Jason Hartman starts off the show by sharing that investors must align their interests with Central Bankers. He also explains arbitrage or exploiting the differences in things as a real estate investor. Then, Jason Hartman becomes the interviewee in an episode of “Investor in the Family” podcast by Brian Bain. In the show, Jason explains how 30-year mortgages on single-family homes are not only a multi-dimensional asset class but also a tax write-off. He also talks about inflation, how the government deals with underfunded entitlement programs, and long-term investments.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Announcer 0:13
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution. For real estate investors.
Jason Hartman 1:03
Hey, welcome to the creating wealth Show. I’m Jason Hartman, your host, thank you for joining me for episode number 638 638. And it’s great to have you here today. And I have only done this on rare occasion. And that is where I was interviewed on somebody else’s show. But I kind of thought the points were pretty good. It was maybe a good review of a topic we’ve done before. And I will play it for you on this show. So that’s what we’re going to do today. Your guest is none other than yours truly Jason Hartman. And someone else interviewing me. Occasionally we do this and this is one of those times I don’t think we’ve done it in a couple hundred episodes. So we will get to that here in just a moment. But first, I will share with you something that I wrote on my Facebook page today, and it will give you caused ponder. It’s a couple quotes from Ben Bernanke key and Then one from the brilliant old Yogi Berra, the late Yogi Berra. He has such great quotes. You know, I’ve shared a couple of those on the show previously. So yeah, Yogi Berra said, when you come to a fork in the road, take it, or the one I love the most, the future ain’t what it used to be. What an awesome quote. You really got to wrap your head around that for a moment to ponder it, but it’s it’s really good. Anyway, two from Ben Bernanke, and one from Yogi Berra, Ben Bernanke. In 2009. No one will lend at a negative interest rate, potential creditors will simply choose to hold cash, which pays zero nominal interest, says Ben Bernanke key or former or former Federal Reserve Chair in 2009. And then he contradicts himself massively in 2015. Quote, I think negative interest rates are something the Fed will implement should consider if the situation arises. Ben Bernanke 2015. I mean, this is unbelievable. And then the Yogi Berra says, in theory, there is no difference between theory and practice. In practice, there is awesome quote Yogi Berra, you know, it just goes to show you the central bankers around the world. They’re frickin making this stuff up. I mean, they, they really, these are not the brilliant people the world wants to give them credit for. They are simply human beings with their own agenda and their own self interest. And they’re making this crap up as they go along.
And we realize that the only real tool in their tool belt is money creation, actually, sorry, let me correct myself. Currency creation, to create currency fiat currency out of Thin Air, whenever the industrialized nations around the world meet, they have some big meeting in Davos, Switzerland or wherever it is, you know, Davos has only one of their big meetings or Jackson Hole, Wyoming or whatever, you know, they got their big important meetings for these self important people. They’re meeting to see what they can do to fix the world economy. And the answer, why do they need to talk about this for hours? The answer is, let’s just print more money. Let’s just create more money out of thin air. We don’t even have to print it anymore, because we can do it on a computer screen. So it’s just an absurdity wrapped in an enigma. I mean, it’s crazy. And then I posted a little picture meme, and it’s, it’s good. I like this one. So I’ll share that with you too. In the same Facebook thread. It says, give a man a gun and he can rob a bank. give a man a bank, and he can rob the whole world. It’s so true. Isn’t it? Oh, it’s just crazy. It’s just crazy. So we’ll see if we, if we really see a negative interest rate environment. We’ve got that in a couple places around the world. We talked about that before on prior episodes, and we shall see how it all evolves. We are living in crazy times, crazy times of financial repression, financial repression. And we as investors must align our interest with these incredible powers. You know, before I probably misspoke, as I often do, by the way, there’s my disclaimer, I often miss speak it like that one. And I said, these were self important people. They’re actually not self important people. They are important people. And the world has made them important. So we must align our interest with theirs. We must not fight it. We must we can bitch about it. We can complain about it, but we must ultimately align our interests with it. Because we know their interest will win the day, it always does. And that’s why we engage in lots of arbitrage. As real estate investors, we get probably more arbitrage type opportunities than any other type of investor. And again, my simplistic definition of arbitrage you know, go look it up, I’m sure you’ll get a much more academic definition.
Jason Hartman 6:28
But you know, me, I think, a lot of times simple things are the best. That’s why I think a good old internet meme on social media can explain things much better than some long flipping essay. You know, if you if you have to use a lot of words, you’re probably either hiding something, maybe you’re hiding the fact that you don’t understand it, right? And that’s what a lot of these people do. You know, the Fed comes out with a Beige Book, right? They got a lot of words to explain something which basically means Let’s create some more money out of thin air or currency sorry, misspoke again currency not money, there’s a difference money is real currency is fake okay currency is Fiat always by nature by definition. So, you know a lot of times a simple little meme can explain it well. So, what is the Jason Hartman definition of arbitrage Simply put, exploiting the differences in things, exploiting the differences of thing in things, right. So you, when you geo arbitrage you exploit the difference in geography, right, for example, pay scales in different geographies vary greatly. And that’s why we’ve seen so many companies do offshoring and outsourcing and, you know, moving to different jurisdictions where they can arbitrage the tax Nexus where they can arbitrage the payroll or the wage Nexus or they can arbitrage environmental Laws where they can arbitrage the cost of real estate or they can arbitrage all sorts of things in the sort of the Tim Ferriss movement, he and those people in that movement have got this term, they use a lot called geo arbitrage. And we can do that ourselves. I mean, I like to do that in my company. You know, I’m not too into the offshoring things.
I haven’t had very good luck hiring people in the Philippines or India. You know, maybe it’s a cultural barrier or language barrier, I don’t know. But it just hasn’t worked for me. I’ll put it that way. So I hire North American workers to work in my companies and to do different things and provide different freelancer, contractor oriented task for us. And I try to hire people who are living in a lower cost of living market. I mean, if I’m going to hire a person who you know is going to do a website for me, or, you know, edit a podcast and they live in New York City. They live in Los Angeles, California, or if they live in Miami or Boston, I know I gotta pay them a lot of money to be able to afford to live there. But I cannot hire a person who’s very bright, who’s every bit as capable in Phoenix, or Dallas or Austin, or Indianapolis or Atlanta or hay. Coincidentally, a lot of those are markets that we either recommend now or have recommended in the past, right? linear real estate markets, where the cost of living is reasonable, the cash flow is good, the LTI the land to improvement ratio. Another term I coined, the land to improvement ratio is favorable to us as investors using the Hartman risk evaluator to reduce our risk dramatically when we invest in those markets. I am geo arbitrage, right because I can pay people More than they can get working locally. But to me, it’s a bargain compared to hiring someone in a really high cost jurisdiction. So it’s a win win deal, we all win. It’s a win win deal for everybody. So arbitrage and as a real estate investor, we want to arbitrage as many things as possible. And there are all sorts of ways we do this with monetary and fiscal policy and tax policy, and rent to value ratios. And of course, we’ve talked about those extensively over the many, many years, and many prior episodes, but just keep that in mind.
And as you listen to this interview, I think you’ll get a lot out of it. Join us in Salt Lake City, coming up fast, March 12. We’ve got a great Jason Hartman University, a j h u live event there and a lot of you have registered already. So thank you for that. And just make sure you join us it’s going to be an awesome event. I’m really Looking forward to this event, and we’ve made this one a lot more challenging. So if you came when we did it the first time in August last August in San Diego, come to Salt Lake City. Enjoy a little spring skiing. I think you’ll have a great time there. It’s got the best snow in the world. Enjoy the natural beauty of the Salt Lake City area, great city love it there. also learn some good stuff at Jason Hartman University, we’ve got a beautiful hotel, they’re just really a great all around setup a great room block with some low rates. We did just recently announced that so you should have received an email if you’ve already registered with the booking link to book your hotel rooms at the bargain room block rate. And if that got filtered or you didn’t receive it for whatever reason, check with your investment counselor, and they will be glad to provide you with the information. And before we get to our interview. Here’s a little quick nice boxer message I got today that I wanted to share with you.
Listener Message 11:57
My name is Ross Johnson from Minneapolis Have I heard about you from Ryan Daniel Moran on freedom Fastlane. I’ve been listening ever since probably about 200 episodes now. I’m very intrigued in the Orlando market. Definitely checked into it. I’m very curious to hear what your thought is on vacation rental properties there. I’ve not heard you talk much about it. It seems like there’s a lot of upside. And I know you’re not big on a choice, but I just wanted to hear what your thoughts were on vacation rental properties in the Orlando area. Thanks, Jason. Appreciate it.
Jason Hartman 12:31
Hey, Ross, thanks for the message. Appreciate it and appreciate you listening to 200 episodes of the show. That’s great. You’ve only got about 440 of them to go. Anyway. Yeah, I have talked a lot about vacation properties over the years you know, on various episodes, and it’s not that I’m this is a statement on Orlando in any way. Noise But rather a statement on vacation properties in general, and I am not a fan of vacation properties. I think there’s a lot more management involved. There’s obviously a whole world of change that is occurring with Airbnb, in various sharing economy sites like that, that is changing the game quite a bit. There are huge tax implications that people don’t need to know about. And a lot of these owners that have vacation properties are going to be hit with big tax bills they don’t even expect and I’ve tried I have done some shows recently on that. So you’ve probably heard those episodes. And I’ve also I think one of those tax episodes is on the AIP is show. But you know, one reason that regardless of all of this stuff, that I’m not a fan of vacation from pieces because they’re not amazing And, you know, the economy goes down the tubes. The first thing people gonna start doing is taking vacations, right? So I’m just, I’m just not a fan. I think that stable necessity oriented housing is where it’s at. And, and that’s what you want to be investing. So I hope that helps. And I appreciate you listening to the show, and in referring your friends. Thanks again.
Listener Message 14:27
Hey, Jason, just wanted to say thanks for the quick reply. There’s some great advice there. Also, just want to say I really appreciate your show. And I’ve definitely learned a ton. I own two rental properties now that were bought and speculation and I was definitely led down the wrong path. And I’m very excited here to be getting close to having enough money to get back into this, but with a whole new mindset, so I really can attribute that straightaway to you in your show and all of your guests and I just I really, really appreciate it now. Want to let you know that Thanks, Jason, I have a great day.
Jason Hartman 15:02
But that’s the thing. See, I hope everybody will listen to my show before they go buying real estate on a speculative basis. commandment number five, thou shalt maintain. Well, that’s commandment number three. What am I thinking? commandment number five, Thou shalt not gamble. Do not buy real estate on speculation. Buy it, because it makes sense the day you buy it by cash flow, income producing real estate, it’s the only kind to buy. So definitely stick with that, and you’ll have a good experience. That’s the thing to do. So yeah, I know a lot of people have been led down the wrong path by many different promoters out there. The other thing that I did not address in that voxer chat there, by the way, sorry about the sound quality, I’ll try to only respond when I have better sound quality in the future. But the other thing is, I don’t like condos, as you know, and he did mention that. So again, avoid condos. Get yourself single family homes or get yourself apartment buildings but not condos. Unless you control the homeowners association, which you’re probably not going to do. So forget about condos and forget about vacation properties and forget about high priced speculative properties, income producing real estate, the non sexy stuff with good land to improvement or LTI ratios. That’s the thing to do. Let’s listen to the interview and hear more.
Brian Bain 16:29
Well, hey, Jason, welcome to the show.
Jason Hartman 16:31
Thanks, Brian. It’s great to be here on Investor in the Family. Love the name by the way.
Brian Bain 16:36
Hey, I appreciate that. It’s something we’re definitely excited about and also excited to have you here with us because a lot of our focus so far on this podcast has been on equities and will continue to primarily be on equities. But real estate investing obviously is your wheelhouse and I would love to use this opportunity with you to knock those doors open for some of our listeners. get a better feel for opportunities in real estate and how to make maybe make some first steps and kind of dip their toes in the water. But before we do that I would love to get or have you just introduce yourself to the audience to kind of give you a background as an investor as well.
Jason Hartman 17:15
Yeah, absolutely. Thank you. So first of all, today I want to share some truly new thinking when it comes to investing in income property. Okay stuff that your listeners have not heard before. You know, there’s there’s no shortage of hokey real estate gurus out there that promise you know, the world and, and and fast fortunes and so forth. I want to talk about the prudent tried and true approach to long term investing and some monetary policy issues and how we can align our interest as investors with the most powerful forces in the world, governments and central banks, okay. your listeners will hear some truly new ideas that they have not heard before anywhere else from other real estate people out there. Basically, to answer your question, the way I got started is I grew up fairly poor in Los Angeles, California. And when I was 16 years old, I kind of hit me, you know that money is a significant part of life. It’s important. You know, I didn’t think too terribly much about it before that, I guess I happened to be at home. And I was watching an infomercial. And there was a real estate guru on there. And he was talking about his book and how you could buy properties with no money, blah, blah, blah, the typical spiel that you you’ll see on TV if you can’t sleep, yeah, you know, insomnia cure, right? Yeah. And so so I heard him talking about that. I went out and I got his book. And I read three chapters of it. I was only 16 years old, mind you, and I put it down. My mom picked it up and read the rest and got really interested in the topic. Two years later, I was about to graduate from high school. I was now 18 years old. And my mom says, you know, Jason, you got me into this real estate stuff. I’ve been going to seminars, reading more books about it, and there’s one this weekend. By Disneyland here in Anaheim, California, why don’t you go and so I rounded up nine of my buddies from high school and I, I got them all to go to the, the seminar with me, you know, because you can’t do anything alone at that age, right? And so we all show up on Friday evening, and the first speaker is talking about something called points. And I didn’t know what points were. And you know, they’re prepaid interest on a loan, I now know that. And one point is 1% of the loan amount, right? And so, I remember I discovered Earl Nightingale Denis waitley, Zig Ziglar. And Jim Rohn, about a year before that, when I was 17 totally changed my life. I remember Earl Nightingale saying, you know that whenever you want to learn something new, you should just Humble yourself. And he gave the example of real estate Actually, he said, if you want to get rich in real estate, learn the business first. So by the end of this seminar, I was just hooked. I was totally fascinated. I I stayed all through the weekend. through Sunday afternoon, I saw all the speakers. All of my friends had gone off to the beach and boogie boarding and surfing and working on their tan. But I stayed inside every speaker and first thing Monday, I went and I looked for Where can I enroll in real estate school. And by the time I was 19, I was in my first year of college now, I got my real estate license in hand. And it was just a couple weeks before my 20th birthday, I went to work at a cheesy century 21 office in Anaheim, California. And I started just selling real estate part time while I was going to college. And what do you know, I actually worked on like most people in the real estate business, or at least at the time, it’s, it’s matured, admittedly, that industry has gotten, you know, much more professional over the years, but this was a long time ago. And so, you know, I sold like five properties my first full month in the business and I couldn’t believe it. I had only earned minimum wage. Before that. I started working at age 14. The minute I could work and get a work permit And I couldn’t believe it. And one of my clients, a guy named Jim wall, he was buying investment properties from me. And I was, you know, driving them around in my little Volkswagen Jetta. And I was working with a lot of investors because that was really my interest. It was the investing side of the business. And he comes to me about six months into my career. I’m now 20 years old, and he says, you know, Jason, one of these properties I bought from you, I really don’t like it very much. Why don’t you take the listing and sell it for me find a buyer, I’ll buy another property with the proceeds. And I said, You know what, Jim, I don’t want to sell it for you. I want to buy it from you. And I actually bought this little property this little one bedroom condo on Coventry lane in Huntington Beach, California, from Jim and that was my first rental property when I was 20 years old. I had what most people would consider a bad experience. My very first tenant stopped paying me rent after a couple of months I had to evict them from the property, and they left the property in bad condition. I ended up selling it to another investor who was doing a 1031 tax deferred exchange. And I actually did okay on it. And then I started buying properties. And I was selling real estate and I was going to college, I was doing all this stuff at the same time. You know, I had just made a bunch of money, both in the real estate business as an agent, serving clients, and also as an investor investing for my own account. And I just, I just fell in love with it. I think it’s the most historically proven asset class in the entire world. Unless you’re an insider. Now, you can make a ton of money on Wall Street if you’re an insider, but you know, for the rest of us, it’s a little harder. And so so that’s the story of how I got started and, you know, glad to share anything or answer any questions you have.
Brian Bain 22:44
Yeah. Well, I mean, I lots of questions. I mean, I fall in the camp of probably like many of our listeners, where, you know, I’ve attended some seminars, and I’ve read some stuff on real estate rental properties. I’ve actually been very close to purchasing one before but I haven’t actually followed through with it. There’s a Obviously a lot of different reasons for that. And some of them are good, maybe some of them not. But I think a lot of my listeners probably fall in that category as well. And real estate unlike some other investments, whether it be equities or otherwise, there is that there’s that kind of fear risk factor that comes into the game. And you mentioned earlier, there’s lots of unknowns that can come into real estate or it’s how you mentioned how it’s important to learn the business first. I would like I would love for you to address that just people on the fence. Love the idea, but just don’t know what to do next and fearful of taking that first step.
Jason Hartman 23:34
Yeah, yeah, absolutely. So first of all, one of the beauties of income property and we really should refer to it properly is income property versus real estate because real estate could mean anything, but with income property, you know, income producing rental property. It is a multi dimensional asset class. So when you look at stocks, if they’re non dividend paying, you have one source of potential profit, capital gains only. If you look at precious metals, capital gains only. If you look at raw land capital gains only, but income producing real estate income property is a multi dimensional asset class. So you have capital gains opportunity through appreciation, you have tax benefits, because it’s the most tax favored asset class in America. Taxes are the single largest expense in any of our lives. So that’s, that’s huge, just on the tax angle alone. And then of course, you have income from the property, and you have leverage, and you have something that I want to share with your listeners, which is a concept probably nobody has really thought of, and I have a little trademark term that goes with it. I call it inflation induced debt destruction. And I’ll share a real live example that happened to 10s of millions of people over the past couple decades, and it’s this hidden wealth creator in the real estate Income property world. And it’s it’s, you know, you can use what I call the double inflation arbitrage to really, really ramp up your profits. So happy to take it wherever you want. But, you know, when you when you hear about these bad experiences in real estate, look at if you own stocks and lose money, you don’t really feel the bumps in the road. Even if you make a modest return from those stocks. There may be a whole bunch of bumps in the road that you never heard about. You never noticed and you never dealt with, for example, you have so many layers, so many layers where you have to peel back this onion, you’ve got your financial advisor, hopefully you’ve got a good one. And hopefully, you know, they’re not a crook, right? So you get past them, and then they put you into maybe some funds, or maybe they put you into some different companies in which you own stock. And you’re subject to all the graft and corruption of the CEO and the board of directors of the company or or maybe the the middlemen in between the fund managers whatever right and so saving All of that goes well, and everybody’s honest and upstanding. And, you know, they, they comply with gap principles and proper corporate governance and all that good stuff. Okay? So say you get past all of that, well, you know, the bumps, you don’t feel that you do feel in real estate because you’re a direct investor in the property, right? It’s yours, you’re in control of it. So you feel the bumps, if the tenant doesn’t pay you, if there’s a repair, if there’s a disaster of some sort, you you’re gonna feel that and know about it. Whereas if you invest in the company and own stock in them, you know, you don’t know if the CEO is getting sued for sexual harassment, and that could really screw up the company. You don’t know if they’re on the take. You don’t know if you know they’ve infringed on somebody’s patent, and they’re about to get sued the way Samsung did and lost several years ago to Apple, you know, they’re just you don’t know about their competitive landscape very well. You can’t you’re not there. Okay. You know, it’s just not possible to really know this stuff with with I mean, you can be a great very aware of Well read and well, well educated investor, but you can’t know everything because it’s not your company, you know. So those are some of the differences.
Brian Bain 27:07
Yeah, no, and that’s helpful. And, of course, one of the things that I think people probably think it’s good about that is, even if you may not know, those things are happening. You’re the worst case scenario and a stock investment is that you lose your entire investment, which would be very bad, obviously, and rare. But that’s, but that’s it. But obviously, with real estate, you know, that you’ve got the debt you’re responsible for. There’s potential legal ramifications, because you are the frontline person. And then, you know, as the as you’ve heard, I’m sure a million times the three tiers of taxes toilets and, and tenants, you know, so I am Yeah, I love to hear. Yeah, just how you address those things.
Jason Hartman 27:43
Yeah, absolutely. I’d be glad to address those. So first of all, the vast majority of income property loans are non recourse loans. So you’re not going to you can walk away. That’s the implicit what I call nuclear option that over 10 million people did during the Great recession. In fact, a lot of them walked away and got paid to walk away. countrywide Bank of America was literally paying people to do short sales unsolicited on their properties they would send out, they probably sent millions of letters that said, we will pay you to do a cooperative short sale anywhere between 6000 and $30,000. You know, you will let you out of the loan, you’re off the hook, just sell the property. And of course, they did that because of, you know, all of the dynamics to which we’re not privy, but it’s probably tarp. And, and, you know, the various Omnibus bailouts, the bank’s got and all of this kind of stuff. And so, you know, that usually very rarely is there actually a recourse loan on a on a on a piece of housing.
Brian Bain 28:51
And so just to be clear, when you say, when you say non recourse that means, so if I’m if I own an income property,
Jason Hartman 28:58
You can walk in the lender accounts. sue you for the difference.
Brian Bain 29:01
Right? And so basically, they would just, they would sell the property to cover the loan on some and
Jason Hartman 29:05
Well, they probably not cover the loan, and you know, they lose money, but it wouldn’t be your problem, you would lose your equity, your down payment. So if you put 10% down on that property, you could lose your 10%. And you could walk in as long as it’s a non recourse loan. That’s it.
Brian Bain 29:21
But that would impact your credit, I’m assuming, right?
Jason Hartman 29:23
It would impact your credit. Right? Okay. Yes. But then, you know, there are a plethora of places out there that can repair your credit. Sure. So, and some of them are very hokey and dishonest. Yeah. So be careful with everything right. But But you know, some are reputable and it can be done.
Brian Bain 29:38
Okay. Of course, obviously, it’s an extreme situation.
Jason Hartman 29:41
Yeah, absolutely. You know, hopefully you’re never gonna face that. But certainly, it’s an option. Okay. Yeah. So what where would you like me to go? Do you want me to talk to you about inflation and do step destruction?
Brian Bain 29:53
Yeah, go. Yeah, I mean, I was gonna get there. Eventually. We might as well do it now.
Jason Hartman 29:56
Yeah. And I’d be glad for your listeners. If you’d like to supply you with some of these written materials, some of the actual PowerPoint slides I’m referring to here, so that you could put them on your website and they could, they could actually download them and look at them. If you, if you’d like me to do that, I’d be happy to, because I’m going to be talking about quite a few numbers. Okay.
Jason Hartman 30:15
But let me just set this up first, and let’s look at the more macro economic environment. Okay. I your listeners are sophisticated educated people, and they’re certainly aware as Are you as to the problem with our spendthrift government. Okay, we are in the hole in a massive way. Okay. And so, with in knowing that, I’ve identified six basic ways the government can get out of its debt and deficit problem, okay. I had Laurence Kotlikoff on my podcast a couple of times. And you know, he’s the famous economist to who has really probably studied this subject more than any by anybody. And that is the unfair Funded mandates and the unfunded entitlements that are hitting us over the next 1015 and 20 years. And some would call this conservatively conservatively, the 60 trillion and that’s with a T trillion not billion trillion. Okay? The $60 trillion time bomb. Laurence Kotlikoff says it’s about a 200 and $20 trillion time bomb,
Brian Bain 31:25
And this would be referring to, like Social Security, pensions and things like that. They probably don’t have funding.
Jason Hartman 31:31
Yeah, absolutely. All the promises our government has made that it simply cannot keep. Okay. So there are really only six ways out of the mess that I’ve identified that I know of. Number one is to default to simply say to everybody look, sorry, you know, everybody before me, it’s all george bush’s fault, whatever. Yeah. That’s what they always that’s, that’s Obama’s favorite line. not to get too political there. But, you know, all my predecessors, they overspend and we can’t keep The promise so sorry, we just can’t give you Social Security tough. We can’t give you a Medicare, we can’t give you Obamacare. We can’t give you disability. We can’t, you know, we can’t maintain the roads, we can’t pay for national defense, whatever. Right? So that’s one very politically unpopular, very unlikely option. Fortunately, the United States has the reserve currency of the world, at least for now. So we can inflate our way out of the mess very nicely. Other other countries don’t have this luxury that we do. The second option is to raise taxes. And there it’s simply not possible to raise taxes enough if you literally taxed everybody at 100% of their income. If you said, you know, all of your income, give it to Uncle Sam, there wouldn’t be enough to pay for this problem. The problem is expanded it’s it’s too big. taxes will not do it. And of course, we all know as as Reagan so aptly proved that when you raise taxes, you actually suppress revenue and you suppress economic activity.
Brian Bain 33:00
Yeah, you’re punishing earning potential,
Jason Hartman 33:02
Right. So it’s a terrible idea of raising taxes an absolutely terrible idea. Okay, so that’s number two. Number three is we can have a yard sale, we can sell the port’s to Dubai, we can sell military equipment to Libya to Taiwan, you know, and these are all things we’ve either considered or we’ve done, you know, the Bureau of Land Management sounds like
Brian Bain 33:19
You’ve seen that Greece right now, for example. Yeah,
Jason Hartman 33:21
yeah. Absolutely. Greece’s, you know, thinking about maybe they’ve actually done it now. selling off islands. Spain is a disaster. Portugal is a disaster. The world is a disaster, basically. Right. And so, at this dance of really ugly girls, the US happens to be the prettiest out of the ugly girls. Okay. Right, because it’s got some special characteristics that other countries don’t enjoy. So number four option after having a yard sale is just use the most powerful military force the world has ever known the US military to basically steal from other countries steal their resources. Certainly, you know, we were accused of doing this in Iraq. I don’t know that it’s true. But, you know, it is an option. A very famous person that is usually revered in history was just a thief with an army. His name was Napoleon. Okay. I mean, you know, he was he was a, he was a thief, okay, that had a military and he, you know, he’s a hero, right? It’s an odd, odd view of the world. On the positive side, we could have a great technological innovation, you know, in the areas of maybe energy, biotech, nanotechnology. You know, there’s all kinds of exciting things happening. I mean, I always say on my show, it’s an amazing time to be alive. And it really is, if the US is at the center of one of these innovations, or many of them, that could dig us out of the hole pretty far. But the most likely thing the sixth option is to simply inflate our way out of the problem. And that is basically debasing the currency and paying all those promises back in cheaper dollars, as as the value of the dollar inflate it away. This is a fantastic business plan for governments. It’s a fantastic business plan for investors. And what I’m proposing is that we as investors align our interest with governments and central banks, the most powerful forces in the world, because, you know, they may be a total scam, they may be totally corrupt, and I agree that they are, but we’re not going to change it. So we better get on their side of the table because they are so powerful. Okay, so to understand and to get excited about monetary and fiscal policy, we need to understand inflation and what it really is okay. And I admit that inflation is pretty tame at the moment. But if you take out a 30 year mortgage, that’s at a fixed artificially low interest rate today, and you have that mortgage against commodities, that where the debt is outsourced to somebody called a tenant. I mean, look, I don’t like debt if I have to pay it myself. But if I can outsource my debt to a tenant, this is a beautiful thing. And that’s why it’s such a great asset class, right. So to understand inflation, we need to distinguish between real and nominal real is the real value of something nominal just means a name only. And, and we need to distinguish between price and value, we need to understand that inflation is this insidious, hidden tax that destroys our purchasing power and our standard of living. And we need to notice that inflation destroys the value of our savings, our stocks, our bonds, and thankfully, the value of our debt. This is the beauty of it. debt is my favorite four letter word when I don’t pay myself and when it’s against what I call packaged commodities. See, I’m a commodities investor, I invest in lumber, copper wire, petroleum products, labor, energy, concrete, glass and steel. And they’re always assembled in the form of a house or an apartment building. That’s my favorite investment. And I get 30 year artificially low fixed rate debt against those assets. So I’ve got the commodity hedge against inflation, and the debt being debased against inflation, while the tenant is actually paying the debt and I’m not. I call this the double inflation arbitrage. Now, inflation is the most powerful method of wealth redistribution ever known to man. It’s far more powerful than taxes. You may remember a long time ago a guy by the name of joe the plumber, right, who asked candidate Obama Are you going to redistribute my wealth? Well, I had joe the plumber on my podcast, okay, and And you know, he got sort of has his 15 minutes of fame from that line. But inflation is a much better way to redistribute wealth than taxation. because not many people notice that they all notice taxes immediately, but inflation is the slow burn. Okay. And inflation redistributes wealth from lenders to borrowers. Because borrowers pay their debts back and cheaper dollars, lenders loan them out in current dollars. So you you take advantage of this huge time value of money, opportunity, and it also redistributes wealth from old people to young people. Now, why does it do that you might be thinking, well, old people generally have assets in the forms of savings stocks and bonds. Well, young people generally have debt. So their debt is paid off through inflation and old people suffer Because the value of their assets is debased by inflation, see, because it’s all denominated in dollars or whatever currency is being inflated.
Brian Bain 39:08
Yeah. So essentially, I mean, not to make it too obvious, but just to make sure it’s clear for the audience and stuff is that if you borrow $100,000, for a house in 2015, or 16 now, and each year, there’s inflation you’re paying, you’re still paying back the same fixed amount of hundred thousand dollars, but you’re paying it back with cheaper and cheaper dollars moving forward.
Jason Hartman 39:29
Absolutely. That’s beautiful. You explained it perfectly. And lest we think unless your listeners think that this is some abstract theory, let me put into into into real terms here, okay. And I’m going to share with you an example. Now, there’s quite a few numbers here. So just pay attention. Okay, I’ll make it easy to follow. And I’ll be glad to give you a copy of this if you want to put it on your website for your listeners. But basically, this happened to 10s of millions of people what I’m about to share, okay. So here’s the example. In 1972, one year after we went off the gold standard, okay, the median single family home was priced at 18. I’m going to round off to make this fast. Okay? About $18,000. Okay? If you put 20% down on this property and you lived in it, this is not an income property. This is just a home you lived in. Now, if it was an income property, it would be dramatically better than this example. But it’s good enough without getting income. Okay? So so if you put 20% down, you would get alone a mortgage for about $14,000. The interest rate on a 30 year fixed rate mortgage in the middle of 1972 was 7.37%. Okay, so that’s what you start with in 1972 $1 was worth $1. But we had some inflation. We had the Jimmy Carter era, which was a disaster. We had paul volcker, the only Fed chair, probably ever willing to make the the economy take its tough medicine, which was tough, but he broke the back of inflation by doing that by raising rates and, you know, curtailing the money supply, which every other Fed chair has done the complete opposite that, you know, their idea of putting out a fire is to throw gasoline on it if you’re, if you’re, you know, Ben Bernanke, Janet Yellen, or Alan Greenspan. Okay, so let’s just fast forward 12 years now to a year that a famous book was written 1984. Okay, the Orwellian era, right? So in 1984, that 19 $72 is now worth only 40 cents. And this is by official numbers. In reality, inflation is always higher than the official number the government gives us, but let’s just take the official number to be conservative. The example is actually much better than this in real inflation terms. So now that 19 $72 just in 12 short years has lost 60 cents of its value 60% has been the based or paid off by inflation, right? And every month for the last 12 years owning this house, you’ve been making mortgage payments of $101 one on one per month. But as the years went by that payment felt cheaper and cheaper to you. Because by 1984 the real value of that payment even though you were still writing a check for one on one per month was only $41 because of inflation paying down the the loan, Okay, now let’s fast forward to the very end of it. 30 year mortgage, this happened to 10s of millions of people. It’s not a theory, it actually happened. But most people thought they they got wealthy by owning their real estate because it went up in value. But what they didn’t usually realize is the day went down in value. Okay, so they got this double inflation arbitrage as I call it. Now, in 2001, when you’re making the last payment on that mortgage, the value of the 19 $72 now only 24 cents, the payment when you’re writing that last check for $101 the the feel value, the real value of it, what it feels like is only $24. You know, it’s basically like buying lunch. Okay, and, and that’s the last payment. So let me summarize this. The mortgage, the money we borrowed was only $14,000. In nominal dollars, we repaid $36,000. But after inflation, attacked those dollars and the base them and paid them down to the benefit of the owner of the property and the holder of the mortgage, the debt being a huge asset, not a liability as most people think the real dollars that we repaid was just over $16,000. Now it gets better. After tax benefits, the real inflation and tax adjusted dollars was only $12,000. But wait, you say Didn’t we borrow 14,000 and we only in real dollars paid back in real terms? 12,000 Yes, we thought we were paying 7.37% interest. But after inflation, our effective rate was only 1.06%. And after tax benefits, it was negative 1.16%. We got paid to borrow the money.
Jason Hartman 44:41
We got paid and I didn’t even mention that we lived there for three decades for free. We got free rent for 30 years and got paid.
Brian Bain 44:52
How does the free rent come in? That’s I thought your income property.
Jason Hartman 44:55
well because it no this is not an income property. If this were an income from would be dramatically better. Because see, we were making these payments ourselves, if we could outsource the debt to a tenant and have them hopefully pay us a little extra every month called positive cash flow, this example would be like, infinitesimally better. Okay? But if I if I even did that example, if I did the math on it, no one would believe me,
Brian Bain 45:22
It’ll be like, like lottery numbers better.
Jason Hartman 45:24
Yeah, it’d be insane. Okay, it’d be like, you know, your return on investment was like 9,082% or something.
Brian Bain 45:30
Okay, so I guess you’re saying they live there for free because they had to pay back less than they borrowed? Is that what it came down to?
Jason Hartman 45:37
In real dollars? Yes. And, and, and just so you know, you know, there were there was some high inflation in there for a few years under Carter. But overall, the average inflation rate over the three decades was only 5.1%. It was modest. I mean, it wasn’t you know, if the if this deal were in Zimbabwe or Spain or Mexico or Portugal or Brazil Or Argentina, or, you know, any of these countries that experienced very, very severe inflation, the Weimar Republic, you know, Germany, for God’s sake, I mean, the returns would be insane.
Brian Bain 46:12
Going by official numbers, even in a relatively lower inflation environment like we have today, the principle still holds, it might not be quite as compelling. But the principle is still there unless we fall into deflation, which is it’s not as dramatic as any of the central bank. So I think we’re probably on a safe end on that front. But no, that’s compelling. And I think that’s, it’s, it’s helpful to hear perspectives like that, because, again, as you mentioned, real estate, it does involve more hands on, especially at maybe an excuse me income properties, especially at an early, early level, because if you’re maybe more deeper into income properties, you can, you know, hire management companies and have a little more hands off, I guess, in the process, but realizing that there are those benefits like that And of course, you know, in the back of everyone’s mind, there’s gonna be that one story you heard over here about the tenant. Yeah. And you know, it was just this disastrous process. And then there’s there’s gonna be one story over here.
Jason Hartman 47:13
Yeah, yeah, I had to evict somebody, you know? Yeah.
Brian Bain 47:16
Yeah. Pipes bursting.
Jason Hartman 47:19
A repair issue or something. Yeah, sure. No, I know you’re out there. Hey, listen, I have them. It’s not perfect. I’m I am by no means saying this is perfect. It has problems. But look, I’ll tell you. You never hear a story from any of your friends. A cocktail party conversation of Oh, yeah, I got a bunch of properties and my tenants pay rent every month. Perfectly on time. Yep. That is what happens most of the time.
Brian Bain 47:42
And I’m extremely wealthy because of it. Yeah, no one says that.
Jason Hartman 47:44
Yeah. Right. That’s, that’s what happens the vast majority of the time you only hear the exception to that. Okay. You only hear the negative story.
Brian Bain 47:52
And that’s my point. And that’s my point. Yeah. People, we get scared off by the one or two stories. That very likely may not be indicative of reality?
Jason Hartman 48:00
Absolutely, absolutely. So so you know, don’t let them scare you. And, you know, I just want to compliment you for having me on your show. Because, you know, this is not your thing. You’re interested and your audience is interested in investing in stocks. And you know, I’m the outlier here. So, you know, it really shows that you’re a journalist by having me on and showing another viewpoint. So I appreciate that, that your listeners should appreciate it, too.
Brian Bain 48:22
Yeah. You’re very kind to say that, Jason. And yeah, I mean, our goal, ultimately, is to become better investors period. I always love saying that every dollar we spend and every minute we spend is an investment in something and you want to make the best possible investments we can and if that’s in equities, great and if it’s not, then we want to go there too. And I think, obviously, you said before we started the interview, you could talk for three days on this topic, and I don’t doubt that because I would like to keep picking your brain on the topic.
Jason Hartman 48:48
I love this stuff. Yeah, I just love I absolutely love it. But But yeah, it’s great. I’d be glad to come back on. You know, there’s another whole principle that’s kind of a big a big chunk. I call it the Hartman risk evaluation. Took me 19 years to discover this, of what really can dramatically reduce risk and investment. You know, it didn’t take another half hour to go through that. But you know, maybe we can do it another time. It’s pretty interesting. But, you know, I just wanted to get this stuff out, because I think it’d be interesting to your investors and, you know, well, we’ll see where it all goes. It’s quite interesting. And I would say if you’re going to be in the stock market by dividend paying stocks, because, you know, you gotta have income. In fact, I define, I say, in the in my podcast, and in my seminars, I say anything without income, does not qualify as an investment. It’s simply a speculation. So they can land that’s real estate, but it’s, it’s a speculation, it’s a gamble. It’s not an investment. In order to have an investment to use that term. You have to have income without income. You know, if you if you buy gold, or silver and you level this, I own all this stuff. too, okay, I own some wall everything pretty much, you know, except I don’t own any stocks anymore, okay, or mutual funds, but I used to own a bunch. If you buy precious metals, you know, they don’t produce any income. That’s a speculative deal. You know, it’s gambling. And so you Listen, I’ve won a lot of times gambling, okay. So I freely admit that, but I’m just saying, The older I get, the more conservative I get. And I just want things I like mailbox money. I just like getting income every month. I like by tenants paying off my loans.
Brian Bain 50:30
No, I mean, that’s a good word. I think, the more I grow as an investor with experience and otherwise, you know, it’s the one of those age old investing truisms that usually usually the more boring the investment, the better the investment is. So, yeah, you know, and you think it’s so easy to get in that mindset of, especially when you’re looking at something that you hope will have quick appreciation or significant appreciation that’s exciting, but it’s almost it’s very rare than an exciting investment. Doesn’t have usually an equal amount of risk involved too. And so that
Jason Hartman 51:04
Yeah, they are the more simple and boring I agree. Yeah.
Brian Bain 51:07
Sure. Well, and over time.
Jason Hartman 51:10
This this what you’re talking about is so true, because there is nothing sexy about my investments except the returns. You know, it’s a difference. It’s a difference between having a wife and a mistress.
Jason Hartman 51:24
One is exciting, but really scary. And the other is dependable.
Brian Bain 51:29
Yeah, and if, and if you measure if you get caught up measuring things in months versus measuring in years and decades, that’s the difference. It’s when you can think into years and decades. That is where you’re positioning yourself for great success in my mind, and that’s, that’s definitely the game of real estate in the local real estate mentor that I’ve been working with. And you know, he’s talked about, you know, everyone wants to say, Well, I’m not quite ready for real estate. I’m not quite ready to do this. But the thing is, it’s the it’s one of those where you you don’t want to wait to buy you want to buy and then wait because you Let that tenant pay off that mortgage. And then it’s like you said, mailbox money and all you’re dealing with is, you know, taxes or whatever else. But Jason again, I want to respect your time. Like I said, I could pepper you with questions for the rest of the day. And I know you could, you could offer great stuff that entire time. But you’ve got a lot on your plate right now. We want to wish you the best with your upcoming conference. And we look forward to hopefully connecting with you again sometime and also getting some of those PowerPoints you mentioned to give their audience that’d be a real help.
Jason Hartman 52:30
And yeah, I’ll email those over to you. So you can put them on your website. And if they have questions for me, my website is Jason hartman.com. It’s just my name Jason Hartman, h AR t ma n COMM And then of course, podcast is on iTunes and all the usual places.
Brian Bain 52:45
Yeah, and we’ll be sure to link to all those things from our website. Make sure our guests and listeners can find you as well. And hey, Jason, thanks for coming on the show and we wish you all the best.
Jason Hartman 52:54
Hey, thanks for having me and happy investing to you and your listeners.
Announcer 52:58
I’ve never really thought of Jason subversive, but I just found out that’s what Wall Street considers him to be.
Announcer 53:05
Really now. How is that possible at all?
Brian Bain 53:07
Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.
Announcer 53:18
I know. I mean, how many people do you know not including insiders who created wealth with stocks, bonds, and mutual funds? Those options are for people who only want to pretend they’re getting ahead.
Announcer 53:30
Stocks and other non direct traded assets are losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades.
Announcer 53:41
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you’re one of them, you will not win.
Announcer 53:51
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.
Announcer 54:06
Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.
Announcer 54:20
We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.
Announcer 54:31
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.
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And this set of advanced strategies for wealth creation is being offered for only $197
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If you want to be able to sit back and collect checks every month, just likea 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.
In this Flashback Friday episode, Jason Hartman talks to Patrick about the benefits of investing in real estate. Patrick also shares what’s it like working with Jason and the Platinum Properties Investor Network’s investment counselors.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Announcer 0:09
Welcome to the flashback Friday edition of the creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you to prepare you for the future by listening to the past. Let’s dive in.
Announcer 0:29
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants Get involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:19
So I tell you, folks, you sure don’t have to convince anybody to buy good income properties anymore nowadays, do you? It is unbelievable how people are just gobbling up rental housing inventory right now. And I mean, from an investment perspective, but when you don’t when I say rental housing inventory that could easily mean rental housing inventory as a tenant, and I guess both are true, really. And that’s one of the reasons the opportunity is so good for investors. I recently interviewed Dan Ammerman on the show and we’ll we’ll have that show published fairly soon. Here. Today, we’re going to do a case study, or we have a client of ours on the show. Any of you listeners that want to come forward and be On the show, just touch base with us, contact us through Jason Hartman calm and go to the Contact Us section and say that you’re interested in being on the show and telling your story. And Heck, we may just put you on and we may even record an interview and hack if it’s terrible. How about this? We won’t publish it. Just kidding. Well, only half kidding. I guess my ex girlfriend Melanie used to say there’s a little bit of truth in every joke, right? And she only used to say that because her mom used to say to her, I guess that’s how old things like that get started. But you know, I interviewed Dan Ammerman on the show. And he talked about this really interesting article that he did about arbitrage and fed policies with rental housing, cash flows. And that’s mainly what we talked to him about in that upcoming show. But you know, I was just kind of looking at this article of his again, is kind of a prelude to this show. And I just wanted to point out a couple of things that are just so telling and make this opportunity so incredibly, incredibly robust right now, in terms of the opportunity for us as investors and there’s one chart that He has here a 20 year history of financing costs. And he looks at the 30 year fixed rate mortgage from 1992 to 2012. Okay, so for that 20 years, and he looks at the Freddie Mac, primary mortgage market survey, and you see that back in 92, rates were about eight and a half percent. And they have just totally, totally plummeted to where they are now, just above three and a half percent. But what does this really mean for us as investors? Well, of course, it has a huge impact on our investment. Because when you combine that with what he talks about, on the next chart, the average price of US single family home, that is inflation adjusted from 1992 to 2011. And this is in $2,011. You can’t go to 2012. Because the years not close yet, obviously, and this is the Freddie Mac house price index, which by the way, I want to make a point, much more accurate to look at that index, which people rarely do, then the I’m gonna just say it from This stupid Case Shiller index. I’m really getting upset with the Case Shiller index nowadays, and, and, you know, we should get someone from Case Shiller on the show, so that they can defend their index, which only represents about 5% of the market. Only 20 out of 400 markets, 14 of those 20 markets, I wouldn’t touch with a 10 foot pole. I mean, isn’t that crazy that people just revere that and that’s like the most, I think, I mean, at least anecdotally, that’s my impression. That’s the most commonly used index. Everywhere I look people look at Case Shiller Case Shiller this Case Shiller that why the heck are they doing that? It’s so it’s so irresponsible. So in this chart, what he looks at here is 1992. And this of course, is inflation adjusted. Okay, the average home price and by the way, there’s a really good debate on what is a more accurate study is average or medium. Remember, you’re listening to flashback Friday. Our new episodes are published every year. Monday and Wednesday. Well, median. Remember, median is just the middle number. A lot of times when you see these statistics, they’re looking at the median price. Okay, I think it’s almost more important to look at the average price. Now, probably the most accurate would be look at a weighted average. But I don’t even know how you could do that on a national scale, certainly, because so many markets and the prices differ so dramatically. You look at overpriced coastal real estate and in the Socialist Republic of California or overpriced real estate in the socialist city of Manhattan, Manhattan, New York. I just don’t know how you can even do that. But this is amazing. 170,000 or so 1992 down 2011, about the same price. And he’s got a line right through the middle of that. That shows it hovering just above $190,000 for the average price for that time period, right the average graph uses single family home prices in the US over the last 20 years as reported by Freddie Mac and is adjusted for inflation with a CPI, you index, the urban CPI, the consumer price index, you for urban, okay. The two most striking features are the surge in prices. That was the real estate bubble and the plunge in prices since that time. Now get this. We go to one more thing here to talk about, and that is this inflation adjusted mortgage payments. And when you look at what has happened to Americans, and what has happened to people in this economy, even non Americans illegal immigrant Oh, I’m sorry, I don’t mean to say that. undocumented workers or as Hillary Clinton called it during the last election against Obama people without papers. I know that’s a little bit snarky, of course, but it’s just so as the ridiculous of our political discourse in this country sometimes. Okay. But anyway, you look at that, and I was thinking, you know, gosh, I had this wonderful, wonderful housekeeper in Southern California for many years. I mean, her name was gourmet. She was just a doll. And she must have been my housekeeper for, I don’t know, 1214 years, probably for a long time. And she was she was great. And I just couldn’t believe it. I was thinking back to that. And I was thinking here in Arizona, what I pay, I pay $65 a week to have my house cleaned. And then I pay an another different party to come through and clean the floors, because it places so big, I pay them 20 bucks. So I pay $85, I guess you should say per week, right? But in California, I was paying $65 a week. No, I think it was actually paying 60 and I was thinking back to the olden days. I only paid goomy like 50 or $60. And I was thinking my gosh, isn’t that ridiculous? Isn’t that ridiculously unfair, that the market price for house cleaning, has probably not increased in enlightened Two decades. That’s insanity folks. I mean, America, when you look at Americans, and you look at all these salary surveys, Americans haven’t hadn’t had a real wage increase in over 20 years now, folks, yet their cost of living has shot up dramatically. And a lot of it I say is deceiving again. And I remember when I was taking back at UCI University of California, Irvine, I used to take these classes on what they called light construction development, which is, you know, all the classes in this iram or Maroon they had like two series of Forgive me, I don’t remember what the acronyms were. But these were basically all the classes you took if you wanted to be a real estate developer. And I remember I took these classes years ago when I first got into the real estate business because I always wanted to be a developer. And after taking those classes, I realized what an insanely risky proposition that is and how totally complicated that is. I would much rather be in the business of what I do now or rehabbing properties Or something like that than developing them from the ground up from scratch. So when I was taking these classes at UCI to learn how to become a developer, What amazed me, is the way that they would look at the statistics, and especially as they related to inflation, cost of living and lifestyle. And I remember in the classes, they were always talking about how the average American Home the square footage has increased so dramatically. I’m just giving you the concept here, because I don’t have the exact numbers, but just conceptually, this is the idea. You know, they would say something to the effect of Well, after World War Two, when the baby boomers started their family formation years, the average American home was like 900 square feet. Well, you know, that’s true. And I think of a place like Lakewood, California as a great example. But there are many other places around the country. That of course became these suburban locations for these small homes. But what they didn’t tell you and what they never tell you is that the the density they were on a quarter acre lot, okay, at that time nowadays, though, or you know, maybe a 8000 square foot lot, but still a nice size lot, by the way, an acre is about 42,000 square feet, I believe. And what they don’t tell you is nowadays, yes, the house is bigger, which means the building materials, it consumes more building materials, of course, but the density is so much higher. I mean, people are packed into much smaller spaces nowadays. So, when you adjust home prices for inflation, you’ve got to really consider what are you really getting? I mean, in the early 70s, when this beautiful area in Newport Beach, California was built called harbor view homes. Okay, maybe mid 70s. Don’t quote me on the year Exactly. I think those homes when they were originally sold, sold for like $45,000 or something like that. Okay, and in the 70s, and nowadays, they’re easily upwards of a million dollars and much more. Most of them have been remodeled and dramatically improved or knocked down but the neighborhood is like a million plus neighborhood Okay, and so back then that was sort of your upper middle class home. And it was on a big lot in a neighborhood with green belts and a school right in the center of it and so forth. Whereas nowadays, you have a little row home, yes, the house itself, the structure is larger, but the density is much higher. And so people are much more on top of each other nowadays. So, in looking at this chart, this is interesting they had now this this effect didn’t happen very much over the past 20 years. It happened before that, that the density dramatically increased. And builders got much better at it building for higher density too. So the quality of density improved, but I’m just pointing out that all things are not equal and they are not as they seem on the surface. So inflation has had huge impact on our lives. And some people haven’t even had a raise. I mean, have you had a massage lately? Okay, spa services. There’s an example luxury item, right? So the price of a massage has not really gone up in many, many, many years. And I’m thinking, Why don’t these people get a raise? Don’t they get a cost of living raise? Doesn’t my housekeeper get a cost of living raise? Actually no. And if you look at typical corporate jobs, the same is also true. So this has been a huge problem for people. And we on this show, we learn how to fix this problem and how to solve this problem, how to actually make it benefit us as proven income property investors. So this last chart that I’ll talk to you about is inflation adjusted mortgage payments. And this one is particularly telling. It goes from 1992 to 2012. And it’s in $2,011 $2,011. So what it shows is back in 1992, your mortgage your typical mortgage payment in America was about $900. And then it went up and it went down. And during the boom times, you know, when things were crazy, 2006 era it went up to 11 over 1100 dollars now That same payment in 2012 get this This is amazing. I mean, think about what this does for your cash flow what I’m about to tell you 20 years ago, that typical mortgage payment $900 boom times typical mortgage payment. I’m going to say on this chart just kind of guessing it’s about 1100 and $20. Now, it is $570 $570 if you are not jumping out of your chair to buy good prudent income property right now, you are completely missing the boat. Okay, you are totally missing the boat, and incredible opportunity we have now and of course you can learn a lot more about this by joining us for the meet the masters of income property event and that is March 24. And fifth in beautiful Irvine, California. It’s at the Hyatt Regency in Irvine, by the way, many of you have registered already. So thank you. We look forward to having you join us. Let me give you the airport code you don’t need to run a car. The hotel is literally five minutes if that from the airport but it’s gorgeous hotel and the airport code is sn a for Santa Ana sn a Orange County Airport, john Wayne Airport, Santa Ana airport. It has about three names to it. And it’s beautiful Airport. The transportation is super simple. There’s a shuttle from the Hyatt Regency. You could take a taxi to cost you nothing. Basically. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday, every Wednesday. So join us for that and there’s still early bird pricing. It’s now $597 and that will cover you and the guests Be sure to join us for that I increase the size of the room block and we were able to extend that $99 rate. But I can’t say when the hotel will cut us off. It’s sort of illogical how these hotels act they extend the rate but then when the roadblock sells out They still have rooms, they won’t sell them for $99 anymore, which is a quite a bargain price. So the early bird gets the room. early bird gets the worm too. And so join us for that 597 and $99 room rate, well the room lock and the early bird pricing last, and that price will escalate again pretty soon. So register at Jason Hartman calm two days it will be filled with all kinds of great info. So join us for that. Now one of our vendors, and this kind of irks me a bit here, one of our local market specialists or LMS, as we call them, they have set up a fund, a realty fund, a distress realty fund, and they’ve been sending out solicitations to our clients who have purchased from them in this market to join this fund. Now look, folks, you know me I don’t like pooled assets. I have a quote that I say pools are for fools. I think we should all be direct investors and we should not relinquish Our financial future to anybody else in my 10 commandments of successful investing. What is commandment number three, you’ve heard me talk about it before it is, thou shalt maintain control. Because when you relinquish control to somebody else in a pooled asset, mutual fund, this distressed asset fund that they’re setting up, stocks, bonds, whatever anything else that someone else has control of besides you, where you are not a direct investor, you leave yourself susceptible to those three major problems. And look, folks, you can make a lot of mistakes in your investing career. But if you just don’t make this mistake, you’ll you’ll stay out of a lot of hot water be a direct investor, that is the commandment number three is probably the most important commandment, but the others are important too. So three problems you might be investing with a crook and you’ll lose your money because they’ll just rip you off because they’re graft and corruption. Number two problem you might be investing with an idiot and you’ll lose money because of their sheer incompetence and stupidity. But assuming they’re honest, assume they’re competent. They take a huge management fee off the top for managing the deal. So why would you leave yourself susceptible to that be a direct investor in speaking of direct investment, boy businesses booming, we got a good case study coming up not only in this show, but on another show. I rarely take on clients of my own. But you know, we have investment counselors to do that. But a larger client was referred to me a couple of months ago, and I’ve been working with them on this 1031 exchange. And let me tell you something, they are going to profit so handsomely from this. And we’re going to do a case study a show about this because it’s a it’s a great case of highest and best use of any asset you have. And basically this particular client had a beach home in the family and expensive beach home and was worth about, I think $2.7 million, produce very little rental income. And they’ve turned it around and they’ve been buying property through us all over the country. They just bought 10 properties today in Atlanta, Georgia. Last week, they signed up for 20 in Dallas, although I don’t think they’re going to do all of them. Dallas deals, they purchase some in Phoenix and in St. Louis as well. And it is really amazing. I mean, folks, the the cashflow will be improved for these people more more than tenfold easily from what they had to what they will get when this exchange is finished. And people all over are coming out of the woodwork buying dozens and dozens and dozens of income properties. Because this opportunity is so impressive right now. So take advantage of that. But here’s what I don’t want you to take advantage of. And this is from a competitor. And you know, I actually like this competitor, some of my competitors I really like and I really do respect but I can’t say I agree with them on everything. And this one I definitely do not agree with and they’re offering properties in Nicaragua and they’re saying Oh, it’s the next Costa Rica and folks, we have so many people pitching us on this believes Costa Rica, Nicaragua, all of this stuff, and I don’t know the details of this deal. I suppose I could be wrong, but I bet I’m not. I’m a world traveler. I’ve been to 64 countries. I have not been to Nicaragua. Although I have read a lot about it. I subscribe to international living. I’ve met with real estate brokers and numerous countries around the world in Eastern Europe and Central America, in South America. And I look at real estate pretty much everywhere I go, even if I don’t meet with a real estate broker, I’m still checking out the real estate market because it’s just fascinating to me, in Ukraine. I mean, made Russia I’ve done it everywhere. Okay. I am not a novice at this stuff. And I have not found one international investment anywhere on planet earth in 64 countries. And some of those countries I’ve been to numerous times, that makes anywhere near the kind of sense American real estate makes, and I’ve got friends that have purchased properties in Costa Rica. I’ve got friends that have purchased properties in all different places around the world. And clients. I hear about their experience. And let me tell you something, folks, This doesn’t make sense, in my opinion, you want to purchase property that produces income. Now on this sheet from my lovely competitor here, it talks about how you can get oceanfront condos and non recourse zero percent financing for 20 years. Well, why are they offering zero percent financing? Because they’re building it into the price? The new Costa Rica Prices start at 70,000 bucks basically. Okay? And who is your renter here? Are they American tourists or European tourists? Are they Vacation Rentals? I mean, these places don’t have much of an economy at all. And if they have any, and I tell you something, when I was in Belize, I was gonna just jump over to Nicaragua. I was with one of my investment counselors down there, and we were looking at property and we were looking at banking and thinking of, you know, I had actually opened up a Belize bank account, and I didn’t find it yet though. I just opened the account before I left, actually several months before the trip and then went down there and I went to the bank and going around the country. I was so completely unimpressed. I couldn’t believe it. It was the sum of these places, folks. These are totally third world countries. Well, I read the Lonely Planet Guide, which is one of my favorite travel guides, by the way, about Nicaragua. And we were going to go over there. Instead, we went to Guatemala from Belize, but Nicaragua was right there. We were going to go over to Nicaragua. And they talked about the crime, the crime, the crime. I don’t know last time I was in Costa Rica, there were bars on every window. I mean, granted, there’s a couple of nice beaches. So what what are people thinking when they do these investment? These are not even called investments. Yes, they can own properties. They’re sure if you want to check out a society and check out a civilization and go lay on the beach somewhere fine and dandy. That’s one thing but to consider these investment properties, or you have employment and rule of law, and good infrastructure, I just think you got to be out of your mind, American real estate is a steal right now. People from all over the world are lining up to buy it. I talked to one of our vendors. He said he’s got a group in Egypt that buys properties from him. 30 at a time 30 single family homes at a time just in one shot. Every several months, they come back and they buy another 30. Unbelievable. Shouldn’t you be doing that? Yeah, yeah. So So stay away from these distractions, Belize, Costa Rica, Nicaragua. And listen, if I find one of these deals, that makes any sense. I’ll be the first to tell you about it. But I haven’t. And I’d say the closest thing that makes any sense in my opinion in Central America is Panama. I did go to Panama. I looked with a broker there. And that was sort of interesting. I’d say it was it was the closest but it did not beat anything we have in the United States that we recommend through my network and on the website at Jason Hartman, calm Okay, join us for meet the masters.
Let’s get to our case study here and We will be back with an actual client, talking to you about life and retirement and college and investing and all of that good stuff here in just a moment.
Announcer 23:10
Have you listened to the creating wealth series? I mean from the beginning. If not, you can go ahead and get booked one that shows one through 20 in digital download, these are advanced strategies for wealth creation. For more information go to Jason hartman.com.
Jason Hartman 23:31
My pleasure welcome Patrick to the show. He is one of our clients and he has been to many of our events, meet the Masters creating wealth etc. And he wanted to talk today a little bit about his experience with investing and planning for your own future. None of us is going to retire with a gold watch anymore unless we’re a wall street insider that’s basically ripping off the middle class, which is what Wall Street seems to be so good at and you know, they’re we’re just living in a great state of insecurity Nowadays, but insecurity breeds opportunity at the same time. So as long as we plan and act correctly and view the situation correctly, the opportunities really in many ways have never been greater. But for those living by the old rules, you’re going to be sadly sadly surprised at how things do not work out. So that’s what we’re going to talk about today. And Pat, welcome. How are you? Alright, not too bad. How you doing today? Good. Hey, thanks for joining us on the show here. And first of all, let’s just get a little background. Tell people you don’t have to be very specific, but just maybe what industry you’re in what you do for a living.
Patrick 24:33
I’m in the aerospace industry in an engineering field and currently manage people and work on various military type programs.
Jason Hartman 24:42
Fantastic one. Sure. You can give us all the details about those military programs, right? Yeah, that’s a top secret. So how long ago did you I guess you first found out about us through the podcast. Right?
Patrick 24:53
Right. Yeah, first, I guess I have to thank apple and then I have thank you for doing the podcast. I’ve learned You know, a lot of I’m sure I’ve listened to all your shows, and that was probably back in 2008. And the one thing I was thinking of I kind of maybe listen to them in the wrong order because I was in the middle of purchasing a house locally and in the end, after I closed escrow and then a few weeks later finishing the podcast, I you know, wish I would have not bought that property here locally.
Jason Hartman 25:19
Well, there, sorry about that. They’re not in any order. But and speaking of locally, you’re in Southern California, right? Yeah,
Patrick 25:25
I bought the house in Lancaster, California, which is probably 80 miles north of like, LA x. And you know, at the time, I thought it was a good deal. But you know, since then it’s probably declined some and you know, I had to come in with a lot of money and could have really used that money to have better cash flow in other areas, but I look at it as a learning process and I want to keep pushing through and learning more and sometimes it costs you money. Sometimes it doesn’t.
Jason Hartman 25:51
Well, yeah, that’s true. You know, we all live and learn and I gotta tell you, I it was interesting, because just when I was driving on my way to do this, this interview with you I was listening to a real estate show on the Phoenix radio here. And they were talking about doing short sales. And there were two guys hosting the show. And one guy says, Call us today because your house is your greatest asset. And then the other guy says, Ah, your house is your greatest liability. And, you know, for a long time, I didn’t look at it that way either. And, you know, Robert Kiyosaki says that he says, your houses is your usually your biggest liability. And I think we’ve got to just change our mindset, slightly, not completely here. And and of course you have and I have to, you know, in the past several years, whereas when I moved out of my house, living at home with mom, okay, when I moved out, I moved into a brand new condo that I bought, and I remember that was a condo in Irvine, California. And that was not my first property, but it was it was my first residence that I actually lived in and I bought that for $102,000 and 11 months later, I sold it to a buddy who was Wasn’t a friend at the time, but now has become a very good long term friend. And he bought it from me for $160,000 in 11 months later and I thought, yeah, and then Patrick it gets even better than this because I borrowed the money for the down payment from my grandmother. So my I wanted to calculate my return and being at about 600% in 11 months, but it was really infinite because it was someone else’s money I used for the downpayment and that is the beauty of income property, and I have made some money on the houses I’ve lived in over the years. And I’ve rarely ever been a renter all my adult life only a couple of times one time when I was building a house in Newport coast and had to wait for the construction to finish and I rented them and, and I’m a renter now, as I mentioned on a few few shows ago, and it’s great to own property income property is far and away. The greatest asset class it’s the best wealth creator there is, but owning our own home, not necessarily So your home doesn’t produce income for you, it just costs you money. And if you’re going to live in an upscale area, you can usually rent for so much less as a percentage of value than owning. And so when you get into more upscale property, the rent to value ratio has become so in favor of the tenant. And that’s, that’s a reason really, why as an investor, you shouldn’t invest in these expensive or even medium price areas of say, Southern California or New York City or you know, any high price market you want to you want to serve the masses and dine with the classes As the old saying goes by low and low end and medium low rental properties. And you can rent your house.
Patrick 28:44
Yeah, you know, where I live now. I mean, our house you know, right before it all blew up. It went to as high as about 600,000. And I, you know, talked to my wife and said, hey, let’s we should maybe sell it and it’s, I think there’s an emotional attachment sometimes. And now I think my house I’d be lucky if I could sell For 250 so it’s it’s really been depressed. And, you know, in my industry now we’re going through some downturn with the the government, you know, not being able to spend the money it used to. And what I’ve seen is the people that can’t move, and part of it is they’re upside down on their house, so they can’t move and the ones that are getting the jobs are the ones that are actually mobile and able to go move 50 miles or move 200 miles and they can get the job the people, some of them are locked in or they have these houses that they’ve bought that now they’re upside down, they can’t, you know, short sell them or get rid of them without you know, a credit issue. So I think being a renter gives you that mobility that you’ve talked about before, and I have talked to several people and they you know, there’s some people that just like owning a house, but I agree with you like in a South Bay down in Redondo Beach or Manhattan Beach in Southern California, you could rent a house for 3000 a month and that same one to buy it, you’d have to come in with a couple hundred thousand dollars and then, you know, end up having a payment of about 5000 a month, right?
Jason Hartman 29:59
Yeah, no, you You’re absolutely right. And you know, what we’re going to do on our discussion today is really challenge some of these old ideas that people have. And we’re going to talk about college and retirement planning. And we’re starting out with his homeownership thing. And you know, I have said that on the show, the best thing anybody can have on a resume nowadays is mobility. And being able to move to where the jobs are, where they were they the business climate, or the jobs climate, it’s friendly to those who want to work. And so that’s a very important factor that you just mentioned, houses tie people down. The United States is the most mobile society in the world. You go to Europe, and you go to South America, these people, they live in their houses forever, they don’t move. And I say that that really cost their economy a lot of money because it reduces efficiency and velocity in the economy, when people can’t move to where jobs are. And being mobile is a stimulating factor to the economy. And as investors. That’s what we’re here to do is to provide that mobility to our renters to our tenants. And in turn they’re gonna make us wealthy by doing it so it’s just a it’s really a win win deal for everybody concerned. Okay so you found the show the creating wealth show back in 2008 and then what happened?
Patrick 31:17
Well then I Sarah you know work with me you know over probably six months I was in the middle of an escrow on the house that I bought here locally. And then I kind of decided to go purchase house in Indy just because at the time to be honest, it was the cheapest one and had the least amount of risk if I lost my money, it would have been you know, less than maybe buying a Dallas property and that one in the end you know, your team really helped out because about two weeks for us supposed to close the the original lender I went with decided he wasn’t going to make enough money on the loan and didn’t want to do it and Sarah scrambled and worked with you know, her team to help get me the the mortgage. That one you know, it’s been a good house. I’ve had a turn at one time and that cost me about 16 hundred dollars you know, the people had been there about two years but it’s uh, the numbers you said it would hit they’ve hit and I always put my own, you know, little margin in there in case it doesn’t but
Jason Hartman 32:09
that’s a good point assume it’s not going to go as well as, as the performance or the projections say because life happens if it goes that Well, great, but you know, assume it won’t assume it’ll go worse.
Patrick 32:20
Yeah. And one of the things that I think when I’ve researched these other markets and I like kind of look in and dive in a little deeper than maybe most people is, we make some assumptions here in like California, when I buy a house I pay taxes based on the price I paid for it. Well, an indie you buy a house based on the value that I think it’s worth, not what you paid for it. So you have to kind of factor that in or the taxes may be a little higher. The other big thing I think is that I’ve learned from you is you know, keeping that reserve you know, I have money set aside to handle that I could pay payments on all my mortgages for about six months. And I was really tested earlier this year. We were going on a cruise to Alaska, spending a lot of money My daughter is getting ready to go to college. And then all of a sudden, I had four, four of my houses going rented all at the same time. I didn’t think it would happen, but it was literally with all within about a month and a half. And the initial reaction is maybe to go sell everything, but I really just kind of said, Hey, I put this money aside, I saved this For this reason, and, you know, started dipping into that money and, you know, eventually we got everything, you know, taken care of and rented. But what I’ve learned, you know, listening to you is I got to do my planning and then stick to my plan and not change it just when something bad happens. So
Jason Hartman 33:30
yeah, well, a couple comments. I want to just say before we go on, first of all, you said India and I want to make sure listeners know that means Indianapolis and then you also refer to turning the house or turning what you meant is turning the tenants the tenant turned over. So in between that cost about 1600 dollars to do that turn and then the new tenants have been there for two straight years with no vacancy right now. Why did it cost you 1600 dollars?
Patrick 33:55
Well, in I guess I gotta correct that. I did get some of that deposit back.
Jason Hartman 34:00
Basically out there security deposit you mean yeah
Patrick 34:02
I mean so it probably total cost me maybe 600 out of my pocket I’m just thinking of what I had to pay the contractor but it was carpet paint you know people some some tenants are dirtier than others but you know and once again to you know all honesty I’ve never been there never seen the house I’ve I do have a house in Phoenix that I got on my own not through your network, but I’ve never actually been to my house. Well, yeah. We’ve just given you a hard time ship with a realtor. So you know, I’ve never been at Annapolis. So you’re really relying on your team and their property management, they’ve done a really good job. You know, they communicate well with us and and you are paying a little bit more every time I talk to somebody about this. They always say well, I could fix that faucet for this much money or, you know, save $50 here but I really don’t have the time. So I think when I look at it when I have my house here locally in Lancaster, when I have to go change a tenant out or do something it costs Ask me a lot of my personal time. You don’t have to go over there to get bids. And when I do this one in Indianapolis or Atlanta, you know, you’re paying a little bit more money, but you’re really not doing any work. You know, what I’d like to say about that is if you’ve got a good, honest property manager, they’re great. They’re really not making much money. But if you’ve got a dishonest property manager, and you got to watch out for them, they can cost you some money, but not nearly as much as something in a pooled or traded Wall Street Style investment, where you don’t notice all the costs. They’re just skimming all the profits off the top and you don’t even know they’re doing it. So right. Yeah, I mean, I am doing self management on the place I have in Phoenix and actually, I bought that I partnered up with another guy, and we’ve purchased we’re in escrow on one right now in Indianapolis. And we have a total of three and then the one in Phoenix, we’re self managing. And so I’m trying that And what’s nice about it, you know, it’s it saves me about $100 a month. The real challenge is getting to know all the different contractors. And we’ve had a few little issues that we’re able to resolve, but we’re trying to maximize our return on investment on that. Plus, you know, like you said, when you have a really great property manager, to me, it’s worth the money when they don’t do a good job. It makes it more complicated and more work for you anyway. So you might as well just do the work yourself if you can.
Jason Hartman 36:20
Yeah, that’s a good point. One of the things I wanted to mention about that you alluded to earlier, was about sticking to the plan. And it just reminds me of a great quote that I’ve always, really tried to live by at times when I’m indecisive. I’ll try and remember this quote, and here it is. Successful people make decisions quickly, as soon as all the facts are available, and change them very slowly, if ever unsuccessful people make decisions slowly and change them often. So you see the difference in the in that when a successful person they look at all the They make a decision, they don’t agonize about it. And then they stick with the decision and they stick with their plan. Now, that doesn’t mean being so unaware that the whole environment has changed around you, which is actually one of the things we’re going to talk about today, when we talk about the business world and college and so forth. And you just keep following the old plan. I mean, but when it comes to doing these, these properties, I think that quote really applies well, because you’re gonna feel the bumps in the road here and there. And it’s just important, you know, real estate is a game of staying power, it seems that people that stay in the game, always make very, very nice profits, but the people that are jerky about it and indecisive and get hung up on little issues that when you look at them in the rearview mirror, they’re really very minor. Those are the people that really, they just don’t do well. They don’t do well with business or real estate, or relationships, for that matter. They don’t do well with much of anything in life that I can think of.
Patrick 37:54
Yeah, the people around me too. You know, it’s there. There are people that are going to support you and there’s people, they’re going to have Want you to fail? And the funny thing is, when I lost some of my tenants this last summer, you know, there were several people that said, Oh, you should sell and they were almost happy that it wasn’t working out.
Jason Hartman 38:11
Yeah, right. And some of those people can be your best friends. Ironically, it’s just sort of an ugly part of human nature.
Patrick 38:18
Right. And like, I’ve been to many of the Masters events you’ve had, and, you know, I think there should be maybe a frequent flyer program for that. But I’ve been to so many of them. Really what I enjoy going back is that networking because you’re around people that are passionate about doing this and wanting you to succeed where even the people in your own life, they’re just too negative, and they don’t understand it. I mean, I’ve invested. I mean, I’ve listened to every one of your podcasts. That’s a lot of investment in you and not just you’re creating wealth one but the Solomon success stories and other things. So there’s a huge investment and I gained a lot of knowledge and just by me talking to somebody I really can’t convey that and when you when you tell people Hey, go Go check this out and they don’t do it. And then they wonder why things don’t work out for them. And they don’t understand how to do something, it’s it’s not real hard to understand why they’re not being successful. But I agree this is about staying power. And I it’s important, I think, for anybody to make sure they have their reserves and have a basic plan. And, and I hear a lot of people saying they’re going to go out buy 10 houses in a year. And I’ve partnered up with another, you know, one of your clients that I introduced Sarah to, and we’ve had our LLC form now for a year and we’re on our third house, and it you know, it’s, it’s hard when you’re working, and you got to get the funds together. But to me, if I could buy one house a year, I always tell these younger people that are 25 or 30, you know, if you could have 10 houses by the time you’re 30 you’d be set. You know, when you’re 60 Oh,
Jason Hartman 39:46
yeah, you know, and so when you’re
Patrick 39:49
60 and also where to buy I mean, like Like I said, I’ve bought here locally. And I think the the thing that I wanted to say about that is that with California, we have earthquakes and I know if For a fact my house is, you know, Indianapolis is covered for a tornado, but yet my rental house here is not covered for a earthquake.
Jason Hartman 40:07
Yeah, and you know, one of the things about earthquake insurance is that a lot of people think that when the big earthquake comes in, it will inevitably come it has to, nobody knows exactly when, but it will come. And when it comes, they just think the earthquake insurance, it won’t be able to pay, there just won’t be enough money to pay the claims. Because it’s, you know, earthquakes are so devastating to a whole area, just a huge, huge area and the claim will be so major that they just don’t think the money will be there. And that’s why I say is is counterintuitive as the sounds and as maybe sounds a little ugly, but the best insurance is a high loan balance.
Patrick 40:44
Yeah. And I’ve with folks at work everybody, you know, they keep saying they want to pay their mortgage off and to me, money’s not that important. It’s, you know, what can you get for the money you have? So to me, it’s about the cash flow. And I think I my first house that I bought here when I was kind of Listen to your podcasts, I don’t lose money on that I kind of break even. But I really bought it for a speculation that in the future would go up. But now looking at the economy and where we’re at, you can’t fix the housing market to fix the job market. And I think we’re five to 10 years away from having recovery, at least where I live. And I bought that house based on the fact that one day I could sell it for maybe twice of what it’s worth, but I you got a lot of inventory, jobs are moving out of California. So you know, to get into that one house, you know, it’s a beautiful house, and it was really big, but I probably spent 64,000 get in that and I could have bought a couple houses and other markets that have maybe give me you know, $300 a month each. And it’s really just using that cash flow to maintain your lifestyle. And I still argue with a lot of people on this when they say hey, I’m gonna go out and buy a car, and I go, why don’t you go buy two houses in Indianapolis or Atlanta and then use that money to pay for your car payment. Get a good point. Now they don’t get it.
Jason Hartman 41:57
They don’t get it unsuccessful people they spend money On the appearances of wealth, successful people spend money on the things that create wealth and there is a big big difference so if you want to buy a liability and you want to enjoy those things in life those material things those little perks like that like a new car or whatever, just buy some assets to counteract that pay for it and have have the liabilities paid for by the assets and then you’re out of the rat race and that’s the way you want to be so in what cities do you own properties now you’ve got Phoenix Indianapolis, Southern California where else
Patrick 42:31
so I have a let’s see, I have two houses in Indianapolis one I bought with my 401k rollover I did a self directed IRA I bought a house in Atlanta that was a $7,000 down deal. And you know, if I look on the return on investment on that, it’s been you know, really great. I mean, I still make about you know, 150 bucks a month on that house and
Jason Hartman 42:52
with only 7000 down that’s an awesome cash on cash return. Yeah.
Patrick 42:56
And you know, so far there the market you know, the, you know, the rental market it’s hard to predict. I’m glad I’m a little diversified because I know if I, you know, stick in one area, other areas may do better. And I have a condo in Long Beach that I bought from my brothers and my father passed away. And that one is kind of a break even. And then I have the house in Phoenix, I partnered up with a friend of mine and we have an LLC. We bought that one. And we have two more in Indy that we bought together.
Jason Hartman 43:26
Good, good. Well, so what do you think when you when you look out at the landscape and you talk to the people with up work and you’ve got a daughter that’s going to college? What do you think about retirement planning? What do you think about college and really this it’s, it’s not even new, but I want to say the new economy and of course the rules have been changing, but I’d say that in for purposes of this discussion, a few major shifts that were just huge, huge. mega shifts in our world is number one back in 1971. We came off the gold standard Number two, we really became a globalized economy, all these free trade agreements, China, etc outsourcing to India, China, other countries, and then to really, really even magnify that trend. It was NAFTA when Clinton signed NAFTA. So a lots been going on. I mean, and and you know, I guess the other big mega trend I’d mentioned would be automation in the internet. And it’s it’s really causing a lot of job insecurity nowadays, and things are changing quickly. You know, they say we live in our in alchemic economy alchemy, where things change really quickly. We’ve got to be very nimble. We can’t depend on any company or any job, or even any line of work or profession. Because sometimes whole professions are just imagine Think about it. Imagine if you were a successful travel agent in 1998. Where would you be now wouldn’t have a career. I mean, yeah, there’s virtually no travel agents. It’s a very small industry, compared to It used to be so things they are changing as Bob Dylan said, Yeah,
Patrick 45:04
well I just was I almost took a picture of it and send it to you. I was in Denver last week and I walked by this big you know, shopping center and there’s this big blockbuster video it’s all boarded up and it you know, look like it was pretty fresh. But I mean, if we think back maybe five, six years ago, everybody went to Blockbuster Video and you would have invested money then and thought it was a great deal. And now with with technology, it’s put blockbuster least a segment of it, where you actually go pick up the movies kind of out of business. So with with industry, I think it’s changing so fast. And then also, all the companies are lining up where they’re not giving the great pension programs they’ve, to me, that’s a disservice. I mean, I’m no financial planner. I’m not a big stock market person. I don’t you know, could give anybody advice on that. But the, the issue I have is that companies have shifted people from pensions to 401 K’s and they tell them to go manage their own money, and it’s gonna end up hurting people in the long run because they don’t really know how to do it.
Jason Hartman 46:03
Yeah. And now tell you something, we’re gonna do a 401 K’s show on it was inspired by a client that I spoke with just the other day in Atlanta Mario, I asked him to look up on Google. The video I just said type in 401 k jL and you’ll see a video we produced about that these 401 Ks and IRAs that aren’t self directed, the ones that are in very liquid, very mobile, things like stocks and Wall Street Style investments. I think there’s a big fear of them being nationalized. And you know, I’ve talked about that on the show, especially the interview with Doug Casey a few shows ago. And I tell you, Patrick, I think that’s what’s coming next. That’s going to be a big big shift is the nationalization of retirement plans. And if you’re, if you’re if you either don’t have a retirement plan, in the sense of a 401k, or an IRA, or if you’ve got a plan that’s self directed, where the assets are immobile, it’s going to be very difficult for the Government to, to nationalize those assets in that way. And that’s that’s your protection, there are two ways you can protect yourself against that possibility.
Patrick 47:07
Yeah. And unfortunately, like, you know, I’ll be 47 here in a couple months. And, you know, I’d like to retire when I’m 55. I mean, look what’s changed in the previous 10 years? What’s going to change in the next 10 years? And you really, you know, you kind of make your financial plan for what’s going to be what’s going to happen, you know, 10 years from now, but I don’t know that you can really count on it. So that’s why I’ve chosen to take some money and put it to these investment properties. And the thing I look at Sometimes I wish I would have done it sooner or understand it better, but I don’t think there’s ever been a better time I keep hearing people say well, everything’s bad don’t do it. But it’s, you know, interest rates are low. Housing is below construction costs. If I if I look back in the past 20 years, I don’t think there’s been a better time than right now to actually go do it. I I don’t know if there is either given the combination of all things now I I hate to say it again because I’m always saying it but the the housing market on a national basis if you’re looking at Case Shiller is probably still in decline as far as a price issue, but again, Real Estate’s a multi income property is a multi dimensional asset class. So you have the cash flow from it, you have the tax benefits from an etc. And just from a cash flow basis in the markets that we recommend. Who cares if the property goes to zero? I doubt it ever could or would, because you’re already buying way below the cost of replacement or construction, but you’re very protected. But the problem is, you look at the stupid Case Shiller index, and it’s only got 5% of the nation’s market, only 20 cities, and 14 or 15 of those cities, I wouldn’t touch them. Those are overvalued cities that are still going to decline. So I you know, I just can’t stand it. When people talk about housing as though it’s one monolithic thing instead of a bunch of little diverse markets. All real estate is local. Of course, we know that I could ask Actually in the market where I live right now, it’s kind of unique where the you know, we can get a single family home for probably anywhere from 100 to 150 and make a return on investment. So it’s it’s different everywhere. And then what I what I’ve seen is how people the news media sometimes I just want to turn it off because it’s just so negative. But you know, there’s so many different areas out there and and a lot of people say, well, who would want to live in your rental house and let I know you’ve talked about it before. It’s the people that almost every one of our rentals that i’ve you know, aware of who’s in it, you know, some of the ones I have no idea who the tenant is because the property manager does it but people have experienced a loss of their own home. And they sometimes they get to move in the same size house they moved from their 3000 square foot house they owned at one time with a 30 $500 house payment. Now they’re down to another 3000 square foot house. It only has a $2,000 rental payment. So people just kind of shift down to a different class of house and You know, I’m providing a service. I’ve argued with a few of my more liberal friends. I’m upset that I don’t get more of a tax break because I’m actually putting people to work when I buy a house in Indianapolis. And I go put out you know, $15,000 in rehab costs, I’m putting people to work. And if you would give me more of my money to play with, I would put more people to work I’m creating jobs doing what I’m doing, and and a lot of people have thought I’m an evil person, because I’ve taken advantage of somebody but every one of my houses I have somebody living in that needs a house. Yeah, right. Exactly. There’s no construction going on right now. So you’re gonna have a housing shortage. And I know on a you know, several episodes ago, the the gentleman mentioned that a 1% reduction in the homeownership rate is like a million renters. You know, my son who graduated from college, you know, who’s still at home is looking for a job. And he’s here eventually he’ll go out and you’re going to have more renters that come online, especially as the economy picks Except slowly, I think you’re going to have people that are sharing a house or living with their parents, they’ll move out and it creates more demand. But the thing is these markets that you’ve recommended, and I will say, working with you, since 2008, I’ve seen you do what you say where once a market doesn’t work, or vendor doesn’t work, you’ll switch to another market. And I don’t think you have any favorites. If the market doesn’t work, you switch to another market. That does make sense. Yeah,
Jason Hartman 51:26
that it’s not that’s not exactly great for my business relationships. But I think my customers love me for it. And I’m in business for the customer. I you know, I’m really like, I have a libertarian viewpoint about things and I really think, yeah, I don’t know, I’ve just always been in favor of kind of the underdog or the little guy and rather than support these other businesses, our affiliates, our vendors, or our property management affiliates, I want to support my customers. That’s who pays us we can find another vendor customers are hard to find customers are the most valuable thing Customers number one. So the fact that we have no physical presence, or we haven’t really spent any real money, of any significance in any one market, unlike national real estate firms or even other real estate clubs, you know, like, there’s one competing podcast, I won’t mention their name. But I know some of you guys listen to it, because I hear you tell me that sometimes. And they have groups in three different cities. And you know, it makes them beholden to those those markets. And we’re just in and out of things. When they make sense. We try to be there and when they don’t make sense, heck, we get out and we still have a contract or an agreement with that local market specialist in that market. We’re just not referring business to them. Because we just don’t think that it makes sense at that given time. You know, we want to go where customers are going to have good experiences, and it’s going to be easy for them to invest and do business and the numbers are going to be good and all of that type of stuff.
Patrick 52:53
Yeah. And in the markets, I think there’s, you know, maybe two types of investors when you do an Indianapolis home and you have to be there. rehab yourself, it’s a little, you know, there’s more risk, that maybe the rewards are a little better. But I know you have a lot of markets where you could go in and buy like the one I did. In Atlanta, it was fully rehabbed, it was very simple. And it didn’t take a lot of work. So the thing I think that that people need to understand is, when it doesn’t work, you’re going to move out but you still are supportive. I know when I have an issue, I can call Sarah and she’ll do whatever she can. And and the nice thing about working with you, which at first I you know, there’s different real estate clubs, like you mentioned, I’m buying the house directly from the person in that area, and I’m not relying on you’re not taking part of my profit, or I’m not giving you a fee to do this. So to me, I know it’s on my own. And, you know, if I just take the numbers you’ve given me and I do a little research, I can validate those numbers. And I would say I’m a repeat customer. I mean, we’re in the process of buying a house or an escrow right now. We’re hoping to close here in the next week or so. But if the numbers Didn’t work, I wouldn’t come back. Yeah,
Jason Hartman 54:02
yeah. Well, one of the things is we’re attached to the outcome. Unlike someone who’s on an infomercial or selling an expensive coaching program or something, we actually supply the goods, we supply the inventory, not directly through our affiliations, as, as you mentioned, through our local market specialists that we contract with, but what we say on the show, it’s gonna happen in real life, or we’re not gonna stay in business for very long.
Patrick 54:27
Yeah, and it’s not always perfect either. I mean, I the one thing I do say is a, with all this technology, you know, we have caller ID now. So anytime I see one of my property managers come up on my phone, they’re not usually calling to tell me ask you, if I’m having a great day, there’s usually something wrong and you just got to deal with it. That’s why you have those reserves. But I’ve had bought a house that we do inspections, and then two weeks later, the heater goes out and it’s you know, 1000 or 1500 dollars, and you just got to account for that and deal with it. And most of my properties fortunately, we We’ve had him rented, you know, within a few weeks, you know, so it’s, but that’s when it’s everything works great. But sometimes you just got to plan for, hey, it could take a month or six weeks to get it rented.
Jason Hartman 55:09
Yeah. So you know, that’s why you have at least 4% of the value of each property in cash reserves. That’s very important because you never want to be forced to do anything rash. You always want to be able to stay in the game, and that’s why you have cash reserves. Let’s talk a little bit about what the original idea of this show was. I appreciate you sharing those experiences. But you have a daughter going off to college, and I know that you kind of perked up and were interested in some of the remarks I made several episodes ago about college and about student loan debt, not being dischargeable in bankruptcy, which is something I didn’t know till recently. And the world has changed so much around us and planning for retirement planning for the future planning for financial success, financial independence. What are your thoughts on some of this stuff?
Patrick 55:55
Well, yeah, I originally had talked to Sarah and why because I had I had kind of Live some similar experiences where I in 1986 I finished, like an associate’s degree in electronics. And then when I went into the industry, I got married, I had a job, I was making good money and working overtime and didn’t really want to go back to school. I kind of did, but it was expensive and time consuming. And then I got promoted within my organization and to the point where we’ll be back in just
Jason Hartman 56:23
a minute.
Patrick 56:26
Did you know that we offer one on one coaching? This includes six months of one on one coaching For more information go to Jason hartman.com
Patrick 56:39
I should have it and you know, starting to be judged and I didn’t have it. So a few years back I
Jason Hartman 56:43
have it You mean your degree right by
Patrick 56:45
my bachelor’s? Okay. And a few years back, I mean, and while I was really struggling with this on a you know, it’s more of a you know, maybe you don’t feel good enough for you, you should have tried harder. But you know, everybody around me would say, hey, you’re doing a great job. Don’t worry. about it, but unfortunately, sometimes it does matter. So I went back to school, it was really tough. I mean, I gave up probably two years of weekends or spend time with my family or watching their sporting events because I was doing schoolwork every weekend. But in the end, I think you have to ask the question is, you know, why are you going to school? What do you want to do if you want to be a doctor, obviously you need to go to school. If you wanted to be an engineer, or you’re designing something, they’re gonna want you to have certain you know, education, but I think if you’re in business for yourself, there’s other ways where you could you know, learn and I think what happens what I’ve seen even with people that I know that have graduated, they get out of school thinking that everything is just gonna be handed to them and really, what’s what I think is the day I graduated from school back in 1986, I really just didn’t know anything. And that’s the day you start learning is when you graduate, you know, school just give you some basic fundamentals. But, you know, we should look at life as a continuous process of learning and I’ve invested a lot of time learning about the real estate market. And I’m currently took all the tests for my broker’s license that I’m going to eventually study and take that, but it’s a, you know, a continuous learning to understand. But with, nowadays, people just go to school for maybe some of the wrong reasons, or they get a degree that’s not going to do anything for them. And then they’re, they’re left with 100,000 in debt, I mean, essentially, to go to any, you know, average school these days with the roof aboard. It’s about 20,000 a year plus, you know, ancillary, you know, money that you have to spend for them to go out and do things. So, you know, my daughter’s going and I want her to have that experience. But I want her to also look at fields where she’s gonna be able to, to get a job, hopefully. And I think the one thing that that we don’t teach in high school or maybe even colleges, how do you become an entrepreneur or how do you how do you take somebody that’s not motivated and make them motivated? So there’s a what i what i see lately with people that are graduating is they feel everything just will be given to them. And that’s not the way life works. And also what I’ve seen also, which, to me this not paying your mortgage to me, there’s kind of a moral hazard. And I’ve seen a lot of people. It’s almost like a business model where they’re just gonna not pay. And it seems to be okay. We’re
Jason Hartman 59:17
like the business people that he talked about a lot of these real estate gurus, they file bankruptcy every seven years. It’s just part of the business plan.
Patrick 59:25
Right? Yeah. So yeah, but it’s to me. What I’ve discovered, though, is I know a lot of people that are, you know, have higher degrees and stuff. And I think my passion for like the real estate or listening to what you’re doing, you know, runs deeper. And I don’t know how, why it is, but the how do we get people excited about taking care of themselves. What I think we’ve done is we’ve created a society of homeless where people feel you know, we’ve trained him to be factory workers where they can just go in, and if you get this job, you’ll get this retirement. You’ll get medical The whole like school union mentality where you don’t really have to perform, you just have to be there the longest. And that’s an old fashioned mentality. It doesn’t. It doesn’t play anymore in today’s world doesn’t, right. But what I, you know, to me when I go to work every day, I really try to over deliver, do the best job I can because I feel I’m not guaranteed my job. If I don’t do a good job, somebody else could do it for me. And I think I think a lot of the younger people, we, you know, they’ve lived, my kids included, have lived in a world where nothing really Bad’s ever happened. You know, when you look at other countries, people don’t have enough to eat here. We have, you know, too much of everything, you know. So nowadays, the new phone comes out, everybody wants a new phone, even though their phone works just fine. But
Jason Hartman 1:00:41
well, that’s an interesting point that you just bring up because I was talking to one of our clients about this just a few days ago. Everybody’s talking about how we’re in such bad economic times and everybody’s suffering so much and I know that there are people out there genuinely suffering I understand that for sure. However, by and large, you look around and a lot of the people People that have been unemployed for a while they’re still buying the newest iPhone. They’ve got a house full of gadgets and they live in a decent area and they’ve got a car that’s newer than 10 years old. That family, they’ve got two, maybe three cars, folks, we got to just keep this in perspective. I mean, you look at the people lining up for soup or selling pencils on the street corner in the Great Depression, things are better nowadays. There’s no question about it. They’re a lot better. But just keeping it in perspective, being grateful for what we have, and never deciding that we’ve done enough always wanting to earn our keep every single day. That’s a recipe for success. And never feeling complacent. You know, Napoleon said the most dangerous moment comes with victory. So if you have a victory, stop for a short celebration and get right back to it and get your nose to the grindstone. That’s what you should be doing. It’s good character. It’s character building. It’s good for you.
Patrick 1:01:53
Right. And I think a lot of people they they, they enter a job or something and they feel that that something’s owed to them. And they there’s this mentality that, well, I want a brand new car right now and I don’t want to pay for it. I want all these great things. And it’s, if you really think about it, we kind of set ourselves up for failure, even sometimes with our own kids, where we give them everything. And when they get out of school, what else could they have ever wanted? You know, they had nice cars, a nice place to live plasma TVs. And this goes back to where I know people are always like beating up on Walmart, for example. But Walmart offers cheap products to a lot of people. And I think it’s improved. People that don’t have a lot of money. It’s improved their life. And everybody complains about Walmart. But I always every time I go there, I would see a lot of people in Walmart, so I know what’s up. Must be doing.
Jason Hartman 1:02:39
Right. Exactly. I know. I know. I mean, look, I’m not a parent. I would love to be a parent. I’ve thought I would have had kids by now definitely. But just have it hasn’t happened for me yet. Maybe I’m working too much. That’s probably part of it. But let your kids have a little hardship, let them work and suffer a little bit. It’s good for him. It’ll make them stronger people you know, when I look back at all the hardships I’ve had in my life at the time, they seemed so difficult. But looking back on them, they seem like nothing. And it’s like, the world throws something at me now and it’s like, you can hardly faze me because I’ve been through it. You know,
Patrick 1:03:15
my daughter I bought her a used car that wasn’t really great. It was like, you know, $4,000 and she she was upset at me that I she knows I can afford it. And I think at the time I was choosing to buy another house versus buying her a better car.
Jason Hartman 1:03:27
Well, my first car my first car, I paid for all by myself cash it was $700. And it was a piece of junk
Patrick 1:03:34
that I had a $400 station wagon I brought from my brother and we use the pull up of MC brake because the brakes didn’t work, you know. So
Jason Hartman 1:03:42
and and, you know, Patrick, I walked to school, and it was uphill both ways.
Patrick 1:03:48
Yeah. But yeah, but my daughter and I like I’m not going to be on this planet forever. And if I could leave my kids 10 or 15 houses, and when they’re older when they’re 40 or 50 years. Old they see what what they have that that’s what it really benefit of if I would have bought her one car that you know, she’ll get scratched up or you know, it gets wrecked in the parking lot. What good is that do them when they’re older
Jason Hartman 1:04:12
now you’re absolutely right, you’re giving them something strong, something that’s powerful, something that’s an asset that will help them for many, many years to come. So very good point. Well, on the college note, just so people know where I’m coming from on that. I think college is great. I just think it’s just massively overpriced. And it’s the government’s fault, largely because the government has promoted student loans and financial aid programs. And the universities in turn, just raise the price because the money is there to pay for it. The universities don’t have to compete in a free market, where if there were no student loans, college would be priced. reasonably it would have to be the universities would figure it out. They would just somehow figure out how to offer college for one half the cost Or one quarter of the cost. And when my mom went to school, you know, she went to Berkeley, okay, a great renowned school, one of the best colleges in the country really. And, and she worked her way through college, no one paid for it. She didn’t get student loans. She just paid for it as she went by having jobs. And kids can’t do that anymore. It’s so
Patrick 1:05:18
expensive. The funny thing is, all the schools are protesting that the kids shouldn’t have to pay their student loans. But yeah, they could just lower their rates. You know, they could just say, Hey, we’re not going to charge you $50,000 a year to go to school, and then that’ll help the actual students, but they won’t do that. But these these universities are a bloated bureaucracy. They’re just like, they’re just hugely bloated with all sorts of pensions and all kinds of people that they really don’t need to have there. And it’s just a bloated system. It’s totally inefficient. It’s Yeah, I went to it was dry. It’s to technology now. It’s called the right University when you know, back in the 80s, and it was like, basically You know, in a industrial area, because if they didn’t have the money, it was they’re there to teach you and it was their business. So they have to be efficient. You know, they have to compete with, you know, the universities to get a lot of government subsidies. And I will say like, but they get it, they get it, they get into grants and loans and everything too. But the funny thing is, like these junior colleges and stuff, they just suck the money from the community, but they don’t even really produce anything because there’s they don’t have to, you know, they could just choose what classes they want to offer without really having any structure. I mean, how many people really graduate from junior colleges that actually go in there? I mean, the numbers are pretty low,
Jason Hartman 1:06:39
folks, if you’re if your kids are going to college, do not let them get a useless liberal arts degree. Let them get a degree they can actually use in the real world, okay. Something that will that will pay them that the world needs, not these sort of airy fairy things that just you there’s no employment for half of these degrees that are out there. It’s It’s ridiculous.
Patrick 1:07:00
Yeah, I think if you’re gonna work in a corporate setting, you have to go to school and get your degree, because that’s the, that’s the gatekeeper that determines, you know, what you’re going to get paid and how much advancement you get. And I’ve seen in several different industries, that they say, hey, if you don’t have your bachelor’s degree, you’re gonna be capped at this much salary. But you know, if you’re going to go into business for yourself, you could get your education, other ways, and you’d probably be more successful. You know, I do work with people that have master’s degrees and PhD that they’re, they’re just not I don’t want to say, Well, I guess I will say that there’s sometimes they’re lazy and they think it’s owed to them. They don’t produce anything. They say that, hey, I went to school and I have this degree so I don’t have to perform. And that’s not the way society is going to work in the future. I think it kind of works that way now, but I think that’s changing. It is changing. It’s changing quickly. Well, folks, everybody needs housing, stock up on some rental properties, stock up on some very long low fixed rate mortgages, and you’ll Be a happy camper. What else do you want to just conclude with about, you know, investments and planning for the future Pap, I just think it’s never too late to start. I mean, I’ve been talking to a few people that are 50 years old or 55. And they really don’t have a financial plan and they’re getting ready to retire and I go, it’s not really planning. It’s more like triage at that stage. I think it’s never too late to get started. And I think the real thing is a call to action is even you know, myself, I do a lot of things productive. I think that I also waste a lot of time watching TV. But if people would just take an hour today to kind of learn some of this stuff and spend time and develop their investment portfolio. It’s it’s not it’s not a big investment, but it’s gonna pay off in the future. And I think the real thing is taking action. I mean, I mean, too many people out there complain and say what’s wrong with the world but don’t take action in their own personal lives. To make it better. I mean, the the, to me, the only thing I can do, I can’t control politics and what’s going on I can only control my myself right now. And and I’m trying to use the things that government does with a tax strategies to use for my benefit in the future. And right now, if interest I don’t agree with what Freddie, Freddie and Fannie are doing with these ridiculously low interest rate loans, but if they’re going to do it, I’ll try to use them to my benefit, because I am providing a house for somebody to live in. So
Jason Hartman 1:09:20
yeah, well, it’s not a time to be an optimist. It’s a time to be an opportunity to exploit the opportunities out there. And there are a lot of them. They are great, good stuff. Well, Pat, thank you so much for joining us today. Appreciate it. And I guess I will see you at meet the Masters in March, right.
Patrick 1:09:35
Yeah, I’ve already signed up and set my money or my credit card and I’m ready to go. And once again, I enjoy going by meeting the people and also I think it’s just a good refresher. You know, when you’re listen to it again, and I will say the first few times I didn’t always get it, but now, you know, you’ve been going for this many times I’ve been I keep learning more and more each time because it sinks in a little different or you see it from a different perspective and you I’ve used Mark Kohler to set up an LLC and use some of the other folks that you have. And you know, I think it’s just a great how you get all these people together. And then the cost to me is insignificant for all the knowledge you get considering what some of these other real estate investment companies will charge to send you to a similar type education.
Jason Hartman 1:10:18
Yeah, that’s for sure. Well, thanks again for supporting us. I’m so glad that you’re involved with us and we appreciate your business. And appreciate having you on the show today. Thanks so much. All right. Thank you.
Announcer 1:10:32
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 any individualized advice. opinions of guests are their own, and the host is acting on behalf of Platinum properties investor network, Inc. exclusively.
Jason Hartman 1:11:10
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
5 Common Complaints About Out Of State Rental Property Investing
Dealing with an out-of-state rental property can be difficult. It’s always a little harder when you’re not there, but it’s not impossible to make your out-of-state rental property work for you; and especially if you take advantage of modern digital solutions. Here are five common complaints about out-of-state rental property investment and some ways to deal with them.
Complaint #1: The Tenant Hasn’t Paid Rent!
Don’t let the grass grow under your feet on this one, because the longer you go without pursuing your rights, the more tenuous your position becomes.
Send Out a Notice
Send your tenant a quick notice reminding them the rent is past due, listing all the fees, including late fees if applicable, and giving a clear but not overly threatening warning that you’ll have to take legal action if they don’t pay. Keep a copy for your records.
Don’t Accept a Partial Payment
Don’t complicate the situation by accepting a partial rent payment.
Don’t Let It Happen in the First Place
Try using a great app like Landlord Studio to keep track of rental payments and notify you of any late payments as soon as they become late. If you and your tenants all use RentTrack, they can’t ever claim they couldn’t get to an office or to the bank before closing hours.
Complaint #2: Property Management Fees Are Too High
What do you do when the fees grow too quickly, or you aren’t sure what the fees are covering?
Demand Itemization in Writing
If your fees keep going up, demand an itemized bill for every single charge. Make sure you keep copies of your requests so that if you need to take legal action, you can.
Get a New Property Manager
You need a good reason to break contract, but you should be able to hire a new property manager if you’ve kept clear records of correspondence and problems.
Consider a Mobile Solution
Use an app like Landlordy to coordinate with your property manager. Everything you both do can be seen by the other, making it simple to keep tabs on fees. In some situations, property management software like this can replace a property manager altogether.
Complaint #3: I Can’t Check on My Property Easily
What do you do when you just can’t get free to visit your rental property?
Watch Your Finances
You may not be able to look at the property itself, but you can certainly keep an eye on your investment. Always be looking at your expenses relative to your revenue stream so you can spot a potential problem early on.
Keep Track of Everything Online
Use a smart personal assistant app like 24me to keep track of your property. Even if you can’t get there in person, your personal assistant can send out emails to tenants asking for updates or remind you to call property managers or other parties regularly.
Complaint #4: I Can’t Work On the Property Myself
Your tenant is saying there’s a major leak, and they want a fix now. What do you do if you can’t go fix it yourself?
WeGoLook
This simple app allows you to check up on anything, including your rental property. You pay anywhere from $50 to $100 for a thorough report, including pictures, and have the assurance that you’re getting real-time, third-party confirmation about whatever is going on.
TaskRabbit
Sign up with TaskRabbit, and you can get someone to do almost anything for you, from cleaning to moving, yardwork, online research, repairs of your property, or almost anything else you can imagine or your property might need.
Complaint #5: What’s This New Government Fee?
When you’re not living in a community, you can sometimes be blindsided by new fees and taxes.
Contact the Relevant Authorities Fast
As soon as you notice a new, unexpected fee, contact the municipal or state authorities, and find out what’s going on. If you didn’t know about the fee, you might also not know about possible options for getting a waiver or deferment.
Keep Track of Your Fees
Use a software solution like Quicken Rental Property Manager to track all your expenses, so you know instantly if something changes. You can also integrate this with your other accounting numbers to keep track of ROI and even your personal finances.
Scams Highlighted by Jason Hartman
When your career is about helping people make better use of their money to gain financial freedom, nothing is more frustrating than identifying a scam. Scammers are out there just waiting to grab your money: here are just a few Jason Hartman scam reveals that can help you avoid the worst of them.
Wall Street Scams
Let’s start with the big one: Wall Street. Wall Street has been full of scams from the very beginning. We are taught to consider Wall Street the first and last word in smart investment, but in some ways, it’s almost the worst thing you could do with your hard-earned money. In an interview with James Altucher, Jason Hartman helped reveal one of the major scams of Wall Street: only the privileged few are allowed to make money there.
The “Privileged Few”
There are only a few moneymakers on Wall Street, and most of them are not ordinary people. High-frequency traders with access to supercomputers can change position in mere fractions of a second, giving them an edge that no ordinary person could hope to compete against.
The very wealthy can also make money off of Wall Street because they’re able to buy and hold forever. This is how investors like Warren Buffett keep their wealth.
Watch Out for Hedge Funds
One particular area to watch out for when it comes to Wall Street scams are the hedge fund sellers. Sometimes known as “Mini-Madoffs,” named for infamous hedge fund scammer Bernie Madoff, these scammers are running the same play but don’t get caught because they know enough to keep things small and out of sight of SEC investigators.
Tesla
Another Jason Hartman scam reveal is the Tesla Corporation, with its claims for a perfect electric future. Whether you’re considering buying a Tesla or investing in Tesla, you need to know the truth.
Buying a Tesla
Because Tesla is subsidized by the government, everyone who buys a Tesla is essentially getting a subsidy from working-class people for a car that doesn’t even work all that well. Anecdotal evidence abounds of Tesla’s much-vaunted technology failing on a regular basis, and that’s not even considering that the battery life isn’t what is claimed, especially in the winter.
And that’s not even taking into account the environmental lies Tesla is telling. While the company bills its vehicles as a green transport alternative that will save the planet, everything about the Tesla, from the battery to the headlights, causes damage to our world.
Investing in Tesla
In 2016, an investment firm, Devonshire Research Group, did an analysis of the company and found that they were trying to manage a number of financial instrument models under one umbrella. In the researchers’ estimation, one small wrong step on the part of the company could easily destroy it. Meanwhile, Tesla has been accepting deposits for vehicles in numbers it can’t possibly keep up with and accepting enormous subsidies from federal and state governments.
Property Management Scams
Jason Hartman highlights huge property management scams that endanger the hard-earned money of real estate investors everywhere.
The DC Frauds
In 2012, one of the biggest property management scams of all time finally ended. A management company owned by Brian Talbott and Chester Ranson and operating out of Washington DC was found guilty of conspiracy to commit bank fraud, mail fraud, and defrauding the government.
The company managed properties for distant landlords, but what they were mostly doing was lining their own pockets. They were not paying property taxes, double debiting the checking accounts of their clients, tampering with rental checks and keeping the extra for themselves, doctoring deposit slips, and incurring late fees by making sure condo fees were paid late.
Jason’s Advice
In flagging up this scam, Jason Hartman points out that the company had many complaints with the Better Business Bureau. A landlord who had done even a basic amount of research could have seen that Talbott and Ranson’s company wasn’t one to do business with. The take away? Always do your homework.
Don’t Get Taken By Scams
Scammers are everywhere, but there are safe ways to invest your money. With the right advice, anyone can achieve true financial freedom.
