To start this Flashback Friday episode, Jason Hartman shares an article from CNN about real estate’s new problem: not having enough homes. Then, Investment Counselors Ari and Sara give a debrief on the last Creating Wealth Boot Camp. Jason also talks about income property bonds, gives investing insights, and shares a “case study” article from The Financial Freedom Report.
This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
Jason Hartman 0:09
Hey, this is Jason Hartman, thank you so much for joining me. Do you know what day it is? Yes, it is flashback Friday, where you hear the best of the creating wealth show and you hear some good prior episodes, some good review. Remember, we’ve got almost 500 episodes out. And you know what? iTunes doesn’t even hold them all if you’re an iTunes listener, if you are listening on Stitcher, thank you for joining us. So we want to bring you some good review stuff. Now. What’s interesting about flashback Friday, it’s a little scary for me. I got to be very, very candid with you on that. Because you the listener, you get the chance to hold my feet to the fire. Did I make any predictions? Was I right? Was I wrong? I’ve been right about a lot of things, but I’ve been wrong about a few. So you can give me a hard time about that if you wish. But it’s flashback Friday, and we will give you the uncensored Best of the creating wealth show with a prior episode. So let’s dive in. Here we go. Remember, this is not current. It’s flashback Friday.
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 whose own 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 2:11
Hey, I don’t know if you saw the article in CNN Money, and it says Real Estate’s new problem. Not enough homes. Just as I have been predicting for about three years now, I knew that when construction came to a standstill, the inventory hangover would be gobbled up, the population is increasing rather dramatically. We’re having some of the biggest birth years since the big birth years during the baby boom, post World War Two and the inventory hangover is being gobbled up pretty quickly. So my prediction again, by the end of 2011, early 2012, we are going to see a rather dramatic shift in the inventory problem. We do have anywhere depending on who you listen to from two to 7 million homes in the potential foreclosure pipeline. However, many of those homes you must remember are currently occupied. It’s not like these are new homes being built that suddenly hit the market just because they’re foreclosure. All this is is a moving around of occupants. So maybe the people that live in those homes now move to a another home, again, filling existing inventory, but the construction machine has basically stopped and you’ve got to remember that it takes a long time to ramp up that construction machine. So again, our philosophy be a packaged commodities investor tie up three or four decade long as I’ll talk about in just a moment fixed rate financing, let your tenants lead inflation that is coming, it is definitely coming pay off the loans. And by the way, I just wanted to address the inflation deflation issue. And we’ll go into this in more detail in future shows. But I’ve been debating with a friend of mine who’s a very knowledgeable guy who has been talking he’s kind of becoming a bit of a deflation as to actually and I think the overall big trend is definitely inflation. And what is faulty about the deflationists argument, in my opinion, is really hinges on two major things. Number one, they say things like the government, the fed the Treasury, whatever, it’s sort of all three of these cannot possibly print enough money to offset the deleveraging that is occurring.
Well, I beg to differ with you, because there is no limit to the amount of money they can print. Look at Argentina, look at Zimbabwe, look at all of the other examples throughout history where the fiat currencies have become totally worthless. So inflation is an unlimited prospect, there is no limit to the amount of money they can print. The number two thing is they say they’ll say things like you know there’s $40 trillion of potential deleveraging but that assumes that everything will be leveraged and everything will be defaulted upon. And that is just simply not true. Now some of it will, some of it already has and that does create deflationary pressure but nobody knows how much of that will ultimately be D leveraged or defaulted upon so this deflation argument just really doesn’t fly with me. So anyway, enough of that. I’ve got some And are here we wanted to give you a little debrief on our boot camp that we had last Saturday.
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. So Sarah, what do you think of the day?
Hello, everyone. The day was great. We had a lot of guests from out of town, which was nice. I want to thank our two guests from Hawaii, Nyota and Emily, thanks for coming out.
Jason Hartman 5:26
We had people come from all around. We had East Coast, we had Hawaii. I don’t think we’ve ever had any people come from Hawaii to our event before, have we?
I don’t think so.
Jason Hartman 5:34
Well, I want to say mahalo.
Jason Hartman 5:37
We do have some Hawaiian clients, though.
Jason Hartman 5:40
Fantastic. So I want to come visit. Can I come and hang out with you for a while? Hawaii, what a beautiful place. But I wouldn’t invest there. It’s a little too expensive. The RV ratio is not good.
And gas is definitely not cheap. So I also want to thank Ozzy from New Jersey. He’s been a longtime podcast listener and exchange many, many emails. So it was great to put a face with the name.
Jason Hartman 6:00
Fantastic. Ari, what do you think of the day?
Good afternoon, Jason. The
Jason Hartman 6:05
We’re all being so funny with these greetings, by the way. You know, whenever we get together, folks, don’t we get a little goofy. It’s just funny how we are. Okay, we’re being a little goofy today. Go ahead.
Yeah, no, the weekend was great. Actually, there was a lot of new clients there. I don’t think anyone there in the room actually currently owned an investment property. So it was a really good education for them. A lot of people enjoy the inflation talk.
Jason Hartman 6:26
Well, I think I think my mom was kind of an interesting guest. We’ve never had her speak at an event before have we?
No. I think everyone liked her because everyone heard the podcast with her on it. And they really wanted to see her in person. In fact, that was a good idea to have her come out. I think that was fantastic.
Jason Hartman 6:39
Yeah, she flew out from Alabama and talked a little bit about her investment property experience. And I think the big message there is, keep the faith. Keep moving along the same path. That’s really what it’s all about. In regards to the number of people there, the room was packed. We had expanded from one section of the ballroom to two sections, and there was one left that we didn’t take. And looking back just like masters, we can we probably should have taken it because we could have certainly used all three sections of the ballrooms. Folks, we really got to ask you, please register for our events in advance, give us notice. We can plan better and do a better job at that. If you do.
Yeah, another one of our guests, actually, a real estate broker in San Diego came out. And you know, I always wonder, you know, when when real estate professionals come out, you know, what their intentions are and coming to our seminars, and you know,
Jason Hartman 7:26
Are they spies?
Are they spies? You just never know. But no, it was great meeting you, Richard. I know you’re a podcast listener as well. And you know, Richard said that no one does what Jason does, his teachings are money in your pocket. And I think that was just great of you to say that.
Jason Hartman 7:39
Yeah, and I appreciate it. All the kind words also at the break from you as well. And I’m glad that we’re gonna get your wife listening to the podcast now, too, because, because I know that she was complaining that you were paying more attention to my show than to her. So you don’t want to do that. That’s not good for marriage. Right? This is a team sport.
I wanted to give a shout out to Phil, our Texas.
Jason Hartman 8:02
Yeah, Phil from Texas.
That was awesome. He came out. And a lot of people really enjoyed that market listening about it. And all the deals are going on there. And I think a lot of people got a lot out of that.
Jason Hartman 8:13
Yeah. And we also had Jennifer from Entrust, talk about investing with your IRA and the Roth conversion topic. Very, very hot topic. No question.
We are going to give Jennifer more time to speak next time, because we just had a ton of questions. So if any of you are listening and attended, and you have more questions for Jennifer, let us know. We’re happy to put you in touch with her.
Jason Hartman 8:31
And we’ve had her on the show before too. So some more detail there.
So I want to also thank one of my clients named Matthew for bringing Jason and I some fantastic Tshirts.
Jason Hartman 8:41
Those were awesome. By the way. The first one, the one, well, he gave me two of them, but one of them. I just love it. It was hilarious. And it’s a it’s a great looking T-shirt. And by the way, his T-shirt company is called Chai America. Yeah, so we want to say that on the air if anyone wants to get one of those, but it was a picture of Tim Timothy Geithner and Ben Bernanke. So you’ve got those two guys that are totally messing up our economic world here. And, and the caption says, The Dukes of Moral hazard. I love it.
Jason Hartman 9:11
Those are great. So thank you very much.
Yeah. Thanks, man. Thanks again for that.
Jason Hartman 9:14
Those were awesome. Folks. One of the things I really want to talk to you about today is the concept of these income property bonds. That’s kind of our little trademark term, income property bonds. So call them IPB’s. All right, like ICBMs, intercontinental ballistic missiles. Okay.
And what does that mean, Jason?
Jason Hartman 9:32
Well, what an income property bond is, is a property that is usually a lower price property in a very stable linear market with a fantastic RV or rent to value ratio. And I’ll give you a great example of one and we have these in several markets, but one of them that has been very dependable for many years, and we have a lot of happy clients in is good old Indianapolis. I know we’ve talked about it before, but let me give you an example of a specific property we have right here. Now now folks, I cannot stress to you enough. If you’re interested in one of these properties, you have got to act, lickety split. Because these properties go, they’re just gone right away multiple offers constantly on this property. I’ll give you the rundown. Okay, and I know you guys will have comments on it. So get to that in a moment, but built in 1999. It’s a foreclosure property. It’s a single family home. Again, we’re not crazy about condos here. This is 1200 square feet, it’s $59,000. It does need some minor rehab, that’ll cost about 70 $800. Your total cash into this property is just over 25,000 bucks, it’s $49 per square foot, it would cost you almost double to rebuild that same house today. Okay, so you’re buying it far below the cost of actual construction, the projected rent is 950 per month positive cash flow is listen to this 40 $184 annually on a $25,000 investment. So I just want you to notice what a bond this is, this is better than the crummiest junk bond out there on the market, this cash on cash return, I’m not talking ROI, I’m talking, no appreciation, no additional financing, none of the multi dimensional characteristics of a real estate investment like tax benefits 17% cash on cash return, the cap rate here is projected at 12.5%. Folks, you can’t beat a deal like this in a quality market. Now granted, I know you may have heard these other groups peddling junk properties from the loser city of Detroit properties that are being bulldozed to the rate of 10,000. Homes, this is not a junk property in a junk area. These are yuppie ish communities, these are quality properties, these are properties that have a potential for appreciation in the future, your overall return on investment here is projected at 28% annually. And without the multi dimensional characteristics 17% annually. That’s just a phenomenal opportunity. Just look at it like a bond, compare it to a bond, where a normal bond, you might earn three to 5%, a junk bond, you might earn nine to 12%. If the company stays in business, if you’re lucky, in your savings account, you’re gonna earn 1% if this only works out half as good as projected yourn, eight to 9%. That’s just a no brainer deal.
Well, I gotta tell you, Jason, I do a lot of researching, and I’m sure YouTube can attest for that.
Jason Hartman 12:35
I do know that already. Because you are constantly emailing me articles and constantly emailing all kinds of, you know, interesting stuff. Some of it’s a little off the beaten path, I will definitely say,
Yeah, well, I love the source information. And I see a lot of websites, a lot of companies out there selling beat up properties, like you’re talking about, and they’re selling them for 4050 $60,000. And they’re 40 years old,
Jason Hartman 12:58
I see the properties these companies are recommending, and one of my former tenants actually bought a couple properties from them. And you know, I’m thinking what is this guy’s thinking? You know, I obviously did not get through to him here is looking at a property in Detroit that is, so it’s an older house. I mean, I saw the property on the website. And it says that the after repair value of that house was like 110 $120,000 for a house built. I can’t remember offhand. I think that was built in the 50s. These are a little 1100 square foot house, folks, I don’t know, you know, I’m no expert on Detroit. But I do know that I hear stories all the time of people buying houses for $1 $1 people buying houses for $500, that the city is just dying for you to take over the house. So someone will pay the property tax bill, and someone will mow the lawn and keep the house secure so that it’s not invaded by gangsters. I mean, there are areas in Ohio and Michigan that are absolute disasters.
Well, and here’s what I want to point out, Jason, is that you’re putting $25,000 down in this property and you’re leveraging your money to get a loan.
Jason Hartman 14:06
Yeah, the bank’s putting up the other 75%.
So here’s what a lot of people don’t understand. Some people might see a house in Detroit, Michigan for 25,000 say, well, I’ll just pay $25,000 in cash. Can you explain the difference between not having a loan versus having?
Jason Hartman 14:22
Well, you know, it’s definitely better, you know, and we all know this and all the regular listeners know this, it’s definitely better to have financing on the property because you have a partner. But there are some times where paying cash makes sense. And that is in an area like Indy or any area where you have really low priced properties that become those income property bonds. Now, these don’t really exist, the income property bonds don’t exist in much in some of the sexier markets where the properties are a little more expensive, because the cash on cash return isn’t so good. And you need the leverage to amp up the return. your cash flow will still be decent. It won’t be as high when there are these little inexpensive properties, you can pay cash, those lend themselves very well to investing with your IRA, your 401 K, and they just work really well inside a plan. Because inside a plan, the financing is not quite as good as it is outside the plan. So if you already have your four loans or your 10 loans, and you’re maxed out on financing, here, it does make sense to buy with cash. But overall, given the choice, sorry, to your question to end tierpoint, I would rather have a loan on the property, I’m just saying, if you’re maxed out on financing, then the income property bond really becomes something of interest, and you want it to be in a quality area. Look, everybody listening has heard the three main things about real estate location, location, location, right, and there are some areas that look, heck, I could be wrong. But some areas that I just don’t think have any future. And I think one of those areas is really Detroit.
Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday.
Well, and I’ll bring this up because you mentioned Detroit, I had a client call in he’s been on my email list. I don’t know for two years. He’s attended many of our seminars. And he calls it and he says, Do you have anything in Detroit? And I said, No, please don’t buy in Detroit.
Jason Hartman 16:15
We get the call from these groups that want us to sell their inventory in Detroit. I mean, it must happen twice a week.
Well, that’s exactly what I told him. I said, Look, if we thought Detroit was a good market, we would recommend it. We can recommend anything we want
Jason Hartman 16:27
We are area agnostic. We can go anywhere we can recommend look at I’ve looked at properties in numerous countries, we could recommend Romania, we could recommend Panama, we could recommend Detroit, we can recommend Lansing, Michigan, anything you want. But we’re not there because we don’t like it. We don’t think it’s good. We don’t have faith in it. And remember, we have to live with you clients through the life of the investment. And the story has got to work because we’re gonna be here to service you. We’re gonna be here to take care of you. We are attached to the deal. We’re not just selling books and tapes and sending you on your way.
Well, and just to finish my story here. So he calls anyone
Jason Hartman 17:04
Did I interrupt you?
You interrupted me many times.
Jason Hartman 17:08
I’m such a big mouth.
Okay, this is not morning talk. Okay.
Jason Hartman 17:12
Jason Hartman 17:13
They might be listening in the morning. You know what I said before we started recording everybody. Oh,
Did you just interrupt me again?
Jason Hartman 17:19
I think so. I’m guilty as charged. Okay. I asked why. Why is it that morning talk shows like TV and radio are so different than nighttime shows. Why is it that in the morning, they always have these chatty people talking and telling jokes and laughing? What is it people can’t wake up? I mean, in the morning, I’d rather just listen to regular news or music. I don’t get it. Anyway.
Jason Hartman 17:44
Maybe this is a morning show.
So the guy calls, he wants Detroit. He’s a longtime listener attended many seminars. And he says, Look, your strategy doesn’t work for me. He says, I’m retired. I’m 78 years old. I’ve been investing all my life. And I just have a bunch of cash. It’s not doing anything. And I so I suggested Indi to him. And you know, long story short, that was about a month ago, he contracted and closed on his first properties in the rehab phase. And he called me the other day just to kind of check and he says, I can’t wait to buy more properties in Indi. And I’m so glad that you know, I chose Indi.
Jason Hartman 18:13
So I mean, you know, that’s a quality city. It’s not a disaster like Detroit. This is just doesn’t work. And the other question we’ve talked about on prior shows, we always get, as you know, what about California? Look, folks, we’ll be recommending California in the future, I am sure. It’s just got to get a little bit less expensive, because it still doesn’t work. The state has way too many problems ahead of that all these states that are sort of the more socialistic liberal states, they’re collapsing upon themselves. I mean, look at what a couple decades of that is done to Michigan, it’s a disaster, California, look at what a couple decades of that has done to California, total disaster. So let it equalize, let it hit bottom, then we’ll recommend it. Nobody really knows where the bottom is for sure. But we don’t think we’re there yet. For sure. They said that it was a recent article, I should have had it with me to talk about here. But that article that our local market specialist in Indianapolis sent us the other day was showing that Indianapolis was the number one most affordable market in the country based on income to home price ratio. And the worst market in the country was Riverside, California, an area that many investment groups are recommending, just like Detroit. You notice we’re not recommending those.
One thing I want to say real quick about the seminar. A question that came up a couple of times was people were saying, Well, what kind of weather do these cities have? What kind of dangers do they have as far as storms and floods and earthquakes and people are looking at their markets?
Jason Hartman 19:45
Yeah, good question. They’re all different. Every area has got something California has wildfires and earthquakes. And I’d say if you’re going to choose a natural disaster, the worst of all is earthquake, because earthquakes total destruction and insurance for it is rarely held and very expensive. And there’s a huge likelihood that if there was a giant devastating earthquake, none of the insurance companies could pay the clients.
But no matter where you go, whether it’s Indianapolis, East Coast, West Coast, South, North, you’re gonna have something to deal with. snow, west, cold, hot. Yeah, yeah. So So I would say, That’s not a big deal. People just need to get over that.
Jason Hartman 20:20
Yeah, they do. Because every area has something
Well, and you don’t have to live there. There’s plenty of people that already do and will rent your place.
Jason Hartman 20:27
The funny thing I get from Californians is, is Houston. That’s been a very good market for us. And I own properties there. And we’ve done a lot of business in Houston in the past, not doing quite so much now, because we haven’t been sourcing really good inventory when we do or recommend it to you. But everybody says about Houston, ah the weather here is just awful, the traffic is bad, etc, etc. It’s sprawling metropolis megalopolis. And you’re right. But look, 6,000,000, 5 6 million people live there. So somebody lives there.
Well, it’s a disease that Brian Tracy calls excusitis.
Jason Hartman 21:00
When people make excuses to not buy in these places because they hear things and they’re not living there. So
Jason Hartman 21:07
Good point. Yeah. Sounds like paralysis of analysis and other disease.
Well, and just to wrap this conversation up, and I have to run but exactly what Ari said
Jason Hartman 21:14
Are you off to yoga again.
Actually, I am. Hot yoga.
Jason Hartman 21:18
Sara, you have such a hard life.
Hey, I have a one-hour conference call on the way to hot yoga with a client.
Jason Hartman 21:24
Well at least, you’ll be more flexible.
So what I wanted to just say kind of in closing, and you know Ari already sort of alluded to, but I noticed in the seminar that there were several clients that have attended the seminar before or maybe they’d been on my email list. I’ve exchanged emails with them over the last two, three years. And you know, I’m looking and Ari said, you know, nobody in that seminar had purchased through us anyways. And I just want to saym Don’t look back in a year from now and say, I wish I would have purchased when the interest rates were low, and there were so many foreclosure opportunities. I mean, so many of those people I’ve been talking to for so long and they can do it, they just for whatever fear factor is involved, they just haven’t pulled the trigger. And I hope you don’t look back a year from now and wish you would have taken advantage of these opportunities.
Jason Hartman 22:06
Yeah, don’t be the I coulda, shoulda woulda that’s just a very sad place to be in life. If you live in the past, you’d become senile. If you live in the future, as Denis Waitley says, You’re on someday I’ll. Like I apostrophe ll, like I will. Do it today. Make it your now. Look, we are not saying that real estate is gonna start wildly appreciating anytime soon. We don’t think that. We’ve never, we’ve never said that. What we do think, though is that there is a high risk of interest rate increases. And there is just these treasury auctions are not going very well. And that’s directly tied to mortgage rates, folks, you gotta tie up as many packaged commodities as possible little houses in good areas and diverse markets that are sustainable, self-sustainable, and what else are you doing with your money in the meantime? I mean, you put into the stock market, the stock market is becoming very volatile again. I heard a prediction yesterday that the S&P is going to be around 7 to 800, from a very reputable guy who I’ve interviewed on the show, and that the Dow is going to 8000. I predicted 6000, we got to 6400 so we got close. Hey, you want to just share that testimonial? Before you go,Sarah? That was kind of interesting, I thought.
Well, let’s see. 30% the price. This is on the seminar, 30% the price and 3,000%, the helpful information of a Robert Kiyosaki seminar. Yeah. And then in parentheses, it says, point 3% the sales pitch maybe less.
Jason Hartman 23:31
Yeah. And what was the, who was the star of the show, though?
Oh, the star of the show, of course, puppy.
Jason Hartman 23:37
That’s my dog, puppy, the ROI dog. You’ve heard him in my newsletter. He writes a column in there from time to time and Puppy was there at the Masters weekend and at the creating world boot camp we just had.
Yep. And so Thanks, Matt, for that little comment there. I know you’re a listener of the podcast.
Jason Hartman 23:51
Thanks to you.
You’re one of you’re already registered for masters weekend in October. So I’ll see you then. Awesome.
Jason Hartman 23:57
Hey, by the way, we have several people registered for masters in October, be sure to take advantage of that early bird pricing. Remember, it does escalate as you go on in time. So planet advanced. Next, Creating Wealth Bootcamp is July 31. That’s a Saturday.
I also want to tell our listeners, they can purchase the creating wealth in today’s economy home study course on our website. And you guys, if you can’t make it to our seminar, you got to buy that because it’s just like being here, but you can listen to on your own time. You can read the materials on your own time. And it’s fantastic. It’s a great way to learn.
Jason Hartman 24:27
Yeah, the Creating Wealth Home study course is fantastic. It comes with a complete transcript, the audio files as well as the PDF of the workbook as well. The PDF file. So you get all three of those. And that’s on our website. Jason Hartman dot com. Great point, Ari. Ari, it looks like we lost Sara, she’s off to yoga to learn how to become more flexible.
Jason Hartman 24:48
The other thing is, so we’ve got the next boot camp on the 31st wanted to talk a little bit about one of our clients who just got a fantastic loan modification. And I tell you folks, if you are not asking for your bailout I mean, why should all the banks and the Wall Street firms get the bailouts on your tax dollars and you not take advantage of that? Get a loan modification on all of your properties if you can. These sometimes take a while. You have to be a little persistent, but it’s well worth it. And I’ll tell you how worth it. It was for one of our clients, check this one out. Her rate was 7.3%, I think was 7.325, I’m not mistaken. And this was a B of a countrywide Bank of America countrywide loan modification, and they lowered the interest rate to 2%. Yeah. 2% for five years, she sent me the documents, I read them 2% for five years, and then listen to this. They extended her loan for 10 years. So they took the maturity date from 2038, which was a 30 year loan originated in 2008. And it’s now not due until 2048. Okay. Her payment is dramatically lower. This property is now super positive cash flow, it has turned a so-so property into a fantastic deal by nothing else happening, but the loan modification.
Thank you for listening to the creating wealth show. This is Jason Hartman, your host, and we appreciate you following the show. We have many, many episodes, hundreds of episodes, and some of the older episodes have been archived and placed in our members section. And that applies to this one. So we include a sample that’s about 25 minutes long. And then for the rest of the show, you can go to our members section at Jason hartman.com. Many of the other shows are still in their full length complete version. However, some of the shows like this one are in our members section where you can hear the show in its entirety. And again, you just need to go to Jason hartman.com. And you can get the full show there in the members section plus a whole bunch of other great members benefits and resources, whether it be documents, forms, contracts, articles, other video and audio content, just a great resource, so be sure to join as a member at Jason hartman.com and thanks again for listening to the creating wealth show.
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.