In this episode, Jason Hartman shares what’s happening with the home builder stocks. He explains why the rising rates are not as impactful as a lot of people think. Afterward, Jason plays a recording of Adam providing a portfolio review. These are actual profit and loss numbers that are from properties bought through the network.
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 multimillionaire 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 on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome to Episode 1663 1663. And one other way to judge the housing market? Well, there are many ways, but one way is to look at home builder stocks and interest rates, of course, because these are very sensitive, just as the housing market is to interest rates in general. But you have heard my enormously gutsy and neat I say brilliant prediction about what will happen with interest rates? No, it’s not the same bad prediction I made on interest rates 1617 years ago, no, this is a different kind of interest rate prediction, my bad prediction years ago, which I freely admit, I was wrong. Wrong. Wrong. Wrong. Jason, you were wrong. Yep, bad, bad work. That prediction was that interest rates would be higher. And yet, they have only gone lower. But we did have to severe economic crises in there to push those interest rates down. You never know it’s so hard to tell. Interest rates are a tough thing to predict. But But this prediction, as you will recall, is simply this interest rates will go up, because now there’s almost nowhere else for them to go. Right. That’s the first prediction. And it will cause people with these incredible mortgages, the 10s of millions of people that have either refinance, or purchase, it will cause them to hodl like the Bitcoin people that don’t sell right, that that funny word that they made up, it will cause them to hold on to those properties. Not because they love the property so much, but because they love the mortgage so much. That mortgage asset will be duplicatable. It will be impossible to replicate, like the Mona Lisa, which is overrated. Until I watched a video over the weekend and I gained a new appreciation for the Mona Lisa. Do you know Leonardo da Vinci studied the facial structure of the human body. He went and looked at cadavers and studied them to see how the bones and the muscles around the smile work? Yes. That is why there is such controversy over the Mona Lisa smile. I never knew I went to the loop several times, I saw the Mona Lisa. And I thought, What’s the big deal? What’s so great about this, there actually is a lot of great stuff about it. I did not appreciate until over the weekend, when I watched a lesson learn more about it. You appreciate things more when you know more about them a lot of times, and that is the same truth that applies to the housing market, and the economy and the marketplace. You appreciate it so much more when you have a deeper understanding. And so that’s what we hope to share with you here on the show.
So from investopedia got their little newsletter and it says here, home builder stocks, underrated by interest rates, investors bought up shares of state street’s home builder index ETF x h B is the symbol today sending it to new highs. Meanwhile, interest rates climbed to yet a another high today as well. Now that you know compared to what is always the right question, because that high is still very low in the overall scheme of things. And remember, people are going to hole these super cheap mortgages they’re not going to sell their properties. That’s my prediction. This is going to further constrain inventory. See most people are thinking of this wrongly, wrongly. if they’re thinking of it wrongly they’re not going to win big lee that’s how trump would say it and scott adams the dilbert creator wrote a book called winning bigley which was all about trump another story there we won’t go down that rabbit hole but anyway it’s kind of funny when bigley they will hold these properties and they will further constrain housing supply versus everybody out there saying oh when interest rates go up the markets going to crash i know we’ve heard it all over and over again and they’re not completely wrong but they have to understand there is nuance to this they think that when rates go up well the market’s going to crash because people will be priced out housing affordability will decline that’s all true they’re right about that but they’re only looking at the demand side of the equation not the supply side and i say and i’m gonna be right about this if i’m wrong just come back and throw a pie in my face now just so you know i actually prefer pumpkin pie because of pumpkin pie a slice of pumpkin pie in the fall with a scoop of vanilla ice cream hmm that’s good stuff and i don’t even love ice cream that much but you know with the pumpkin pie it’s great maybe warm the pumpkin pie up a little bit after you take it out of the refrigerator and have a little scoop of vanilla ice cream oh that is so good so when you throw the pie in my face make it a pumpkin pie because that’s my favorite other than that um chocolate all day long but that would mostly be in the form of something else not a pie anyway so interest rates up right and what this article is saying the 10 year treasury right that’s the bellwether rate right the 10 year treasury has been climbing strongly since the start of the year creating a steeper you know what i’m gonna say yield curve we’ve talked all about the yield curve and what it means and when it becomes inverted what that means right you know we talked about that is that like is there a recession coming it’s been a good indicator and you’d have the dice that went up to because there is a recession in some parts of the economy certainly not in the housing market definitely on my forehead there’s a recession yeah i noticed that my forehead keeps getting a little bigger and the hair keeps retreating and right there’s a recession i’m telling you it’s a recession all right that is a steeper yield curve in the markets have seen in many years all right now what does that all mean well the article goes on to say as i’m just skipping down here it will be interesting to see if this dynamic continues even if mortgage rates which are typically tied to the tenure note the 10 year treasury the bellwether rate continue to rise this would spell a bullish move in that sector however it would be extremely unusual and the article says the bottom line as interest rates rise right along with homebuilding stock prices investors are signaling that they expect demand to continue even if the cost of borrowing increases it would seem to be a bullish indication for the market in general but some companies might find it challenging to manage the balance between supply and demand let me just interpret that for you here’s what so many people miss they don’t get it they don’t get it they’re not too smart when they miss this here’s what it is they assume that there is a certain kind of a parity between a particular house and a particular buyer of that house but that is just wrong wrong wrong why is that wrong the article says they think they’ll see demand continue even if the cost of borrowing increases well yes it will be demand but not from the same person or the same family buying the house you know you commonly get this question with this sort of very shallow thinking that look our brain takes a lot of energy and i get it thinking is hard work you know i think it’s been said that of your whole body right all the stuff that your body uses energy for that instrument, the most incredible instrument in the universe, between your ears consumes about 20% of all of the energy in your body, you wouldn’t think that thinking would be such hard work, such energy consuming work, but it is, it is really, really hard work to think. So, we will typically ration our energy. And we won’t push ourselves to think think think it’s the most productive work, it’s the most rewarding work. But it also really does consume a lot of energy. So people have shallow thinking a lot of times they don’t think about this stuff. And in this example, what they’re not thinking about the thing that is the the unseen, right, the unseen thing that they’re not thinking about is there’s not a parity with one house one buyer. So for example, today, you’ve got someone out there looking at a $200,000 house, maybe they’re a couple, and they got two kids, right, you know, the typical nuclear family. And so they’re looking at this $200,000 house, but then interest rates tick up 1%, making that $200,000 house, basically 10% more expensive.
Okay, so what do they do? Are they still a buyer for that house, maybe they can no longer qualify for it. So they still have to look for a another house, but they will no longer be able to afford the same house with the extra bells and whistles that the old one they could have afforded had because interest rates went up and affordability declined. That’s the thing that few people really pay attention to. They somehow assume there’s this parity, if you look at the socio economic ladder, and you’ve got, say two ladders side by side, when I do live conferences, for those of you who’ve seen me speaking live, you may have seen me draw this on the whiteboard. You know, there’s these two ladders side by side. Well, people move up and down the socio economic ladder, and houses move up and down the other ladder in terms of what can be purchased at what price. So the fact is, when rates rise, and if supply, demand is still out of balance, causing prices to either hold or continue to rise, even in a rising rate environment, which certainly has happened many times throughout history. If that happens, it simply means something has to give what has to give for the homebuyer, well, standard of living, the standard of living has to decline, they’re just not going to get as much as they were going to get in the past. And that’s the way it works. So there’s no parity between the same consistent homebuyer, in the same consistent home. Those things are both dynamic. They’re both moving targets, and they change all the time. But if you want more money, and you want access to more money, here’s what you need to do. And we just did a survey on this. Last year, just about a year ago, this time, we offered a live webinar. And we’re doing it again, because we got some very nice comments on our survey. We had a whole bunch of clients sign up for this program. We did a survey and ask them what they thought about it. There are more results probably trickled in since I looked last time, because we just sent it out last week, but the comments were really positive. And so we thought we should do this, again, we’re doing another live webinar showing you tomorrow, how you can obtain up to 50 to even up to $250,000 in extra funding. Now, what could that buy you? Well, that could be a few more down payments on a few more properties. And it can be arranged as business credit. So it doesn’t even show up on your credit report. A whole bunch of our clients signed up for this. And now that we have the survey results back, a whole bunch of our clients loved it. So we’re gonna do a live webinar tomorrow. And then we’re going to do it again one more time this week. You just go to Jason hartman.com slash fund. This is brand new, it’s a live webinar, the founder of the company will be there to answer questions live. I did say that enough, right? That it’s live. Okay, you got that. And we got a couple different times for you. So just go to Jason hartman.com slash fund Join us for that webinar, you will really like it. And you’ll like how you can very easily obtain some extra funding for whatever you want. But hey, I would say you might want to buy a couple extra properties with that funding. But if not, you can buy something else. You can buy whatever you want. There’s no requirement on how you spend that extra funding. And if you learn how to work it, and work that system that they’re going to teach you on the webinar, you can make that interest free funding. It’s pretty darn cool. PB see pretty darn cool. PDC Yep. So join us Jason hartman.com slash fund.
Now, today, this is not your usual client case study. This is Adam, who now is one of our team members. But he was a client at first. And he bought a bunch of properties. And he is going to go over how his return has been produced on his portfolio. And you’re going to hear the good and the bad. And he’s really got specific calculations. So you’re really going to like this, you are really going to like this today. So without further ado, let’s go to Adam. And let’s hear a whole different kind of client case study that is way more specific. And I must tell you also, that since this was recorded this session with Adam, he has purchased a couple of other properties. One of them, he said he reached out to me maybe last week or the week before, and he says, Jason, I think this one deal that I bought through your network could be portfolio changing. It is a portfolio changing deal. It’s so good. So listening, here we go. Remember the webinar, Jason hartman.com slash fund. And here’s Adam.
You ready for the portfolio review?
Jason Hartman 16:59
Yeah, let’s do it. Let’s see what happened to you, Adam.
This is yes, these these are my personal properties, we got all the 2020 numbers, then Now obviously, there could be a repair done, you know, repair could be needed between now and the end of the year. But as of yesterday, or two days ago, when I put this together, these were the actual numbers for 2020 for each of our properties. Okay, so
Jason Hartman 17:22
we’re gonna see, we’re gonna see Adams real portfolio.
Okay, so this is our first one of our properties in Jackson, Mississippi, for the year, so I’ll explain a couple of the numbers. Number one, the cash on cash on the bottom right here that says 77.96. What I started doing in my spreadsheets is I have way too many data figures in my spreadsheets to begin with. But I started thinking, you know, what we look at how our, you know how the money we put into the stock market did in 2020 Why don’t I look at the money that I actually put into my property and 2020 did. So I started putting in all the money for repairs and pi, my total mortgage payment. And I just put my cash flow over it to see what percentage return on the money I actually put into the property got some it was something I did it was curiosity. So this property
Jason Hartman 18:14
Adam, this is this is incredible. So when did you buy this property?
Um, beginning of 2018
Jason Hartman 18:23
maybe Okay, so you’re almost three years old now. Okay. And did you refinance that property yet? No, we haven’t
refinance any of these.
Jason Hartman 18:34
Oh my gosh, it’s gonna get so much better when you refi Do you know your mortgage rate on this?
I’m pulling it up now. We we haven’t had it in the price point and the amount of money we have in it right now. Didn’t make refires the most didn’t make them make sense. At the moment.
Jason Hartman 18:53
Let it make sense now though.
Yeah, so we got so just so people who aren’t watching can see we
Jason Hartman 19:02
have a for the year we had a two watching and see I like that that’s that’s good.
Cash Flow on this property we made $4,853.88. And cash on cash for the year was 77.96%. And the lifetime cash on cash. So this includes closing costs. It includes every dollar we’ve ever put into the property is 24.29% and
Jason Hartman 19:31
24.29%. Overall cash on cash for the last three years. cash on cash return. That means the comparison of how much cash you put in to how much cash you got out. cash on cash return is a very simple metric. And that includes every dollar you’ve got into this in cash on cash return this year. 77.96% Adam even I is quite bullish right now not believe you so you got some you got some splaining to do as ricky ricardo would say i love that we got to get a sound effect of ricky ricardo say luzi you got some splaining to to
look at it this way we had 2% maintenance our mortgage payment is about $450 a month and our management fee is $50 our our interest rate on it is 4.75% and what is your rent our rent is $917 wow we’re looking at you’re getting $400 a month cash flow on average on this property and you’re looking at you know 500 $500 a month between mortgage and maintenance and then or mortgage and management and then 2% of that is is maintenance on this property so that’s how you get your 78% cash on cash for the year
Jason Hartman 20:59
yeah that is amazing and that is amazing
that was a note not all of them are this great the other one in jackson didn’t do so hot this one
Jason Hartman 21:07
here we go now we’re going to even it out and average the portfolio so what went wrong here
yeah so we had a tenant who stopped paying and did a lot of damage to the property and then it became vacant right at the start of COVID okay so it was vacant for three months and not an ideal time to go vacant yeah we
Jason Hartman 21:29
had taken two months in the COVID you would have been okay because the lockdowns would have lifted yeah and he would have had someone moving in there but yeah yeah
so maintenance this year with the rent we collected it was 35% now obviously that’s skewed by the fact that we didn’t have rent for four months but the cash flow we lost $2,516.93 it is it was a negative 31.61% cash on cash but lifetime for this property we’ve still got a 4.67% cash on cash return
Jason Hartman 22:04
okay so you definitely outperformed the best cd you could get at the bank by 500% or more but let me ask you a question is that crazy high maintenance number of 35% ouch okay let’s we need a sound effect for that bomb ouch that hurt but with that art is that maintenance or some of that capital improvements i would argue that i’m gonna guess you’re gonna say that some of that is capital improvement cap x that is going to last for many years to come that’s not maintenance only
okay so it’s it’s it’s every dollar that we spent on the property now it was
Jason Hartman 22:47
you spent it just you know did you put in new flooring new paint when we we had
to put new drywall we had to paint the house because they put holes and stuff
Jason Hartman 22:58
where they punched the holes in the wall like put their fist
there were huge chunks of drywall missing from the walls i don’t know what happened adam did
Jason Hartman 23:07
you file an insurance claim that’s an insurance claim
well it wasn’t enough to file an insurance claim but we did file a that we had a judgment against them and we went after him and we got some money back and we came to a settlement with them
Jason Hartman 23:20
Oh wow good and so tell us about that how much was the judgment for and how much did you end up settling for
So the judgment was for about 1500 16 $100
Jason Hartman 23:31
Yeah so they did it before we probably could have gone back to court and gotten a better judgment i think they just did the judgment before the courts closed down honestly and before we knew the total cost of the repairs but we got the judgment there and then all i did was i got the judgment and i googled you know rent collectors or you know collection agents like some agencies in jackson mississippi found one that had decent reviews contacted in their charge was $75 to start it and then 25% of collected money so i thought you know if i get 100 bucks out of it then i break even they went after him and i believe we settled for about half it was like seven or $800 they offered to pay and it wasn’t worth you know continuing the fight to risk not getting that money they said we can pay it today so i said take it okay good good okay so this maintenance also covers the new lease up fee every dollar we put into it
Jason Hartman 24:37
Yeah okay so you’ve still made money on the property but for this year you got some tax write offs there and i’m saying that in a sort of snarky way you don’t want to ever get that type of tax write off but let’s go on to the next property because we’re already almost at an hour here so
little rock this property we had to do some fixes to it to make it to qualify for section eight there are just a couple things that cost a little bit to get that up and ready to go so it’s still positive cash flowed $898.95 we made 11.65% on the cash we put in the property and then the lifetime cash on cash is at 3.15%
Jason Hartman 25:17
okay awesome congratulations so there you’re getting almost 12% annualized cash on cash and remember cash on cash doesn’t include inflation and do step destruction it doesn’t include tax benefits it doesn’t include appreciation okay so his return is considerably higher than that even on the bad property that had problems so you know he’s just doing straight cash on cash you know that’s a one dimensional return rather than the multi dimensional okay go ahead sorry the
first property we ever purchased through the network okay it is in memphis we had a 4.45% maintenance on the property we had a $3,728.36 cent profit for the year a 70.46% cash on cash return for the year one time cash on cash is 34.67%
Jason Hartman 26:16
awesome that is phenomenal
yeah this this property has been a cash cow for us
Jason Hartman 26:22
and how long ago did you buy that one
four years ago
Jason Hartman 26:26
okay so four years yeah so just so you know adam why don’t you tell them your story how you came to know us and you know came to start investing with us and then you came to work for us you know you’re i mean you’re you’re helping clients you’re part of the team
yes so we were introduced by narration which a lot of people probably know is another one of the investment counselors i started editing the podcasts and i’ve learned about real estate some over the years i used to work at a financial radio station and so we had real estate shows there and i was curious about it and but once i started editing all your podcasts and hearing all your interviews i thought well you know this this could make sense you know i i needed to learn more about it so i started learning more and more about it and then one day aaron and i were my wife we were discussing how we were actually going to make retirement work and you know stock market who knows you know and so we thought you know maybe we’ll we’ll buy a property and so i boxed you late at night one night and you responded and told me you know what you’re invested in the stock market when’s the last time you went and you know checked out their books and visited their their site yeah so then we decided to buy this property said you know what’s the worst the worst case scenario this was a cheap property this property was $53,000 when we
Jason Hartman 27:45
wow $53,000 now if anybody lives in california or new york or you know south florida and they’re looking at the year just incredible yeah
so so we decided you know worst case scenario it burns down to the ground we still haven’t lost a ton of money on it right that obviously would hurt it’s not the worst case
Jason Hartman 28:08
people when they have a disaster like that they make money on their insurance claim so you know it’s it can go down though
yeah we started buying and loved it and started getting good returns and eventually jason and i talked and i thought you know what i want to help other people build their portfolios because i’m really i mean look at these numbers i’m clearly enjoying the returns that we’re getting on the on the money we put in so far so that’s kind of my short and sweet story so our other our second memphis house this one had another vacancy we had to do some some repairs to it i was not this some of this was also like we had replaced a refrigerator on it we had to do some make ready way to do some yard work on it and we then i like i mentioned before we also have our rent our lease up fee included in the maintenance just because that’s i should just put expenses instead of maintenance but so we had an 18.27% expense on the property it’s still cashflow $813.84 we still made 22.76% on the cash we put in in 2020 and lifetime for the property we’re at 8.79% cash on cash
Jason Hartman 29:22
wow you know i mean if you just i even folks let’s not even get greedy here well let’s get greedy we might as well but if you can make 810 12% a year for several years you’re killing it i mean you killing it you don’t have to make 34% like one of adam’s other properties or 76% like the other one you know just eight to 12% you’re gonna do great i mean now that depends on the inflation rate over that time period as well but it’s pretty good yeah congratulations wow do things to adams numbers are great and put a thank you in the comments and any questions for adam sharing this personal stuff so thank you adam
yes our final memphis property this one did pretty well it had a maintenance of point five 9% literally all we paid for was the walkthrough inspection on this property this year cash flow of $3,614.92 a 39.68% cash on cash for the year and a 22.15% lifetime cash on cash but this property since we’ve purchased it has appreciated approximately 40% so it’s been it was in a nice area and it’s appreciated great so all in all for 2020 these six properties got us $11,393.02 and cash flow we made 34.88% on the money we put in and 2020 and we get to depreciate $17,160 on our taxes wow so we lost five and a half $1,000 according to the irs
Jason Hartman 31:07
Okay adam first touching and then and then that is awesome congratulations and thank you so much for sharing that that’s that’s really it’s just great to see and by the way folks i didn’t know what adam was gonna go through when we started this today you know i just sort of leave it to him and you know he that’s the first time i’ve heard him talk about this so that. That is awesome i love it i love it or we’re spontaneous here and and robert says thank you adam so so that’s great and we’re getting some other good comments anything else you wanted to go over adam before we wrap it up do you have any more in your deck there
Nope, that’s it. The next slide is just the thank you.
Jason Hartman 31:58
All right. Well thank you to everybody. We really appreciate you joining us.
Thank you so much for listening please be sure to subscribe so that you don’t miss any episodes be sure to check out the show’s specific website and our general website hartman mediacom for appropriate disclaimers and terms of service remember that guest opinions are their own and if you require specific legal or tax advice or advice and any other specialized area please consult an appropriate professional and we also very much appreciate you reviewing the show please go to itunes or stitcher radio or whatever platform you’re using and write a review for the show we would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes we look forward to seeing you on the next episode
In this episode, Jason Hartman describes the sad state of retirement savings in the USA and explains that retirement saving recommendations overlook inflation’s impact. The second part of the show is a client case study with Curt Moe. He shares why he started looking into real estate, explains the importance of overcoming limiting beliefs, and expresses how cash flow has helped him in his life.
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 multimillionaire 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 0:52
Welcome to Episode 1673 1673. Thank you for joining me today. So the nagging question is how much have you put away for retirement? Actually, given our brilliant listeners, I bet this is not a big worry for you. But if we have massive inflation, which finally, as Jason Hartman has been saying, for quite a while, it seems like the popular consensus is that that is coming our way. Now, I guess last year, was the straw that broke the proverbial camel’s back, right? When you print 20 to 35% of all dollars ever created? Ever. In one year, people are starting to believe there might be a problem. Hashtag hungry, hashtag why Mar Germany, hashtag Zimbabwe? Hashtag Argentina hashtag Venezuela? Why do you put hashtags in front of them? I don’t know. It’s just kind of cute. Go on Twitter and search those hashtags. You’ll see it. But the question is, that’s a moving target. Now, the numbers I am about to share with you, ladies and gentlemen, do not mean cash. Well, I don’t think they mean cash. The sources I’m getting them from, don’t say, but I just think they mean available wealth that is convertible to cash in a reasonable amount of time. So I would include equity in real estate. But remember that equity is a moving measuring stick to because it becomes debased by inflation. And, of course, it becomes potentially at risk with market cycles. And that’s why you will engage in the Hartman, equity stripping refi till you die strategy. Because we have talked about that for so many years now. And you’re doing it, you’re doing it, you’re taking advantage of it. Okay. So let’s look at some numbers. So I found a chart from one of these financial planning outfits. And it talked about, you know, the amount of money people should save based on their age, and they’re doing it as a multiplier of income.
Now, the methodology, you know, I don’t know how they arrived at this, but I would assume this is somewhat, and I think it’s a reasonable assumption, that it’s somewhat industry standard, if you will. So by age 31, time, your income by age 43 times your income 55 times your income 67 times your income 79 times your income. So you see that this is not any kind of a one for one ratio here, right, but by at 11 times your income, and based on the typical income of they’re saying about, you know, household median incomes about 61,000. So, if you’re 30, you got 60. Well, 62,000 in the bank, hopefully, or saved in one way or another, your 40 180 886,000 if you’re 50 310,000, if you’re 60 $434,000 if you’re 70 $557,000 if you’re at $681,000. But I don’t believe this really counts for the ravages of inflation, which is on our doorstep, I would say on the doorstep, waiting outside waiting to come in. And Rob our house, our house of wealth will be robbed by the burglar casing the joint. That’s that’s inflation right So, what is the actuality? Right? what is reality? That’s the recommendation. Okay. But what’s the reality? Here’s where we need to get really, really concerned. Why do we need to be concerned? Well, number one, if you’re like me, you don’t want to live in a banana republic. No, that’s not the store, which by the way, I highly recommend I do shop there myself, check out the Lux touch t shirts. They’re the best. And they’re not expensive either. So I recommend, boy, how much did Banana Republic just make off that free advertising I just gave them. You know, I hope they send me a gift card, because I’ve earned. Okay, anyway. So by age 40, to 49, right in that 10 year span. So this could be essentially an almost 50 year old 41% of those people have less than $50,000.
Now, some have more, but I’m going to go with the downside. The banana republic, by the way, is obviously a country where you have a small number of people who are very rich, and the masses who are very poor, and there’s no middle class, that’s a banana republic, the US, as I’ve been saying, for 20 years is quickly becoming a banana republic. And California specifically, is really becoming a banana republic much more quickly than many other states. But I like a big middle class, I don’t like a banana republic, look, even if I’m rich, I don’t want to live in a banana republic, because it’s not pleasant. I want my fellow citizens to be doing well and enjoying a nice lifestyle. And, you know, having that big stability of a big middle class, that’s a much better world to live in. I mean, the old saying, right, even if you win the rat race, you’re still a rat. Well, particularly true in banana republic countries. Now that, you know, that old saying really refers to people who are still on the treadmill and haven’t created wealth through investments following our plan. These are people that are on the treadmill, and they earn money, and then they spend it all and they buy expensive toys, and those are depreciating assets and luck. You can buy those depreciating assets if you want, but only after you have other assets that will pay for them for you. Right? That’s the thing. Don’t become debt laden with the appearances of wealth without having the real wealth to back it up. That’s the key. Okay, so 41% of the country from age 40 to 49 years old, has less than $50,000. Okay, ages 50 to 59 37% of the country has less than $50,000. Now compare that to the recommendation. So the 40 year old should have $186,000, the 50 year old should have 310,041%. You know, granted, I’m looking at two different charts.
So they, uh, you’re either way, irrelevant, right? But 41% has less than 50 grand. And then when you go to the next decade, if you’re 60, you should have $434,000. Well, guess what? 37% have less than 50,016% in that same cohort has only 50 to $99,000. Okay, let’s go to the 60 year old 69, cohort 28% less than $50,000. Wow, that’s really, really sad. And so let’s look at the 70 number. Nine times income. $557,000 is the recommendation. And 28% have less than 50,000. Now remember that less than number could mean they have $1,000. It just has less than 50,000. It doesn’t say how much less? Right? That’s the lowest segment in this chart I’m looking at. So folks, things are dire. For many, many people. The best way to help the poor is don’t be one of them. And you know that sounds like a sarcastic callous thing to say but it’s actually quite true. Because these people, the vast majority of people will be putting a huge burden on the system. And some just won’t get aid because our government is obviously broke or Government is printing fake paper in mass 20 to 35% of all dollars ever created created in the last year. Remember, the two primary value drivers for anything according to yours truly scarcity and utility, scarcity and utility, if something is not scarce, it becomes less valuable. And the more abundant It is, in many cases, especially with money, or currency, the proper word is currency, not money, the less utility it has, because fewer people think it’s valuable if there’s so much of it. Right. And I’m not saying so much of it in a good way, I’m saying in a debased way, meaning the governments and the central banks have debased it by creating such an abundance of it.
This is not abundance in a good way, this is abundance in a inflationary way. So there you go, something to think about, okay, we’ve got a nother client case study today. And that is our note, here’s the important thing about this one, this is a good case study. Here’s why I particularly like the client case study you’re about to hear. I like it. Because he’s not doing it in some big way. He’s not saying hey, I want to I want to go get rich and make, you know, $10 million. He’s just doing it at us in a very sort of basic, incremental way, you know, listened to the podcast for nine years, bought his first property. And then a couple years later, bought another property. And now is buying another one. I think he’s closed on that one now. So I think three properties in right, not a big deal. This is not a pie in the sky story. This is a very, very realistic story. But you see how after a job layoff that could happen to any of us? Well, wouldn’t happen to me. I mean, sort of could slowly right. I remember I was with my girlfriend at the time, Lynn and her father, Jerry, she was saying something like I was talking about how bad the real estate market was. It was really tough cycle. And I was in traditional real estate way back in the day. You know, her father, very wealthy guy had a big company. She said, Well, you know, we were talking about all the job layoffs, right? And she said, Well, Jason, you can’t get laid off. And her father says, Well, he gets laid off one at a time. You know, he was right. Meaning that there’s just not that many real estate transactions going on. So you’re basically getting laid off one at a time, or you take a listing on a house and it doesn’t sell. And it’s on the market for a year, which I experienced a few times, property just won’t sell, the seller won’t get realistic about the price. And the buyers just that they vote, they say that we’re not paying, sorry.
So that’s how you get laid off. And if you’re self employed, you do get laid off. Anybody can get laid off, right? Everybody has a boss, remember that? So when you have that, and you just have to one or two properties that provides a security blanket for you doesn’t have to be a big thing. Doesn’t have to be a big giant portfolio doesn’t have to be a dozen, two dozen, three dozen houses, right. I mean, some of our clients have been on the show, you know, they got dozens and dozens of properties, right? You’ve heard those case studies. The thing I like about this one is this is just a super duper realistic, anybody could do it case study. So it’s Curtis, Mo. And here he is. It’s my pleasure to welcome Kurt Mo. today. He is a client and this is a client case study and his is special in a lot of ways. I think you’ll like it. Kurt, welcome. How you doing?
Curt Moe 14:01
I’m doing great. Thanks for having me, Jason. Yeah, happy to talk about real estate and whatever else. It’s good to have you on. And
Jason Hartman 14:07
you know, we talk a lot. We’re messaging back and forth frequently. I guess. You know, I first came to know you about three, maybe four years ago, I think I remember when you messaged me. And you said something that was really cool. Do you remember what you said when you introduced yourself?
Curt Moe 14:25
I don’t I
Jason Hartman 14:27
remind you remind you that you said hey, Jason, my name is Kurt Mo. I’ve been listening to your podcast for nine years. And I finally bought a property. And I’ve been working with Sarah and that’s what you said.
Curt Moe 14:42
Jason Hartman 14:44
Yeah, that was awesome. I remember it and it just makes me think, you know, some people, you know, they hear the podcast, they find us on YouTube, whatever. And they jump right in and do stuff in some you know, they got to warm up to it for a while. So tell us about your story and where you first started. listening to this show, I think it was when you were serving in Iraq. And by the way, thank you for your service. Tell us about that.
Curt Moe 15:06
Yeah. So I, you know, I went to Iraq and Oh, 607. And yeah, had a lot of downtime. And that was also like, you have time to kind of think about what what I want to do next with my life. And I had been working in coffee shops for like seven years. And during that time, I was like, I’m done with this. But I didn’t know what I wanted to do. And I just started going through the whole Kiyosaki library. And I think I read at his at that time, all of the rich dad books, and then started, you know, podcasts were brand new thing, and I stumbled upon yours. And after reading his books, and listen to your podcasts, and some others, I knew, like, hey, I want to get into real estate. But at that time, and when I came back, I had quite a bit of consumer debt and some student loan debt, and some core beliefs that I had to address also. So you know, that was, Oh, 607. And then, you know, I sent you that first message in like, 2017, when I bought the first house in Memphis, that was really just, you know, in that 10 year period, it’s, it’s, it’s a struggle, a mental struggle of wanting to invest in real estate so badly, but having to address that debt first. And I didn’t pay off the whole debt before I got the house. But I got it down to a point where my monthly payments were enough that I could save more, where everything didn’t have to go to the debt payment,
Jason Hartman 16:18
which debt Are you referring to?
Curt Moe 16:21
I had credit card debt, I had some student loans and stuff.
Jason Hartman 16:24
So tell us about those core beliefs that you had to change and why that was impactful?
Curt Moe 16:29
Sure, sure. I had a pretty rough, young childhood, and just a lot of ingrained stuff in there that maybe I wasn’t deserving of wealth, or I wasn’t deserving of, you know, a quality life. And that’s something I’m very open with it about people these days. But it’s something that you know, you’re saving, and you’re saving, and you want to you have this goal you want to get in real estate, but you’re always coming up against these beliefs that in your core says you can’t do this or you aren’t, you know, worthy enough to do this. So that’s, you know, that’s just another piece of the pie that I had to get through. And just like a lot of people say, once you get that first property, it’s like, Okay, I’m ready to do 10 more.
Jason Hartman 17:07
Yeah, yeah. Well, that that’s great. And then, you know, just fast forward a little bit. So well, first of all, maybe we’ll talk about these beliefs a little bit. But I want I want to make sure, Kurt, that you talk about that other message, you left me that I will never forget, where you were changing jobs and relocating, and how, you know, just having two properties, no big deal, not a giant portfolio, not 50 properties, how it really, really, I guess we’re going into it now. But we’ll get back.
Curt Moe 17:38
to backup Just a minute, I got the first house in Memphis. And then shortly after I moved down to Tennessee, and you know, I just said, Why don’t I move to where, you know, it’s a great market. And I’ll really start to learn things and and understand Memphis. But one thing that really opened my eyes, there was, I got a different job in Memphis, but I ironically got hired at the exact same rate I was making in Minneapolis, high tax Minnesota, went down to Memphis, no state income tax, and just from that move, again, making the same amount in my salary, I was still able to net around $500 a month, just from the no state income tax. And that really opened my eyes to what the lower taxes can do. And now, interestingly, you’re living in Puerto Rico that has the best tax deal on planet Earth. Yeah,
Jason Hartman 18:28
we’re an American citizen. If you’re not American, you can do all kinds of stuff. But Americans are kind of trapped, because the IRS taxes you worldwide, except Puerto Rico, they give you a big exemption. So congratulations on that. But just to also explain you’re an IT professional, right. So you enter information technology, you know, saving six grand a year on taxes was significant, because in a couple years, you can add another property your portfolio, right?
Curt Moe 18:56
Absolutely, absolutely. It was it was incredible, especially it really, the numbers really helped. I mean, I would have preferred more money when I moved to Memphis, but just that the fact that I was getting the same amount and pay, but my my checks were like, or at least every month was like 400 extra dollars or 500.
Jason Hartman 19:11
Your cost of
Curt Moe 19:12
living wasn’t right that to that to that too, but to the message that when when all this pandemic started, I was actually in the middle of switching jobs, and was kind of nervous about things. But I remember the message and I said, maybe not a confidence, but I did have a fear and anxiety. And I just said just from having these two houses, you know, plus the income and savings that I have, you know, I know I’m feeling a lot better and a lot less anxious, and I don’t have to worry about as much as I would need to if I didn’t have this passive income coming in. Even if it got to the point where I didn’t it was a really weird transition because my new job really delayed on bringing me on board where I was taking just a week off between jobs, and it ended up being five weeks because they didn’t know what to do. As coding was starting,
Jason Hartman 20:01
so you know, switching you were switching as the COVID thing was becoming a big deal. Yeah. And so they delayed your hiring. Yeah, that’s when having the two rental properties made you feel more secure because he had the income from them, right?
Curt Moe 20:14
Yep. Because I thought at any day, companies were starting to downsize already. This was March, April. And I thought any day, they’re just gonna say, Hey, we need to downsize also, and we’re not bringing on new people, or we’re going to a hiring freeze, I was convinced that was going to happen until that laptop arrived in the mail for me to start working for him.
Jason Hartman 20:32
And now you’ve got a third property underway. Right?
Curt Moe 20:34
closing Thursday. Yeah. Okay, I’m gonna fly back to Charlotte, because unfortunately, the government doesn’t let you wire money electronically, with some banks. So I gotta, I gotta fly to Charlotte close, and then I’ll fly back.
Jason Hartman 20:46
Cool. So basically, you’ve you’ve done a property per year, right?
Curt Moe 20:50
Just about I mean, it’s been, I’ve really had to bootstrap, you know, all my savings, and you know, cash flow, it’s all going into to the next down payment. But I think I’m at a point now with this third one, especially where I can really accelerate it. And yeah, and that’s just the power of compounding, you know, adding one property and then the next and as long as you you know, you don’t have to live like a popper. But as long as you keep rolling your profits into the next down payment, you know, you can really accelerate it. And of course, like I said, after the first property you want 10 immediately, but, you know, part of the learning process is, you know, the patience, you have to exercise, you know, to get to the next one in the next year.
Jason Hartman 21:27
This is definitely an addictive hobby being a real estate.
Curt Moe 21:31
Yeah, yeah, definitely. Yeah. Good, good
Jason Hartman 21:33
stuff. You talked about those limiting beliefs. Do you want to circle back to that at all? Because I think that’s really important for a lot of people. And it’s amazing, you know, it’s this difference between context and content, right? For example, you know, fish, they live in water? Do they notice the water? Well, we don’t know, because we can’t read their minds, right, but probably not. You know, we live in air, do we notice the air? We don’t really think about it too much, unless really bad, right? But everything in our lives is generated out of this belief system we have. And that’s why it’s so incredibly important to manage one’s belief system, isn’t it?
Curt Moe 22:15
Absolutely, absolutely. And they really, you know, you can have unlimited beliefs, and you can have limiting beliefs. And I definitely had limiting beliefs. And I, you know, it came to a point where, you know, I just accepted my past and really dove into those. And it’s, it’s the thing where I’ve read and read the prosperity books, and the wealth books, and the finance books and the Tony Robbins, but until you really, you know, look at yourself, and confront those beliefs. And, you know, I recommend if they’re bad enough, see a therapist, I’ve done that. And I still do that. And it’s extremely helpful for me.
Jason Hartman 22:49
But most therapists, though, aren’t going to be prosperity conscious, though, are they?
Curt Moe 22:54
No, no. But if you can address like beliefs of like, shame, and guilt that you may carry from your childhood, where that was the repeated message that he received? I mean, absolutely. It’s going to carry over into other things a life, you change it in one area, and then then it’s your diet and your health and your exercise. That’s, you know, it’s lifted also.
Jason Hartman 23:15
Right, right. Well, you’re definitely a health conscious guy, I’m sure. I mean, I met you when you came out to our meet the Masters in 2019. Right. Ron Paul, you’re Newport Beach, California. And the funniest thing. You sent me a message right before the event we haven’t met yet. But it was a another, you send some funny messages I love and this message was funny. He said, Hey, Jason, let me know if you need any help with the event. You know, I’d be happy to work security. Thank God, if I need security, I’m in trouble. But if you’re not watching this on video, Kurt is a big buff dude. So he could handle security for sure.
Curt Moe 23:59
I wasn’t always I wasn’t always Yes, I was upwards of 250.
Jason Hartman 24:04
But But you know, what applies with health and weight? And with prosperity and with all these things, doesn’t it? You know, we
Curt Moe 24:11
just relationships? Absolutely.
Jason Hartman 24:13
Yeah, absolutely. Yeah. You know, they say the most important conversation any of us will ever have is the conversation we have with ourselves. And we’re just talking to ourselves all the time all day long. Are we Yeah, yeah. So share with how the changing these belief systems just anymore on that, you know, did you change the conversation with yourself? What was the only one what’s the new one?
Curt Moe 24:37
Oh, definitely. Definitely. I mean, the old one, you know, one of the messages I got growing up was you know, everything I touch breaks that was a troublemaker you know, I got into trouble all the time. And a lot of things broke, you know, when I
Jason Hartman 24:50
so it wasn’t it wasn’t unproven.
Curt Moe 24:52
No, it wasn’t untrue. But then when you hear that repeatedly, it gets ingrained in you and I told told my sister The other day I said you I carried a lot of pain for a long time. And I think, you know, a lot of people who knew me knew, but I’m just I’m just very open to sharing these things now, especially during these COVID times, because I think a lot of people are hurting and they need, they need that stigma removed of, you know, things like depression and things like mental health that we’re human, we go through this stuff. Yeah, you know, if you know that someone else has gone through that, and you’re going through it and trying to hide it or or just keep it in or you’re, you’re scared to even admit that you have it here in one person say that that’s what changed my life A long time ago.
Jason Hartman 25:33
It’s interesting that you say that, because I read a post on social media this morning. That circles right back to what you’re saying. It said something to the effect that suicide is not a selfish act like some people have said that it is right. But it’s the final symptom of a disease known as depression. It’s so sad when that kind of thing happens, right? But it’s true. Everybody goes through these difficult times these rough patches in their lives. You know, it’s just helpful to know that it’s normal. And people go through it. Right.
Curt Moe 26:09
It is and you know, social media does no favor when you have curated, you know, someone takes 100 photos and posts the one that just looks awesome, right? And we’re constantly seeing that, and then you’ll mentally or consciously or unconsciously comparing ourselves to that, you know, I’m a big, big recommender of, you know, getting off Facebook, which I’ve done recently. And you know, anything else that you overall it’s like, when you look at social media is the tangent. It’s look at it as the overall and for me, it was a net negative. over the whole time and years that I used it, it was a net negative, you know, I got I got less out of it than I gained.
Jason Hartman 26:44
Yeah, I’m starting to think the same way. You know, when I’ve been, I don’t know if you’re, we’re still on Facebook together. But I’ve been posting a lot of things since I got restricted. I got put in Facebook Jail for saying, quote, they just want a fair election. Apparently, that was blasphemy, Kurt. And so I’ve been really outspoken lately, and I was thinking, What if they kicked me off? And I’m thinking it might be a blessing. Because that comparison trap is is bad? Well, you know, is it always bad because sometimes the comparison thing makes us strive for more, right? We
Curt Moe 27:22
need to have our heroes and our idols, but I don’t know how to really break it down into words, but there’s that there’s the heroes and idols. But then there’s the I don’t know what social media does to it, it’s, you know, it’s that YOLO life, it’s the, you know, I was in Guatemala recently, and I saw some folks taking a photo and I was like, and I just kind of jokingly walked by them. And I said, you know, you know, guys, life doesn’t wait for Instagram. And the girl immediately replied that pics or it didn’t happen, you know? Well, it did happen. And when I go on vacation, I take photos of like nature and stuff. But what I don’t take photos of is up in my head. And I don’t worry about not posting an ad or something like that, and getting all those likes. So
Jason Hartman 28:03
I think one one way to think about that is, you know, go ahead and take the photo, if you want to take the photo, right? For those of us old enough to remember there was a time in life when we didn’t take photos all the time, because it costs $1 a photo. And if you adjust that for inflation, you know, that’s probably like five bucks today. Okay? Taking photos was expensive, it was something to be used conservatively. But go ahead and take the photo, and then put your phone down and experience it. Take in the beauty of whatever you’re looking at right
Curt Moe 28:34
now. Life is happening, you know, regardless of what’s going on in someone’s state, or someone’s country locked down in regards of lockdowns and stuff, life is still happening and people are still living it. And it’s out there for for anyone.
Jason Hartman 28:47
Yeah, it certainly is. Okay, so these beliefs, do you feel like you overcame them? Or is it something that you always have to just constantly work on and remind yourself of,
Curt Moe 28:59
you know, with other things I’ve gotten, you know, where you make a little progress, and you’re like, Oh, I got this. And I’ve done that with with core beliefs. And, and I think just the the cautious approach and approach I’m taking it is just to assume that it’s something that I’m going to have to work on, at least for a long time. Maybe not lifelong, but it’s important to me enough, and I’ve gotten so much value and I’m just a completely different person from you know, addressing them and working on them that I get value when I when I do really dive into them and things like yoga and meditation. I mean, anytime I do yoga and meditation to start my morning, the day, at least the first half of the day, whatever happens. I’m still super chill. And and it feels great.
Jason Hartman 29:40
Yeah. And in your line of work. There’s a lot of things that go wrong, right? Yeah, definitely, definitely. Well, what’s your plan for your real estate portfolio?
Curt Moe 29:50
I remember doing the I don’t know if you remember the five year plan. I think it was before the 2018 meet the masters or I forget when we did that, but I had the Ric Flair costume When I did mine, but then I think mine then was a property’s within five years. And that was 2017 or 2018. And I know I can still hit that. So I got till 2022. So once we get this next one, I think I can accelerate and maybe refinance the two that I’ve had. And really just kick that into gear. I’m not a huge, like, definitive gold person, but I just keep progressing, you know, and everything I’ve been doing since 2017, is just funneled into the next property.
Jason Hartman 30:27
That’s awesome. That’s awesome. So before you picked up the books, and started checking out the podcasts and so forth, why real estate why income property? What brought you into that?
Curt Moe 30:39
I really don’t know. I think anyone listening I was thinking about this as we were getting, you know, as the days were approaching for the for this interview, and I was thinking anyone who has gone down a rabbit trail of podcasts, or maybe they found you from George gammon, or someone else, and they found the Jason Hartman podcast, be thankful that the stars aligned to get to hear or maybe they didn’t, but they’re on you know, listening to some other podcast. And I don’t know why I got into real estate, you know, once I started reading, and it made sense, passive income, this looks nice. You see that Roberts cashflow quadrant, okay, I want to be in this quadrant. In real estate seems to do that. It’s just the rabbit trail, I guess. And if you follow it, and you follow the direction it brings you, I think good things will happen. It’s like listening to podcasts and and just being a YouTube junkie for like George’s channel, a real vision and other stuff like that. You know, if you really make that as part of your life, you can’t not be changed somehow, because of it. It’s impossible not to as long as you’re absorbing it, and you’re not just sleeping, sleepwalking, you know, as you’re listening to the podcast. So I mean, it’s not a great answer. But you know, I think life leaves a little breadcrumbs to trails of positivity, as long as you follow on your like, good things are gonna happen as long as you take some action.
Jason Hartman 31:54
Yeah. And, you know, I guess part of that is not specifically about income property or real estate, but it’s just becoming more financially focused. And some people Kurt might view that his work, right. But other people just think it’s interesting. You know, it’s an interesting thing. I mean, to me, it is at least studying investing and economics and stuff like that. I remember years ago, I took a community college night class with my mom, and I was only in high school, at the time, I was a senior in high school. And I took like, our real estate finance class or something, you know, we met some different people. And you know, I remember meeting this one, like, rich guy, and he talked about how he owned all these, I think bicycle stores. And I recognize the brand, because those stores were all over. And, you know, he had all this real estate and stuff. And I asked my mom, I said, Why is someone like that here? You know, why is someone like that working on investing in working at all? And she said, it’s just interesting. What else? Are you gonna do? You know, be interested in something? You do? Yeah,
Curt Moe 33:07
I had a co worker and a good friend, we were chatting earlier. And he knows I’m flying to close out the property on Thursday. But he’s like, you know, what’s your goal, you know, retire early. And I said, Well retire in the sense that if I want to walk away from a nine to five, I can, but I’ll still keep working on something like I enjoy the the fulfillment and the sense of achievement, you know, that you get from, you know, a day’s work or, you know, saving up to get your next property? I think we need that. Yeah, you know, as everyone knows, or I’m sure everyone’s heard something, you know, if people who don’t do anything after they retire at 65, you know, they’re kind of gone with, you know, they’re off this world and a few years, you really need it
Jason Hartman 33:44
to live you do you got to be engaged. That’s the people who live the longest and the healthiest are engaged in stuff. If you like, financial freedom, you might as well be engaged in the area of finance and investing, right? Any lessons you learned along the way, I’m sure there have been some that you can impart or share with people listening, you know, any technology that you’re using any apps, any tools or resources or anything like that to do better at investing?
Curt Moe 34:14
Yeah, well, I mean, real simple, is stay out of debt. And if you’re in debt, address it immediately
Jason Hartman 34:19
except for mortgage debt, right, except for mortgage debt,
Curt Moe 34:23
off that consumer debt and do what you can do the Dave Dave Ramsey method, the snowball method is what I did. There’s a lot of great calculators out there, where you can see visually, I think one of them is like, snowball calculator calm or something along those lines. And you can see visually the breakdown of when you’re going to pay off each if you pay off this much extra per month. And then once you can just start saving for that first property. You know, I waited a long time almost a decade for that first one, but I mean, that first one has changed my life and the path since then, has also as far as tools a tip of the cat to drew Baker dipped my In self management, with the one house hack I did in Memphis, so I, I use tools like, smart move for my background checks. And then I use. What’s the direct deposit? One? I’m trying to remember now.
Jason Hartman 35:12
Curt Moe 35:13
cozy. Yep. I use cozy for direct deposit.
Jason Hartman 35:15
I’m on the show. Yeah, but your use property tracker, right?
Curt Moe 35:18
property tracker? Yep. Product tracker is great, especially when it comes time like right now to get your schedule, even your tests makes it a lot easier. And yeah, I don’t know, there’s so many so many. You know, that’s one of the other, I guess affirmations I’ve been telling myself lately is there’s the world’s full of trustworthy and safe people. Not all of them are trustworthy and safe. But there’s tons of them, and people who want to help. And I think that’s another belief I had to get over is being comfortable asking for help, you know, asking for assistance on things, not just living in my pride that I can figure it out on my own. There’s groups like, like Jason Hartman, other tools that can make it happen. And you know, along to Drew’s line of self management, that’s easier than it’s ever been. Yeah, you can cut out your property manager. If you feel comfortable. I still use management but I, I self manage that one.
Jason Hartman 36:06
So you self manage one of the you have two now and you’ll have three soon you self manage one of the two, right?
Curt Moe 36:13
Yep. And I’m gonna put the next one under. under management also.
Jason Hartman 36:18
Good, good stuff. And I agree with you, you know that there are most people are good people. You know, most tenants are good tenants to the vast majority of them. There are definitely some scammers and shysters out there, we’ve all been burned by them either at one time or another, maybe multiple times. But I came across a good quote. And I have to credit one of my social media friends, again, some good things out of it. And I took a screenshot of this because I liked the quote so much, it said, the rich get richer, because the poor think every opportunity is a scam. And there are certainly a lot of scams out there. But you got to balance that you got to take some risk, and be willing to try things and sometimes not gonna work and you’re gonna get burned. That’s just reality. It’s just odds, right? It is.
Curt Moe 37:09
And it’s like, I don’t know, if it was the previous episode or two episodes ago, where you said, Look, what the Fed is doing, and what central banks doing is absolutely terrible. But what are we as individuals going to do to change it? So we can do what you always say, which is align ourselves with the most powerful forces? That is no demand?
Jason Hartman 37:27
Yeah, right. Right, these these governments and central banks, they’re not ethical, what they’re doing, right, but we aren’t going to change it. So we might as well just align our interests with theirs, we’re not part of it, we’re not doing it. Okay. It’s not like we’re gonna commit the crime with them. But look, they’re going to do certain things, nobody, but nobody’s gonna stop them. Okay. And we might as well just ride on the coattails of what they do. And that mean grit, get those big, long mortgages, and don’t pay them off, don’t pay them down, let those mortgages make you rich. And I want to make sure you distinguish that because you said pay down your debt. And you don’t mean the good debt. Right. Right.
Curt Moe 38:10
low interest debt, that’s, you know, tied up to a house. Absolutely. That’s the good stuff.
Jason Hartman 38:15
That’s the good stuff. Good. Good deal. Tell us about your military service. And again, thank you. I mean, you were, you were in the action
Curt Moe 38:22
tells me I didn’t kind of I never you know, I was logistics, the MLS for any other military guys is 88 November, you know, we were the core transportation hub for everything going on in Iraq, and you know, come in, things would come in through Kuwait before there, it was a wild time, great experience. And for jobs like mine, you don’t, if you don’t need to go off base, you don’t go off base. So I didn’t see any, you know, action, you know, as we, you know, see in the movies and stuff. But one thing that was really nice anytime you do run into a guy who drove truck, you know, trying to dodge IEDs and suffer an infantry guy, you know, you have a talk with them. And you know, our job, we kind of knew our place, but it’s like, you know, I’m just a logistics guy. But everyone in the military knows that nothing happens until something moves, some type of equipment, people or things move. And that’s a fact.
Jason Hartman 39:13
You know, that’s interesting. That’s a good metaphor for life and investing, isn’t it?
Curt Moe 39:17
It is, it is. Yeah,
Jason Hartman 39:18
yeah. So until you take action, and you know, start buying properties, nothing happens, right? You can learn about it, you can think about it. And that’s all great. get educated. But you can’t do it.
Curt Moe 39:32
You got to do it at some point.
Jason Hartman 39:33
Yeah. You know, you
Curt Moe 39:34
don’t have to wait nine years. But if you do, you know, it’s, like I said, I’m still very happy that I’m on that path. So
Jason Hartman 39:41
Kurt, thank you so much for sharing your story. Thank you for your service. And it’s just always great people love when they get to your client case studies from real people like yourself, and I’m just really happy for you. So keep up the good work with your investing and any any final words to wrap it up.
Curt Moe 39:57
I can’t go without tip of the cat to ask. Jackson, who, you know, we were at that the Memphis property tour. I think it was 2017. And, and he told me, he’s like I cashed out my 401k and buy 10 houses and what?
Jason Hartman 40:12
Yeah, and I was on the show talking about that.
Curt Moe 40:14
Yeah, he’s great times. And that kinda is like, okay, I can I have a little bit of my 401k I can do something here. And so he just that little conversation also played a big part in me getting that first house. So yeah, I always appreciate Yeah, that’s awesome. Thanks
Jason Hartman 40:28
so much, Kurt. Really appreciate you being on the show. Thank you very much, and happy investing my friend. Thanks, Jason. Thanks for having me. 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 heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
Adam joins Jason Hartman in this episode to answer some listener’s questions. The topics include profiting from inflation, why banks give out loans, the best market to buy income properties, options if you can’t get a fixed-rate mortgage, and a decrease in housing prices.
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 multimillionaire 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 0:52
Welcome to Episode 1675 1675. And thank you for joining us. Adam is here with me today. It’s great to have him back. We live stream every two weeks, but he hasn’t been on the podcast in a while. So we thought we would take some of the accumulated questions from the YouTube channel and other sources and get those answered for you, Adam, how’s it going?
It’s going well, and it’s amazing when you blow up on YouTube and you get you know, 30 plus 1000 subscribers that question start rolling in?
Jason Hartman 1:30
Well, it’s not just the number of subscribers, by the way, which we thank all of you for subscribing to the channel. But it’s the amount of time people are spending engaging with the channel. Do you know, last month, people spent over 7 million minutes watching our YouTube videos. And that’s just on one of three YouTube channels we have. So we are really glad you’re enjoying the content folks. One of our videos, by the way, has become very viral. I think it’s close to 500,000 views now just on that video about inflation. So check that out, check all the other stuff out. Let’s tackle some of those questions. Because a lot of them have been accumulated and we need to get to them, right?
Yeah, if you want to, if you want to feel good about your content, just say no. 7 million minutes is 13.3 years spent watching your stuff last month. Jason? Wow.
Jason Hartman 2:24
Oh, my gosh. That is amazing. Wow. 13 years. Okay.
So let’s go to that popular the most popular video How to profit from massive inflation ahead. We have one from Terry clevenger. He’s a little skeptical. He said, I watched the entire video, and only God that you need to go further into debt in order to profit from massive inflation ahead. I have no way to buy income producing property and then have the tenant be unable to make the monthly payment. How do I profit from massive inflation ahead? Basically, I guess you’re closer to the money. Terry, I don’t know about what Jason’s gonna say here. But I would say the concern about the tenant not paying in the current environment has been alleviated somewhat, if you look at what the government is doing, the government has essentially become your partner in a way they’ve never done it before. And said, if your tenant can’t pay, you don’t have to pay either. And that is a game changer. When it comes to owning investment property, you’re really getting a bigger backstop, even more than just incredibly cheap interest rates, you’re now getting incredibly cheap interest rates, and an out that still involves you keeping the property which has never happened before.
Jason Hartman 3:45
Yeah, that’s true. I do want to make the distinction, though, Adam, you’re referring to the mortgage and the forbearance programs. But even without a forbearance program, you know, during the Great Recession, and just all the time, you know, on no matter what the economy is doing, people are always renegotiating with their lenders, doing strategic defaults deciding to stop paying their mortgages, because it’s quite a process for the lender to foreclose. They don’t want to foreclose. You know, they will many, many times work with you. So you know, I call this the nuclear option. You don’t want to do it, but just understand that it is always there. Right? That’s always there. But the broader question, I think, is one of, you know, how do you do this if you can’t buy income property, right. And when you have the income property, understand that it is the most historically proven asset class, it’s the most tax favored asset class in the United States. I just love it. It has enriched my life tremendously. And 10s. If not, while really hundreds of millions, maybe even around the world, billions of people over the years have been very, very much enriched by owning income property. Because of the Inflation induced debt destruction strategy that we teach, you can really turn this income property into an authentic passive asset, right? Where you can offensively play the inflation game and really win with it. If you can’t buy income property, you can do some defensive things. And what those usually entail is buying gold or cryptocurrency, right? Those are the typical strategies or commodities, really, of any sort, are the defensive strategies, right? You know, you could buy silver, you could buy other commodities, you could buy lumber, right? There’s an endless list of commodities. But the point is that in an inflationary environment, understand what’s really happening, most people just think of inflation as well, prices are going up. That’s a symptom of inflation. It’s not technically what inflation is. Inflation is an expansion of the money supply. And remember, as I’ve been teaching for many, many years, there are two value drivers for anything. And the first one is scarcity. And the second one is utility. So the reason currency, and notice I didn’t call it money, I call it currency. The reason currency has value is because of its scarcity. And its utility, right? When they start making so much of it, creating it out of thin air, printing it out of thin air running the printing press, then the value has to decline, because it’s less scarce. Now, it still has utility, but that utility declines with its abundance. Okay, you know, look, diamonds are more valuable than sand. Because sand is more plentiful than diamonds. They both actually have utility, okay, diamonds are used in industry. And they’re certainly used in jewelry, obviously. And sand is used in industry. And actually, there is a shortage of sand compared to the historical thing, because so much concrete is being used around the world to build homes and other structures. But certainly Everyone knows that diamonds are more valuable than sand, because just scarcity alone, right? So just understand that. But the way you want to play this strategy, as outlined in the video is off offensively by owning good quality income properties where you own all those commodities, the lumber, the copper wire, the petroleum products that the concrete, the glass, the steel, and you have the beautiful four letter word. And that four letter word is debt debt, my favorite four letter word, and you can often simply benefit from inflation by using debt. And that’s all explained in the other video in detail. So I won’t go into it here. But that’s a great question. So I’m glad Yes,
yeah. And it’s also important, Terry to remember that when you’re talking about not being able to afford the mortgage payment if your tenants not paying, that’s one of the things we look at when we look at markets, and you need to be sure that if your tenants not paying you are in a market where you can get rid of your tenant, you know, if you’re in a state, that’s not going to let you get rid of your tenant, then you know, it could take six 912 months to get them out of your home. Or you can be in a state where the government works with you. And they’re out in 3060 days, something like that, right. And then you know, you need to make sure you’re going into the right markets. What Adam means there is that we look at and we help investors invest nationwide, and we vet markets, and one of our vetting strategies is we want to look for landlord friendly markets, where the regulatory climate, the judges, just the whole vibe of the place is friendly to our cause as landlords, we don’t want an environment that allows tenants to be deadbeats and leech off of you. Okay, in California, New York, Washington, DC, you know, many of these other left wing places,
Jason Hartman 9:11
you have a very landlord unfriendly market, we want to avoid those areas. Now, there are many other things we look for as well, that’s just one of them. But thanks for bringing that up, Adam.
Yeah, a lot of our places, you know, if they’re five days late on their rent, you can technically file an eviction notice on them. So you know, you can definitely set yourself up for better success doing that.
Jason Hartman 9:32
Absolutely. And, you know, understand that when people don’t obey their contracts, civilization falls apart. So there is nothing wrong with telling people look, they got to live up to their contract, because it’s a daisy chain effect. If they don’t, if the tenant doesn’t pay you, you can’t pay the lender. And if you can’t pay the lender, their bondholders suffer, you know, or those mortgage backed securities of whatever type this stuff matters. I mean, people just have to keep their agreements. That’s the way the world works. You know, you can’t have this domino effect. Okay, next question.
Yeah, we’ve got Kluver Bucy saying, Hi, Jason, great comment about taking mortgage debt and paying back with cheaper dollars. But if it’s such a good deal for you, why would banks give you a mortgage? Don’t they have a lot of smart people working for them? Great question.
Jason Hartman 10:22
So yes, banks, the banksters. They do have a lot of smart people working at banks and on Wall Street, of course. But remember, they are rarely holding these loans in their portfolio. The loans are sold off in the secondary market, to these government sponsored entities like Fannie Mae and Freddie Mac. And basically what this does is in the United States, ever since come, we came out of the Great Depression, back in the, you know, the late 30s, or I guess, the 40s, when Fannie Mae was created, I don’t know the exact year offhand. I, I used to know I just can’t remember, these government sponsored entities are essentially putting you in the position where you’re getting a welfare benefit as a landlord, okay. And the homeowner, homeowners get it too, right. But but small landlords that invest in single family homes get this benefit as well. So your investment is essentially subsidized by the government. So congratulations. You know, finally, Look, you’ve been paying into the system, you’ve been paying taxes all your life, right? And you’re finally getting something back. You know, I like to joke, I’ve, you know, what, actually, I can’t say this anymore. I did take some government money, just last month, it was sort of against my religion the first time around a year ago to take a PPP loan. But I said, you know, I’m getting my money to I’ve paid taxes, I paid millions of dollars in taxes in my life. And I want some money back. So I got $16,000.
Much, someone standing in the corner holding out 16 grand, you’re a fool not to take
Jason Hartman 12:03
it right. You are a fool not to take it. So I did take a PPP loan. I think that’s the first time I really took any government money. Look, folks, I don’t even have a library card anymore. Okay, so I don’t get anything. I just pay. And, you know, I get the services that government offers that everybody uses. But, you know, again, you have the right to it, right? So look, the government wants you to provide rental housing to people take advantage of these, these programs. And to answer your question, though, the banks don’t keep the loan, they sell it off. And then after that loan is sold off on the secondary market, it’s bundled into pools of mortgages and sold office securities. So you know, it just goes down the line, it’s just this big game, the banks essentially make money on the points that they charge and the loan origination fees that they charge, and they make a spread from the rate at which they borrow to the rate at which they lend for a small amount of time. Okay, this is a very murky world, okay? Because they don’t do the same thing with every loan at exactly the same time. Banks have, what’s it look at, I’ve owned a few mortgage businesses in my life. I’m not in that business now. But they have what’s called a warehouse line where they fund the loan, and then they sell the loan off of the line is the way they say that, you know, it’s a whole murky thing. But the banks aren’t really lending you the money for 30 years. in almost any case, it’s extremely rare that that would happen.
You also have to look at their whole business model is based on giving out loans, and what you’re looking for in return isn’t necessarily what they’re looking for in return isn’t necessarily what their clients are looking for in return. I mean, if you’re looking at it that way, why would anybody ever buy a treasury? Why would you agree to that? It’s just some people’s portfolio and some people’s investment strategy. Leads it to where you know, getting a three 4% return is absolutely fine for them. Yeah, so everybody has different strategies. It’s there, enjoy it.
Jason Hartman 14:08
Take advantage. One more thing, and this is a little bit down the rabbit hole. Okay, so we’re not going to have time to go into this. This is a subject that it took me years to grasp, endless, endless amount of studying on this topic. It’s so esoteric and so hard to truly understand what’s happening here. But I’m just going to save the phrase, and you can listen to my creating wealth podcast, my YouTube channel for more on this because there’s a lot more to it if you want to go down the rabbit hole, but here it is, you’re ready. Here it is. Money is lent into existence. That’s how money or really currency is created in the kind of system we have and some of you heard We say that that money is lent into existence and you’re thinking, Oh, yeah, I get it fractional reserve banking, fractional reserve lending. You know, I challenge you, as I’ve been studying this for a couple of decades now. I don’t even really totally get it. This is so esoteric when you go down the rabbit hole, there is so much to it. A good start is to listen to the episodes I’ve done with maybe G. Edward Griffin. He’s been on many times, he wrote a famous book called The creature from Jekyll Island, I took my mastermind group to Jekyll Island, Georgia, we had our event in what’s called the Federal Reserve room. And that’s where the people met and created the Federal Reserve. There’s just a lot to that topic. It’s quite fascinating. But there’s a huge incentive for banks to lend money because the system doesn’t work unless they lend the money into existence. So they have big incentives to do that, in many ways. Alright, let’s go on. Alright, so
we have another one from Rick darsky. He says, Hello, Jason. Excellent video, it will make my fave five list one question. Well,
Jason Hartman 16:09
Rick, Rick, it’s not your number 111 video. So I’m in the top five. Okay, I’ll take it. But I want to at least be in the top three, Rick.
So when is the best time to buy rental properties, low rates with the high purchase price or higher rates with a lower purchase price? Or just jump in when you have enough for downpayment and closing costs? Thanks for helping out the common man.
Jason Hartman 16:34
Yeah, that’s an interesting question in here’s the thing about it. The great thing about income property is that when you buy it, that deal is endlessly re negotiable. Here’s what I mean by that. You buy it today, there’s a snapshot in time, and you paid a certain price. And if you paid cash, then you just pay the price. If you use financing, which hopefully you did, then you got a certain price and certain terms, right. But as things change over time, you can renegotiate that deal. One way you can do it is by simply refinancing the property. But there are many other ways you can do it, you can improve the property and rent it for more money, you can 1031 exchange the property and get a different property without paying taxes, you know, you’re deferring the taxes, you could lease option the property and get a higher rent that way, there are just all kinds of things you can do to renegotiate the deal endlessly into the future. You know, some people are adding what’s called ad use to their property’s accessory dwelling units, where they put a mother in law’s unit or a casita in the backyard, and then they increase the income with that, there’s just an endless amount of things you can do, right? So the deal you agree to today is not necessarily the deal you’re going to have forever. In fact, it almost never is. One of the other absolutely beautiful things I love about income property, the most historically proven asset class in the entire world, is that you can buy the property. So you put 20% down on it. And then you can wait till the property appreciates a bit or add value yourself and force the appreciation. And then you can refinance the property, get all of your money back, and maybe even more than all your money back. And then still on the asset. I mean, where else can you do this, ladies and gentlemen, where you you get all your money back out, and you still have the asset? Right? It’s just a phenomenal asset class. So to answer your question, I hate to sound like the typical guru that says, oh, there’s never been a better time to buy. Well, that’s complete BS. Of course, there’s better time to buy, you could have purchased property in 1970. And that would have been better than today, although interest rates back then were much higher than they are today. Right? Here’s the reality of this. I’ve got a video that I’m about to produce. So look for this. It’s coming, folks.
Okay, because I’ve done a couple presentations on this. I always want to test this by speaking at a conference or two. And I have done that, and sort of refine the idea before you see it on the YouTube channel. Okay, or hear it on the podcast. But I did a couple of presentations on this. What is your measuring stick? Okay, to determine the value of anything, we’ve got to ask what my listeners call the Jason Hartman question. And that question is compared to what, right? Most people when they’re trying to understand the value of real estate or anything else for that matter. They compare it only to one thing, dollars. Well, dollars are not the only thing To compare it to because the dollar is a fluctuating measuring stick, its value constantly changes. Let me give you just one of many examples. I’ll give you a little sneak peek into this video. Okay, you know, if you followed my work for any length of time, I’m not a gold bug, okay, but gold has been a measuring stick for 5000 years. So it’s worth it to compare housing prices to gold. So let me give you an example. In the year 2000, if you wanted to buy the median price home, you would need 610 ounces of gold to buy that house, because the median price was about 168. Gold was $274. So you’d need 610 ounces to buy a house in 2010. It got a little cheaper, a lot cheaper. Actually, in 2010, the median price house was 223. And I’m rounding here, by the way, but gold was 13 $174. Okay, so you would only need 162 ounces to buy the house then in 2010. What about today, in 2021, you only need 208 ounces of gold to buy that house. So compared to 610 ounces, 21 years ago, the house is about 66% cheaper today. Okay? I mean, you know, roughly Okay, it’s about two thirds cheaper now. So always ask yourself this, when you’re looking at an asset and you’re thinking of buying it, ask yourself this question, is it cheap? Or is it expensive? And then ask yourself that question in many different assets in many different comparisons, not just dollars, because you will be totally misled. If you are only comparing the price to dollars, that is not the way to compare it, you got to compare it to many things.
Now in this upcoming video, I compare it to orange juice, rice, gold, Bitcoin, I mean, just everything. And then you’ve got to go another step, and not just look at the price of the house, but the payment on the house and adjust that for inflation. And I’m telling you folks, real estate in most markets is still pretty cheap, when you compare it to all these things. So look for that video in that podcast coming up. It’ll be on the YouTube channel and the creating wealth show. And by the way, our stuff is on other channels as well. Because, you know, censorship, okay. You can always find my stuff on bit shoot and rumble and all those other platforms as well.
Yeah, I’ll also say, you know, you talk about whether, you know, high price, low interest rate, low price, high interest rate, you know, obviously, you would prefer starting with the low price, high interest rate, because then you can get the interest rate down. But realistically, the way you need to look at it is the right time to buy it is when it makes sense, you know, when the property is going to, you know, make sense from day one, follow the commandments. If your property is making sense from day one, you are putting yourself in a fantastic position moving forward.
Jason Hartman 23:15
Good point. No, that’s absolutely true. I mean, look, the best market to buy in is to buy with cash, when things are super cheap, and then have the interest rates go way down and refinance them and pull all your cash out.
refi in 2020, right.
Jason Hartman 23:34
That’s the strategy we were recommending. And many of our clients did it and they made a fortune. I mean, Adam, you know, I really wonder if like, any other Real Estate Group, or Guru has made more people rich than we have, you know, I mean, we’ve made a lot of people very rich. And if you don’t believe us, just go listen to the creating wealth podcast and listen to all those client case studies. We have them all the time. And you can hear it right from the clients. You don’t don’t have to rely on us, we go in depth, you know, 2030 minute interviews, where you’ll hear all about the clients and what they’ve done. And so we’ve got another question from Peter wood delco.
He said, what about when you don’t have a fixed rate mortgage? So I’m guessing that means he can only get an adjustable rate mortgage. And with those, I mean, you’ve still got a certain amount of time they’re fixed. And you can always in that certain amount of time, you know, try to get yourself a fixed rate mortgage out of it. So you know, it’s if you can’t get a fixed rate mortgage, for some reason, it doesn’t mean you can’t get into the real estate.
Jason Hartman 24:40
Yeah, yeah, of course, right now, we highly recommend you get a fixed rate mortgage for three decades. I mean, it’s just a phenomenal opportunity, right? Because the debt is so cheap, but overall, if for some reason you want to take an adjustable rate mortgage for a short period of time, you know, then refinance. Before rates go up, you know, you’ll get a lower rate initially, but you got to be careful because the likelihood is, and this is never for sure. And I’ve been lousy at predicting interest rates. By the way, I just got to point that out. That’s my one area where I’ve not been good. The likelihood is rates will be higher in the future. I mean, they are artificially low, no one can deny that.
Alright, so we have a question from julu. Who said, thanks for the video, will the housing price go down ever, back to pre COVID price? Thanks. Now, this is something that I covered in the recent live stream when Jason couldn’t make it. And the housing prices will go down at some point. Unfortunately, I’m concerned about when that Sunday will happen at this point, because as I mentioned, on the live stream, so many fundamentals are against a decrease in housing prices. So many commodity prices are high supplies are plummeting, you know, you do have the potential forbearance run out
Jason Hartman 26:00
and for collection, moratoriums ending, no problem.
And so I mean, that could bring a little bit of supply onto the market. But at this point in time with the number of forbearances, they are, it’s way lower than people were saying it could have been at the beginning. So the supply isn’t going to gush onto the market. And even if it does, right now, I saw a graphic from realtor.com that was sent to me yesterday, housing supply across the country is down 40%, year over year. So even if we get, you know, a 20% increase, we’re still 20% down. And so all of the factors are lining up, and eventually, you know, the regulatory environment will lead to builders building more, I assume, at some point, you know, eventually commodity prices will flatten or maybe even drop a little bit, you know, eventually something will happen in our society that will cause a crash, or a drop in some way back to pre COVID prices. You know, it’s gonna be tough. It’s gonna be tough.
Jason Hartman 27:02
Yeah, you know, you’ve got to ask yourself, folks, what will cause prices to go down? The inventory is so scarce, and the construction materials have run up so high in price that even with a dump of inventory, and I’ve looked at a lot of analysis on this, I’ve looked at, you know, that analysis with Ken McElroy, who’s more bearish than I am, I’m quite bullish for a while, I think things are going to be pretty amazing. For a while the market can absorb a lot more inventory, even if there is a sudden increase in supply, with foreclosure moratoriums, which probably won’t be acute, they would probably be staggered or staged out, you know, if there’s a lot of foreclosures in the pipeline, the market can just gobble that inventory up with no problem. I mean, probably about a week. I mean, yeah, it’s it’s like, there’s just no shortage of demand at all. I was on television recently. And they were interviewing me about the administration and what they’re doing and, and you know, this idiotic idea that Biden has that he wants to give first time buyers a $15,000, housing credit, tax credit for housing, that is the stupidest idea in the universe, what that will do is it will instantly cause prices to go up by $15,000, maybe more, because it will just create more demand, what they ought to be doing is figuring out how to create more supply, what we need is supply. So how about this Biden? How about if you put pressure on municipalities to ease building restrictions? Okay, how about if you give developers some tax credits, so they’re incentivized to build more, or, you know, just do something that eases the supply chain? How about if you cut, you know, very burdensome environmental regulations that aren’t allowing, you know, the lumber producers to produce enough wood or the steel producers to produce enough steel? You know, that’s what you need to do is create more supply. I mean, you know, in the politically correct sphere, People Keep Talking about systemic racism. Well, you know, what we have, we have a systemic housing shortage, okay, fix the supply problem. The demand is there. You don’t need to give people a tax credit to buy a house, they all want to buy a house, okay? There’s no you don’t need to incentivize that. That’s idiotic. You need to incentivize supply, work on the supply chain, and make it easier to build. That’s what you need to do. Okay, so
that’s the thing you got to do. And especially, you know, you look at the first time homebuyers, they really need to be incentivizing the building of homes under $300,000. Absolutely. Right now, if you’re a builder, building it, I mean, I’m, I’m genuinely impressed we can source inventory under new inventory under 300,000. Because the profits on Those are so so much smaller than if you build a 567 $100,000 house or more. Yeah, that builders, they look at under 300,000. And they just ask themselves, why bother? Yeah, you know. And so if you really want to help the first time homebuyers, you’ve got to almost flood the market with homes under 300 250,000. So that they can be purchased. We have years before that happens. Oh, it’s it’s never
Jason Hartman 30:25
the shortage is so severe. The other thing I want to say about this is just remember that the other thing that would cause prices to soften is higher interest rates, right. So higher interest rates mean, affordability declines. And so prices tend to soften true, right? supply demand, right? Just simple economics. But understand that 1% in interest rate is equal to about 10% in price. Okay? So if rates go up by 2%, the price of the house has to come down by 20%. that’s unlikely folks, that will take a long time to work its way through the system. So all of these folks sitting on the sidelines missing the market, they’re angry, I get it, you know, they’re jealous they right hit and run comments on YouTube. Oh, you’re stupid. You know, you don’t know the markets about to crash. Good luck, folks. Because you know, you’ve missed the market. And because all these same people were saying this 10 years ago, and they were saying it eight years ago, and they were saying it five years ago and they were saying it definitely last year. Okay with with the COVID lockdowns, okay. And they’re still upset that they have missed every opportunity, folks, you can rationalize your way out of any decision in life you ever want to. But the fact is, if you look at I’m old enough to know now, I’ve watched it play out in the course of many people’s lives, people who do things who make decisions, there’s just this propensity toward action that always gets rewarded in life. So don’t be that person who doesn’t take action, that the world belongs to those who make decisions and take action. Okay, that’s just the way it is, you know, there’s an old Zen saying I like very much to know, and not to do is to not yet know. So there’s all these know it alls out there. Right? They know everything. They’re right, they can win every argument, right? But to know when not to do is to not yet know. Okay? The people who do things are the people who really know things. And life always seems to reward them, disproportionately. So anyway, I know we got to wrap it up, Adam, folks, I hope this is helpful to you. And Adam, thanks for being here. Any thoughts you want to share? As we wrap it up,
I would just say, you know, I was talking with another investment counselor, Sarah, yesterday about kind of what people are looking at number wise. And I mentioned that on live streams before really, when you’re looking at your returns these days, you know, you’re going to see a much, much, much lower return than you would if you were looking at it one to two years ago, the returns have just been compressed because of the run up in price. So now, you really have to look at your property today at purchase time, and your property in two to three years, purchase wise and look at how your return will be over that span. And not just what are the first 12 months going to give me because the first 12 months at this point with the rise in prices. And with the rents slowly catching up. The first year is not going to look fantastic, you know, pretty much anywhere you look no matter what market you’re in. But the second year, you need to look and see what’s the rent, then like what’s the rent increase been like? What is it likely to be? And then what are my returns going to be after that? And when you look at it that way, you’ll become much happier investor. When you see Oh, my goodness, you know, this home I bought a year ago is running for $75 a year more now, or a month now that make my returns fantastic. So when your rent renewal comes around, guess what? You know, even if you just raise it by 50 or $60, not 75 you’re in a good place.
Jason Hartman 34:11
Yeah. And if you’re not understanding why $75 is so significant, because I can just hear people who are doing well making good money if their business or career thinking this is stupid, like you’re talking about 75 bucks, that’s like nothing, right? That’s not true. Okay? You got to understand how to do the math, okay. And I would highly recommend that you watch I got a free video for everybody. It’s, it’s about well, we’ve changed a little bit. It’s about 3030 ish minutes now. And it’s on the front page at Jason hartman.com. It’s totally free, no strings attached. If there is one video, you must see it is this one which is how to analyze Real estate deal, it goes through every number on the Performa. And this will make you a much much better investor. So please go to Jason Hartman calm, do yourself a favor. It’s the speed class in real estate investing it really is. And just watch this one video, take 30 minutes. And that will make you a fantastic real estate investor. Just that one video alone will really really help you. So check that out. It’s again, right at Jason hartman.com on the front page. Adam, good comments. Good questions. Thanks for the questions, everybody. We’ll get to more of them next time. And thank you all for joining us and we just want to wish you happy investing.
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 heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
This Flash Back Friday was published in November 2018. Jason Hartman begins the show by discussing Mortgage FAQs. They also talk about how technology is changing our buying habits. Later, he welcomes Drew Baker and asks him about a mistake that made him realize it’s important not to deviate from the contract. Jason and Drew also tackle dividend stocks and Argentina’s economic disaster.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.
He 1012 is when we did our first purchase. I think 2011 is when we started. You know, attending meetings, probably 2010 is when I started listening to podcasts. My husband was a little ahead of me. So he’s probably, you know, late 2009, early 2010. And you know, we’ve just obsessively listened to you. I think you’re on episode 300. At that time, though.
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 multimillionaire 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 on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:28
Welcome to Episode 1083 1083. This is your host, Jason Hartman, coming to you from San Diego, California. And I happen to be with Carmen San Diego. Yes, Carmen San Diego here. And Carmen San Diego’s parents are in the back. I heard a fascinating story from them today. But they do not want to talk on the podcast about Venezuela and just just totally fascinating history. That was amazing. But on a very serious note and a grim note, our hearts go out to these victims of these California wildfires. Boy, as we were coming back from Hawaii, I started really noticing all of the news, it’s kind of odd in being in Hawaii, I guess we were either so busy doing the venture Alliance event and the profits and paradise event. Or I don’t know, it’s sort of even though it’s part of the United States, it felt very separate, felt like it was coming back into the country from from out of the country, you know, and to Hawaii many times, of course, I’ve been all around the world many times. But it just sort of felt like I was out of out of the news cycle. These wildfires are terrible at the time of this recording, 25 fatalities and over 110 people missing. So it is very sad. 1000s of structures have been burned to the ground, the entire city of Paradise, California, or town is gone. It’s just really shocking and tragic, really a tragic thing. on the business side of that, of course, we have to think of the insurance claims and the massive burden on the insurance industry, and also commodities prices to supply the rebuilding efforts. Whenever these tragedies strike, we see the market react, and it reacts in price changes. And those price changes through the wonderful capitalist system, deliver commodities, and help people rebuild and help people put their lives back together. But it is just awful. And of course, we will all continue to follow it if you’ve not been paying much attention to the California wildfires. These are the worst wildfires in California history. Let’s just hope that there’s some relief very soon for that. And other notes.
Our guest today will be a returning guest to the podcast. And that is Drew Baker as we talk about a whole bunch of things, not the least of which is blockchain cryptocurrency, what it means for the future self management, real estate investing all of the above. It’s just sort of a very eclectic discussion. Whenever we get our clients drew on the show, we’re going to cover some good stuff. But before we do that, today, I want to talk about some financing. Some FAQs, frequently asked questions when it comes to financing. Before we even get to that part, I want to share a couple of factoids that I thought were just kind of interesting. These are from the leftist rag USA Today. Yes, I always have to throw in something a little commentary about the media. Do you know that the average job tenure in America Guess how long it is? Guess how long the average person stays on their job in the United States nowadays? As of 2016, that number was unchanged. The average person stays on the job. Yes, not one year, not 10 years. 4.2 years, 4.2 years. That’s the average tenure on the job and it makes me pretty happy. My people stick around a long time. I’ve got people For me, they’ve been with me, I don’t know, 16 years now, still several 1011 years. So a lot of time, you know, but you know, you can almost compare that to my prior discussions on vacancy rates. When we look at vacancy rates on real estate, you know that job tenure has something to do with that. And if you don’t know what I say about that, go to Jason hartman.com, and search vacancy rates, and you’ll find out more. I think that has a lot to do with job tenure in sort of an odd way. But you know, how I always make odd leaps and statistics that hopefully you find interesting. Here’s another factoid that I thought was interesting. cameras, right camera as well. You may not know that the creator of the digital camera, the first digital camera was none other than a company that has gone from the American landscape. Today, the worldwide landscape, a company that really did change the world. And that company is Kodak. Yes. Kodak not only became the global leader in the film world, but also they invented the first digital camera. I think it weighed about 10 pounds. And it wasn’t very good. But they just thought it would really never take off. They thought that technology wasn’t ready. And of course, they were very wrong about that. That was a pretty terrible decision on their part. They dabbled in the digital camera industry. You may remember that years ago. But this was an amazing stat.
You know, we’ve all got cameras in our smartphones nowadays, because it is an amazing time to be alive. But guess what, as the we’ve seen the rise of the smartphone, the camera sales have declined dramatically. You know, I used to carry a digital camera around with me, and a phone and then a smartphone, and then you kind of didn’t need a camera anymore. You’ve just had your phone and in the incredible camera built in? Well, worldwide camera shipments totaled 25 million cameras in 2017. But the question is what as I always say, compared to what compared to what? Well, compared to 2010. That is down 80%. That’s an 80% decline in digital cameras shipments down 80%. in just eight short years, as we’ve seen, the processing ability of cameras built into our phones improved dramatically. I want to talk to you about millennials and renting versus buying. But you know what, as usual, I am running out of time. So let me get on to a couple of these financing, frequently asked questions, because you know, we’ve got to get to the movies here. Can you tell we’re in the car? Yes, we’re going to the movies. Alright, so a couple things that I thought would just be interesting at our profits and paradise event in Waikiki Beach. Last weekend, one of our lenders that was there spoke about financing. And we did some panel discussions and had a really interesting time. But they talked about financing. And they came up with a really good little pamphlet. And as I was reading through their pamphlet, I thought there were some good FAQs that I would address on the show, because of course, people tell me I have a gift for explaining things. And we’ve had many lenders on the shows, of course, we have our monthly mortgage update. I just wanted to tackle a couple of these here, time permitting. Before we get to our guest today. One question we commonly hear is can you finance more than 10 investment properties? Well, the answer is yes. But that’s each person. So a married couple can finance up to 20 with agency loans, Fannie Mae, Freddie Mac, these are the really desirable loans, but you can go beyond that with portfolio loan products. And those are not as desirable but they’re still pretty good. Because when you ask yourself compared to what the financing above 10 properties per person, or per spouse, still pretty darn good, pretty good. But you might ask about your credit score. Now, as I’ve talked to you about before, there are many FIFO scoring models, and FIFO.
The Fair Isaac scoring system that’s been around with us for years that is probably going by the wayside as credit scoring becomes a lot more big data oriented and has a lot more cool features, as I’ve talked to you about each consumer really has about 1000 data points, this credit scoring, this traditional FICO scoring stuff is really not as good as it could be. But we’re still on the FIFO system. And the FIFO system that mortgage lenders use requires a credit score of 620 Yes, only 620 only 620. For your first let me see your first six properties, your first six financed properties, only 620. That’s not very difficult folks, as you know, for properties seven through 10, a minimum credit score of 720 as well. required. Now, if you use any of those credit reporting services like Credit Karma, or any of the many others out there, I remember I sat next to the founder of Credit Karma on a plane ride from San Francisco to Las Vegas about a year and a half ago. And it was interesting talking to him. But remember, you might just be looking at one of your FICO scores, and you don’t know which FICO scoring model you’re looking at. Is it 504? Is it FICO eight? Which model? Is it? That’s the first question. But wait, there’s more. It’s complicated, like my favorite Facebook relationship status. It’s complicated. So also remember, you have three credit bureaus, right. And so they do what’s called a try merge score. They don’t just take one of those, right, because they vary dramatically, you know, some are tougher than others, in terms of the way they score you. So it’s the FICO scoring model. And it’s all three bureaus. I believe most mortgage lenders take the mid score, I don’t believe they average them. But frankly, I can’t remember. So ask one of our lenders, and they will help you with that. So I just wanted to talk about a couple of those things. We are already 11 minutes in, I am going to announce the contest winners on the next episode. So we will do that on Wednesday. Last chance to enter our contest for the ring doorbell or the Amazon Echo. At Jason hartman.com slash contest. Just talk to any of our investment counselors or lenders who can help you with financing details. I’m going to tackle a few more of these FAQs in the next episode as well, time permitting. But for now, let’s get to our guests because hey, this is a fairly long interview. And we’re going to cut it into two segments. We’ll play part two of it on the next episode, as we announce the contest winners and get to a few more of these FAQs. So here we go. Until next episode, happy investing. But here is our guest.
Hey, I wanted to welcome a returning guest back to the show. And that is one of our clients drew Baker. Today we want to examine some economic issues and talk about the possibility of a market crash. Well, when I say market crash, maybe stock market real estate market economy in general, we’ll talk about that and some other things as they relate to the strength of the dollar. I want to make sure we touch on Argentina and Turkey because while big currency devaluations, they’re pretty scary What’s going on? We’ll just kind of dive into some of that. And of course, you know, Drew is a client of ours. He’s talked a lot on the show previously, about self management has really shared some of his experience there and I think enriched our audience a lot. So Drew, welcome back.
Drew Baker 12:55
Hey, thanks for having me, Jason.
Jason Hartman 12:56
Good to have you on. And thanks again for sharing your self management experiences, how you converted from having property managers to self managing about half of your portfolio, you’re having a really good experience with that. So you know, let us know how it Yeah, unfolds over the months to come.
Drew Baker 13:13
He had it’s funny, I could share a story with you about something that I made a mistake if you want to hear a mistake story about myself management. So in a previous podcast, we talked about how I became friends with my tenants, quote, unquote, you know, a friendly, I suppose. Yeah. And I think that the issue with that is that I, when I was having the tenants occupy the properties, one wanted to break the lease, and just as a very Matter of fact, way, they said, Hey, don’t worry, we’re going to have somebody else fill in our spot, we’ll help you find somebody. And I said, Well, you
Jason Hartman 13:47
got to qualify them. Yes.
Drew Baker 13:49
Yes. I said, Well, if you find a qualified tenant, whatever deduction and sees that I’m charged by my new agent, I’ll just take off of your breaking of the leaf. Okay, well, it turns out that they needed their handheld the entire time, you know, did you show the property? Did you do this? Did you do that? Now I didn’t I just have someone that’s interested. Well, if you put a lawn sign out and you have a phone number, it doesn’t help me to like have to qualify the tenants or have my agent do that. So it’s basically creating more work than if I did it myself. I mean, this is like, basically the property management game where you have someone in between you and the tenant, or you have someone in between you and the applicant, right? This person who’s the tenant doesn’t know how to find a qualified tenant, ridiculous course. So I was a bit naive thinking like, Hey, I’ll deviate from the contract help these people out. And instead, it just created more work than if I had done it myself. So I think that the lesson that I learned is that the contract is what it is. And if a tenant decides to make a life decision, like buy a house or something, once they’ve decided that they’ve decided it In light of the contract, it’s not like they can come back to you and go, Hey, I made this life decision. Make me a deal.
Jason Hartman 15:06
Yeah, right, right now they have to, they have to uphold their bargain, and you need to hold them to their bargain, you know, they have a right to try and mitigate their losses. And they can cooperate with you in showing the house, they can help you find a tenant. But of course, you, as the owner get to make the decision who you want to lease the property to. And you need to make sure that new tenant is fully qualified, and that they’re going to take good care of your place. So
Drew Baker 15:32
yeah, goes without saying and no good. There was a, there was a silver lining in this, because they had told me that they were considering leaving in the middle of the month. And since I’m not prorating, you know, middle of the month type thing, what I said to them was, hey, if I get a tenant on the first of the next month, and I can use the time that you leave to get the place rent ready, I’ll apply that time to your discount on the breaking of the lease. So they ended up having an incentive to leave a little early. And they got a little bit of a discount. And I got the place rented with very little vacancy on the first. So there was no real downside. And I was fighting the weather changing, you know, because this is in a four seasons part of the US. So I had an incentive, and the tenant had an incentive and our incentives were aligned. To say, yes, yes,
Jason Hartman 16:23
you must have aligned incentives and lights, try everywhere as much as possible to align incentives when incentives aren’t aligned, problems always seem to occur. And and that’s really the basis of commandment number three, thou shalt maintain control, and why you should be a direct investor. And, and like I’ve said, Every time I violate my own commandment number three, and some of the times I you know, I do it, I walk into it fully knowing it usually turns out bad, but some things I do to be a laboratory for our clients and listeners so they can hear about my bad experiences that might turn into litigation and, and cause trolls and hate. By the way, I’m wondering, you know, maybe you got an email from my troll on the last time you were on the podcast, but if you didn’t, you might get one. So we’ll see. Yeah, it’s coming. It’s coming. Make sure you tell them I want to troll. Yeah, yeah. Then you know, you’ve reached the big time when you’ve got hater Yeah, okay.
Drew Baker 17:23
Although I’ve made it when I have a troll. That’s exactly true.
Jason Hartman 17:27
But hey, so let’s talk a little bit about the economy. You know, there are so you know, right now, it seems to be that everybody’s trying to predict something, you know, we’ve got this real estate market and this stock market that have been on a tear for years now, really, now, both of them have come off very low bottoms from the Great Recession, but they’re still booming. You know, now we’re, we’re almost two years into the Trump presidency. And unemployment is super low unemployment, when you segment it into women, African Americans, different minority groups, it’s really low. So you know, anybody’s entitled to hate Trump as much as they want. But like I said, he’s going to be good for the economy. And I think that’s gonna continue, you know, because we actually have, I mean, listen, I don’t like the guy. I think he’s a jerk, okay, but he’s a business person. He understands the way business works, you know, and that’s a lot different than having a politician or a community organizer. You know, there are people that have different talents, some understand business, and some just don’t. Okay, so I just do you know, that the trade war, I mean, you can criticize that all you want, but it’s making American wages go up. And things are doing pretty well. I don’t know. Do you agree with me? And Jason,
Drew Baker 18:53
I want to tell a funny story. If I went to one of your events, it was probably Oh, gosh, I don’t know, getting close to 10 years ago, I think it was in 2009 or 2010. I can’t remember. I went to one of your events. And just I was talking to some people in an audience and talking about the stock market has taken just such a huge nosedive. And I remember you crowing that you had called what you thought the bottom might be and you were right, and someone in the audience, I remember talking to them, and they said, when I was a little kid, I used to mow lawns, and I saved all my money up and I bought Bank of America stock he said today, today Bank of America stock is less than what it was when I was mowing lawns. One guy had you know silver hair, he had clearly seen a lot. That’s pretty
Jason Hartman 19:39
amazing and tragic in the same time. See with income property, because it’s a multi dimensional asset class. You can earn your return from lots of ways. Now I don’t know if Bank of America pays dividends or not. But if it does, it’s a two dimensional asset class you get appreciation or sadly depreciation and you got to Adjust that for inflation always. And then you get maybe you get dividends. I don’t know if it pays dividends or not, you know, I don’t really follow the stock market very closely. But with income property, you make money. You make money, six different ways. Okay? I mean, six, most people say five. And you know, they use that acronym ideal, right? Most say five, but they don’t include the Jason Hartman way, which is inflation induced debt destruction. And for our regular listeners, I won’t bother boring you with the repeat if you’re new, go to Jason hartman.com. And type those words in here all about it. Okay, so what do you think is going on with the economy? I mean, Drew, we talk about this a lot, you and I, we trade messages back and forth constantly. I think you talk to me more than you talk to your wife. Okay. I’m thinking that might be true. Is that true? Is
Drew Baker 20:50
she complaining about? Well, she wants to she wants to thank you very much. So for her constantly hearing me tell her self management stories. I think we’ll call it even. Okay. All right, there we go, there we go about what you were talking about. With dividends, I mean, the thing about dividends is if the company doesn’t do well, they will either take away or dramatically cut the dividend down to almost nothing. So it’s not like this dividend is some stable horse, if the company becomes unstable, that’s the thing is the situation that your tenant might be in. And the situation you might be in are probably a lot different than what your acquisition price is, doesn’t have any effect on the tenant. So the finances of you and your tenant are in different worlds. Whereas when you are owning a stock, you’re very much tied to how the how the company’s doing, because that’s reflected in your return. Yeah, absolutely.
Jason Hartman 21:47
And the thing is, the dividend can be much less stable than the rent. I mean, certainly, you could argue that, well, if times get really bad, the rent could decline. And that is true, you know, or the tenant won’t pay at all, because they will be in trouble. So that can definitely happen. There’s no question about that. But the amount of it that can happen, the significance of it is well, at least I say, and I’m not coming from some scientific study on dividends here. Okay. Because I don’t have the stock market knowledge, but it’s less volatile than the dividend equation.
Drew Baker 22:22
Well, the thing too, I mean, by the way, dividends are a joke today. I mean, they’re so low that you know, I mean, this is this goes back to the whole wealth gap thing that you mentioned the past. I mean, if you look at the greatest generation, our grandparents, they had one parent at home, and one income, and kind of everything was calibrated family wise to that one income. And then when the baby boomers came around, and you had the 70s, and women coming into the workforce, now you had double incomes. So the prices dramatically gapped up, because now each family had more income, and you have more dollars chasing fewer goods, and the prices go up from then. And then you look at 30 years of declining interest rates today, you have free money, double incomes, and just things are nutty. So it’s like you have this slow erosion at being able to get in, as far as what you’re talking about with the wealth gap, that the bar is so much higher, you have to have every cylinder going in order for you to basically be in the middle class almost feels like right.
Jason Hartman 23:34
Yeah, no, there’s no question about it. I mean, it is a myth. In some ways. I mean, see, this is these equations and discussions are complex, because you can’t say it’s one way or the other. But you can definitely say that look, Americans, if they’re a couple, mostly both of them are working, okay. And it takes two incomes nowadays to support a house, and everybody is a heck of a lot busier and a lot more productive. Okay, then they ever have been in history. I mean, just like I always say, you must watch old TV shows, and old movies. I mean, you just must do that everybody needs to be a student of history. There’s an old saying, you know, those who don’t learn from history are doomed to repeat it. And you got to watch old stuff. So you’ll know how it was, you know, go on YouTube, or Nick at night or something. And watch, Leave it to Beaver in the Brady Bunch, and just see how life was? Yes, it’s the movies. I know. It’s Hollywood. But it’s a much better depiction than the one you have a memory of, okay, or maybe you weren’t even alive then. And you just got to see how life used to be. It used to be much more relaxed than it is today. Much less intense than it is today. What people were more like people back then now they’re like distracted by a billion things. And hey, that’s one of the human connection is has been just decimated in our culture. And it’s not just that way in the US, it’s around the world. But the US is one of the worst places in that respect. If you’re single, and you know, marriage has become extremely unpopular, if you’re single, and you’re trying to meet somebody, it is really tough. With people being so distracted, everybody’s looking at their phone, they’ve got earbuds in their ears, they don’t go out because everything comes to them. They’re doing what the futurist faith popcorn back in the 90s talked about, she talked about nesting, and how back then the example was, well, everybody has a big screen TV now a home theater in their home, they don’t need to go to the movies. Well, now. You don’t need to go out at all.
Drew Baker 25:43
And so it’s just a different world. It really is. The whole world has changed so much. I was watching Joan Rivers interview, my wife was like, why are you watching Joan right now?
Jason Hartman 25:53
I never knew you were a fan.
Drew Baker 25:55
Well, you know, I was a fan of the tonight show. And I remember it being on when I was a kid. And I know that Joan Rivers sort of filled in for Johnny here and there. And she spoke about Johnny having a dark side. And she had done this for a while after she had called Johnny and said she was going to leave the show. And he hung up and never spoke to her again. And basically how Johnny, the way he was on television was different than how he was in his personal life and how someone today like Johnny Carson couldn’t exist, because of how private he was sort of how he and avoid a ladder in his life, sort of had no one surrounding him. Whereas today, you have the Papa Razzi, and you have all this technology. And you know, he’s out in Malibu just putzing around and just left alone. And today, he would just be harangue. So you’re in such a well, we should. We should we should we should make the note that Johnny Carson has passed away many years ago. But yes, go ahead. I know you. Yeah, I mean, well, the observation i thought was interesting was that someone like Johnny Carson with all that fame, you know, Johnny could make you or break you, he could make you famous for life just by anointing you. And basically today how there’s so much technology, that things today, the currency is getting in front of people is getting people’s attention. I had a friend who’s a stock analyst, and he said, I was joking that a lot of these companies now are just basically giving away free things and operating at cost or loss, just to get attention. And he said, Oh, well, of course, all they want to do is sell their stock, they don’t care about the company. So the primary mode is getting attention to get a higher valuation in the market.
Jason Hartman 27:36
Okay, so let’s talk about that for a minute. That’s interesting, because a long time ago, I remember talking about this on the show, and I’m glad you brought this up. Okay, so about 70% of the s&p 500 index is composed of consumer spending. Right. And I know you know this already, the question would be in it’s kind of an interesting thought experiment. Is it more important for companies to sell their widgets, their products and services? Or is it more important for them to sell their stock? And this makes the public stock market creates a misalignment of interests? Because you’re right, these flashy CEOs? I mean, Ilan musk certainly comes to mind even you know, he maybe he’ll go to jail. I don’t know. Ilan Musk, I love I’ve talked about a much and I know you’re a huge fan boy Drew. And well, no,
Drew Baker 28:31
I think that that can be a whole nother podcast.
Jason Hartman 28:34
I have a lot to say about that. We could we could we could do a musk cast. Listen, I like I was a big fan. When I got my first Tesla. It was good. But when I got my second test lie became a non fan. To say that I love his vision and stuff. But you know, he’s a crony capitalist. I mean, many people just say he’s a crook. Okay. He’s, it’s kind of like the same thing in government, right? Bernie Sanders and the late Ted Kennedy. I mean, all they do is they take other people’s money and redistribute it and they’re viewed as heroes. I don’t know. I mean, look, you know, raising money is a legitimate thing. But it becomes real cronyism, certainly, in the case of Elan Musk, but I don’t know if that’s, we’ll get into a huge tangent if we go down this path, but thoughts.
Drew Baker 29:23
What’s funny cuz CNBC did a whole thing on how all these original Model S owners, the people that bought the first Tesla cars are now having trouble with service and because they’re no longer you know, under warranty, and it was talking about the exorbitant cost to repair just silly things like the door handles are over $1,000 each for hair.
Jason Hartman 29:45
Yeah, yeah, no. lifeless, you know, it’s just crazy. My Okay, so check this out. I have not had a traffic ticket in probably 20 years. Okay. I’m a you know, pretty conservative driver. Okay. And my insurance My Tesla Model S the first test I had was maybe 20 $800 a month. I thought that was outrageous. Okay, I thought that was really high. But wait, there’s more a year. You mean a year that month? No, sorry. Yeah. A year. Did I say month? Sorry, okay. 20 $800 per year when I thought that was outrageous. I thought that was really high. Okay. But I got the Model X in the insurance was like 50 $200 a year, I thought, Oh, my God, Tesla did not disclose this to me. I went online and started reading about it. I thought I have never had such Carnage, just insanity, that my car insurance would be that much. I mean, you could buy a whole cheap car for that, you know? And it’s because and then I read it, I think it was Consumer Reports had an article about it. And they said, these new cars with all the safety features are really cool in a way, but just the mirror on one of these cars, if the mirror has a camera in it, you know, the mirror alone, if you break the mirror off, it’s 13 $100. You know, these high tech cars are pretty darn expensive to insure in some, in a lot of ways. They’re safer, because they have lane departure warning system and, you know, maybe autopilot like the Tesla had. But we’ve seen that that doesn’t work very well. Yeah, it’s just interesting. I mean, it is, but hey, let’s get back to the investing stuff. Because I know there’s some stuff you wanted to talk about dollar devaluation, well, not dollar devaluation, but currency devaluation. And let’s talk about the crypto stuff. And Argentina is now having every 10 years like clockwork Argentina has an economic disaster. And they’re having one now. I mean, just I think it was just today, their currency devalued by like, I don’t know, several percentage points in a day in a day. It’s tragic Turkey. Tragic. Now, is this stuff going to be contagious? I think the real estate market is going to hold up pretty well in the low end. But in the high end, it is softening quickly. I just did a radio interview about that yesterday on a phoenix station. What do you think is going on out there?
Drew Baker 32:06
I mean, this is the classic government running the economy. I mean, when you have central banks and the government, you know, talk about misaligning the interest between the people and the government. I mean, the thing that’s so funny about this is if the government creating the money, you have the government collecting the money through taxes, and getting to use the money first as its devaluing. And that basically leaves the general public to operate within that kangaroo court. And if you don’t follow those rules, they’re gonna put you in a cage. Right? And who gets held who’s accountable? When the experiment goes awry, and fraud occurs? And you know, the biggest fraud of all, no one gets held accountable on the government’s and but maybe if there’s a revolution, people might hold them accountable, they might have to stake
Jason Hartman 32:55
you know what I’ve been, I got another half to watch still, but I’m watching this. It’s amazing that a movie could actually be funny. It’s sort of like a comedy about Joseph Stalin, the biggest killer of all time, probably, you know, when he was running Russia, and it’s like the spoof on on Stalin ism. And it’s sort of interesting, but you see how bad it is when their central planning of any sort, and government control and overreaching government and and what you said about the central banking cartel that a lot of people just don’t understand is Look, they get to, like you said, the government and the central bank, the unholy alliance between the two, they get to use the money first. And by the time it trickles down, it’s devalued by inflation. And they want to see it devalued, because it’s a great business plan for governments, because the government gets to pay its debt back in depreciated, cheaper dollars. That is an awesome deal. They are following the Jason Hartman model of real estate investing, inflation induced debt destruction, inflation induced debt destruction, where you borrow for the long term at very low rates, and you pay that debt back and ever cheaper dollars. It’s a great deal. And if you know, look at the people running the governments and central banks are much smarter than any of us they have way more information than we do. And that’s their business plan. So just Tony Robbins says success leaves clues. Okay, let’s emulate that. Let’s use them as our mentors. Because they they know what they’re doing.
Drew Baker 34:33
Yeah. Well, it is funny when you think about the whole economy and the money supply. And all these people talking about, you know, private assets, such as in Bitcoin, you know, type thing and everyone flooding out of the dollar. And I think when you look at the Fed decreasing liquidity and slightly bumping up interest rates while everyone is still doing quantitative easing in other parts of the world, you know, immediately the US starts to look like the prettiest of the three ugly sisters. And you have to find out Well, where’s all the money going to flow to? And since we are kind of, you know, when things go awry, you know, if we get catch a cough, everyone else, you know, kiss on life support, and we’re starting to improve our economy and everyone’s lagging behind us. You think about all that money that’s going to start to flood into the US, it makes you wonder if asset prices are going to go higher, because why would you put your money in the Japanese economy where they’re buying, you know, 97% of their own bonds, and some of these other economies where they’re just printing their money, like it’s going out of style. And you look at the US dollar starting to look pretty good. And so when you talk about like Bitcoin and some of these competing currencies, I think they sound great on paper, but you have this the system is so entrenched in the dollar, whether it’s paying your tax bill, or this, the political aspects of it, you know, and the social aspects of you revolving your life around the dollar, and just all these implications, and I think you talked about the military aspects, you know, they are the ones with the guns. I just don’t see the infrastructure that could adopt having a cryptocurrency be a viable thing. And I know we’ve talked about this in private message, but I just don’t see the architecture there.
Jason Hartman 36:23
I don’t see the system isn’t there, the infrastructure is not there. This will be continued on the next episode. Thank you for listening and happy investing.
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guests opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
In this solo episode, Jason Hartman explains the Stock Market Bubble by performing a walk-thru of the Wilshire 5,000 Index. He also shares self-management tips from clients, the Refi-Til-Ya-Die option, and using Thumbtack.
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 1655. It’s Wednesday, March 3, and a question we are constantly being asked. Not we meaning us necessarily, but in general, we are all thinking about this. everybody’s asking maybe themselves this question. And what is that question? The question is, are we in a stock market bubble? Are we in a stock market bubble? It’s a good question. Well, looking at a chart here of the Wilshire 5000 index. Now, that’s the big broad based index, it takes market caps, it weights them. And these are, you know, actively traded stocks in the US, right. But here’s the interesting thing, the quarterly averages in the past, not today, used to match the quarterly intervals of the GDP statistics, the gross domestic products, not products, singular product, the GDP, the gross domestic product, right. And so now, a fair question to ask is, how does this look today? Yeah, there are many metrics. There are many ways you can compare things, of course, and we’ve obviously talked about that ad nauseum on the show. But here is another when we look at not inflation, necessarily, although this, this sort of has an indicators, at least for asset inflation, most certainly, right? But when we look at comparing the Wilshire 5000, to nominal GDP ratios, okay, in the past, it was pretty much in sync, but it got out of whack a few times. And let’s compare the past to the out of whack periods, to today. And I think this is very enlightening. And then we’re gonna get to some listener questions. And I’ve got a couple more things I want to talk to you about the the S h fa, not the FHA, this is the Federal Housing Finance Agency, and talk to you about what they’re doing with forbearance. So let’s get to that in a moment. But first, let’s talk about these these stocks. Okay. So looking at this chart, going back to 1975, it looks pretty, you know, even keel and then we see a big increase at about 1995. Not not really then but it’s it starts its climb up to the big bubble about five years later. And of course, you know, what that big about bubble is? It is the.com bubble, the the tech bubble, the first tech bubble, okay, now at this point in in the first quarter of 2000. So this is 21 years ago, the ratio of the Wilshire 5000 index, compared to what compared to nominal GDP was 1.37. And that is far out of sync compared to the norm. If you looked over the past the past 25 years before that, you see it at like point four, up to point six, then you have that climb at 1995, which I which I described where it gets out of sync and it peaks at 1.37. Right? And then obviously, there was a crash, and at the lowest point of the crash at the trough of that crash, that hit in about and you remember it folks, I mean, you know, this was about 2003 ish, give or take the ratio went down to a about a point seven.
Okay, out of point seven there and then we Saw a bit of a climb, but the climb wasn’t too outrageous. It wasn’t too radical until until we got to the next bubble. Now, they’re calling this the housing bubble, because that’s how it started. But it was really, as I’ve explained many times, it was really the Wall Street bubble, because it wasn’t really housing directly that caused that. Yes, of course, the mortgage underwriting standards back then, or stupid, silly to liberal, and they had too many adjustable rate mortgages that one underwritten properly, etc, etc. And, you know, nothing new there. We’ve talked about that many, many times. But, you know, for, for whatever it’s worth, it caused a housing crash, right. But really what happened was the second part of that, that really caused the Great Recession, the global financial crisis, the GFC, was the fact that wall street was doing their little shenanigans, and Wall Street was selling the same mortgage note in, in these pools over and over again, there was toxic debt, we all, you know, became familiar with a whole bunch of new acronyms. And, and we all we all remember it, right. But they’re the ratio only got up to 1.05, as opposed to the prior peak, about seven years early of 1.37. So let’s keep going. Mm hmm. Get ready for this one, get ready for this one, the ratio goes down. Great Recession, stock market crash goes down to about point six. All right, then it starts its climb. And there are some jagad you know, peaks and valleys in this climb. But overall, it’s it’s an upward trend. And we get to the fourth quarter of last year. Okay, q4 2020. What is the Wilshire 5000 index to nominal GDP gross domestic product. In other words, the output of the country now, before I give you the answer, there’s one more thing that you really need to consider. And that is the ironic situation, the irony of a massive decline in GDP that we suffered last year, obviously. And then you really see how this index is out of sync, and how and why people have really been talking about two completely separate economies. Because that’s what we’ve had two completely separate economies, where we have the Wall Street economy, and then we have the main street economy. We have two different things. Okay. But the number today is 1.72 Yikes, yikes, yikes, yikes, it is way out of sync way out of sync 1.72 is the number q4 of last year. So we can see here that that shows us that we we may have a problem. You know, here’s when we have a problem.
Okay, there you go. So for whatever it’s worth, consider that. All right, the FHFA has extended the forbearance period, to 18 months. In other words, you don’t have to make your mortgage payment for a year and a half. Congratulations. Now, this doesn’t apply. Remember, do not do this, or at least proceed with caution, and get some advice from competent professionals. And we can refer you to those competent professionals. You’re certainly not listening to one of them now. There you go. Little self effacing humor, Jason, okay. Get some advice from competent mortgage people. And remember something when we refer you through our network to mortgage professionals know that they specialize in the investment property side of the business, there really is a difference between that mortgage person that you, you know, got your home loan through if you own a home, or maybe you refinance your home, and someone who really specializes in helping investors build portfolios. That is a different type of mortgage Rep. So reach out to us Jason hartman.com. Have your investment counselor help you if you don’t have an investment counselor. Just fill out any form on our website. And they will contact you, or call us at one 800 Hartman in the USA one 800 Hartman, and you can get some assistance, get referrals. One of the big parts of being successful as a real estate investor is having a team. And guess what, we can provide that team for you through our network. Instantly? Well, almost instantly, maybe it’s not quite a microwave oven. But it’s pretty fast, we can get you connected with all kinds of resources, all kinds of referrals, people, software, etc, etc. So don’t hesitate to reach out, even if you’re not ready. You know, we’re always here to help you, we take a very long term view of our, our business and our relationships with customers. So there you have it, folks. 18 months of forbearance option now, not sure if I mentioned this a moment ago, but why wouldn’t you want to take advantage of the forbearance opportunity? Because it is an opportunity? Why wouldn’t you want to do that if you are looking to buy properties soon, because some lenders are saying that you cannot be in forbearance, and get any new loans. Okay, so just take that for what it’s worth, and get connected with right professionals that can help you with that.
Okay, now, let’s go to a couple of comments, listener questions, things like that. The first one comes from our client, Drew Baker, who’s been on the show many times, he also really helps our empowered investor, inner circle group. If you want to know more about that, we announced a kind of a webinar and intro on that. And I’ll see if I can get that link for you in the show, we’ll certainly post it below in the show notes, if I don’t grab it for you, while I’m speaking here. Today, he really adds a lot of value to that group, and we appreciate it. And he has an interesting comment here that I’ll start with. And here it is, of course, focus being self management, and being an empowered investor. And I gotta tell you, I love self management. But it’s a choice, you know, you may or may not want to do it. But here’s what he says about hiring contractors in the handy platforms that are available to all of us.
Drew Baker 12:18
Hey, Jason, you know, I’ve thought about, possibly, if you want to do another podcast one these days, I have a couple of interesting things we can talk about, you know, one of which is that, you know, a lot of these crowdsourcing sites that have reviews for, you know, contractors like, thumbtack, and you know, TaskRabbit, but I think that’s a little bit smaller. But you know, these people that are on thumbtack, they like really strive to have good reviews. And I think, I think my issue with a lot of contractors is kind of the 8020 rule applies to them, or like 80% of their business comes from 20% of the clients. So kind of the people at the periphery, don’t really get any attention, because they’re kind of seen as almost a burden to the, to the contractors. And people will get flighty and, you know, there’s unreliable wares, I think these people on like, a site like thumbtack, the ones that get good reviews, they’re 80% is thumbtack. So you’re kind of under the umbrella of them being accountable to you. And so, you know, not giving some crazy quote, not lying to you. And so I used a contractor today that did some AC repair work for me. And the guy sent me a photo of the gauges sent me a very reasonable estimate by email, I paid him right there over the phone, and gave me his thoughts about replacing the system eventually. And I just thought, Boy, this person just has it together, they have a system, small business guy, you know, talking to the owner, texting with him, you know, just kind of that small business competent person here if you want to find, and I thought, Boy, this is so rare. So it’s nice though, that, you know, these people sort of are held to account so they’re not just these flakes. Because I had some of these, I had this guy that was like a flipper in Memphis. I don’t know, he like gave me kind of some of the contacts that he uses when he needs help for doing some repair work. And I called them these people. And I mean, it’s like, some of them don’t speak English. A lot of them, like don’t get back to you. One of them went out and looked at it and like wanted to charge me like $12,000 to do stuff that really didn’t need to be done. It just seems like so disconnected from someone you’re like, you I’ve never done work with you before. You’re telling me that I need to spend $12,000 on fixing everything is kind of just random. So so what I was gonna say is I’m gonna go through a little bit of an experiment here, but I’m going to sort of try to build my vendor list and by using the some tax sites and see how that goes, and I’m doing it in two different markets. So I’m doing it in Memphis, and I’m doing it in Indy, and so
Jason Hartman 14:49
and what he means to say is, you know, he refers to as thumbtack sites. thumbtack is one site, you know, TaskRabbit is another there are there are several of them out They’re okay for all sorts of trades. But I’ve used them both. And I like them very much, I had very good experiences, and really think they’re a great resource.
Drew Baker 15:09
I’m contracted with someone to do a rent ready in July. So we’ll see how that goes. And I’m the guy who was probably gonna do the AC unit next month. And then in Indianapolis, I’m going to do some drywall ceiling repair work. And then if that goes, Well, I’ll use the same guy to do a bunch of interior maintenance on one of the properties that had been neglected forever. I’ll let you know, if you want to do kind of a before kind of podcast on what I’m what I’m thinking about that could help your audience, I’d be happy to do that. And then we could do a follow up after interview if you might go, here’s all the things I learned. What I’ll do different next time.
Jason Hartman 15:46
And the next message is from one of our investment counselors, Evan, you’ve heard him on the show before. And he is speaking internally to our team. Just talking to our other investment counselor, another one of them, Sarah, about how he refinanced his four Plex. And I’m sure most of you have taken my refi to die advice. But if you haven’t yet, it’s obviously a phenomenal opportunity. Right now, your rich uncle, Jerome Powell, has given you a big gift of these insanely low negative interest rates, they’re basically negative interest rates in real terms.
My four Plex in Little Rock, going from four and a half percent to three and a half percent gonna save me 300 bucks a month. Awesome. refi. It works. Yeah, it works. And it doesn’t even take that long. That’s the beautiful thing. I mean, you can wait seven years or 12 years, you know, when that didn’t end the video that you outlined. But you could also do it much quicker. Hey, Jason, I listened to your podcast the other day with the Marxist professor. The only question I had to him was if this is a much better model than he was claiming it to be. Why would it not win out and competitive marketplace?
Jason Hartman 16:54
That’s a good question. So you might remember the episode I did a while back with the the guest calls himself the Marxist Professor believer in Marxism. I’m not a believer, but I thought he was a very interesting guy. So I had him on the show. I like to get some opposing viewpoints of course, as you well know. And so one of our listeners asked a good question here.
Isn’t that the foundation of capitalism itself? If you have a better, more efficient system and idea?
Jason Hartman 17:20
Yes, it is.
I’m listening to an interview that gunlock did for Yahoo.
Jason Hartman 17:25
And this is George gammon speaking, you’ve heard him on the show, many times
George Gammon 17:29
looks like July 1. So if you go to Yahoo, finance their YouTube channel, and pull up the interview, basically, he states exactly what you’ve been saying for, like two months now that everyone’s moving to the suburbs. And his firm did extensive research on this and showed that the offers in the suburbs have gone through the roof while in the cities, they’ve just plummeted. And I think I don’t know what you’re doing for marketing material right now. But to have gunlock backup exactly what you’re saying that might be a cool clip, that you can download and turn into some, like a testimonial, almost backing up what you’ve been saying for like, two or three months.
Jason Hartman 18:12
So with that, you realize how it has been a while since I’ve gotten through some of these messages. So that’s why we need to get through some of the listener comments more often some of our internal team discussions that we share with you and so forth.
I hope you’re doing well. Just wanted to let you know, today’s a celebratory day for me, I’m finally no longer a California property owner sold our primary residence last week, after only six months of ownership, and just sold the Oakland, four Plex and super thankful to have gotten out before things get worse, and totally reinvesting in all the areas we recommend and want to thank you for your guidance. I’m also connected with Bob, who I thought was gonna be the masters and setting up a whole new asset protection strategies that was total repositioning. And I’m super excited to be on the other side of it. And I just want to say thanks.
Jason Hartman 19:06
So that’s our client, Adrian, and I’m sure he’s listening now. Hi, Adrian, how are you? And he’s been doing some great stuff with his portfolio really repositioning getting into the right cash flow markets, and getting his asset protection strategy set up. You know, he did that with our attorney that we recommend there. And you can listen to that free web class at Jason hartman.com slash protect. So thanks for that message, Adrian. And let’s go to the next one.
Well, Jason, I do think about you every day. In the mornings when I hear your podcast, you have become like a drug for me that I need every morning and recording the day. I can tell you that it was too bad. I wasn’t able to hear the whole thing because that weekend I had my grandchildren here is three of them, which is a few things I heard I lost very much. And I learned a lot. So thank you for those events. And hopefully, I would love to see one in person. Okay.
Jason Hartman 20:14
So that’s one of our listeners who joined for just a brief time one of our online zoom events. Just a little, little reaction there. Let’s go to the next one.
Hey, Jason is clay, just giving you just reaching out to thinking about you, when I was listening to George Gavin’s most recent podcasts with Jason Garrett, where they were talking extensively about them backplate tax in life. Anyways, I thought it was
Jason Hartman 20:38
stag fleet tax and lie. That’s what the government’s doing to us.
Important to hark back to a couple of the things that you do with real estate portfolios as a means of defense against what what the government’s going to be doing. What they were talking about is they think that one of the most likely ways that the government’s gonna try to come after people is through higher property taxes. And that had me thinking, Oh, man, it’s not good for, it’s not good for our bus that own portfolios of rental properties. But then they talked about the way they think that’s going to happen is they think that, instead of just simply increasing the percentage tax, they think what they’re going to do is re re estimate or take the current nominal value, and increase taxes based on kind of the new or higher or current value, as opposed to whatever previous value people were probably paying taxes on. And what that brought me to thinking is about how you’ve advocated so strongly for the refund till you die. And I think that’s incredibly prudent to think about. Now we need to, we need to have that as the probably a central pillar of our current investing mindset. Because what we can do to protect ourselves, if property taxes start going up, is there still 1% of rental value properties out there, and even those properties that are in our portfolio, essentially what they’re going to be trying to do, they’re going to try to tell each of us that, hey, your houses has changed in value, we’re going to touch base on that, well, if that’s how that’s gonna work out, what we need to do is we need to, we need to refinance the house, we need to strip the equity that they say is there, that way we continue to renew or reset the property and the leverage on that absorbs in order to to reach those gains. And essentially, we need to protect ourselves. Obviously, with the rent coming in, that’ll that’ll continue to get, you know, to probably keep going up. But if we keep stripping equity, and then using that equity for good things that will keep us current and allow us to continue to recognize the value of our houses as a phenomenally appreciate. But it’ll also keep us with a hedge with our leverage against the devaluation of the dollar, which is a part of that same theory. So anyways, the old mentality is going ahead and paying all your properties off cash and keeping a low, you know, property tax and kind of writing things out, I think that mentality is going to be chipped away at even more going forward. And so that you in the back of my mind, as I was thinking about that, this is gonna get crazy, and we need to protect ourselves. Anyways, hope you’re doing well. And I’ll catch up with you again soon.
Jason Hartman 23:14
Okay, so that was a really good point that he brought up. And one of the things that he didn’t say, but I was thinking, is that and this is a really neat opportunity for us as investors, because that is a loop, right? If the assessor says your property is worth more, and if municipalities are doing that, to try and gain more property tax revenue, then you can go to the lender on your refi to your di plan, and use that comparison that the assessor has made to get a better appraisal. And you can also do that in reverse. You can fight an increased tax assessment with an appraisal that you’re refinancing on. And that is a very, very powerful tool to do that. As you know, and we’ve done many shows on this over the years, you can appeal any property tax assessments, when markets are going up, as they have been for quite a while now. Some of these municipalities are seeing that and, you know, they’re they’re trying to reassess properties and raise taxes, right, or raise property taxes, but that’s an excellent way you know, use those and play them off of each other as a way to get better appraisals and get more cash out on your cash out refinance, following my refi till you die plan, and then also use it in reverse in whatever way it works best for you to get a lower tax assessment. Okay, so let’s see if we can do one more message here. And then we’ll call it a day for these and I really am glad we had a chance to catch up on some of these. We’re still not quite up, we have many, many more listener comments, and internal team comments and so forth. But let’s see if we can do one more today before we wrap it up. So this is our client Drew Baker talking again,
Drew Baker 25:12
someone that would default to that controls the narrative, they’re never going to be wrong. And I think that’s the problem is they control the narrative, and they control the flow of information. So it’s filtered through their lens, anytime bad news comes up, they can just deflect it elsewhere. And so, you know, I mean, I had a tenant that moved out recently, and, you know, they were kind of rough on the property, but they were good tenants, they paid on time. And, you know, there was one little hole in the wall, a door.
Jason Hartman 25:39
And so what he’s referring to is the property manager. Remember, Drew and I are both big fans of self management. And having more control, being an empowered investor, I would not recommend that if you’re brand new, to investing, of course. And I would definitely recommend that if you are going to self manage, you become a member of our empowered investor inner circle, which has, it’s not just about self management, but that’s definitely one of the focuses. And, you know, we provide a bunch of resources to help you self managing and becoming a more empowered investor
Drew Baker 26:16
kind of busted up that may have been from previously. So I didn’t hold them account to that. But you know, a couple little things that I went through about five things, half the things they reasonably explained. And I said, Okay, no problem, I’ll cover those. And then, you know, having the house professionally cleaned and 16, a hole in the wall, and getting the house deodorized basically was like $500, which is really what it’s gonna end up costing me to deal with those things. And so I held that money back from the security deposit. Now, I can tell you, there is no way that any property management company would give them any charge on their security deposit refund, this way, based on their condition of the property, even though it was in rough shape, they would have given them a full refund. And what’s nice is I control I mean, this may not be for everybody. So I fully understand this. But like, I’m working on template for my lease agreements, and every lease, I tend to get better, I tend to add more things, remove things, sharpen up details.
Jason Hartman 27:10
In other words, the lease agreement itself, he’s got a better clause, he’s had experience, he makes the lease agreement better every time. And he uses hellosign, to do the signing. And it’s free, you know, for a small volume. Of course, if you have a big volume, you’ve got to, you’ve got to pay for the upgraded hellosign package, which is still incredibly cheap.
Drew Baker 27:35
I’m working on a lease agreement right now for this other property. And I had two things in here that I thought were like really important to outline in the lease agreement. And basically the premises I realized that like, maybe 50% of my service calls are because you know, there’s a bad light bulb, you know, they need to reset the breaker or, you know, reset the GSI switch, or the H back service comes out, it’s because they didn’t, the failure to replace the furnace filter, stuff like that. Like, it’s kind of like, okay, I’ll just let it go and pay for it. Well, I’m not doing that anymore. If you put in your your hairdryer, and it pumps the breaker, and you want somebody to come out for $100 and flip a switch, then you’re gonna have to pay for that the house protected itself by turning, you know, not not allowing the thieves to break blow the circuit. So, you know, if your light bulbs bad, and it’s within reach, and you know, you want to have your your furnace service, and you didn’t do the proper service. And it’s not working because you didn’t do your part. Like, I don’t think it’s unreasonable that those things be covered by you. And,
Jason Hartman 28:34
and when he says you, he’s referring to the tenant, and he’s absolutely right. Some of these property managers just give people’s money away. It’s absolutely ridiculous. Now, on balance, I just want to say this again, okay. nothing terribly earth shattering here. But remember, one of the most, I guess, coveted commandments of my 10 commandments of successful investing is commandment number three, thou shalt maintain control. The reason you want to maintain control and be a direct investor is so you don’t leave yourself susceptible to the three major problems. When you relinquish control to somebody else, mostly referring to you’re investing in a fund, you’re investing in a wall street related asset, a bunch of executives control everything, investment bankers, Wall Street brokers, you know, Goldman Sachs, aka Goldman Sachs. And, and they’re in control, right? The CEOs are in control. The Board of Directors is in control. The other executives are in control. They’re paying themselves huge bonuses, and their investors are getting lousy returns. You don’t want to relinquish control, because you’ll lose your money. Or if you don’t lose money, you’ll get a meager return compared to being a direct investor, when you would get a much much better return. So that’s That’s the scoop. And here, when you’re self managing, you have much greater control. And you can make sure that your tenant understands that they’re not living in a hotel room. There, this is not a full service hotel at the Ritz Carlton, right, they need to act a little bit more like a homeowner. And if the GFCI breaker blows, because you know, your blow dryer blew it, you got to flip the switch, right? It’s not hard, it does not require an electrician. This is a self service thing. You don’t change people’s lightbulbs, okay, things like this, right? This is this is obvious stuff that the tenant has to do.
Drew Baker 30:41
It’s not my responsibility to send the the tenant furnace filters, but I find buying a 12 pack for 50 bucks.
Jason Hartman 30:48
It’s also not your responsibility to pay for crazy Pest Control expenses, right? You know, if there’s some ants in the house, your tenant needs to buy some ant traps at the grocery store and place them around the house to to, you know, to keep the ants out. I mean, this is property managers, I’ve seen them pay for this stuff. If they try to charge you for this stuff, just tell them no, you’re not paying for it. But a better alternative maybe to just self manage
Drew Baker 31:19
on and shipping it to their house makes me look like the good guy, they will, they will presumably do it. And if they don’t, they’re going to be charged for the service call to replace it themselves. And they’ll learn quickly, that that didn’t work out well for them. And you know, they can’t say, oh, why should enough pay for the service, while you’re like, Hey, you didn’t replace the filter, I paid for the filters, when technically, that’s your responsibility. So this is something that you did, you have to do maintain, you have to do routine maintenance, to keep the house in good shape, and keep these things working on your end. Otherwise, they’re going to break down and you’re going to be responsible. So it’s about setting the expectation, and stuff like that I’m getting better at and I’m building that into sort of my expectations. So, you know, in the past, I just want all this stuff go, you know, and, and now I’m kind of defining what I think is fair, and outlining for the tenant, which is what I think is fair, you know, I had an elderly lady who like had a curling iron, and you know, the guy had to go over there and just hit a button, and then charge me $95. And I’m like, it’s ridiculous. I’m not doing this again. Like, that’s not happening.
Jason Hartman 32:23
So folks, that is why we do this show. So instead of learning on your own dime, you can learn from us. And that was great. So I’m really glad glad that drew shared that. And I couldn’t agree more. Do not let property managers overcharge you for all this stuff. Teach your tenants how to be good tenants teach them what is what what they can expect, and what you expect in return. Okay, so we will be back with another episode on Friday. And then next week we’ve we are packed with information, we’re going to talk about the states that don’t tax retirement distributions. And even if you don’t want to move to one of them, you’ll want to hear about this, because it has a lot to do with what is happening with the economy’s in various locations. And with real estate in those locations to anyway, reach out if you need us, Jason hartman.com. Or in the US, you can actually pick up the good old phone and call us at one 800 Hartman, have an investment counselor on our team, we have several who can help you build a portfolio they can consult with you. Even if you’re not Ready, get set up for a great next year. If you’re not going to make this happen this year, get set up for next year. And by the way, you might have to get set up for next year. Anyway. Why do I say that? Because inventory being very scarce. We have clients who are buying properties today, that won’t even be completed until next year in some cases. So the sooner the better. engage with us, the sooner the better. Even if you’re not quite ready to do anything right now. You definitely want to be engaging with our team members. And hey, it’s free. All right. We will talk to you on Friday. And of course, the YouTube channel is always available to you. And until next time, happy investing.
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are 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.
Jason Hartman starts the show by talking about Texas’ issue with snow and power; and what ‘the tolerant’ has said about Rush Limbaugh’s passing. Then, Jason interviews Dan Amerman about his book, The Homeowner Wealth Formula. They discuss home price indices, inflation, and wealth transfer from boomers to up-and-coming generations.
One way of looking at a mortgage is that it is a short against the dollar. It’s as a liability. It’s short against the dollar. And it needs to be refreshed periodically, right? Otherwise it uses up its power.
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 1:05
Welcome to Episode 1649 1649, we’ve got Dan Ammerman back on the show today. As you know, he’s been on many, many times and always has some interesting new and innovative ways to look at things. And I think you’ll enjoy this interview, we did about 41 minutes with Dan this time around, really enjoyable, he’s got a new book out on how people create wealth with their home. The only thing I want to say about that before we dive in, is remember, we did not go into the whole concept of rent to value ratios, RV ratios, and how that impacts whether or not it makes sense to consider your home as an investment. There is more to it than we discuss here. But I didn’t want to divert the conversation too much from his points. Just note that you know, we didn’t do like the comparison of having a high end rental versus low end properties that you rent to other people and meaning the high end rental you rent for yourself and so forth. So much going on in the world. Before we get to the interview. All of you know about the craziness with Texas and I feel really bad our heart goes out to the people in Texas, Texas is very special because it has its own power grid, you may have heard of that. I remember reading that many, many years ago, a lot of it relies on clean in quotes, or green in quotes, energy, and that has failed these windmills, these wind turbines just will not work in cold weather. And there wasn’t much of a good contingency plan for them.
So we have our own people in Texas affected by this. Of course, many of our investors have tenants there. Our Podcast Producer is there. One of our investment counselor team members is there. And it’s absolutely crazy. So I saw an interesting meme. Actually, Ashley shared this with me. And it is a picture of one of those giant when windmills, wind turbines. And you know if we’ve all seen these things from a distance, but have you ever been next to one they are, they’re ginormous, these things are huge, huge, that the scale and size of them cannot be appreciated until you get up close to one because they are very, very large. Anyway, she shared with me this theme of a it’s a picture of a helicopter flying over one of the blades of the wind turbines. And it’s a it’s a tweet. And it says a helicopter running on fossil fuel is spraying a chemical made from fossil fuels onto a wind turbine made with fossil fuels during an ice storm. Awesome. And, and that’s just so ironic, isn’t it? It’s just total irony. Because when the environmental movement looks at the entire picture of the green energy, the Clean Energy movement, they sell them calculate all of the things into it, the entire ecosystem, the entire equation. And the deal is just not as good as it seems. I still believe and I remember reading a book on this many many years ago. I can’t even remember the name of it. About a the author a woman who set out to write a book on how nuclear power was dangerous. It was bad. We shouldn’t you It very anti nuke. And she ended up writing after researching it, she ended up writing a book about the complete opposite how it was the safest, cleanest, most sustainable form of energy production. So again, as I’ve said many times before, over the years, that is one of the few things that France is doing right? Most of that country runs on nuclear power. And it is that’s been a very good move.
And, and we should learn from that. It’s absolutely crazy how things just just don’t work out properly. In the US because of the media and PR and these crazy ideas that we get into our heads at a sort of a cultural level like this Zeit Geist, about how nuclear power is bad, and we’ll take it from good old Jane Fonda’s movie the China syndrome back in what the 70s. And, you know, it’s just, it’s these new reactors are so much safer, so much cleaner, so much more modern. And all of these terrible predictions just never happened with nuclear power. The worst, of course, was in Ukraine. That was Chernobyl. Hopefully you all saw the series on Netflix, it was great. By the way, I think it was on Netflix, but whatever. Anyway, enough of that. So heart goes out to the people in in Texas, and hopefully, they’ll get their power and water and everything back working again. But this also shows us that an individual level, we need to be prepared. And of course, I have another show on that the holistic survival show, protecting the people, places and profits you care about in uncertain times. So check that out the holistic survival show for more on that. Sadly, you probably heard the news. Love them or hate them. Okay. Sadly, conservative talk show host rush limbaugh passed away. And the left is out with their evil, intolerant awful, just as some of the stuff that you read online. I can’t even share it with you on the show. It’s so bad. But here’s a couple of examples. Mike Drucker tweeted, it’s easy to make fun of rush limbaugh right now. But it’s important to remember that he also brought a lot of he brought a lot of people a lot of joy. by dying. Yep, that’s what we get with the tolerant people. Yes, they’re so accepting and tolerant. And then here’s another one. Billy Moe says, I don’t want to say anything bad about Russia since he’s gone. Only good. Russia’s dead. Good. Unbelievable. That’s just pathetic. And here’s another one called with a handle. Of course, they use fake pictures. They don’t have real names. This one is called this girl. And she says, hell just got a lot fuller. That’s the tolerant accepting people on the left, folks right there. And, of course, Trump’s impeachment defense attorney, you know, how his home was vandalized. And in his driveway, they spray painted the word traitor. just unbelievable. This is this is the accepting, tolerant left. And if any of you are to the left side of the political aisle listening, which I’m sure you are many people are I have some left left wing views myself. So you know, but is that the group you want to be associated with? Yeah, just really consider that. That’s, it’s just awful. It’s really awful.
So anyway, let’s get into the show. We’ve got a good show from Dan Ammerman. And we’ve got a couple of exciting things coming up. We will announce for you next week. We’ll just keep that all for next week. And oh, one thing though, I do have to mention on Friday, you know, we do flashback Fridays. Well, this Friday is a 10th episode show. So it’s going to be kind of a double hitter, if you will. It’ll be a 10th episode, plus a flashback, all in one. That’s a very rare occurrence. So be sure to join us for that one. A very rare occurrence. All right. Without further ado, let’s get to Dan Ammerman.
It is my pleasure to welcome Dan Ammerman back to the show. You’ve heard him on many times. You know, I have been a fan of his for many, many years. And he’s out with a new book, the home owner wealth formula. subtitle the best investment most people will make is their home. Learn the historical formula that has created wealth for millions. Dan, welcome back. Thank you, Jason.
Dan Amerman 10:04
It’s good to be here.
Jason Hartman 10:05
So this is a common discussion, right? Is your home in investment? Or is it an expense? And I have many of my own opinions about this. And I think it depends on the price of the home. But of course, with the mortgage being a big part of the asset, maybe we should ask the question, is the mortgage, a good investment? Or a good asset? Or is it as it’s traditionally thought of? Is it a liability?
Dan Amerman 10:38
It is a liability that can be arbitrage. But you’re, you’re getting ahead to book number three in the series?
Jason Hartman 10:46
Well, you know, me, Dan, I’ve been Yes, I
Dan Amerman 10:48
know, I know, you just jump right ahead, you understand what’s going on there. But I am really excited about this book, even though it appears to address some things that you and I have been talking about for many years, it’s really very different to, after working with this, for all these years, what I did was I took about a year and I intensively researched, what’s actually happened with single family home prices in the US ever since 1975, which is when we start to get good data in terms of what they call pairs methodology, which is the same home so you’re tracking price changes for the same home instead of different regions, or how sizes or different things like that
Jason Hartman 11:34
he did the NBN. One, you know, that’s an important point, the arrays, and I’m about to do a video on the different indices. And you know, there this is really something that people do not realize is that the when you look at one index versus another, they’re really telling you different things. And so you’re talking about tracking the same exact home, like 123 Elm Street did this. And you know, four or five, six main street did that, right? Is that what you’re saying?
Dan Amerman 12:10
Exactly. And the another big difference between the indexes that you hear about is it depends on what part of the country they are covering the basis of what I used, was the Freddie Mac house price index for all 50 states.
Jason Hartman 12:28
And is that is that your favorite?
Dan Amerman 12:30
Yes, it is. Because it covers all 50 states, the media and Wall Street and so forth, will more typically focus on the Case Shiller re 20. metropolitan area. And I think that’s a huge mistake. I’ve
Jason Hartman 12:44
debunked that index many times. Because Yeah, you know, us we like we like to look at the markets in three ways. Linear markets, cyclical markets and hybrid markets, and the Case Shiller 20. Only, well, not only, but 75% of that index, is cyclical markets, you know, these are the high flying sort of trophy metros, they get all the attention, but they’re really not most of the real estate in the country.
Dan Amerman 13:11
Absolutely. And where things get really interesting. I mean, this wasn’t the track has tended to go down. But there’s some fascinating stuff here is that as you know, the metro areas, you’re calling them cyclical, have exaggerated price cycles, right? Compared to the national average. So mathematically, what that means is that when you go to everything that’s not the 20 Metro, they’re opposite enough, where when we look at a national average, we’re looking at the average of those two, but really, they’re much further away than that.
Jason Hartman 13:42
Yeah, right. Right. I
Dan Amerman 13:44
know. So when you when you put those together, you get a very different price difference, you get a different volatility, in terms of how the prices have changed nationally. And mind. Research is based on looking at all 50 states with pairs methodology. So it’s the same house and looking at it for the period from 1975 to 2019. Okay, good. What
Jason Hartman 14:09
does it tell us?
Dan Amerman 14:11
Amazing things, just amazing. What I did was I took those years, and I looked for every possible one year combination, three year combination, five year combination, 10 year, so I looked at say 1986 to 1987. And I looked at 2012 to 2017 or 1999 to 2009. I looked at every single one of those in terms of national average home price changes in terms of inflation, in terms of what mortgage rates were in each of the starting years, and what amortization would have occurred over that period and so forth. And I could be wrong here. But to the best of my knowledge, I’ve just done the most exhaustive study that anyone’s done. It changes in home equity during that entire period. And the results have been just amazing. And of course, this applies for homeowners. But this also applies equally to investors in single family homes. And I would argue that it actually applies more so to investors because investors have the benefit of not paying their own mortgage debt. Right, exactly. And that’s a huge benefit. And of course, they have the benefit as well, that they have an appreciating property. And they have an amortizing mortgage where the mortgage is being amortized for them from the template, tenant, round to payments, good stuff.
Jason Hartman 15:39
Okay, well, let’s get in the mode here and talk about what it tells us. What did you find in this exhaustive research?
Dan Amerman 15:46
Well, first, the results are amazingly positive. And I also confirmed that using an entirely different source, which is the kind of the definitive source of information when it comes to consumer finances, which is the Federal Reserve’s once every three years survey of consumer finances. And what they found was just amazing. If you look at it in practice, about half of the net worth of the average homeowner is in their home equity. Mm hmm. And the amount of Home Equity they have is almost twice what is in the average retirement account.
Jason Hartman 16:22
If you’re looking at median values, so that’s really their savings. It’s not their their qualified plan. It’s not their retirement account. Exactly.
Dan Amerman 16:30
Exactly. In it, you know, you talk to some financial planners who will have the greatest respect for and home equity is kind of a problem for them. Yeah, they
Jason Hartman 16:37
dismiss it. I don’t have the greatest respect for
Dan Amerman 16:42
the, the issue is that from a financial planning perspective, homeowners have way too much money in home equity. Well, they should, they should have that money out of home equity, and they’re saying it should be in stocks and bonds and so forth. But the problem is, that’s not really intentional, when it comes to Home Equity, is just home ownership, whether it’s a rental property, your own home, has been such a lucrative investment that it puts so much money in there that the rest of the portfolio can keep up with. Yeah, right. Right. Right. And so this is where we get into kind of a funny thing, because, you know, I would say that it’s great that they’re building equity, and that you know, they’re getting a, that means they’re getting a good return on their, their property. But leaving the equity in there and letting it fall asleep, and be debt equity is a bad idea.
Jason Hartman 17:34
So that’s where I’ll kind of agree with the financial planners, and I think you, you know, about my refi till you die plan. I just like to make sure people are making that equity work for them rather than sitting in there. But I don’t know your we have our little slight differences. We mostly agree on this stuff. But I don’t know. Yeah, no, no,
Dan Amerman 17:55
no, no, I totally track the mathematics. And that’s part of what I’ve been doing there. What you really have in one way of looking at a mortgage is that it is a short against the dollar. Okay, it’s a liability. It’s short against the dollar. And it needs to be refreshed periodically, right? Otherwise, it uses up its power, the power in the first 10 years. So yeah, there’s a strong case to be made, all else being equal, that if you’re looking at this, and you can do so as an investment in particular, but also with home ownership, that you want to refresh that every now and then because then you get the maximum power back to play the liability arbitrage.
Jason Hartman 18:35
I agree. Good,
Dan Amerman 18:36
is how that works. But the other thing I found out, this is true national averages. If you look at three year home ownership periods, all the way from 1975 to 1978, up to 2016 to 2019. There’s actually 42 individual homeownership periods in there. And you average those together, the national average is to almost double home equity in three years if you bought it with an 80%. LTV mortgage. So that’s amazing. How else do you How else do you have a national average across all those decades of almost doubling your money?
Jason Hartman 19:16
Yeah, everything is amazing. It’s just such an incredible asset class because it’s multi dimensional, it’s tax favored. You know, you’re shorting the dollar, which which, by the way, when you said that, I thought that was a great way to put it. I’ve heard that before us shorting the dollar wise, because and this is another rabbit hole. We don’t have to go down too long. But here’s why I say that. I think it’s wise, it’s obvious that the dollar is being managed very irresponsibly. However, they have been able to defy gravity, much better than one would think if you’re just doing the math. What I mean there is of course, they’re printing, they’re spending, they’re doing QE they’re spending You know, etc, etc. And you’d think there’d be like massive inflation by now. And yes, there is much more significant inflation than is being reported. But it’s not as much as one would think. And I believe that’s just because the US is in a very enviable position and can get away with it. But well, you know, is shorting the dollar wise, what do you think of those questions? Well,
Dan Amerman 20:24
okay, Jason, you just raised a whole series of issues that we could be talking about for the next six to eight hours, pretty easily. You’re not necessarily really with, there’s two different ways of looking at this, one of them is that you are looking at the inflation driven destruction of the real value of the mortgage. But the historical look that I’ve taken it, this shows a whole different way of looking at this, that has been far more consistent when it is comes to creating money. And that is, you are really not just going short, the liability but more directly, you’re going long inflation. Mm hmm. And I use some different data in the book as well, going back to 1940. And looking at US Census data and census data, and so forth, that doesn’t have the Paris methodology, but it’s still pretty accurate in broad strokes. And the average, or I should say, the median value, according to the 1940, US Census for a home in the United States was about $2,900. And if you look at every decade, after that, what is happening is on the one hand, yes, you can say all right, the value of each dollar is falling. And that’s a very steady process. But the other way of looking at that, and this is just a key part of chapters two, three and four in the book, because I think this needs to be more widely understood by homeowners and real estate investors, the falling value of the dollar is manifested much more directly by taking ever more dollars to buy everything. And as you know, there’s a pretty good historical tie between single family home prices and inflation. And that was part of what my research established as well is actually overwhelming. If you look over the long term, if you look at all these different periods, overwhelmingly, inflation is far more important for determining home prices than changes in real market value. And in fact, it’s an exponential series in the formulas that go through in the book, The formula for inflation, increasing the number of dollars it takes to buy everything, including the homes is identical to the formula for compound interest. A lot of people don’t realize that.
Jason Hartman 22:40
Say that again. Let’s make sure we got that.
Dan Amerman 22:44
Okay. The number one historically proven method for creating wealth over the centuries, when they’re not artificially holding down interest rates, what they are right now is compound interest. Right? It’s your money working for you. Yeah, yes, it’s your money working for you as to you working for your money. And what a lot of people don’t realize is that when we change our perspective on inflation, from a decreasing value to the dollar, to an increasing number of dollars, being needed to buy everything, and those two halves of the same thing, the inverses of each other, but they’re representing the same thing. Inflation actually grows with the strength of the compound interest formula. So the compound interest formula says that a 7% interest rate will double your money in 10 years. Well, a 7% inflation rate will double the value of a home in 10 years, right? The math is identical. And inflation just completely overpowers real market value changes over time, which is I realize a lot of real estate investors don’t see the world in those terms. They think they’re trying to make smart investments, and it’s much better. It’s much better to make a smart investment than a dumb investment. But really changes the market value real market value are fairly minor.
Jason Hartman 24:08
Well, that means in so of course, the mortgage being debased by inflation is a wonderful thing, the mortgage, the principal balance and the monthly payment, both being debased by inflation. Wonderful, wonderful. And, you know, real estate doesn’t really go up in price that much over time. You know, it, it’s somewhat close to the CPI, some will say it outperforms the CPI by about 3%. Some will say it’s about even, is that what you’re referring to when you say market value versus inflation? Because, yes, people listening damn might think that, well, isn’t inflation what’s making the price of my real estate go up? Is there a distinction there you want us to make sure we understand.
Dan Amerman 24:55
Yes, there is very much so and it is kind of crucial to understanding I would say almost Everything about where the money is really coming from when it comes to homeownership when it comes to real estate investing is coming for some very different sources than I think most people realize. If we look at all 35 of the 10 year homeownership periods, starting from 1975, to 1985, and ending with 2009 to 2019, the average across all of that is in inflation adjusted terms, for a home to increase in value by 9.9%. call it 10%. Okay, now, if we look at the increase in homeowner equity, with an 80%, LTV mortgage for all 35 of those 10 here combinations, the average increase in equity is 311%. Wow. So if we compare a real increase in market value, which is 10%, to the total increase with the other seven levels of the multiplication of wealth, that’s what I did, I took a look at home ownership. And I literally broke it out into an eight part multiplication formula. Only 3% of the money is coming from the fifth level, the multiplication of wealth, which is real changes in home value. The other 97% is all inflation and the mortgage and various factors within that.
Jason Hartman 26:25
Isn’t that amazing? That’s it’s just it’s such a such an interesting asset class, isn’t it? Okay. Tell us more. And I love that. You said, yeah, we could spend six to eight hours on that. Actually, damn, we could spend six to eight days on it. But
Dan Amerman 26:40
Oh, yes, we totally could. We totally could. And it’s not just as an aside, it’s not actually money printing. That’s why they haven’t seen the inflation yet its reserves based monetary creation. Okay, what’s
Jason Hartman 26:51
the distinction there? We need to know.
Dan Amerman 26:55
I’m Benjamin Bernanke, in 2008, changed the nature of the US dollar, even though most people aren’t, aren’t really aware of this. The Federal Reserve wants you a different way of creating money that was used to fund the rescue in 2008. It was used to fund the QE. Right now it is being used to fund this enormous creation of money, this helicopter money that we have. And it is kind of interesting, if you think about it, this is just a quick aside here. Virtually our entire economy and investment markets this at this point, are based on two radical ideas that Ben Bernanke he was pushing back in the early 2000s. One of them is this idea if we had a future crisis of just using helicopter money, and just showering huge sums of money down on the population to do it. And the way they’re doing that, is I don’t I put out a recent analysis, you may have seen it, Jason, if you look at it, even in inflation adjusted terms, the US national debt went up more in a single year, last year in 2020, than it had in the first 208 years of the nation. That’s that’s not inflation, that’s real dollars. And where are the real dollars coming from? The Federal Reserve isn’t actually printing, they’re doing a very complicated kind of shell game that lets them get access to dollars up to a certain point, a certain number of trillions without triggering inflation.
Jason Hartman 28:26
Is this a when they run through that,
Dan Amerman 28:27
then you’re left with straight up monetary creation? Something like modern monetary theory? And at that point, then yeah, inflation would take off, and that would be tremendous for home investment.
Jason Hartman 28:38
Okay. So with with this method of increase, I mean, I don’t know if my words are right, increasing the money supply, but not creating inflation. Is that a fair statement?
Dan Amerman 28:51
Yes, that’s exactly what Bernanke he came up with
Jason Hartman 28:54
in does that work? Or is it a game of smoke and mirrors? I mean, is it the Shogun guy? Yeah. I mean, game.
Dan Amerman 29:03
Yeah. I mean, I’ve got, I’ve got a, I’ve got a two day workshop on this coming up in May. Okay. But so it takes a good bit to explain it. I think for the average person, although I can do that. I can get them there where they can understand that. Yeah. But
Jason Hartman 29:17
your workshop back in 2007 or eight, I think it was, you probably know, Dan. And it was fantastic. And many of our clients and listeners have have attended your stuff. So kudos to you. We really like your work.
Dan Amerman 29:29
Well, thank you. Thank you
Jason Hartman 29:30
with what you just said with what Bernanke he came up with? Is that something that can continue or does it automatically have like an inherent expiration date on it because it’s a shell game. It’s limited. And
Dan Amerman 29:44
a lot of government programs are actually shell games, the funding for Social Security, for example. And the interesting part about the reserve space, monetary creation that’s creating the money that’s keeping everything going right now is it has a lot in common with the money. Funding for Social Security. It’s a very similar shell game this going on. In that essentially what they’re doing is they are steadily draining the safety and reserves from the US financial system and spending it today to bail out the economy and to keep the markets going, and so forth and so on. But at the very same time, they’re hollowing out the financial reserves of the country and of the banking system.
Jason Hartman 30:27
So Dan, that kind of begs the question. I mean, there’s so many rabbit holes for us to go down. And of course, we’re limited on time. But, you know, there’s this whole thing that the millennials, you know, it’s it’s kind of a viral meme that’s going around, called, hey, Boomer, and the millennials are, of course blaming their Boomer parents for, you know, ruining the world for them. And, you know, I don’t think that’s very fair, because in a lot of ways, the boomers, you know, they have their contribution in Building America. I mean, you know, they, you know, hey, look, Intel, Microsoft. I mean, all of these, all of these big revolutions, you know, we’re Boomer driven. Now granted the greatest generation before them sacrifice, you know, much more than the boomers, the boomers were much more hedonistic, and, you know, they did the drugs in the 60s, and they were the sort of Clinton era people. Fair enough. But Is that a fair meme? To say, hey, Boomer, you know, like, in other words, you look what you left us with.
Dan Amerman 31:27
A Boomer is a an unfortunate generalization of quite like everything. Now, there are younger boomers, there’s middle boomers, there’s older boomers. Yeah. And the role of the younger boomers, such as myself, is to pay taxes for our entire lives helping to support the greatest generation when they retired, and the older boomers and to some extent, the middle boomers. But we’ll probably be the ones who get shafted when it comes to getting our money. Yeah. So you know, it’s kind of an inter Boomer thing, to some extent, where the older boomers are really benefiting from the younger boomers, but the younger boomers aren’t going to get what’s coming to them. Yeah, but it’s not like they’re taking any it’s not like we’re taking anything from the millennials.
Jason Hartman 32:18
Right. And we know for sure, though, that just by virtue of inflation, and you could say that that’s happening because of the irresponsible fiscal and monetary policies of boomers, there’s going to be a wealth transfer to millennials, just inflationary wealth transfer, because, you know, the older people usually have assets and savings, and the younger people usually have debts. So that helps them whether they know it or not, to some extent. So, you know, there’s there’s consolation prize, maybe,
Dan Amerman 32:52
yes, inflation is a traditional way of transferring wealth between generations. And it takes the wealth has been accumulated by one generation and essentially wipes it out while transferring it to the younger generation if you happen to live in a time of high inflation. So yeah, that’s a very distinct possibility, if you look at what’s going on right now, in terms of the monetary games that are being played in these fantastic increases in the national debt, is that unfortunately, by the time all of a sudden done after having paid taxes for their entire working careers, when the time comes to cash in for many younger boomers, they may lose that to inflation, unless they’re prepared for it. Yeah, right. And that’s where things like income, property investment, the homeowner wealth formula, all those can work really well. And that was a key that was a key part of the research I did is just how tremendously effective home ownership is, or owning a rental property with a mortgage. When it comes to not just surviving inflation, but really turning inflation into wealth. There has been just an amazing amount of wealth created over the years. another statistic from the Federal Reserve consumer survey, the Federal Reserve survey of consumer finances, is that if you compare the median net worth, for homeowners to the median net worth for renters, there’s a 40 to one differential.
Jason Hartman 34:20
That’s it. That’s incredible.
Dan Amerman 34:21
$40. And I would argue that is exactly these things that we’re talking about exactly what I’ve determined in the book from my research, the eight levels of the multiplication of wealth, most of which relate to taking advantage of inflation, whether people are doing it intentionally or they’re doing it accidentally. If you understand what you’re doing there and you think and you look at this, okay, the national debt that just went up more in a single year than it had 208 years, this is not going to have a good ending, well, home ownership or buying rental properties if you understand how the underlying math is doing and that’s what my research brought out these eight different levels of knowledge. allocation of wealth is a fantastically good way to come through times like that, with more Real Net Worth than you started with,
Jason Hartman 35:08
you know, what I’ve been talking to people about Lately, I’ve been talking to them about the economist style, Richard can tell you, and then the cantillon effect, which I’m sure you’re probably familiar with, but the thesis is that the people closest to the money get enriched the most. Right. And so, of course, those are all the Wall Street insiders, the folks at Goldman Sachs, and just have to throw that in. intentionally. And, and and, you know, the politicians and that the elites, of course, right. And this this, that, you know, owning income properties, with mortgages with these incredibly cheap mortgages, thanks to our one our call our rich uncle Jerome Powell, okay, is the way to become a millionaire like they are right, because we’re aligning our interests with them. And philosophically, we all probably disagree with what they’re doing. But like the old saying, goes, never bet against the Fed. And so this, this puts us in alignment with, with what they’re doing. And we become enriched by it, as well, right?
Dan Amerman 36:20
Yeah, that’s something I’ve been talking about for many years, and many workshops, many different materials on that is the advantages of, Okay, if you’re facing this terrible, overpowering force, it’s doing all these unfair things in terms of forcing interest rates artificially low, taking huge risks with inflation, all this kind of stuff. You can get mad, you can get upset about it, or else you can say, You know what? I disagree, but I’m going to align myself with them. So as they serve their interests, as much as I may disagree with them, they’re going to serve my interests, too. Mm hmm. And over time, if you look at how things historically work, people have made a lot more money aligning themselves with those forces, then trying to fight against them.
Jason Hartman 37:10
They sure have very good point. Very good point. So then, could we agree that the worse inflation gets, the better it is for people following this plan?
Dan Amerman 37:23
Jason Hartman 37:25
Take that one more step, can we predict that inflation is going to be worse in the future than it has been in the past? Given all the, you know, the spending and the, you know, stimulus, and blah, blah, blah, there’s so much of it. Now, you know,
Dan Amerman 37:44
this is the time when I usually reach for my crystal borrow my crystal ball. But there’s a problem with that. Jason, always find out I don’t have one. Yeah. So we need to be careful about saying that we know certainty. What we do know is that there are enormous financial pressures that are going on right now. We do know in terms of alignment, we have many centuries of information on what happens when governments get heavily indebted. And the way they always choose to get out if they can do so is inflation, because it’s a great business plan for them. That really is its survival, yes, survival, that they can’t afford to really pay the money back. that they’ll never default unless they borrowed in someone else’s money. That’s why Argentina defaults, because they brought in US dollars, right? It was pesos, they’ve never default. They would just create inflation. And that’s the same thing for the US government too, if you want to look at the consistency is amazing. But if you want to look at why the dollar is only worth five cents, compared to where it was when the US went off the gold standard for domestic purposes, 1933. That’s why, as a matter of policy, they create inflation every year. And one of the really interesting parts of what I developed in the book, I believe it’s in chapter five is that I take a look at government interest and creating a 2% annual rate of inflation just as a minimum. And I show that how through home ownership that can be turned into a 10% annual gain with with leverage because that’s the leverage in the mortgage. Right, right. Yeah, this combination 97% of the historical returns from homeownership or owning single family homes over a 10 year period look into all these different tenure combinations. Is the other seven layers the multiplication of wealth that all revolve around inflation in the mortgage in different combinations. They’re off.
Jason Hartman 39:45
Yes, it’s the real changes are only 3% it’s truly amazing. The the problem with all the historical references Dan, are that you know, when we look at hungry Argentina, you know, was it Bob way, well, you know, whatever, right all these examples is that none of those countries had the position the US enjoys the reserve currency, the biggest military in the world, etc, etc. It’s just such a different world nowadays. And, and I say that understanding completely that the famous last words of every investor are This time, it’s different. You know, I just I just wonder if they can just sort of continue to, as I say, defy gravity, and and not let the chickens come home to roost. You know, this is, you know, you, when you look at the Peter shifts out there have been predicting the end of the world for so long, and they’re just never right. At least not yet. You just wonder, you know, I mean, in this world, we have to get other countries to keep buying our debt and financing the whole thing. And, and they’re not going to do that if they believe we’re debasing our currency too much. How does No, no, we don’t,
Dan Amerman 41:03
you’re I’m sorry.
Jason Hartman 41:05
You know, how you think it’s all plays out?
Dan Amerman 41:07
You’re thinking old school there, Jason?
Jason Hartman 41:10
Yeah. Okay. All right. Fair enough.
Dan Amerman 41:11
We don’t we don’t need other countries to buy our debt. Okay. That’s not what’s happening right now. Okay, what do we need that that’s not how the we just funded a four and a half trillion dollar deficit in the calendar year 2020. That was primarily done through monetary creation on the part of the Fed. So that this particular path that we’re going down right now is historically unprecedented? Sure, anything like this? And it’s actually works internally. Now, you are absolutely correct, that there is a scenario that happens.
Jason Hartman 41:50
Because I still think these countries are wondering, look, okay, even if we don’t buy any more debt after today, we’re still holding a bunch of it, you know, to the tune of like a trillion dollars? And is that going to be debased? As they debase the dollar? They’re still worried about that? Right.
Dan Amerman 42:07
Not Not, not to the extent you might think, okay, because of that debasement then could potentially benefit them in terms of the balance of trade, and so forth. But I think the real issue here that we’re looking at is that so much of our standard of living is based upon other nations assigning value to the US dollar as a reserve currency. And if we were to lose that, that would trigger a very high rate of inflation very quickly, because we simply can’t pay for, we don’t make enough to swap for what we take in from other countries. So if you look, you really got multiple different things going on here, we can look at the US being the reserve currency, over a period of decades. And that’s the entire period that I looked at that I had the really good data for 1975 to 2019, the US was the number one nation in the world economically that entire time, they were the superpower for that entire time. But we still had an enormous amount of inflation, creating a great deal of wealth for real estate investors, as well as homeowners. And if we lose that, then probably we’re going to even more inflation, which then creates even more wealth for real estate investors and homeowners, at least in that aspect of their life. Yeah, maybe that aspect? Yeah,
Jason Hartman 43:29
yeah, I mean, their purchasing power declines, but they’ve got the the magic asset that protects them from from that. So as prices go up, it’s like they they look around, and they go, Wow, it’s ridiculous what everything costs, but they, they’re, they’re fine, because they have the wealth effect of of those properties. And those mortgages,
Dan Amerman 43:49
as long as they have that, if they don’t, they just get hurt worse and worse. And that goes back to that. Comparing the median net worth for homeowners and renters from the Federal Reserve survey of the nation’s consumer finances. If inflation goes up, then that differential becomes a lot larger than just 40 to one mm hmm
Jason Hartman 44:10
yeah, it sure does. Well, Dan, what else do you want people to know just anything you want to share about this the book is, is excellent. And this is a series right?
Dan Amerman 44:20
It is it is I’m going to be releasing number two probably within the next month or so. I cover the the most important four levels of multiplication of wealth and book one. Then I have the next four levels swept all eight. So we’re up to all eight by Book Two. And then in Book Three, I take a look at some of the best information of all some of the best ways of building wealth, which is looking not at changes in home equity but looking at monthly cash flows.
Jason Hartman 44:49
Right wrap it up for us for this book or or even the future ones, whatever else you want us to know.
Dan Amerman 44:55
There is literally based on my research a Historically proven methodology for building wealth. That is the American homeownership experience. It’s just amazing. Because what I have been studying is literally generations of people under wildly different circumstances in terms of different parts of the nation, different interest rates, different inflation rates. And there’s just this extraordinary consistency to the amount of wealth that has been created. That is truly life changing. Number one there is, if you know anyone who’s thinking about whether they can afford to buy a home or not, or whether they should make the life changes will be necessary for them to do so. This there is an extraordinary, historically proven formula here where homeowners build a lot more wealth over their lifetimes. And people who aren’t homeowners, it is a natural result of the process. And even after having worked with this for all these years, really putting all this national data together, and seeing where the money comes from. First, there’s more of it. And it’s more consistent that I think most people have any idea. And second, it doesn’t come from the places people think it does. It’s the relationship that multi tiered relationship between inflation and the mortgage that has historically produced the vast majority of this highly reliable over the decades. form of building wealth. Hmm, yeah,
Jason Hartman 46:31
it sure has. And this didn’t really work before 1971 did it, it all that it just all changed. And by the way, we’re on the 50th anniversary year, right? So
Dan Amerman 46:42
it worked. It worked fantastic. Before 1971. It worked unbelievably Well, in the 1940s and 1950s. It worked even better than than it has recently,
Jason Hartman 46:52
really because I you know, when I look at these price charts that go way back, you know, further and they go back into those decades, I don’t see the type of radical price appreciation, which I know is not the point. But it’s it’s you know what’s correlated to inflation, at least,
Dan Amerman 47:10
the key is which years you’re looking at looking at things historically, if you’re looking at long term homeowner prices, then what you’re looking at is the year that the nature of money changed, which was 1933. That was the year FDR in his first three days in office did the bank holiday he did the gold confiscation, he totally changed the nature of the dollar, that set in motion all these decades of inflation, and also the financial repression that was associated with paying for World War Two. So those are some amazing years. Now, if you go back further in time, and you’re looking at, say the 1900s 1910s 1920s, when you had a gold backed currency did not have the reliable inflation. And it became much more of a crapshoot at that time. In terms of whether you’d make money or not by owning a home.
Jason Hartman 47:59
It just seems as though when Nixon you know, put the final nail in the coffin on gold. That’s when it really started to become just frenzied, you know, I mean, that was like the start of it, you know, but you’re saying even even before that back to Roosevelt home, oh, yeah,
Dan Amerman 48:16
I track it. And I have, I’m stuck with the 10 year census numbers at that point. It’s a lot harder to get good information about it. But I do track it over those years. And probably the single best 10 years that we have seen in our lifetimes for investing in homes would have been 1971 to 1981. Just because the degree of inflation during that time, but there were some really good times in the 1940s 1950s, early 1960s.
Jason Hartman 48:46
That worked really well as well. Interesting stuff. Dan Ammerman. Thank you so much for joining us. give out your website.
Dan Amerman 48:53
Daniel ammerman.com. And Ammerman is spelled a m er ma n.
Jason Hartman 49:00
Thanks for joining us, Dan. It’s always great to have you on the show.
Dan Amerman 49:03
Thanks for having me, Jason. It’s always good to talk with you.
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are 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.
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.
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.
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.
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
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.
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.
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.
Hi, my name is Michelle. And this is my husband, Phil.
Marcy Nina 16:16
Hi, I’m Marcy Nina.
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.
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.
I’m going to retire early from teaching and build a media production business producing video and audio from my own studio.
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.
I want to go to Paris.
Marcy Nina 18:38
I want to eat sushi in Japan.
I want to travel to Tierra del Fuego and see Antartica and the penguins.
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.
I want to add to the show,
I have lots of music that I want to record and perform. And I’m going to earn a degree in kinesiology.
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?
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.
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes, be sure to check out the show’s specific website and our general website Hartman media.com for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review For the show, we would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
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.
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.
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.
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?
Hey, Jason, thanks for welcoming me on the show.
Jason Hartman 29:06
Well, good to have you.
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?
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,
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?
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.
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.
I keep forgetting it changes every year. So
Jason Hartman 35:05
you got to update your clock, right?
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.
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,
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.
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,
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?
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.
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?
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
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.
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.
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.
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be
Really. Now how is that possible at all?
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.
I know I mean, how many people do you know not including insiders, who created wealth with stocks, bonds, and mutual funds. those options are for people who only want to pretend they’re getting ahead
Stocks and other non direct traded assets 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.
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win.
And unluckily for Wall Street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.
And this set of advanced strategies for wealth creation is being offered for only $197.
To get your creating wealth encyclopedia book one complete with over 20 hours of audio, go to Jason hartman.com forward slash store.
If you want to be able to sit back and collect checks every month, just like a banker, Jason’s creating wealth encyclopedia series is for you.
Jason Hartman 50:22
But yeah, that is a great plan you, you have definitely achieved it. And congratulations, I What’s your goal?
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.
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?
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.
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.
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,
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
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?
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.
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.
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?
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.
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.
What’s great about the shows you’ll find on Jason hartman.com, is that if you want to learn about investing in and managing income properties for college students, there’s a show for that. If you want to learn how to get noticed online and in social media, there’s a show for that. If you want to know how to save on life’s largest expense, there’s a show for that. And if you’d like to know about America’s crime of the century, there’s even a show for that. Yep, there’s a show for just about anything, only from Jason hartman.com or type in Jason Hartman in the iTunes Store.
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc, exclusively.
In this episode, client Jeff Morris asks Jason Hartman’s advice about investing in Chicago. They discuss the cash flow and rent-to-value ratios, maintenance costs, and the vacancy rate in Chicago and determined that it’s the least expensive world-class city in the U.S. Jason and Jeff also talk about the advantages of buying a group of properties all at once and compare the rental properties in Little Rock and Memphis and Chicago.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Welcome to the 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 1:03
Welcome to the creating wealth show. This is your host, Jason Hartman. And this is episode number 553 553. Thanks for joining me today. We love having you listen, and we’ve been getting such great feedback on the show. So thank you so much for all of your support. And for your reviews on iTunes and telling your friends about the show, and all that good stuff. We really appreciate it. And that’s what keeps us going. Booking great celebrity guests, and thought leaders and people who really know what’s going on. We’ve got some great shows coming up for you. On Wednesday, our next episode, not this one, we have a presidential candidate. I’m going to let you guess who it is. And of course, we already had one. We’ve had four presidential candidates on the show now including, of course, Steve Forbes, probably the most famous one of the bunch. Pat Buchanan, maybe the second most famous, but we also had Dr. Ben Carson on the show. Of course, he was in the recent Republican debates, which you probably saw those were like the highest rated debates ever. So anyway, we’ll keep them coming. We are trying to get Donald Trump on the show. And also either Rand Paul or Ron Paul would love to hear from them. But yes, Wednesday, we have a presidential candidate coming on to talk to us as well. So look forward to that. But today, we’re going to talk hardcore real estate stuff. We’ve got one of our clients, Jeff Morris coming on the show, and he will be our guest today.
But before we get to that, two big announcements, well, one big announcement and one not so big announcement. How’s that sound? The big announcement is we have our next venture Alliance trip all planned out. And I tell you, I am so excited about that. listeners. Have you ever been to the east coast for a fall foliage tour? And have you ever been to see the biggest mansions in the United States? Now this kind of stuff exists in Europe, but there’s only one place in the US where you have these spectacularly opulent, incredible mansions. And yes, that is Newport, Rhode Island. That is where our upcoming venture Alliance weekend is. It’s our second venture lions weekend. There’s a lot of excitement about this. And that is at the end of September. And I’m actually going to do I’m working on this I’m pretty sure I’m gonna do a side trip to Martha’s Vineyard. I have never been to Martha’s Vineyard. I’ve never been Newport, Rhode Island either. But I’ve been on fall foliage tours. And let me tell you, it is spectacular. I know we have a lot of East Coast listeners. So if you want to come if you’ve been thinking about joining the venture Alliance, the only mastermind group built around, of course, fun adventure, great trips, great camaraderie, lifelong friendships, creating deep bonds between people but also on doing deals together. You can come as a guest and our guests fee for our Newport Rhode Island trip at the end of September. I believe the dates are September 25. That weekend. I’m also going to do a side trip to Martha’s Vineyard. Pretty sure working on that probably the Thursday before. So if you want to join me for that, and the venture Alliance weekend, you’re welcome to if you’re thinking about joining of course you can do that at Jason hartman.com in the Products section. But also you can come as a guest if you’re not sure if you want to join and we’ll apply your guest registration fee to your membership. Again, guest fee for this one is $2,000. And the membership is of course still at its early bird price at 10 grand a year. I know if you’re not used to these mastermind groups that may seem high. But really, it’s cheap. I’m a member of a mastermind group where I pay $25,000 a year to join. And I gotta tell you, if you ask me years ago, if I thought I would ever be spending like $100,000, a year on memberships and stuff like this, I would have said, You’re crazy. But it’s the new country club. It’s where you get to meet with people and hang out with people that are doing big things. And it’s aspirational. And that is so critically important. So check that out. Let us know if you’re interested. I know there’s been a lot of questions, a lot of interest about venture Alliance. And I don’t talk about it very much on the show. But again, that is our next event. So I hope you’ll join us for beautiful, stunning, spectacular, Newport, Rhode Island and fall foliage, it’s just going to be an awesome trip. So we’re really looking forward to that. And then Jason Hartman University live is coming up in San Diego on the other coast. So you would go coast to coast here, don’t we? That’s August 29. And 30th. This event is selling very quickly, we only recently announced it, we’re in our second tier of early bird pricing, that’s going to increase again at the end of the week. So you can get in on that. And again, here, this is a totally new event. It’s two whole days, it’s a whole weekend, we’ve had our meet the Masters event for many years, we’ve had our creating wealth, boot camp for many years, we’ve had our property tours for many years.
But here we’re doing more of a workshop format event where we’re going to cover market analysis, how do you pick what market to invest in? We’re going to talk about property analysis, you know, how do you analyze a property from the land to improvement ratio, the rent to value ratio, the return on investment, the cap rate, the cash on cash return. And I think importantly, although I don’t talk about it a whole lot, the debt coverage ratio, the debt coverage ratio, we’re going to talk about property acquisition, creating a real checklist for how to analyze the property once you’ve purchased it, or right before you purchase it. So what things you got to check off what things you need to look for. And then we’re going to talk about managing your manager versus self management, and then overall property portfolio planning. We’re also going to talk about land contracts. We’ve got it looks like we’ve inked three special guests for this event. Number one is our land contract expert. He is flying out for the event. And now that we’ve got all the compliance issues, we didn’t think some of the things he was talking about before were totally compliant with Dodd Frank. Now that we’ve got that ironed out, I’m super excited, we’ve had a lot of clients investing in land contracts. But also there is an opportunity, it’s fairly limited. But there is an opportunity to do what we call ground floor deals to where you can actually make some big capital gains. And so we’ll talk about that as well. This is just going to be a great event, we’re going to have our Chicago local market specialist fly out for this event, he will be speaking only on Saturday of the event, he doesn’t think he can stay through Sunday. So we’re gonna have Kim come out, we’re gonna do some panels. And this is just gonna be a great event j Ah, you live. Of course, this is free for venture Alliance members, and early bird pricing for everybody else. And then you know, if you want to write a review in iTunes, my ethical bribe here, many of you have written reviews over the years, and we sure appreciate that you reviewing the show in iTunes. If you want to write a review, just send me a screenshot to this email address. You’re ready. It’s reviews at Jason hartman.com reviews at Jason hartman.com. Send a screenshot of your review. And we will email you back a promo code for a 30% discount. Hope that helps and hope you love it. And you know what, there is a lot going on in the real estate world that I want to talk to you about. We’ve got a bunch of articles to share with you. We’re gonna tee some of those up for the next episode. But at risk of me going long again, let’s just get to our guest. And let’s talk to Jeff Morris. We’re gonna do a client case study here. We thank him for coming on the show and doing this. I think you’ll learn a lot from it and enjoy it. So here we go.
Hey, so I’ve got a caller on the line, one of our clients, it’s Jeff Morris, and he’s purchased in Memphis and Little Rock. I’m not sure anywhere else, but Memphis and Little Rock and he’s asking about Chicago. Jeff, how you doing?
Jeff Morris 9:47
I’m doing great, Jason. Thank you.
Jason Hartman 9:49
Good. Hey, thanks for agreeing to come on the air so spontaneously, by the way. I asked you because a lot of I think a lot of listeners have the exact same question you asked me when I asked you If we can go on the air with it, so fire away.
Jeff Morris 10:03
So So Jason, I’m looking to purchase six properties before year-end, I’d like to simplify the process by using one provider and making my purchase in one marketplace. I just visited Chicago shortly after your visit. I like the dynamic economy there, the area just feels like it has a lot of energy. And and I’m just trying to figure out if Chicago makes sense, versus some other market in the country?
Jason Hartman 10:30
Yeah, Jeff, it’s a great question. And here is the thing. I think it’s, you know, like anything in life, you know, it’s a two edged sword. It’s, there’s pros and cons to everything. But, you know, I mean, look at Chicago is and granted, these properties, of course, aren’t in the city proper. They’re in outlying suburban areas of Chicago. But, you know, the Chicago land area, is, you know, that’s a world-class area, if you were to go to Europe, and you were to talk to someone, a European person, about, you know, the cities in America that they should go and visit or those cities they know about, they’d say, New York, LA, Chicago, you know, that probably be number three, maybe San Francisco, they’d say is number three. And then you know, you get down to some other cities, they might say, Dallas, they might say, Houston, they might say, Seattle, etc. And forgive me for whichever ones I missed in that example, but you get the idea. Okay. And so, I mean, I love that about it. And I think it truly is a hybrid market, where you’re going to have a lot more potential for appreciation than some of our more linear markets, like little rock Memphis, which have great cash flow. But in the things I do not like about Chicago’s I don’t like the high taxes, I don’t like the relatively speaking landlord, unfriendliness. And I think in those types of markets, you kind of have to know what you’re doing a bit, you know, or you have to be working with a very good team there. And one of the things you asked me, Jeff, off air is about our team, and how you’re looking to simplify and just use one local market specialist, and execute on six more properties before the end of the year. And I think that’s an awesome goal. By the way, our Chicago provider is one of those that can really do that, like an assembly line and make it very easy for you. They have when we toured with them, I mean, everybody was just so impressed with their operation. And I don’t know, did you go to their office? By the way, when you were there? No, I did. Okay, well, let me tell you had you gone to their office, you would have been totally impressed. You can see some pictures on our Facebook page, which is inside of Facebook, just type Jason hartman.com. I know, that’s kind of strange to have a website name inside of Facebook, but but that is the name of our page. And there are some pictures from that tour there. And they’ve got a pretty impressive operation they have in house lending, they have in house property management they have in house tax appeals. So one of the things you’ve got to be on top of there is, you know, managing the rather high property taxes, they have a whole department that just does that constantly for their own properties and for their clients. And, you know, that’s a good feature. But you know, it is a city, you know, Chicago is a world class city. And so it does have a lot of energy, like you said, I mean, they’re some of those suburban areas are really charming, you know, they’ve got nice main streets with, you know, beautiful plantings and high end stores and shops in them. And I got to tell you, you know, I haven’t been there many times myself, you know, going again, this time, I was pretty impressed. So I think you’ve got some real benefits there. You just got to know the pros and the cons. The cons being high taxes, landlord? Well, I’m not gonna say landlord, extreme unfriendliness. It’s not California or New York, probably not as bad as those, especially some of the cities like Santa Monica, San Francisco within those. But that’s those are definitely two of the big cons. So when you look at your RV ratio, it’s got to be a little better than you might expect in a market with lower taxes to offset that con side of the equation. Does that make sense?
Jeff Morris 14:19
Yeah, it does make sense. Yeah. What what’s your, you know, the cash flow figures in that RV ratio seems to be really positive in Chicago, you don’t have any reaction that didn’t have any sense of crystal ball into the future how that marketplace might do versus Texas or
Jason Hartman 14:37
Well, I think here’s my prediction about it. So that, that’s another really good question. Because it’s one that people don’t often, I think, think of properly the way they might balance what I’m about to say in their head. So I think in Chicago, and we say Chicago, of course, we’re talking about Chicago land. We’re not talking about the city. We’re talking about outlying suburban areas, okay, but We’ll use the word Chicago generically. So in that area, you have pretty high rents. Okay? Because of course, you have some high incomes there. But I think that the RV ratios, the rent to value ratios will actually decline there in coming years. Why do I think they will decline? I don’t think it’s because rents will decline, I think it’s because prices will appreciate more so than they do in some of the more linear markets. And rents always lag those, they always lag price increases, historically, by a pretty significant margin rents, they escalate, but they escalate more slowly than prices in hybrid or cyclical markets, cyclical markets, they get left way behind. And that’s why, you know, some of the really expensive areas south Florida, California, northeastern states, they’ll just never catch up those or forget it, you’re never gonna have a good RV ratio in those markets, even in the depths of the worst economy in seven decades, in outlying Southern California, areas like Riverside, and San Bernardino, the RV ratio still didn’t come into line with massive price declines. So I think the RV ratios will actually get worse in that area. But when you go in now, and your basis is pretty low, you can afford to have that happen. And you might actually have some capital gains opportunities where you could sell and in 1031, exchange those properties into more linear markets in the future if you wanted to, or do or execute more quickly, Jeff, on the refi to your die plan. So by the way, where do you live? I didn’t ask you that.
Jeff Morris 16:40
I live in Newport Beach, California. Your old stomping grounds.
Jason Hartman 16:42
Oh, yeah. You’re a California guy. So where in Newport do you live? What area?
Jeff Morris 16:47
Beach front on the peninsula.
Jason Hartman 16:48
Yeah. Okay. So you live in the party zone? Yeah. Good. That’s where it’s happening. Unless you’re unless you’re on the point that it gets a little quieter there. But yeah, good stuff.
Jeff Morris 16:59
Yeah. The other thing, I got a sense of just just get a sense from talking to the provider, Jason, you know, thinking about vacancy rates, that sort of thing. I get a sense from talking to them. It’s almost like non existent, there’s people lined up and waiting for these properties. And they got a real massive, if you want to call blue collar working class population that can afford the rent, maybe they work for Public Transportation Agency, or just good paying, good paying jobs that allow them to afford $1200 $1500 for rent, so so I don’t know if you came away with any sense of that, as well. But I really like the fact that there’s such a large population, they’re waiting for quality properties that are really desirable to live in. So that vacancy doesn’t appear to be a big concern in that market.
Jason Hartman 17:44
Well, according to them, their average tenant stays 3.8 years. And that is pretty darn amazing. When we talk to people about you know, they want to buy apartments, and of course, you know, I like apartments, and I like single family homes. But if you can get a tenant on average to stay in an apartment for a year and a half, you have bragging rights. Okay, but in a single family home in an area like that. Yeah, I agree. That is that is possible. what it might mean, though, is that they’re not pushing the rents high enough. Because if your vacancy rate is too low, that often is a sign that you’re not charging enough, you know, you don’t want to have a super low vacancy rate. Okay, because there’s there’s a balance. In other words there, right?
Jeff Morris 18:34
Well, it’s interesting you say that, because this particular provider I spoke with, they do one year leases. And they typically don’t increase the rent, because they think about the trade-off between potentially having a vacancy than ever to fill it again. And even though they do seem to have people lined up that they seem to be reluctant to do price increases in general on rent during for tenants use who stay in the property.
Jason Hartman 18:59
I know, I heard them say that, too. And I I don’t know, I’m not so sure I agree with that. But, you know, turnover is one of the more expensive things you’ll have when you’re a property owner. So you definitely want to minimize turnover. But I think, you know, I think the psychology of rent increases and of course, it depends what’s going on in the market at the time. So for example, if housing affordability is really low, then you know, those tenants aren’t likely to go and buy something. If the rental market is really constricted, and there’s lines of people trying to get every property available in a in a market at a given time, then you can be more aggressive on rent increases. As I’ve said before, Jeff, my ideal is I want to see people try and get a 4% bump every year, but I know you can always do that. Okay. I can’t imagine too many tenants are going to move. If they’re paying, you know, say they’re paying $1300 a month. I mean, what What kind of price property? What kind of rental prices? Were you looking at at some of those properties in Chicago?
Jeff Morris 20:04
1400 to 1650?
Jason Hartman 20:06
Okay, so let’s take a $1500 property as an example. I mean, what if you were just to do a 2% bump and you raise it 30 bucks a month? If it’s 4%, it’s 60 bucks. I can’t imagine anybody actually moving for 30 bucks a month, you know. Don’t think they’d be more likely to like give up HBO, on their cable, if their budget is really that constricted than actually move. I mean, the cost of moving the cost of paying movers, you’re undoubtedly going to have to buy a bunch of new stuff, have some damage, spend money on cleaning, spend money on on this, and that, I mean, it’s just not worth the hassle. You know, that’s, that’s really what you do is you try to raise your rents a comfortable amount where it’s like, yeah, they might be a little annoyed about it, but it’s not worth moving. You know what I mean? I think that i i don’t agree with him that you shouldn’t raise the rent, I think a good landlord raises rents, you know, tenants will hate me saying that, but sorry. That’s just the way it works. You know, and you know, what, some of our clients are starting to do two year leases as a more common thing. And you can build the increase into the two year lease to or you can just make it a flat two year lease. But why would you see I don’t understand their psychology of saying they sign a one year lease, and they don’t raise the rent. Well, why don’t you just sign a two year lease? If you know, you’re not going to raise the rent? Just give them two years and lock them in? You know?
Jeff Morris 21:39
Yeah, not to upset the applecart. But what’s your sense when a, when the management company has a philosophy, philosophy about how to work with tenants get pushed, who’s calling the shots, you,
Jason Hartman 21:52
You’re calling the shots, because you’re the owner, but I will tell you, I think the one, one of our local market specialists, the one you’re talking about, we have a couple of them in Chicago. But they’ve got a pretty awesome operation going and they really do seem to know what they’re doing. So I guess my answer would be is I would buy my properties. And then I would evaluate it as I go. I mean, I cannot imagine a tenant in a $1500 a month property moving for a two or 3% increase in the second year. I just, I mean, who’s gonna do that? Really? Now, granted, if the rental markets really soft at the time, don’t do it. Okay.
Jeff Morris 22:34
So last question, Jason is to try to simplify this process a little bit I’m looking to do, I’ll call it one transaction at one time. So this provider indicated they could bring me six properties at different locations, different price points, just to kind of diversify my purchase, do you have any any thoughts on why a group of six at one time launching into a market like that all at once and advantages to any advantages or to gain out of the process by doing a group of properties at one time?
Jason Hartman 23:07
Well, the advantages are, you’re going to get it done, it’s going to be easier to just sort of dedicate like, Look, this month, or you know, in the next 4560 days, or maybe 30, you know, you’re going to get this done, get it under your belt and get out of the way. The disadvantage is, if you make a mistake, and you discover later that this wasn’t your favorite market, you’re going to be all in so to speak, right, rather than dipping your toe in the water. So it just depends, you know, what you do for a living, and you know, whether you’ve got your own business, or you know, you’ve got a corporate job, and what else is occupying you in your life, because, believe me, I mean, it’s, it feels like every, at least from my perspective, every time in my life, when I try to save money, I always end up spending more, at least in my time, you know, and so sometimes just getting things done is just, you know, deployment, if you’ve got the money, and it’s not working for you, now, you’ve got that opportunity cost on it, right? Until you’re invested, that money is losing you money in the bank. So, you know, there’s the opportunity costs, and then there’s the cost of your own time and managing the purchases, which you know, that sucks up some time here. You’re going to spend some hours on that no question, especially if you’re financing the properties. So the scalability of just getting it all done. There’s definitely some benefit to that. But again, you have to weigh that against opportunity cost of what is that money doing now? and opportunity cost of taking time away from other parts of your life, whether it be your profession or your personal life, but I mean, I don’t think you’re gonna make a mistake in that market. The only two real downfalls I think are the, you know, the regulatory environment not being that friendly to landlords. You know, Chicago is a mismanaged city. It’s a left wing environment. I don’t like any of that stuff. I’ll be the first to tell you, you know, they’ve got financial problems, like all left lefty areas do. There’s no surprise there. But Heck, I mean, it’s, it’s hard to dislodge reputation, you know, it’s been developed over the years. I mean, think about it, when you look around the US, Chicago is far and away the least expensive, world class city, you know, you can’t live in New York, or San Francisco or LA for the kind of prices you can live in the Chicagoland area. You know, even in the outskirts of any of those places I just mentioned, it’s, it’s, you know, it’s not even a contest as far as cost of living in price. So, you know, Chicago is kind of a Midwestern bargain area, you know, I mean, it’s got a lot going for it. So tell me about the rest of your portfolio, just to kind of evaluate the diversification, you said you had little rock and Memphis, how many in each of these markets.
Jeff Morris 25:59
So just just this year, Jason, I purchased two properties in Little Rock. And those are the loan articles around 125,000. One was a little over 100,000. And then I have two in Memphis, Tennessee, all through one of the providers that we toured there with in the local market,
Jason Hartman 26:18
and is that it? Do you own your house in Newport Beach? Or do you rent that one?
Jeff Morris 26:21
You know, I own that home.
Jason Hartman 26:23
Okay. All right. So you own that one that you live in? And then you’ve got four other rental properties? No other rental properties in the portfolio?
Jeff Morris 26:31
No, that’s it.
Jason Hartman 26:32
Okay. So you’re gonna see, like the sharpest contrast in the United States, probably, when you compare a little rock, which is super landlord friendly to Chicago, which is not as landlord friendly at all. Okay, so, so, so get ready for that one, it’s gonna be like, whenever you face and you eventually will, we all do, at some point in your ownership of those properties. If you hopefully keep them for 27.5 years, you’re gonna face a bad tenant in Little Rock and a bad tenant in Chicago. And it’s going to be just like a totally, you know, black and white experience, I bet. Just a totally different experience. opposite ends of the spectrum, you know, so that’ll that’ll be interesting.
Jeff Morris 27:15
Yeah. Hopefully, that that’s an interesting experience. I have a long time for now.
Jason Hartman 27:19
Yes. Or maybe you never have it would be ideal, but you know, and odds are you will, I’m just warning you in advance. Okay. So, so good. Yeah. Yeah. Good. So, you know, but I wouldn’t do I definitely wouldn’t be doing more than six in Chicago, given your diversification, okay, because you’re basically in in four markets, including your Newport Beach, noninvestment property. And then when you go back to do more, maybe next year, do more in Little Rock or Memphis, or you could pick another market like Atlanta or a Texas market maybe or something like that. Okay.
Jeff Morris 27:52
Yeah, yeah. Okay. That’s great. Appreciate that.
Jason Hartman 27:55
All right. So does that help you out?
Jeff Morris 27:56
Yes, very much. Thank you, Jason. I really appreciate your feedback. Thank you very much.
Jason Hartman 27:59
Yeah. My pleasure. And thanks for coming on the show, Jeff. And, you know, I do want to say that I’m sorry, I can’t be kind of, I feel like I want to be really more definite about a lot of this stuff. But again, this stuff is a million Shades of Grey, it’s just it’s never a black and white decision. You know, I can’t say, greenlight, Chicago, it’s perfect. It’s like human nature. There’s lots of little frailties and little idiosyncrasies to it. And at some point, you just got to kind of jump in, and, you know, and make it work, even if it’s not the exactly right thing. No,
Jeff Morris 28:35
Well, you know, it’s just, it’s two or three things that I heard about that local market that I found compelling. This market specialist was able to tell me the absolute lowest rent they’ve ever rented in a particular neighborhood within a certain parameter. And that number was great. It was within $50 of what they were telling me, even if I get the lowest number, that’d be a great return terrific results. And then the other thing about having people applying and teed up and lined up to rent your properties right away, just because that marketplace is so huge, and so many people, that just gives you a sense of confidence that you’re gonna have a very good cash flowing property without, without a great deal of risk is going to sit vacant for a month or two months, and that sort of thing.
Jason Hartman 29:16
Yeah, you know, I just got to tell you one more thing. I know, we’re kind of extending our conversation, but I think this will be interesting. You’ve probably heard my mom on the show over the years, a couple of times, you know, she’s been on maybe four or five times now. Right? And you know, this constant debate I have with my mother, your family members never really listened to you completely write you a total total stranger will invest a million dollars with me, no problem. My mom, if I could pry out, you know, 100,000 to buy one property, I’ll feel like I climb Mount Everest, you know, like, it’s a huge success, right? It’s just a weird part of human nature again. And so you know, we all we all know that right? And so, you know, my mom always did the Southern California thing and in the last several years She did buy some properties through our network. And she bought one in Gulfport, you know, right by her in Gulf Shores, Alabama, okay. And she just rented her house in Canoga Park, which is in the Valley area of Los Angeles. And once again, my crazy mother who loves to get behind the wheel of a car, drove herself. Oh, now she came, visited me in San Diego, then went up to Canoga Park, and I don’t know she doesn’t mind, right. She likes to drive. She just loves going on a journey in an adventure. It’s a long, it’s crazy. I mean, she’s I say, My mom is an extreme do it yourselfer. But you know what I, I kind of fight it and teaser about it. But in a way, it really keeps her engaged and active and involved in life. And I think that’s a good thing, ultimately, especially in her age, and so forth. And so, you know, she rented that one. And then she goes, because she self manages everything. She does not use a manager or anybody to help her with anything, practically. I mean, every time she goes, one of her houses, her trunk of her car is it’s got tools. I mean, it’s like amazing. It’s crazy, right? So So then after the Canoga Park property, she goes to Gulfport, and she’s working on writing that she puts her signs out, you know, on the corners, a little bootleg signs for rent, you know, and, and just her phone number on it and takes all the calls herself. And, you know, all of that stuff. And I’m not suggesting this extreme self management, but I do suggest another version of it, we’ve talked about on the show, but here’s what my mom said to me just the other night, that was really interesting. She said, You know, I just don’t like running these houses in these little towns. It’s just, I just don’t get enough action on them. You know, I don’t get enough calls. And she said, I put all these signs out. And I’ve only had, you know, a few inquiries on the property. And I said, Mom, hang on a second. The property in Canoga Park, Los Angeles area that you just rented, that one’s worth, I think it’s worth about 450 500,000 maybe right now, okay. And she rented it for somewhere in the ballpark of 20 $500 point five RV ratio. And I said, What’s your property in Gulfport worth? And she says, I don’t know. And I said, Well, what do you pay for it? And she says, I think I paid about 140. So I asked the address. I looked it up on Zillow, it looks like it’s worth about 125 according to Zillow right now. Okay. So you know, she bought it at the peak, and it’s, it’s, you know, gone down just a little bit, no big deal. Okay. But I said, What are you asking for rent? She goes, 1175. And I said, Mom, look at this. This is the debate we’ve been having for years, you think you had such a success on your Los Angeles area house at a point five RV ratio? If you rent, if you put the golf port place up at point five? That means you’ll be asking what $650 you’ll have a line around the corner. It’s all about ratios. It’s not about the price. And so you obviously understand that, try and get your family to understand. Good luck.
Jeff Morris 33:16
Jason Hartman 33:18
But but but to your point about Chicago, and that’s why I mentioned that long explanation to your point about Chicago, you know, in that kind of market, you’re going to have, you said it yourself at the beginning of this talk. It’s there’s a lot of energy, right, you’re going to have a very vibrant mass market have a lot of people, a lot of service providers, a lot of contractors. So oddly, your repair costs will be very competitive, because there’s more service providers competing for business in a bigger metro area. And you’ll have a lot more tenants to choose from. So I you know, I think you’re gonna have a good experience there. I would I would do it, especially if you want to just knock six out quickly. I’m in favor.
Jeff Morris 34:04
Okay. Great. Well, that’s it. That means a lot to me. Thank you, Jason. I really appreciate your your your feedback.
Jason Hartman 34:09
Thank you so much, Jeff, appreciate you coming on the show. And I appreciate your business, too. I’ll stop the recording and then we can wrap up, okay.
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be.
Really now How is that possible at all?
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.
I know. I mean, how many people do you know not including insiders who created wealth with stocks, bonds, and mutual funds. those options are for people who only want to pretend they’re getting ahead.
Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win.
And unluckily for wall street. Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.
And this set of advanced strategies for wealth creation is being offered for only $197
To get your creating wealth encyclopedia book one complete with over 20 hours of audio go to Jason hartman.com forward slash store.
If you want to be able to sit back and collect checks every month, just like a banker. Jason’s creating wealth encyclopedia series is for you.
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own. And the host is acting on behalf of Platinum properties, investor network, Inc. exclusively.