of daunting, because I wanted it out of our area. So basically, that it would be it would be forced to be a hands off investment, like I intended real estate to be. And then the idea of having movements and moves out on fun, 50 different units, that became a little bit daunting. So that then led me to the triple net arena, where the thought of just buying a big box and being able to get good financing on it, the down side of being that typically, the average down payment on a triple net from what I was looking at was about 30 to 35%. So a considerable amount of money, and then they will only guarantee that loan, or you can only lock that loan in for five, seven, maximum 10 years. So then when I started to think about it and weigh the risks, the rewards what you’re talking about, you know, are there a lot of benefit are they over built at the end of that lease period, I’m been negotiating with a large company that I am just a fly on the wall to they’ll squash me like a bug if they want to squeeze me or break me down. And that just didn’t seem like you know, the safety factor wasn’t there. And then I told you that I heard you on the George gammon podcast, and you’re kind of expounding on the single family investment. And I started to relook at that in a completely different light. And I realized that was the best the safest place to park money of any place in real estate. And the idea that I used to have this thing that if you have a single family house, someone moves out, you’re 100% making but if you own 100 of them, it’s so different than owning 100 unit apartment building into someone lives in an apartment building, they’re always waiting for the next step to be able to get that house and because I think America is becoming a, you know, a nation of renter’s right, they’re going to be moving towards a rental house. And there’s, you know, no time more time tested asset, you said again, and again, in real estate, and yeah, so I ended up purchasing, I talked to the wife about dipping my feet in the pool, and we would just buy one property with you. And I started talking to Evan, my investment counselor and one turned into five or 611, which turned into 15. So I love it.
Jason Hartman 27:50
I’m doing sound effects for that. So you were just gonna buy one of our single family homes through our network, and you decided to buy 11 That’s great.
Chad Hewitt 28:02
Because, you know, I told my wife, I said, one is not going to move the needle forward, you know, because another big thing was when I realized that you could also do cost segregations on these properties. You know, I looked at my tax situation and realized that in order to basically, I needed to buy a certain amount of properties, certain amount of value. And that’s where we ended up at the number that we ended up at.
Jason Hartman 28:25
Right? Yeah, yeah, no, I agree. That’s great. And I’m really glad you didn’t pursue the triple net stuff. And you went with a single family homes instead. Because, you know, it’s very hard to disrupt the housing market. First off, as you know, being involved with the construction industry. And we’re going to talk about something you said to me before we started about the cost and the regulations and so forth. But you know, it’s very hard to make new cheap product, which would disrupt the investment, right. And it’s it’s very hard to build that it’s a disrupter. You know, nobody is outsourcing housing. They’re outsourcing retail, they’re outsourcing office space, they’re outsourcing manufacturing, but you can’t outsource housing, it needs to be where it is. And there’s a there’s a huge shortage of it. So I think he made a very, very good decision. And I’m glad he made that decision to do the simple, proven humble, but very profitable, single family homes. And that is if you have asked me
Chad Hewitt 29:31
by the time that I had identified these properties, and I’m buying all new construction properties, just as a side note, this is the direction I want to go in and like the least amount of problems possible. So I figured that buying brand new can’t go wrong with that. Also it helps in the cost segregation into things I think to buy a new property, but the market is so strong and so crazy. I mean, those properties all approved by the time that I had bought them at say 218,000 to the time that I got loans on them, they were all worth 240,000 It’s just you’re seeing all this money printing show up in, in hard assets.
Jason Hartman 30:05
Right? Yeah, I know. It’s absolutely amazing. And the hardest, it’s it’s a good time to be long on hard assets, especially income property. You know, it’s interesting through all of this, Chad, you know, gold, I mean, everybody’s talking about it, but it just hasn’t been, like anything that impressive. And you can’t leverage it. You can’t rent it out. It doesn’t produce income, it has terrible tax treatment. It’s just, you know, it’s and now it’s got a big competitor, which is cryptocurrencies. And, you know, those are so speculative and volatile. Yes, there have been some, some big moves, and some people have made money. But remember the other side of all those people that made money or people that lost money. So there, there’s a counterparty and every one of those up swings, okay.
Chad Hewitt 30:55
Definitely, I’ve been I’ve been gold investors who I keep a small part of my portfolio in gold. And that was just from the vibrations of Robert Kiyosaki. But it hasn’t really reacted the way that other hard assets have been. And that can be a conversation for a different show. But yeah, I’ve been, I’ve been disappointed with, with gold, I thought it was gonna break through 2000 and go to the moon. And that never happened,
Jason Hartman 31:20
you know, a lot. There. There are those very logical arguments for it, but they just never seem to really happen. You know, the only time that really ever happened was in the 70s. I mean, it had a run in the last decade. But, again, it, frankly, wasn’t that significant compared to what happened in the 70s. And the fact that you can’t leverage it doesn’t have a good tax treatment, can’t rent it out, doesn’t produce income, etc. It’s just you know, and it is manipulated. You know, I would encourage anybody listening who wants to know about gold manipulation, and other precious metals, price manipulation, to check out gadda, the gold antitrust action committee? And you know, they, they are the ones pursuing this, but they’re not going to stop it. You know, it’s just, yeah, it’s, it’s too big for any of us do. The one thing we can do is income property.
Chad Hewitt 32:10
Yeah, absolutely. And that’s what I like about it is it’s so scalable, based on whatever situation you find yourself in, I mean, your properties that I was looking at it in Memphis, although they’re not new properties, you know, they’re decent, they’ve got a roof over their head, they cash flow, they’re $80,000, you get into one of those for 20%, down $16,000. I mean, anybody that has a decent paying job can save $16,000 it’s not the barrier to entry isn’t like, eat 1,000,005 to get into a Walgreens or something. So it’s right scalable for anybody, no matter where you’re at. I feel like in your investing career,
Jason Hartman 32:44
I agree. Or you can ramp it up. Like we’ve got one client who closed on a big portfolio last week, and he wants to have 500 units. So you know, he’s on his way. He’s, he’s doing big stuff. And it’s really fun to see, see these people grow? What kind of goals do you have with it? I mean, you’re up to the 11 properties now. Plus, you probably have your own home. Anything else?
Chad Hewitt 33:06
Well, I mean, I have an overall portfolio right now that’s worth about $12 million. My complete portfolio, I’ve got some different properties got a big commercial property. I’ve got a VR Real Property why that I literally think I just sold before we got on the air here that I got rid of just because I was listening to you, I’m thinking, this thing’s worth about as much as it’s going to be worth and the VR market has dropped off. Everyone’s cutting each other’s throats to get those things rented now and equity tied up, they can go somewhere else. So my, you know, goals are always changing, too, right? We want to get to 10. That was the first goal to get to a $10 million portfolio. I got there. And then the next goal for me, is a $20 million portfolio. And I think I can get there with just continuing to add single family homes, you know, to what I already have.
Jason Hartman 33:50
Good for you. Good for you. That’s awesome. So you wanted to talk about cost segregation, I think a little bit Oh, but before we do that, actually, Chad, which markets are you in which markets Did you buy him?
Chad Hewitt 34:00
So I mean, Memphis, I’m in Huntsville, Alabama, and I’m in three different places in Florida and in Ocala. And Northport and in Port Charlotte.
Jason Hartman 34:12
Okay, good. Good stuff. So you got the Florida market covered. Got Alabama so you got the commercialization of space working for you. And Memphis which is just great cash cow logistics. So you’ve got a nice variety there. Now don’t over diversify. Okay. Oh, no, I
Chad Hewitt 34:28
think I’m pretty good with this, just because the cash on cash return was higher. The appreciation isn’t really there. I’m still I feel like it’s a little bit of both and I think Florida overall probably has the over the long haul is probably the highest potential to appreciate. That’s my own personal opinion, just based on supply and demand. But either which way I bought them not for appreciation. I bought them for cash flow. They’re all rented or and as soon as they’re built within a week or 10 days they will have tenants. Mm hmm. Excellent, good stuff.
Jason Hartman 35:00
Good stuff. So I would encourage you to kind of double down in those markets for the new ones that you buy for your next round and, and just get more in those same markets for ease of management, because you’ve got some decent diversification already. So cost segregation. What questions or thoughts Did you have about that?
Chad Hewitt 35:18
Well, I know for me, you know, I bought properties, in part, because of the cost segregation with the Trump tax cuts, which I think are sunsetting from not mistaken on the bonus depreciation. So I took that as an opportunity to buy things I was already going to buy and to get, you know, tax incentives to do so. But I’m curious on your thoughts on why someone wouldn’t do a cost segregation on property? No, why would I’m just curious if you have a counter to that?
Jason Hartman 35:46
Yeah, so. So first off, just for those who don’t know, income property is the most tax favored asset in America, because you can depreciate it in depreciation is a good thing, this isn’t a good way, meaning you’re good to take a non cash deduction, or a phantom deduction, as I sometimes refer to it, where you’re not paying for the deduction, you’re not writing a check to take a tax deduction, like if you donated to charity, or spend money on your business. So it’s a really fantastic tax benefit depreciation. And you can depreciate a residential property over 27.5 years and a commercial property over 39 years. So that’s another advantage by the way of residential you get faster depreciation, meaning more tax benefits, but what you can do is you can take some of the components of these properties, and you can itemize them specifically, because they have accelerated depreciation, for example, appliances in the house, or the HV AC unit, or other certain components of the house, you know, the aircon, assurance, the HV AC, or the the furnace, you know, those depreciate at a faster rate. And so you can itemize these, these items, and you can depreciate them over, say five years or seven years, right. And you get a CPA usually to do your cost segregation analysis, or it’s also called cost segue for short. Okay. And so they’ll charge you a little bit of money. And on a single family home, you can get this done now more and more, it used to be cost prohibitive on a single family home. But nowadays, you can get this done for usually between 500 and $1,000 per property. And it will usually save you a lot more than it costs you because you can depreciate these things faster, take faster deductions. So that’s a long explanation. But the reason you wouldn’t want to do it is, I can’t really think of too many reasons not to do it. I guess Chad, you know, the expense, you’re going to have to pay a little bit of money for the cost sake report, okay, so that you can do it. And that’s going to cost you 500 to $1,000 per house. And then also, all you’re really doing with the cost sag is you’re just bringing the future closer to you. And so you are getting the advantage of the time value of money, because I’d rather have a tax deduction today than later. Right. So that’s good. But you’re not changing the tax deal. Overall. You’re just accelerating it. Okay. So, you know, I guess from that component, it’s not like a Grand Slam home run. But I think it is a good deal. And I think it’s good to do, I can’t think of too many reasons not to do it. You know, it takes a little bit of work a little bit of time. But you know, also keep in mind with everything that you do, you there’s not just the economic component, you do learn something from doing it, right. So just by doing these cost StG analysis and reading the report, after you get it back from the CPA, you get to learn something about it. And that’ll be you know, in education, right. But you only need to do a couple of them to learn something right? You don’t need to do if you have 30 houses in your portfolio, you don’t need to do 30 of them. Right? Well, you might want to economically so yeah, that would be my answer.
Chad Hewitt 39:08
Yeah, like I said, it makes no sense for me to do them. But some people I guess, if you sell the property, you have to recapture the game. So it is kicking the can down the road a little bit. Right, right.
Jason Hartman 39:18
But if you do a 1031 exchange, you bury that recapture into the exchange, so you don’t return. I was always worried about it, sold it. And in 1031. You don’t have to do the recapture? No, no, because the recapture is buried into the exchange calculation. And so it just keeps going over to the next property in the next property. And you can do that your whole life. And then when you die under current law, you know, the basis steps up to market value for your heirs. Now, again, we always need to make the disclaimer, we’re not lawyers, we’re not tax experts. You know, consult the appropriate professional disclaimer. Okay. Yeah, so
Chad Hewitt 39:58
I’m just gonna eliminate the 1030 exchange, what kind of rules do you think are gonna affect real estate for the new tax?
Jason Hartman 40:03
Yeah, good question. You know, we have talked about that on the show, you’ve probably heard us talk about that on the podcast. And it’s a possibility there is some talk of it. But you know, housing and real estate are just kind of, like sacred cow. And it’s very hard to get away with doing anything to hurt real estate. Because, first off, it affects like everybody, you know, it’s not this, this fringe element, that’s not gonna screw up your political career, right? It’s just like everybody’s in real estate in one way or another. Right. And so it has such like, wide ranging effects. And there’s so many people lobbying against any of this, that, I don’t know, even if he wants to it probably, he probably be hard pressed to make it happen. Go ahead if you had something on the tip of your tongue, but I want to ask you about construction costs. Because you said something, what
Chad Hewitt 40:59
I was gonna get into next was just we were talking before we got on recording here about you asked me what how Seattle’s market was, and I noticed a spike of new apartment projects coming in, you know, to get bids on. And I kind of asked around to a developer friend of mine net citizen, you know, what’s going on. And he said, apparently, there’s a new energy code coming in, you know, green New Deal stuff, where the the cost to develop your average apartment building is going to go up something astronomical, so everyone was just racing to try and get their permits in, so that they can build before they have to, you know, comply with the new energy code permit. So that’s just gonna make, you know, they try to make more affordable housing and do anything that the government tries to do, they just end up screwing up because no one’s gonna afford to build these things, or buy them or live in them, or whatever the case may be. So that’s basically, the big thing I see going on in my market is just an influx of people trying to get permits before they have to acquiesce to this new energy code.
Jason Hartman 41:56
Yeah, you know, the government. Yeah, I mean, they, they have created the homelessness problem, not only by shipping the jobs overseas, and you know, not helping the veterans enough, and all of this, but by all of these regulations on housing, they’ve just made it so expensive to comply with the requirements. And especially in places like Seattle and California, you know, I’m talking about Seattle, like it’s a state, it’s obviously just a city. But you know, it’s run like its own little fiefdom. And so it’s just, you know, they’re just making it so hard that, you know, they can’t want either low cost housing, or you just can’t do it.
Chad Hewitt 42:39
Now, the interesting thing about low cost housing, is it’s always built by the government. And if you actually look, when you go to apply to do that job, we’re a non union company, right. So when we go to do one of these low cost housing projects, we have to pay prevailing wage. So everyone gets paid a set amount of money, it’s the highest wage bar that they have. So when you look at the cost of build what they call, quote, unquote, affordable housing in the government run sector, the private sector could have built it for about half as much if they are actually, you know, if they if they let it to the free market. So I’m a free market guy. And I just don’t understand anybody that anything the government touches, they just absolutely, they just destroy it. And they don’t know how many.
Jason Hartman 43:25
Yeah, no, it’s it’s definitely true. I mean, the government, we need a government to do a few things, but let’s just keep it to a minimum. Because, you know, it’s, it’s like Reagan said, you know, the most dangerous words are, I’m, I’m from the government, I’m here to help. run for the hills. Yeah, totally. It’s, it’s just, it’s just the nature of the beast, it really is. But, um, what you were saying, just I don’t know if that point was totally clear, Chad, is that you’re seeing this boom in construction, because all of these developers are rushing to build before they have to comply with these new requirements coming down the pike that will make their cost of construction like 30% higher. So see how that’s distorting the market. It’s causing over building right now in these apartments, right? Yeah. And then later, it will cause a shortage of supply, because no one will want to build.
Chad Hewitt 44:25
Exactly, yeah. Just all racing to get their permits are not going to break down at least to get the permit. And then I think they’ve got 18 months from permit to actually start digging a hole in the ground. Yeah, whatever the case may be, but that’s, that’s there’s definitely things coming down that are gonna distort the market.
Jason Hartman 44:42
Yeah, it just, it doesn’t make any sense. It’s crazy. But um, but hey, you know, I appreciate you sharing your story. And is there anything else we should talk about? You know, questions, thoughts, goals, ideas. Anything you want to run by the audience?
Chad Hewitt 44:59
No, I think I I just wanted to share my experience that, you know, it’s from someone that’s looking at all different angles of real estate, totally bypassing single family coming right back around to that being the best place to park your money, and you guys being probably the best company to deal with it, you know, in order to make that happen. So I just want to share my story. And thank you for the service that you’re putting out there for people and the education that you have on your website and your podcasts and just thank you for me. Hey, well,
Jason Hartman 45:28
thank you for your business. We really appreciate it. And it’s you know, it’s an honor to serve you and other clients like you. And we just wish you super, super success, Chad and that and happy investing and thanks for coming on the show. Really appreciate it.
Chad Hewitt 45:43
Thank you.
Jason Hartman 45:49
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out this shows specific website and our general website Hartman media.com for appropriate disclaimers and Terms of Service. Remember that guest opinions are the rain. 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.
This episode is to celebrate the prosperous year of 2020 and to look forward to another great one! Jason Hartman urges everyone to write down their goals. He explains that a goal should be just out of reach but not out of sight and should be SMART! He also encourages the use of Smartsheet from monday.com and to balance out your portfolio.
Announcer 0:02
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 1000s 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 0:53
Welcome to Episode 1631 63. Oh, and Happy New Year. Happy New Year, Happy New Year, happy new year, it is going to be a fantastic year for real estate investors. Last year was phenomenal. I mean, we just bucked all the trends defied all the odds. And real estate investors did so so well, last year, our clients prospered just fantastically last year. So congratulations to all of you who have been following my plan. I know things have been working great. Granted, there are a couple of problems here and there. There’s, you know, some forbearance opportunity. There have been a few moratorium issues, a couple of tenants sick here and there. But overall, it has been nothing short of an absolutely fantastic year, as so much of the world and so much of the country is in distress. And there are so many sad things going on. The one thing that we have found to be incredibly resilient, and reliable is income property, the most historically proven asset class in the entire world, the asset class that has universal need, everybody needs food, clothing and shelter, and let them rent that shelter from you provide rental housing to other people provide a place where they can be safe, where they can be in a suburban market, where they can shelter in place where they can make memories that will last an entire lifetime. Think of what an important role you play. As a landlord, as a rental housing provider. Think of what an important role you play in people’s lives for their entire life. They will remember your property that they lived in your property, 10 years, 20 years, 30 years later, they will remember things in their life that happened in the property that you own. Think of how significant the role you play in people’s lives are, they’ll think, remember when we lived in that place on Main Street, you know, and guess what that place was owned by you. And you were a big part of their life. Amazing. It’s an amazing what we have, the honor that we have as real estate investors as landlords and we are paid so well for being in that position, we are rewarded. So so generously for being landlord.
So today, as is normal at the beginning of the year. And as we did last night on our live stream, we talked about goal setting. And today I want to take a different take from what we did yesterday on the live stream on goal setting. So we’re gonna play a very small clip from last night on this podcast today. This is going to be different. We have you know, some different angles on on that topic. So we’re gonna dive right into hopefully helping you with some frameworks, some ideas, some ways that you can set goals, make them achievable, make them as the old acronym goes smart. And so we’ll we’ll do that’ll be a little bit of a clip from last night. Just a very short clip. And we’re also going to play one of the winning videos from our contest. And by the way, if you haven’t entered our new contest, I’m here to tell you, your odds are extremely good. This is a small business small company. This is not you know, this is not Microsoft or Apple. You’re talking to This is a small business doing a contest where we are giving out a stimulus payment a stimulus payment for you our dear listeners to have you win 500 bucks cash. Yes, cash. That’s the sound of cash folks. Oh, I amuse myself with sound effects, don’t I? So two of you will win 500 bucks cash. All you need to do is enter go to Jason hartman.com slash contest. That’s Jason hartman.com slash contest and enter to win. So we’re giving away 1000 bucks in stimulus money. It comes a lot faster than it comes from Washington DC, that’s for sure. So be sure to enter our contest. It’s super easy. Jason hartman.com slash contest. But let’s get right into this goal, achieving topic, okay, and figure out how we can achieve our new year’s resolutions, our new year’s goals and make it a fantastic new year. As you know, I am pretty darn bullish on this market. I just finished recording a couple of YouTube videos and podcast episodes with Ken McElroy to be on his show. And he was interviewing me about it. And you’ll hear those probably if you look for them, or maybe we’ll replay them here on this show. But there’s a lot of reasons to believe this market has a couple of good years of juice behind it. A lot of good stuff going on in amongst the bad news. You know, you hear the bad news, the media sensationalizes, the bad news, they’re talking about moratoriums, and so forth. And that’s out there. But by and large, with our investor class, which is different than the institutional landlords that are focusing on lower price, lower class workforce type housing, where there’s a lot more people affected. Our tenant base in the Properties you’re buying through us is largely workers that are unaffected by everything that’s going on in the world. I mean, everybody’s affected, but their jobs aren’t affected, they haven’t lost their job, their business hasn’t shut down. You know, they’re not in as many of the service industries that are so sadly affected.
And you know, one of the things I talked about on Ken’s YouTube and podcast is how the wealth gap is widening and widening. And folks 17 years ago, when I got into this business, I used to say at my very first conferences that I was doing at our Newport Beach office in Newport Beach, California, we used to have them in our office, and then in our Costa Mesa office two, back in the day, you know, many, many years ago, I was saying that the middle class is disappearing, it is under attack. And then I shared some passages from lou dobbs great book war on the middle class, I think that book came out in 2004, maybe 2005. It is really true, it is something that is very, very disheartening, no question about it. But look, the only thing you can do about it, you don’t have the power to change all of that I don’t have the power. But I do have the power to help make sure that the people following my work, listening to my podcast, attending our events, you know, I in our courses, and investing through our network, those people are going to move up the socio economic ladder, many others, sadly, we’ll be moving down the socio economic ladder. And it’s like the old saying, Don’t curse the darkness, light a candle? The best way to help the poor is to not be one of them. Be the person who is self sufficient? Who doesn’t need the government? And by the way, I think we’ve all seen the government isn’t really there for us. How long has it been since a stimulus payment has gone out? It’s been way way too long. You know, if if someone got 12 $100 over half a year ago, you think they can live on that for all this time? Of course not? Of course not. And then they’re going to get another measly $600 again, and maybe if Trump gets his way, it’ll be $2,000. Okay, great. But it’s still not enough folks. We have to make our own way in the world. And the next big tidal wave of crisis coming at us is the pension bubble. It is about to pop. And it is going to be just devastating to people. So you’re in the right place. You’re listening to the right content, you’re doing the right thing, investing in the most historically proven asset class in the entire world. It’s income property. So let’s talk about setting and achieving goals for this new year. And let’s dive into it right now.
So, you know, I think these are just some ideas of how we should look at the new year, right, and how we should look at our new year’s resolutions. Now, the other thing is 80% of Americans, they say, don’t have any goals, no goals at all 80% of the population, right? So if you have a goal, or hopefully a few goals, you’re in the top 20%. Congratulations, now, of the people that have goals in that top 20%. Guess what? How many do you think have written goals? You know, they have a vague idea of the goal in their head, right. But when it’s written, it becomes much more real.
‘Audio Clip’ 10:42
So I’ve been thinking, you know, you’ve heard people at this point have said, Oh, New Year’s resolutions are so cliche, that’s kind of true. But our minds do work in a way that when there’s a clear board, like, you know, one 120, our minds seem to get it right. Like, if you look at the store, and pretty much any store around the world, you see, like everything’s $1 99, not $2. And it’s stupid, because it’s only one cent, but mentally, it does make a difference. And so what I want everybody to do this here, is to make a commitment to make a resolution, to sit down and have a talk either with yourself, or with your significant other or whomever helps you or works with you and making your financial decisions, or your investment counselor or your investment counselor, you know, that would be included. And just figure out what you want to do you know, realistically, what can you do? Realistically, what are you willing to do? So maybe you know, if it is, say four properties, and you want to do one a quarter, figure out, where am I going to get the money? You know, how much every month Am I putting away here? How much am I putting, you know, if you do invest in your 401k? Let’s say how much you’re gonna put there? How much are you going to put away in your savings for real estate? If you have to cut back on anything? What are you willing to cut back on, and just make a conscious effort to plan for the year, don’t go out and say I’m gonna buy 10 properties, if you know, you’re more likely to buy five, you know, don’t make your goals unrealistic, but just figure out what you can realistically do, and how you can realistically get there so that you can become financially free.
Jason Hartman 12:16
You know, I love what Denis waitley taught me at age 17. He said a goal should be just out of reach, but not out of sight. And five years, I think is a really good timeframe for this. Now, yeah, a five year plan would be different if you’re talking about, you know, fitness, or a workout plan versus real estate investing, right? Because real estate investing is you know, it’s the tortoise and the hare. It’s a little slow, you know, it’s the tortoise. But Elizabeth has just done such a fantastic job. And I enjoyed the time I had her on the show just recently where we talked about this. So if you didn’t hear that, please go back and listen to it. But wait, there’s more. Elizabeth, there’s more. Tell us more.
Elizabeth 12:54
Right. So you know, one of the things that we were just talking about is the deep thinking process, and actually taking the time to put pen to paper or video record something or just jot down your thoughts really does help you envision the future but also really thinking through? What are the possibilities? And what are the appropriate targets for yourself. But the other thing that I really love about the goal setting and and as I mentioned on the on the earlier podcast, you know, Neil and I actually carve out time to do this every year. But we also take the time to reflect on how the year performed, right. And so we think about the past we think about, you know, it’s funny, because it’s so easy to remember the bad things that happen, oh, no, you know, a tree fell on a roof and I got to pay for that. But then when you actually look at the performance of your portfolio in aggregate, the progress you’ve made against your goals from the prior year, you get to actually see the scale and the scope of all the things that you actually did achieve. And it just, it’s really exciting because it just completely rubs me up for making more you know, audacious goals, more big, crazy goals coming up, because I see how much I actually already achieved.
Jason Hartman 14:10
Let’s dive into this topic of goal setting and goal achieving tonight, or today, depending on where in the world you happen to be. And I hope you had a happy new year you probably stayed home, save some money, and you probably didn’t have a hangover. So hey, there’s some good things to this maybe you stayed home and had a hangover anyway, but it probably wasn’t as bad as it would have been had you gone out right. Let’s go ahead and just kind of dive into some some content here. So what I want to start with is, you know, a couple of years ago for our meet the masters of income property conference that we have held now 22 times we’ve had 20 we had that we had it last August and it was the 22nd anniversary of our meet the Masters of income property conference. And the one two years ago, where we had ron paul as a distinguished guest speaker, he delivered a keynote there. And we had some other great speakers too. We hosted a contest, and it was asking people to do their five year plan of what their goals are for their income property portfolio. So I want to play for you to sort of kick off our topic today. The winner of the five year plan contest, it’s one of our clients are her name is Michelle. She just did a phenomenal video that really laid out how she and her family intend to achieve their income property goals. And at the time, she did this video, they were well on their way to building an awesome portfolio of income producing real estate properties. And that’s what we do. We’ve been doing that for many, many years, we’ve helped 1000s of people buy properties nationwide build fantastic income property portfolios. So let me play this short video for you because I think it’ll really, really tee up this topic very, very nicely.
Michelle 16:11
Hi, my name is Michelle. And this is my husband, Phil.
Phil 16:14
Hello.
Marcy Nina 16:16
Hi, I’m Marcy Nina.
Sophie 16:17
I’m Sophie.
Michelle 16:20
We’re family. And this is our five year plan. Our five year plan centers around three main areas of focus, health, wealth, and family area number one, health. It all starts here. I’ve learned that healthy habits are the cornerstone for a successful life. If you don’t have your health, it’s really hard to achieve your other goals. So in these next five years, we will focus on getting quality sleep, daily exercise and eating fresh organic meals. We enjoy eating a paleo inspired diet. Area number two wealth, we want to achieve financial freedom in five years. Step one is to build passive income through rental properties because
Jason Hartman 17:08
Income property is the most historically proven asset class in the world.
Michelle 17:13
Thanks, Jason. Our current portfolio contains 10 units, it brings in passive income of about 30 $500 per month. That’s about 29% of our monthly expenses. However, if we want to cover 100% of our expenses, we need about $12,000 a month in passive income. So how will we achieve that in five years? It’s simple. If we buy eight units per year for the next five years, we will end up with a total of 50 units. With 50 units, our monthly passive income will be about $15,000. Assuming an average of about $300 a month per unit. That’s enough to pay our expenses with room to spare. Step number two is to fire Phil’s boss.
Phil 18:02
I’m going to retire early from teaching and build a media production business producing video and audio from my own studio.
Michelle 18:09
Area number three is family. We want to spend our time doing what matters most making memories, traveling the world and becoming the best possible versions of ourselves. With our increased financial security, we can achieve a better work life balance. We want to explore the world together and share an amazing experiences. In the next five years. I want to take my mom back to Korea and meet my relatives.
Sophie 18:36
I want to go to Paris.
Marcy Nina 18:38
I want to eat sushi in Japan.
Phil 18:41
I want to travel to Tierra del Fuego and see Antartica and the penguins.
Michelle 18:46
And when we’re not traveling, we’ll be pursuing our passions. I love reading going to see shows with my friends and trying new restaurants and exotic cuisines. And I’m going to start a blog.
Marcy Nina 18:59
I’m gonna publish my first novel and learn how to drive.
Sophie 19:03
I want to add to the show,
Phil 19:06
I have lots of music that I want to record and perform. And I’m going to earn a degree in kinesiology.
Michelle 19:12
But most of all, we want to spend time with our family and friends, because that’s what really matters.
Jason Hartman 19:20
So there is just a fantastic five year plan, right that gives you hopefully gives you some ideas of how simple it is to lay this out. And by the way, got to mention we are giving away two we will have two winners of $500 cash each. You can go to Jason hartman.com slash contest and Enter. And let me tell you something, folks, you ready for this? your odds of winning are extremely good. It’s not like we’re some big giant company. It’s not like we have 1000 people entering this little contest. They’ll be two winners win 500 bucks each. So going into the contest, and you can actually increase your odds by doing some easy little actions. And, you know, make a five year plan video, I mean, really declare this stuff publicly, it makes it more real, it makes it more achievable. You know about, I don’t know, 20 years ago, maybe 21 years ago, I have the privilege of going on a speaking tour with Zig Ziglar, the late Zig Ziglar, we lost him, but he was such a great influence in my life. He said, and I remembered this quote differently. Maybe he has two quotes about this. But this is the only one I could find tonight. It’s not what we get by achieving our goals that counts. It’s the kind of person we become, just by trying, just by trying. Now, that was a little different. You know, from what I found tonight, what you get by achieving your goals is not as important as what you become by achieving your goals, right? So it’s not about what you get, you know, a lot of people might think, Oh, it’s just about what do I get out of it? Well, okay, I want a new house or a boat or a plane or, you know, whatever, right? It’s who you become, by making the effort. That’s the important part of it. This is an example. We won’t do this one. But maybe we will. If we have time. We’ll circle back to it. But this is one of our entrance in the contest, made a little video. Again, very, very good odds that you will win 500 bucks. In fact, your odds are probably better, that you’ll win 500 bucks in our contest, then you’ll get a $600 check from Washington, DC. There you go, folks.
Oh, gosh, it’s such a mess in government, isn’t it? Isn’t it a mess? Yes. It’s a mess. You’ve probably all heard of the idea of smart goals, right? Smart being an acronym. Okay. And that acronym is, you know, Specific, Measurable, Attainable, Realistic, and time bound, right, you’ve got to have a time limit on the goals. Otherwise, you’re on Sunday, I’ll Denis waitley, has done this great poem called someday I’ll like I apostrophe ll not like an island. But it is like an island, right? It’s both. And so check that out. I’ve shared that on my podcast before. But SMART goals, okay, specific. It’s the who, what, when, where, which, and why. And you know, the thing I want to say about this, and by the way, I got this from a great website called Smart sheet, and you can go there and for free, you can get some free spreadsheets and goal files, basically, that you can run on your computer to help you set SMART goals and make them very specific. One of the things I want to say there besides what’s on the screen, and there are actually I think two books with his title, Manny, you’ll know, because you’re the book guy, okay, in two books with his title. And the idea being, that it’s not how it’s who. And I want to tell you, that is such a powerful idea. So much of my life has been wasted, frankly, on the how trying to figure out how to do everything myself, huge mistake. And when I started joining mastermind groups, and going to a lot of conferences, maybe 810 years ago, that dramatically accelerated my life success. Because I started finding the who, and the who was the shortcut. Certainly, we can become very qualified and very knowledgeable. There’s a lot of information out there a lot of great gurus that can teach us a lot of things. But we can’t know everything. And we don’t have time to implement everything ourselves. So if we can, if we can find the who’s out there, the Who’s that will help us accelerate the achievement of our goals. And when it comes to real estate investing, we are the who my company is the who that can help you and connect you with lots of other whose sounds like a Dr. Seuss book, doesn’t it?
Remember, Horton Hears a Who, I love that book, by the way, it’s great. Anyway, there’s some thoughts on the specific the who, what, when, where, which and why. Okay. And then measurable, achievable. It’s got to be, as Denis waitley put it, just out of reach, but not out of sight. You know, it can’t be so ridiculous that it can’t be seen, but it should be far enough that you can’t reach it now that it stretches you It makes you become more it makes you become a bigger person and the measure Concept back to that for a moment. How will you quantify it? How will you know when you got there? Here’s one of the things. And Lisa, I’m sure you can attest to this. Many investors in the real estate world, they own properties. Okay? These are investors who are already in the game, they have properties. And many times they think they’re losing when they’re really winning. And they just don’t know how to do the math. With income property. It’s this beautiful multi dimensional asset class. And I hate to use all these cliches, but it’s like the iceberg. Most of the iceberg is where it’s below the waterline, we can’t see it. It’s below the water, only a little bit of the iceberg is above the water, most of it is below. And that’s how income property is most of the ROI, or the return on investment is below the waterline, if you will, you’re making money, you’re creating wealth. But if you don’t know how to do the math, if you don’t know how to calculate return on investment, from a multi dimensional asset class, you might think you’re losing when you’re actually winning. And that would be a huge shame to give up when you’re actually winning. Lisa, any thoughts on that?
Lisa 26:34
And if that’s why it’s important to hang in there and stick with it, and not give up not first of the first house. That’s why you need a couple houses. So balanced out your portfolio?
Jason Hartman 26:43
Yes, yes. balance out your portfolio and take advantage of the law of large numbers, where you diversify risk, you diversify results over a portfolio. Definitely. Good point. Lisa. Definitely. Good point. And then relevant, okay. Relevance refers to focusing on what makes sense with broader goals. Now, this says business goals, this is from the website. But I would say for the context of what we’re talking about, just broader life goals, right. One way I’ve heard that expressed is is it ecological? Does it fit into what you’re doing with the rest of your life? Is it? So that’s important? And then is it time bound? You know, it can’t be a goal that says, Yeah, I want to be a rich real estate investor, I’m going to have 100 units. Okay, well, you better put a time limit on that. Otherwise, there’s just this amorphous thing out there in the ether. It’s just someday I’ll someday I will write someday I’ll Denis waitley starts off that fantastic poem. I don’t have it in front of me. But he says, there is an island fantasy a someday I’ll, we’ll never see where we’re session stops, inflation ceases, our mortgages paid and our pay increases, that someday I’ll where problems end where every piece of mail is from a friend, I can’t remember the rest of it. So that’s just from memory. Hey, that’s not bad. I’ve obviously read that a few times. Because it’s a great lesson. You know, it’s a great lesson about not living in the future. Or in the past, we can only control the now we must live in the now we should have plans for the future, we should appreciate and learn from the past. But we can only live in the now because the Now is the only time over which we can exert any actual control over what we do now. Now and it’s gone now and it’s gone. Now when it’s gone. See that moment ago is gone now. And I can’t do anything about it. I can only learn from it or reminisce about it. So he says also that someday I’ll poem. People who live in the past become senile, and people who are stuck in the future live on Sunday. I’ll you got to live in the now.
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In this Flashback Friday episode, Jason Hartman interviews a 26-year-old real estate investor who acquired three good rental properties that produce around $3,000 per month. Then, he talks to Drew about buying a home versus renting a home while purchasing income property. They also share their thoughts on home-based businesses.
Announcer 0:00
The markets were buying in a robust markets, their population is stable and growing, and the values are stable and growing. It’s not like we’re just buying residential anywhere. We’re buying in good market. Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
Announcer 0:28
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities, this program will help you follow in Jason’s footsteps on the road to financial freedom, 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
Welcome to the creating wealth show. This is your host, Jason Hartman. And this is episode number 234 234. Wow, a lot of episodes behind us and a lot of episodes ahead of us looking forward to continuing to report to you on financial, economic and real estate investment matters from around the world. And today, we will be doing a case study a case study with one of our young ambitious clients. And I think you’ll get a lot out of this and you’ll see how the rent to buy analysis plays out in today’s world a little bit differently than it used to. And what I mean there is renting versus owning, owning your own home whether or not that makes sense versus renting your own home and buying investment properties instead. So this should be a very insightful interview. First of all, I should say I hope everybody had a very Merry Christmas talk to you right before Christmas. And now it’s right after Christmas to start the new year off right 2012. I hope you’re all planning to join us on January 7 here in Arizona and lovely Arizona. The weather is gorgeous out here. It is just stunning. I mean, what a beautiful Christmas Day. But a beautiful day after Christmas gets a little chilly at night. But for those of you in the Midwest and back east, I think you’ll feel that it’s warm air actually, but the days are just gorgeous, sunny and bright. And we don’t change our clocks here in Arizona so it stays light longer. And that’s really nice, too. Anyway, we are at the Hyatt place Hotel in Tempe, which is right near the very famous Mill Avenue. It’s a very colorful and eclectic kind of scene, think you may want to go out on Mill Avenue, it’s just a very short cab ride. Probably take it to maybe three minutes from the hotel or you can take the hotel shuttle for free. They do have a shuttle to Mill Avenue at your convenience and just a really cool scene. You know, a lot of very colorful eclectic restaurants and bars, nightclubs, bands, live music and so forth. It’s kind of like Sixth Street is in Austin, Texas, or the French Quarter in New Orleans. In fact, there are some French Quarter looking buildings on Mill Avenue in Tempe, Arizona, and it’s right by ASU. So again, a really fun area kind of eclectic, if you’d like a more upscale type thing, Scottsdale, Old Town Scottsdale is very close by and they’re just there’s just a plethora of wonderful restaurants in Old Town, but also some good ones right near the hotel on Mill Avenue as well. So a lot of choices that will be a great event. And all day Saturday, January 7, we will have creating wealth in today’s economy boot camp. Again, this is our fundamental seminar. It is the one that 1000s of people have attended over the years. I’ve been giving that one for a long time on behalf of different companies actually, and been a guest at different events as well. And it’s very well received I have probably an I kid you not to banker’s boxes, those portable file boxes of evaluations from that seminar, and literally all but out of those 1000s of evaluations, I would say maybe there are three sort of negative ones in there. And you know, you can’t please all the people all the time, folks, as much as you may try. I do tend to bash Wall Street a bit. So I’m certain that I’ve made some enemies out there. And I have this terrible tendency to use a little too much candor at time. So maybe that’s the reason a couple people gave me some bad evaluations but by and large, all of them are extremely positive and just glowing evaluations for the creating wealth in today’s economy, boot camp or seminar and again, we have not done that one in over a year.
We’ve done meet the Masters events. Of course you can purchase creating wealth in today’s economy as a home study course on the website at Jason hartman.com. But again, common see a live and then Sunday morning. We’ll do a tour of Phoenix market. And I think you’ll really enjoy both of those things. And you know, Saturday night, we’ll probably get a little informal dinner together as well and all go out to dinner together should be a really fun time and a very educational and very valuable time to help you start the new year off, right. And again, the cost of the event is it’s just nominal, especially in depreciating dollars, right. So anyway, register for that at Jason urban calm, and we look forward to seeing you there. We’ve got a special room block rate at the Hyatt. And it’s only at $9 per night, they’ve got a free shuttle from the airport. So you don’t even need a rental car. It’s just minutes from the airport. So very convenient all around the hotel was recently remodeled. It’s gorgeous. It’s not a big giant Hyatt Regency Hotel. These are Hyatt place, hotels, smaller scale, but I chose it based on location and just convenience, location wise to the airport, and to Mill Avenue and the excitement and entertainment value there as well. I spoke with a good old buddy of mine, who lives in Seattle today and called to say Merry Christmas, etc. And I got to talking with him. And I said why aren’t you investing in more rental properties. And he says to me, Jason, if you can help me get out of the two I have in the Seattle area, I will be happy to start investing with you like crazy. And I said forget it, I don’t want to talk about the two bad ones, I only want to talk about how much money you have now and what you’re doing with it. And so he goes on to say I’ve got about a quarter of a million dollars. Some of its tied up some of its in 401k. And retirement money and about 100,000 is liquid and I said where’s that 100,000. And my good old friend says in the bank. So I did a little analysis. And I did this before recording the show long after the phone conversation ended. So maybe the first time my friend will be hearing it is here on the show and listen to this analysis because I think you’ll find it really valuable before we go to our guest today. In our case study, it compares three things, it compares the cost. And I want to look at the opportunity cost of this $100,000. And I want to look at it three different ways I want to look at that money in the bank where it is now, I want to look at it in private lending or hard money lending. And as you know, I am very much a fan right now of that short term private money lending.
And by the way, several of you contacted since I mentioned that on a prior show. And I wanted to say send me an email, I can hook you up with the right people you may not be eligible for this depends on what state you live in, and so on and so forth. And again, I don’t know all the regulations, but shoot me an email Jason at Jason hartman.com, if you’re interested, but please do include your phone number in that email. And I will cc you with the various parties. And you can talk with him directly. And I’ll just make the introduction for you. But comparing it to short term private lending or hard money lending on real estate, I want to do that as the second comparison. And the third comparison, of course, is my all time favorite. And that is income property. So when we compare these three, I’m going to take into account that $100,000 and how it performs in the bank, how it performs after taxes, how it performs after inflation, what the net is, and what the potential opportunity cost is every single day by doing nothing. And this folks, this is the great urgent, urgent urgency. How do you like that the urgent, urgent urgency? This is the great urgency of making sure that your money just like your employees, just like your contractors, just like your children, making sure that they are working for you making sure that everything you have is working, making sure that there is as little opportunity cost in your life as possible. Another big opportunity cost and I have mentioned this before, but not for a long time. And that is the opportunity cost of credit. In other words, what I mean is unused credit, having a high credit score, and not using it. Because I asked my friend who I’m about to do this comparison for I asked him, what’s your credit score? And he said it’s excellent. Well over 740. Now, folks, I think in this kind of interesting in the paradigm of our last show where I interviewed the guy from the lawyer from you walkaway.com where we were talking about how and then Katherine Austin Fitz set it to how credit score, it ain’t what it used to be. And you know, I think the banks largely have to look at that as a bell curve. And there may be times and this is a very hard call to make, but it’s a judgment that each of us have to make individually. Or you have to ask yourself, how much is that credit score worth? While I’d say if the score is good and you’re not using it, it’s costing you a fortune. It’s worth hundreds of 1000s of dollars in borrowing ability. assuming of course you have the other part of the ability to borrow You need not just credit or credit score, but you obviously need income as well. Right, because you can’t qualify, at least not anymore because we live in a much more sane world nowadays, this is post subprime mortgage meltdown, you cannot qualify without actual income. And you know, nowadays, they generally tend not to make that up like they used to, in the stated income world of the past the what I call the liar’s loans.
So if you have income, and this person has a good corporate job, W two income, the kind lenders most liked to see, and you have a high score and you’re not using it, and then you have cash. Boy, that is really a shame, because there’s a huge opportunity cost here. So let me go through a little example comparing these three options, okay, these three investment options. And since we’re not doing this visually, I’ll try and describe it as best I can. And if you’re sitting down right now, it would make sense to pull out a pen and paper and just jot these numbers down. But even if you’re not if you’re on your iPod if you’re at the gym, and I know a lot of you are because a lot of you say you listen to me, when you work out, I probably should start playing some really good jazzy music for you to work out to. But anyway, we’ll just we’re working out the mind to not just the body, right, but if you’re in the car you’re working out or taking the dog for a walk or whatever, this example will still be understandable to you. So here it is, my friends $100,000 in the bank earning about point two 5%. That means $100,000 only earns $250 a year 200 and a measly $250 a year on $100,000. Isn’t that a shame? A total shame. Terrible. But it gets worse. Yes, it gets worse. Because after taxes now, I have to make some assumptions here for purposes of illustration. So I’m going to assume that my friend’s tax rate is 40%. Now granted, lives in Washington State, there’s no state income tax doesn’t live in the Socialist Republic of California, where you have state and federal taxes that are very high both together. But just for simplicity sake, I’m going to assume the combined and you know, it depends where you live, the combined state and federal tax rate is 40%. just for simplicity sake, if it’s a little lower, or a little higher, doesn’t matter. It’s close enough for government work as they say. So if you take the $250 that this $100,000 earns in the bank that the measly $250 and you take 40% away from it, you lose another $100. So now, after taxes, you’re down to $100,000 100 gs 100 grand, only earning 150 bucks a year. Isn’t that sad? That is terrible, awful, awful, awful. So now, the total return we have now is our $100,000. One year later, we’ve got 100,000 comma, or 100 comma $150. So less than $101,000 $100,150 only. That’s it. Now the inflation rate is 9%. Okay, and I think it’s about nine and a half to 10%. On officially, but let’s just go with 9% as the number, if you think it’s lower, higher, plug in your own numbers, I’m just using 9%. Because I think that’s a very reasonable realistic number. Now for most of us, then inflation is going to take away 9014 of those dollars. So at the end of the year in real dollars, my friends $100,000 has now devalued to $91,139. You have definitely lost money by through your inaction by leaving that money in the bank it has cost you a fortune. Now, if you don’t think that’s that very significant, listen to this, because here’s what good old sales trainer, Tom Hopkins used to call it but this is in reverse. He used to call it the reduction to the ridiculous now this is in reverse because this is the cost per day per week and per month of this money. This is how real it is for my friend $24.70 a day is the opportunity cost the money that is being lost here.
Now actually, that’s not the opportunity cost. That’s just the cost from taxes and inflation. The opportunity cost is what could have been earned. Okay, so I actually said that incorrectly. So this is costing just inflation and taxes is costing $24.70 a day. $173.35 per week or $751.17 per month. Now folks, I don’t know about you, but $751.17 per month can buy you a nice high end car, you can go get a BMW 535 ai and you can lease that car for about 750 bucks a month. For loaded, I think, okay, haven’t checked lately. But if you want a really nice car, you can definitely get a nice car for $751 a month, or better yet, you could get a rental property, you could get a few rental properties with that money. So here we go. Now let’s look at the short term private or hard money loan. Now that one, I’m taking a return here of 12.125%. So that means that $100,000 on an annual basis, earns $12,125 taxes, the government will come along and basically steal about 40% of that. So you’ll give 40 $850 to the government. So you’ll give 48 almost $5,000 to the government, but you’re still doing pretty well your net is 70 $275. And before inflation comes you now have $107,275 inflation is going to come along though the robber and the thief that few people understand or see who slowly steals your money without actually having to mug you or stick a gun in your ribs or pickpocket you. Inflation comes along. And it steals because it does steal money from interest income, it’ll steal about 90 $655. And at the end of the year, in real dollars, my friend would have $97,620 not terrific, but a heck of a lot better off than he would have putting that money in the bank. Right. So here we’re comparing 91,001 39 by keeping it in the bank and not doing anything to $97,620 by taking some action here. Now let’s look at column number three. Let’s look at income property, we looked at the bank, we looked at a short term private loan or a hard money loan. Now let’s look at income property. Now I know that all of you realize this, that income property can produce well over 20% ROI annually return on investment. But I’m going to be a little more conservative here. Now if you want to see specific performance, especially if you’re new listener, and you think oh, this guy’s saying a bunch of hype, he’s, he’s crazy. This is just too good to be true. This guy’s another one of those late night TV scam artists, guys, 18%, who gets 18% on their real estate?
Well, folks, a whole lot of people get 18% on their real estate, not real estate, actually, I’m calling it by the wrong name, income property that is the right name. And if you don’t believe me, just go look at the very detailed performance at Jason hartman.com and the properties section. And you will see how you can easily and realistically get well over 18% on your properties in terms of total ROI. So here we go, we’ve got that $100,000. And now we’ve used that to buy several income properties. Because remember, we can control maybe $500,000 worth of income property with only $100,000 in capital, and maybe even more than that. But let’s just take that as a as a round number possibility. But look at even if we didn’t do that, even if we paid cash for an income property, we can get cash on cash returns very commonly, of 11 to 13%. Sometimes, and you can see these properties right now, Jason hartman.com, you’ll see income properties, cash on cash return of 18%, or 18,000 per year. So we wouldn’t even necessarily have to use leverage to get this return. Just sit with that for a moment. Because when we use leverage, the return could be dramatically higher than 18%. All right, none of that. Let’s just go with the 18% number. Look at the details, Chase and hartman.com. So we’ve got the income property and produced $18,000 annually on our $100,000 investment. Now taxes, I really can’t even calculate the taxes for you, I’m going to assume that this person would qualify for the tax benefits offered through passive losses, or depreciation, which are the best kind of tax benefit of all, why? Because they’re a non cash write off. They’re a phantom write off. In other words, look, folks, if you were I want to get a tax break for an independent contractor or we own our own business or we’re self employed, we have to take and we have to spend some money. If we spend some money, we can get a tax deduction, or if we take some money, maybe we don’t have our own business, so we can’t really spend money on anything that’ll be deductible. So the other thing we could do is we could do something nice. It’s the holiday season. It’s the time of giving. We could donate money to charity, right? If we We donate money to charity, we get a tax deduction. That’s all well and good.
But the problem with both of those plans is that we have to actually spend money, we have to actually write a check in order to get a deduction. With income property, though, as long as we can qualify for all of the tax benefits, not all of us can. So check with your CPA or your tax professional about the details on that some of us can qualify for some of the benefits, not all of them, some of us can’t qualify for any of them. Some of us can change our plan and our approach a little bit so we can make ourselves qualify for these benefits. So again, that’s a complex discussion, we have had previous shows on that subject where I’ve interviewed some CPAs on the show, and we’ve spent an hour solely on that subject of taking all your tax deductions on your income property. But just remember this one thing is for sure income property is without exception, the most tax favored asset in America, bar none. Income property rules the roost when it comes to tax benefits. So here we go, we’ve got our $18,000 return on our $100,000 investment. Here, we’re actually going to add money for taxes. No, we’re not going to take money away, like we did when we loaned money, or when we put money in the bank and earn interest on it, we’re going to get money from the government, because we’ve created more tax benefits through the most tax favored asset class in America. So here, what I’m doing is I I ran a little very simple depreciation schedule, and I showed that just a $100,000 property, in other words, paying cash for a $100,000 property, not using any leverage at all, no leverage would generate about 2900. Well, the number I wrote down is 2909 annually in tax benefits. Now what if we use leverage? What if we got $500,000 worth of property and we qualify for all the tax benefits? We could multiply that number times five.
Jason Hartman 22:14
Wow, the most tax favored asset class in America, bar none. Again, my disclaimer, I’m not a tax professional, I’m not qualified to give tax advice. I’m not a lawyer, I’m not an accountant, check with the appropriate professional always, but I’m giving you the concepts. So you can go to your tax preparer and talk about depreciation and ask questions about it. Ask about becoming a real estate professional, ask about ways that you can obtain your full tax benefits, and you may be able to, and if you can’t do it, your spouse may be able to one of the advantages being married, right there is that you can get your spouse to become the real estate professional has nothing to do with selling real estate. It’s just an IRS classification. You don’t need a real estate license or anything like that long story. Check. The prior shows more details on that. So now our $18,000 in return on the 100,000 has turned into $120,929. Now inflation comes along. And the question here is, does inflation detract from the return on investment of income property? Or does it add to it? I would argue that it adds to it in not one but two ways. Of course, if we’ve leveraged the property, we’re in a position where we have what I call and this is my own great famous little term inflation induced debt destruction, inflation and do stet destruction, hey, that say that 10 times fast. So that is where our debt is actually being paid off by inflation and inflation is benefiting us. But in addition to that, it gets better. Why? Because we are a packaged commodities investor, we purchased the building materials or the construction materials for that house, that apartment building and we purchased it hopefully with borrowed money. But if we didn’t, we purchased it with cash. Either ways, fine, borrowed is better. But even with cash nowadays, it’s good enough. It’s pretty great, actually. So here we’ve got commodities, what do commodities do? In an inflationary environment? What happens to the cost of concrete, lumber, glass, steel, petroleum products, copper, wire, labor, energy cost, all of those things increase in nominal price, not necessarily in real dollars, although historically for real estate they have remember when I interviewed that PhD on the show a long time ago who was talking about how real estate generally outperforms Inflation by about 3% annually. Hmm, I say inflation benefits real estate investors in two giant ways. But let’s assume that it doesn’t. Let’s assume that like the bank, em like the lending, that the real estate actually is hurt by inflation. So we’re going to take 9% inflation, and we’re going to take that out of the value of our, our return that year, how much was that?
Remember, it was $120,929, we’re going to go ahead and we’re going to take 9% of that, which is $10,884. And at the end of the year, here is our comparison, the income property, even with inflation, without any benefits of inflation only with negatives from it has reduced our return our total at the end of the year we have left in real dollars, is $110,045. We’ve still performed better than the other two. So just to recap, three columns, three investment comparison here, the bank, we’ve got $91,139, the loan, we’ve got 97, where we loaned out money as a hard money loan or a private loan, we were the lender, we got $97,620. And with the income property, we got $110,045. Remember, if my friend lets this money sit in the bank, it’s costing him essentially 25 bucks a day, $174 per week, or $751 per month, folks, herein lies the urgency 2012 is upon us, it is time to make sure as much if not all of our money is working for us. Okay, if you own a business, then you want your employees working. You don’t want them dilly dallying around by the watercooler surfing the internet, doing Facebook or Twitter or whatever they’re doing unless it’s for business you want them working? Why would it be any different for your money, your money has got to work for you all the time, you’ve got to have your money working. If it is not working, it is costing you 25 bucks a day, you know, you could have a darn nice lunch for $25 a day. In fact, you could have a decent lunch and take a friend. This is real money. It is diminishing our wealth if we don’t put it to work. Enough of this. We’ll see you on January 7 Hyatt place in Tempe Arizona. It’ll be a great event. Register now at Jason hartman.com. And let’s go to our case study today with our young investor drew as he talks about what he has done compared to his friends, we’re going to talk a little bit about monetary and fiscal policy and Ron Paul and some other interesting sort of political things here too, and home business. And anyway, I think you’ll enjoy this interview. It’s kind of an interesting conversation with one of our actual clients who’s doing a good job with his investment portfolio. So we’ll be back with that case study in just less than 60 seconds.
Announcer 28:06
Are you interested in a property outside of our network? Do you need a second opinion, no problem, let Jason’s experts evaluate the deal. For more information, go to Jason hartman.com.
Jason Hartman 28:23
Now, it’s my pleasure to welcome one of our clients to the show, he is doing an amazing job at accumulating income properties at a very young age. And well, all of his friends are following the traditional plan of buy your first condo or buy your first house, he’s taken a different tack. And it’s really, really paying off for him. He’s also very aware of politics and the economic environment, so forth. He listens to lots and lots of different podcasts and audiobooks about these subjects. And we constantly talk about them. So I thought we should just get him on the show. Because the other day I was listening to his story. And I thought you probably want to hear this as a listener. Anyway, let’s welcome Drew. How are you?
Drew 29:03
Hey, Jason, thanks for welcoming me on the show.
Jason Hartman 29:06
Well, good to have you.
Drew 29:07
You know, it’s funny that you told me he was he said that I’m I’m follow politics closely. Because my whole mantra in politics is just is very simple as far as people say, Are you left? Or are you right? I always just say, I’m the Leave me alone party, just Just leave me alone.
Jason Hartman 29:24
I guess I’m in the same party you are because my whole mantra about politics is when it comes to there’s an old saying when it comes to architecture and interior design, less is more and graphic design too. And when I say when it comes to politics, less is more because that’s the Leave me alone mantra too. I want to talk about your plan, and what you’re doing for your own financial health and wealth and compare that to what your friends are doing. But before we get into that, let’s talk about kind of the the political and economic environment. What’s going on out there. I guess I’ll just ask you drew, what are your thoughts?
Drew 29:58
Well, you know, I was really interested Following all the debates closely in 2007, when there was kind of that split with who was going to be the next one to take the office, and the thing wasn’t the only one that made any sense to me was Ron Paul. I didn’t even know who he was. I had no I had not seen him ever before. And he was the only one just standing up there saying, Is everybody crazy? Like, you know, you had mitt romney saying, we want to send lawyers over to, you know, Iraq to figure everything out. And he’s like, we have the Constitution. And so it’s funny when you talk about less is more that’s, that’s what Ron Paul had to say was that, you know, a lot of people said, well, you want to go into the White House and not do anything. And his whole thing is, yeah, less is more like, you know, there’s a lot of power in not doing stuff. I mean, and that’s Apple success, their whole thing is not including stuff not doing stuff. That’s how they’re successful.
Jason Hartman 30:51
Well, let’s elaborate on that a little bit. You mentioned Apple, and unfortunately, Steve Jobs passed away fairly recently, a couple months ago, when it comes to Apple. I mean, I think what you’re talking about is simplicity and design. Right? Well, yeah, I mean, like Apple, Apple was the first company to exclude floppy disk drives,
Drew 31:07
they didn’t, they took that out, and it made a lot of people mad. And so they’ve just done a lot of things, you know, seeing what the next road is ahead. But I mean, as far as what the government goes, the the road ahead is going to be far worse than the way it is now. I mean, different meanings, it’s going to get worse. So
Jason Hartman 31:26
I couldn’t agree more. It’s it’s just amazing how far we have strayed from the original intent of the founding fathers and and the Constitution of the United States to where we become this busy body country that is in every body’s business around the world. And you know what, I guess that’s fine. If we decide that we’re the moral authority, and we know better, and we should just go be everybody’s parent and police force and social engineer. That’s one philosophy. But whether that’s true or not, are good or bad. The fact is, we can’t afford it. We cannot afford to have military bases in something like 170 countries. This is insanity. What is going on?
Drew 32:08
Well, yeah, it’s funny, because back in the last debate, Ron Paul was saying that we were building a marine base in Iraq, that was the size of the Vatican. As far as our military presence being completely gone, I know, Obama’s, you know, repositioning troops, and some people say, that’s kind of a political move in order to get reelected, but we’ll see what happens. But yeah, we can’t slay every dragon. And we can’t go after every fight. You know, I mean, we’re just we don’t have the money. And you know, and that’s the thing is, there’s a lot of, there’s a lot of unintended consequences if you try to do that. Well, you certainly certainly make a lot of people hate you. Oh, yeah. I mean, that’s why we got attacked on 911. A lot of people say because of the thing called blowback, we had a military base on the Saudi peninsula. And we were killing people in that country, or killing people outside that country with through the military base, launching mesh missiles and stuff, and got a lot of people, a lot of people pissed. And that was the whole, like, reason that Osama bin Laden came after us was he said, this is like a deadly sin that the Americans have done and will do whatever it takes for them to get out of our country. So what we what did we do we doubled down and went everywhere, right?
Jason Hartman 33:23
Let’s kind of take this into what we’re talking about on the show, which, which is how to create wealth, and have investment success. what this all means to us is that the government is obviously insolvent. But the problem is, most governments around the world are it’s not just us. We can we can yell and scream about how the US is a disaster. All we want. But the fact is, so is everybody else. So I guess it’s just pure pressure. Water seeks its own level, I say that the US is the nicest house in a really bad neighborhood of irresponsible tenants. tenants, right? Yeah. What were you saying? Got it.
Drew 34:02
I got a D on my test. But my neighbor got an F. I’m feeling pretty good.
Jason Hartman 34:06
Yeah, it’s a bell curve. It’s a bell curve. Right? So what what this obviously leads to and regular listeners to the show your regular listener, and most people are regulars, listening as it just leads to inflation. And during the time Obama has been in office, we have increased our national debt by like 50%. You can say george bush was a spendthrift and he certainly was, but wow, he was nothing compared to Obama. And so we’re in a situation now where there’s only I’ve identified six ways out of the mass, but but I think the most likely way out of the mess is to just create more money out of thin air, and tell us how that influences your investment decisions. And then I want to talk about what you’ve done and contrast it with what most people your age are doing. And by the way, are you 27. Now Drew, just turned 2820 year 2828 it’s such an old guy.
Drew 35:02
I keep forgetting it changes every year. So
Jason Hartman 35:05
you got to update your clock, right?
Drew 35:07
Yeah, exactly. Yeah. Well,
Jason Hartman 35:09
I remember I got this one sort of note from a listener once that said, stick to real estate, stop talking about all this government stuff. And I’m like, how can you do that? You would that would be that would be like thinking and talking in a vacuum. The government policy, monetary and fiscal policy have a massive impact on investment strategy.
Drew 35:29
Whenever you’re talking about what the government’s doing and how that all works? And what are everyone’s role is in the government. I mean, I think it comes down to the American dream. And I think a lot of people would say it’s kind of cliche. And I think a lot of people would say the American Dream is owning your home, which I think is a bit of a bit of a distraction, and isn’t necessarily true. It used to be what the American dream was, was creating your own business. That’s a lost art. Now, I mean, and more people are wealthy, because they start their own business than anything else. There’s more millionaires because of the people starting their own small business than anything else. And so I think what the government’s done is they’ve stepped in and tried to manufacture a different American Dream by doing this social engineering and tempting to incentivize certain things and tax other things in order to kind of manipulate the way they want the things want the things to work.
Jason Hartman 36:22
A couple comments here just for a moment, and sorry to interrupt you. First of all, I’m not so sure that more people have become wealthy in their own business than anything else. The distinction I’ll make is this, I think more people become wealthy by investing in real estate than anything else. But a lot of times, those two go hand in hand, because sometimes real estate is their own business number one, or their own business gives them the freedom and, and the money to play at a higher level sometimes, but the pure start your own business statistics, like if you look at the SBA website, Small Business Administration, they’re not good. Lots of businesses fail. They say most 97% of businesses fail in the first year, a whole bunch more fail in the first three years. And if you make it five years, you’re probably going to make it that’s sort of the traditional thinking. But now I want to add on to that, too. And I’m sure you’ll have some comments about this. The thing is nowadays, though, a lot of that was more in the typical traditional idea of your own business of opening up a shop being the shopkeeper nowadays, you can have an online business, a virtual business, and the risk is much lower if if you know what to do. And if you play your cards, right. So just a couple of thoughts to muddy the waters there. Sorry,
Drew 37:39
yeah, no, I would. And that’s how I make my living. Because I sell stuff online. I mean, and I find people online, and I now connect the dots. I mean, I’d be petrified if I had to put down 10 grand, secure lease to then pay a lease and then have a retail location. I’m just too much of a niche. I mean, that’s to be honest. I mean, I don’t have the sort of clients that would be required in a city or you know, in like a small, liberal goona beach. So there’s not enough clients here to support me. So you know, I have to reach to a more global level, so that the internet saved me.
Jason Hartman 38:16
Yeah, it did. And so what you what you rent, your only big rental obligation is some storage units to inventory your your products and so forth.
Drew 38:24
Well, you’ll like this, I lived about 10 miles inland. And I had about three storage units 310 by 20s, salads, I was renting those. And I was driving for what was pretty much an hour to go inland to gather inventory and drive back. So I said this is this, this thing, I got to do something else. So I went looked online, and people are actually renting their garages here in Laguna as a form of storage. And so I rented a guy’s 20 by 20 Garage, that is partitioned in half, and I’m renting one unit. And it’s the same price as what my storage unit it was in England. And what’s the best part is it has an ocean view storage unit with an ocean view.
Jason Hartman 39:13
California. That’s pretty cool. So,
Drew 39:15
Mike, yeah, I don’t I don’t have an ocean view. But my but my storage unit does well,
Jason Hartman 39:19
you can you can always hang out there. So that leads to a good point. Let’s talk about your own plan. We’ll get back to the government stuff, maybe in a moment and the broader picture, but you asked me a few years ago, I think we’ve known each other for maybe four years now about Yeah, four or five years, four or five years. It was it was 2006 or seven, something like that. And we met through Andrew Snyder, one of one of my former employees, great guy and still friends with him. You both of us are and he introduced us in when I was talking to you back maybe I don’t know, three or four years ago, you had asked me several times. I want to move out of my parents house. You were probably 24 at the time, maybe and You know, I want to move out, should I buy a condo? Should I buy my first condo in Orange County, California? And I said no way. Don’t do it. And, and that’s what some of your friends were doing. And I think you were sort of feeling like you were left out a little bit because you saw other people doing that in your peer group. Right?
Drew 40:17
Well, it was weird, because a lot of my friends, you know, we’re getting help from their parents, you know, their parents were co signing on loans for them. And I mean, I didn’t have that option available to me. But at the time, I was making more money than all my friends. And so it seemed like I just wanted to escape from my, you know, from my parents house, which actually plenty I moved to Arizona then and went out there and just saw the insanity at the time. Do you know the market as the market being crazy in Arizona, right? Oh, it was crazy. Yeah, I had a friend that bought a house bought a place out there. And one of these narrow three story townhomes and paid 265 for it. And now they probably can’t get 100. So it’s crazy. So, you know, so I had saved up a pretty decent amount of money. And I didn’t know what to do, because I knew that the government was going to inflate it away, you know, because interest rates were so low. And I just thought, boy, they have to raise interest rates. I mean, that just makes the most sense. But from then to now the interest rates have still been so low and either lower probably well, thinking for the first problem is thinking that the government will do what actually makes sense. Is it dangerous bad? Yeah, it really is. Now, I should start thinking whether it’s not what makes the least sense because that seems to be what it always tries to run after. But certainly I could save that for pretty, pretty decent amount of money. And I didn’t know what to do. And the problem was is that there was so much you know, government reckless spending, but I was just afraid that all my savings was just going to float away and so I kind of was a bit antsy and not sure exactly what to do. So I started looking around and you know, I kind of took your advice and said that you know, real estate is kind of a local market and you don’t have to buy in Orange County you
Jason Hartman 42:03
can look elsewhere. And so what what my advice was just to be clear on this as I said, if you want to move out go and rent a place in an upscale area because you can rent it for such a favorable RV ratio for the tenant rent to value ratio is in favor of the tenants. So well, you you bought some investment properties first, but what you ultimately found as a rental is in Laguna Beach, California, which is a very high end area and I think you’re paying What about 2100 a month or something like that.
Drew 42:34
Now, this is actually funny I what I ended up buying two houses pretty much back to back in August 2010. So it wasn’t too long ago about a year ago. Now these were these are when you say houses, those were income properties you purchase through your computer England properties in Indianapolis, and I found two foreclosures and since I was a cash buyer, so it’s funny because the two houses that I bought as investments, I had enough money to pay my rent here in Laguna Beach. So when I moved there, literally when I moved out of my parents house, the first month’s rent that I got from you know, a check for my you know, agent, I put in on my first month’s rent here in Laguna Beach, so it actually paid me some money and I netted $100 a month, so I didn’t have to do anything.
Jason Hartman 43:29
So let’s compare that to the situation. You could have been in those two rental properties that you purchased through our network in Indianapolis cost about 100 110,000 for both of them, I think right?
Drew 43:40
Yeah, yeah. Maybe like 120 but yeah,
Jason Hartman 43:43
so about 60,000 each on average. Okay, so 120,000 and those were producing income of probably what 2000 a month. Yeah, that’s pretty close. And you could have been the that was that was the the smart option the way you did it was exactly right. But the way most of your friends are probably doing it and just most people in general are probably doing it is they would have purchased a 300 or $350,000 little crummy condo in Orange County and they would have been in debt because remember your house is a liability. It is not an asset. Anything that costs you money is a liability. I love what Robert Kiyosaki his wife Kim says to him, she says, look, you can buy a liability if you want, but you have to buy an asset to counter the liability. So he wanted to go buy a Ferrari. And she said, well go buy an apartment complex to make up for it. You know, and I think that’s a pretty good philosophy Because see, most of your friends are most people just in general in your peer group would have saddled themselves with a property that first of all in Orange County is going down in value. The market outlook not being good, but you looked 1600 2000 miles away in Indianapolis, and you You purchase two properties that were assets that produce income that had rent to value ratios, exceeding probably 1.3, or 1.4% of the price. Yeah, you had to pay 1.5%. That’s phenomenal. You had to pay cash, which would have been even better if you could finance them and get the leverage, but still even paying cash. That was a great deal. You could have taken that money and made it a down payment. On an expensive condo, you wouldn’t be living in Laguna Beach, either you’d be living in Aliso Viejo, or something less desirable than Laguna Beach. And it makes perfect sense what you did
Drew 45:37
well, yeah, it’s funny because a lot of friends now are licking their chops thinking now’s the best time to buy. And, you know, maybe they’re right, I don’t really care. Because to me, it makes way more sense to rent here than to buy. But I mean, we have a friend that bought in a very nice neighborhood, in a suburb in the suburbs in LA. And it’s funny, because what they put down was equivalent to the three properties I now own and paid cash for. So the down payment that they had was how much was how much they put down just for their home there. And I have three homes in India producing income for me. And it’s funny, because the amount of income I’m getting in from my investments is equivalent to roughly how much they’re putting out every month to live in their home.
Jason Hartman 46:23
Amazing, amazing. So in other words, that’s their down payment was probably about $180,000. Right on that housing away. And when you say we, that’s you and your fiance, congratulations, by the way, I know you recently got engaged. And so that’s 180,000, they put down and plus they have a payment that is probably 3000 a month. But you have 180,000 into the three properties in Indianapolis, but you have income of $3,000 a month. I mean, folks, look at this equation, a house is a liability, investment properties, income properties are an asset because they produce as the name would imply income.
Drew 47:04
Yeah, so it’s really given me a lot of flexibility and kind of security. I mean, I work from home. So now I just don’t have to worry about getting a certain amount of income every month to pay off my pay off my rent, because it’s just covered. It’s covered with just two of my properties. And I only have to have a vacancy rate of I can have one vacant the whole time and still have my head above water. So you know, I’m not sure where I’m going to throw the for the chips. Next. I’m debating on the next market to invest in because I don’t want to put all my eggs in the same basket.
Jason Hartman 47:36
But the thing is, I told you diversify. What do you say about Indy? Go ahead.
Drew 47:41
I said Indy just had such a strong rent to value ratio. I just, it’s hard to it’s like a drug addict, man, it’s hard to leave.
Jason Hartman 47:49
You’re addicted to the good RV ratio? Well, you know, as we talked the other day, Phoenix and Atlanta, those are probably the two I consider pretty strongly for for your situation and what you like right at the moment, let me take a brief pause. We’ll be back in just a minute.
Announcer 48:08
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be
Announcer 48:15
Really. Now how is that possible at all?
Announcer 48:17
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.
Announcer 48:28
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
Announcer 48:39
Stocks and other non direct traded assets or a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
Announcer 48:50
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.
Announcer 49:00
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.
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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.
Announcer 49:30
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
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Announcer 50:05
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Jason Hartman 50:22
But yeah, that is a great plan you, you have definitely achieved it. And congratulations, I What’s your goal?
Drew 50:29
You know, as far as next? Well, the problem is, is that I just no one will run me any money. So I have to just because I’m self employed, I mean, it’s totally, it’s totally counter to what the way it used to be. I mean, it used to be that funny because the government was in charge of giving out money. So I mean, back then it was people, instead of people looking for money, there was money looking for people. And so people like me that were self employed would just have a, we would tell them what our income is. And we wouldn’t have to prove it up with every number. Because you know, being self employed, you get to take deductions that people that aren’t self employed, don’t get to take and so I can’t buy anything, I can’t get a loan. So but now with this investment property, I’m starting to get monthly income, so I can show income there. And so I’m just going to try to build up my monthly income through investment properties until I can get a nice size loan. And then I’m thinking about buying like a next would be like a four Plex or something in Arizona, I think that’s the next step. But you know, I have to get my feet wet a little bit with that market. You know, I mean, I like Arizona, I’ve lived there for about a year and a half, you know, it’s a lot different price wise now than when I was there. So I mean, I’m amazed at some of the deals. And the I think I saw a four Plex for like 130, which is crazy. And we have those on Jason hartman.com. And those will generally produce around $2,000 a month in income. So pretty, pretty phenomenal.
Jason Hartman 51:56
We sold a bunch of four plexes out here in the Phoenix area. But there are lots of different opportunities. And I don’t want to talk too, specifically. But you know, one of the things you mentioned about having your own business and about the deductions, this is why anybody listening, if you have a job, W two job that provides just traditional salary type income, you must open a little business on the side, a home based business, because that home based business, even if it doesn’t make much money, you get to take a whole new set of great tax deductions that traditional salaried corporate type employees don’t get to take your expenses are filtered through the business before you’re taxed on them. Whereas with an employee, you pay taxes and then you spend money. It’s a terrible equation. You want to filter them out of business first.
Drew 52:48
Oh, yeah, right. Right. Now I’m right now I’m sitting on my, on my desk in my house, which the government is going to hurt, you know, I get the deduction of an office. And I’m sitting on my computer, which is a work computer, and I’m talking on the phone. So you know, a lot of that stuff when I would be paying for anyways, if I didn’t have that. Yeah, yeah.
Jason Hartman 53:07
So it basically you take a whole set of expenses out of your life. And basically, you get the government to pick up the tab for maybe, depending on your tax bracket, about 40% of the cost. So you’re only paying 60%. So it’s a great deal, folks, you got to have your own business no matter what. Okay, even if it’s a little side business Drew, let’s just kind of close up and talk a little bit more about the government situation if we can, any other thoughts that you have about economics, taxation, monetary policy, Federal Reserve, you know, we’ve had these discussions for hours on end over the years, but I just thought I’d ask you what other thoughts you have on those?
Drew 53:44
Well, I kinda want to ask you some questions. Actually. I think it’s, I think, I mean, you know, a lot of people like Ron Paul, kind of want to go towards the gold standard, which I think doesn’t really work. Because I think there’s too much. I mean, there’s too much money that would, you know, there’s not enough gold to cover all the money. I think maybe his counterpoint would be competition and currency.
Jason Hartman 54:07
Right. Well, competition and currency. Yeah, that’s great. Well, did you have a question there? Sorry. Oh, yeah.
Drew 54:11
So basically, I mean, what would I mean, obviously, I think what’s interesting with that is that there’s more debt than there is money. But you know, how you detangle that mess? I mean, as far as and I know, Ron Paul gets a lot of cheers when he talks about the gold standard. But, you know, I don’t know how you implement that. I don’t think that’s kind of a dream.
Jason Hartman 54:33
I think it is a dream, too. I agree with you. I I don’t think we’ve just gone too far afield. I mean, we’ve created far too much currency or fiat money and currency and money are not the same thing. By the way, folks, those are different currencies. fake money is real. So a gold standard probably wouldn’t work. A silver standard could potentially work. But you know, what, if we just had a balanced budget amendment, if we just had that, that would be huge. But then again, as much as we hate this stuff philosophically, we know how the listeners of the creating wealth show, know how to exploit it, and and use it for their benefit. And that is, you know, to follow my ultimate investing equation.
Drew 55:16
So I don’t think a gold standard is practical either he I’m, I’m kind of I think it’s interesting when people are Well, I mean, and I think as far as gold and silver, I’m skeptical on that. I mean, that’s a wealth, I think, a wealth preserver, but as far as like an investment when people you know, want to purchase gold coins or purchase silver coins, assuming the government doesn’t confiscate them, and they think that’s a form of investment. But I think maybe that’s slightly a wealth preserver. But to me, I think having an active investments like working in my business, buying and selling things, and having an income properties produces income.
Jason Hartman 55:54
Yeah, I agree with you, I think the golden silver, the gold bugs, that is just a defensive strategy, what we do with income property investments is an offensive strategy. And, yes, listen, I would rather have gold coins than dollar bills, because the dollar bills, they have no intrinsic value, they’re just Fiat paper in ink, but the gold coins, they do have a tradition of intrinsic value for sure. It’s a 5000 year old tradition. But again, it’s a defensive strategy, it’s nothing more than a hedge against inflation. Whereas active investments like income property, because they’re multi dimensional, they offer an offensive strategy. And, of course, they’re the most historically proven wealth Creator of all,
Drew 56:39
yeah, and it’s interesting as far as kind of creating wealth, because I, I sort of saw with all my friends that if they went to, you know, the route that their parents went, they pretty much lost their shirts, I mean, from investing in the stock market, to putting a down payment on the first house, and a lot of my friends that, you know, went after, what their parents did, and what worked for their parents, they got their clocks clean, and they didn’t, they, they lost their shirts. So it’s interesting how the game is changing. And I think what you have to do is be proactive in order to counter what the government’s doing. And if you’re not, you’re just gonna put your money under your mattress, and the government’s gonna, you’re gonna wake up one day and the money is going to be all gone. Yeah, the The interesting thing about that, you know, if you put the money in the bank or under your mattress, or whatever, is that nobody has to actually physically steal it from you to steal it from you. In other words, they can just destroy the value of it. Because it’s a it’s a it’s just a notional value.
Jason Hartman 57:37
It’s a symbol, it’s not real. And and I think what’s real are commodities is a very much a resources and commodities person, everybody needs stuff. Stuff is what makes civilization of course, stuff and ideas, good ideas, I should say, fiat money is a bad idea. But again, we’re here to exploit them, not change it, because I don’t think we can change it. And you know, people need stuff if you if you just go about your daily life, look at the amount of stuff you use, or you’re engaged with. It’s all about things and material items, things have value money does not I should say things are money, currency does not have value. Right? Yeah. I
Drew 58:20
mean, and that’s, that’s why I mean, I’m telling you about these storage units that I have with inventory in them. And I mean, there’s a lot of security in having those storage units and having that inventory, because I can, you know, I can always sell it and get my money back. And I can always sell it and make a profit. And so I like I’m very comfortable when I don’t have all the cash. And there’s kind of this Balancing Act of, you know, do I want more inventory? Do I want more cash or more inventory more cash, and usually, like, get enough cash saved up, that I can buy another investment property I just been, you know, and have enough for a rainy day fund,
Jason Hartman 58:56
I’ll just throw the money at that. So it’s kind of kind of a balancing act on what I’m going to do. So your whole thing is like, How quickly can I save the next 60 to $80,000, so I can get another property. And that’s exactly what you do. And you’re doing a great job of that I got to congratulate you for being the ripe old age of 28 years old and starting this plan at about 25 I guess it’s been a great plan for you and you’re way ahead of the game, you’re getting 50% more than your monthly housing expense, where you live paid for by your income properties, and you own them free and clear. So it’s just a phenomenal plan income property investing absolutely works. Did you have any other questions for me?
Drew 59:36
Well, you know, it’s what’s interesting, as far as owning these properties free and clear, because it’s funny how, you know, you can hold title, but the government just essentially taxes you every month for for living there. I mean, it’s it’s funny how the government can get away with owning your property and you still get taxed. I mean, I think it’s funny like when, you know, I think ron paul was at one of the debates and, you know, somebody said, Are you for the flat tax and he said, I’m going to tax rate to be so flat at zero.
Jason Hartman 1:00:07
But what’s funny about what what are you saying? You know, I mean, are you talking about how property taxes represent a perpetual lien on one’s property and we never really own anything. All these people out there are following this terrible plan of like paying off the house in which they live. And I’m a renter now too. And I live in you know, I’ve talked about on the show, I live in this gorgeous penthouse in in Arizona, and it’s brand new. And I’ve owned three houses in Newport coast, California, bunch of houses in Irvine, and I lived in Southern California for pretty much all my adult life. And moving here, everybody says, Well, are you looking to buy something and I’m like, No, I’m involved with a whole lot of rental properties. I’ve got, I’ve got lots of people that are tenants of mine that are producing income for me, and these properties producing income. And I just love being a renter, because the place I’m in the RV ratio is so much in my favor. And even if you own your house free and clear, you never really own it, because the government always has a lien on every piece of property. And that’s almost a worldwide phenomenon. That’s true in most countries as well, not just the US where property taxes just represent a lien. So if you do have property, and you can get financing against it, lever it up and get long term fixed rate financing, because inflation is coming, and you don’t own it anyway. And I’m sure when the time comes, when you can do it, when you stop taking every deduction you can out of your business, and maybe drew gets on the grid, okay.
Drew 1:01:41
Instead of off the grid, then you’ll be able to get financing when the financing market eases up, and you can refinance those properties, pull the cash out and buy more. What’s funny, as far as you know, the government having a perpetual lien on your property, we, of course, just to tease that we were sort of looking around at home, homes around here, because we’re thinking about when we get married, we’re thinking about getting married on the beach. So we were walking around and trying to see what the best spot was. And there was an open house. And so we went through the open house, and it was a nice two bedroom house that was on the water. And it was really nice. But we found out that what the purchase price was was, I think 3.7 million here in Laguna Beach, or two bedroom house,
Jason Hartman 1:02:23
and what a two bedroom house for 3.7 million. Wow.
Drew 1:02:26
And, you know, I was thinking about that the government gets about $3,000 a month from the person that was there that owns that place. So that’s fun, that’s some people’s, you know, house payment.
Jason Hartman 1:02:40
But here’s the here’s the other reality of it is that if that property were for rent, I bet you could rent it for 10 grand a month. And that would be a much better deal than owning it. And that’s the point is that you’re much better off owning a bunch of income properties in diversified locations, and renting your own home. The only time This isn’t true, is if you live in one of the markets you can find on Jason hartman.com. Okay, and you live in a property that’s priced in that price segment. So if you live in Phoenix, and you live in $110,000 house that makes sense to own it. But if you live in Phoenix and you live in a $500,000 house, it makes more sense, it starts to make more sense to rent that house and own other rental properties. Because think about it $500,000 could produce well over $5,000 a month in rental income for you. And you could probably rent that $500,000 house in the Phoenix market for Oh, you know, I’ll say 20 $500 maybe, and just do the math on that. It’s it’s a phenomenal deal. Any other thoughts or questions, Drew?
Drew 1:03:51
You know, I think I think that’s it. I have a few other ideas jogging around in my head, but I don’t want to run around in circles.
Jason Hartman 1:03:59
Yeah, sounds good. Well, hey, thanks so much for joining us on the show today. And thank you for sharing your plan, what you’ve done so far, and what you’re planning to do in the future. And I just think you’re right on track. And I really congratulate you for it. And while all of your friends are struggling to make their house payments, and they’re on this perpetual treadmill or as Robert Kiyosaki calls it the rat race, you’re, you’re free. I mean, you’re basically a free man now where you can you can go you can move to another area where an opportunity might present itself. Yeah, maybe your fiance Katie has offered a job in another location, your mobile, you can move. That’s a great thing. And you’ve got those properties producing income for you, regardless where you go. So it’s just an awesome thing. So congratulations on that. And thanks for joining us today. Drew.
Drew 1:04:47
Boy, hey, thanks a lot, Jason for having me on the show. Yeah, I would just recommend anyone to to get a hold of your indie rep and talk to her about getting an investment property out there. I mean, maybe you might recommend other things for different people and what position they’re in. But to me, I mean, my experience was very positive. And since then I’ve referred a couple of my friends and family to purchase out there. And they’ve had pretty positive experiences, too. So I thank you.
Jason Hartman 1:05:16
Excellent. Well, thanks again.
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