In this Flashback Friday episode, Jason Hartman answers mortgage FAQs from a Profits in Paradise event. He also tackles financing a primary residence, cash-out refinance, and Refi-Til-Ya-Die method. Then, he continues his interview with Drew Baker. They discuss cryptocurrency, the college tuition bubble, and the appreciation vs. cash flow dilemma.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.
Trying to sell a house in 2010. And I just got a little frustrated with the potential buyers I was meeting and so I decided just to turn it into a rental. I currently own five properties the one that I did originally live in I own three unwritten Little Rock as well as one in Mississippi. I am in those markets because I was super impressed with the turnkey operators that I met and super impressed with the renovations that they did the proper the management that they had. And basically it was one stop shopping and everything was in place when I basically I showed up with my money. I kept on investing in real estate because I realized it was just an awesome way to build my wealth. Not a lot of effort on my part. Basically, once again, show up with the money and see my money make money for me. I found Jason through my friend Elizabeth and been super impressed love his passion, love his enthusiasm, and not to mention seems extremely knowledgeable.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:55
Welcome listeners from around the world. This is your host Jason Hartman with Episode 1084. Today we have some winners. Well, you’re all winners because you’re listening to the show. No, but we have some actual contest winners today. Well, and I say winners, did you notice that was plural? Yes, that was plural. very intentionally, because we only promised that one person would win. But I thought, Hey, you know what, why not pick a couple of winners, we can have more than one. We’re generous. Christmas is coming up. So there you go. Okay, so we will announce those here very shortly. And you have the choice of the Amazon Echo, or the ring doorbell. Let us know which one you want when we announce the winners. And we will get those out to you. post-haste post-haste right away. You know, I just want to remind you, of the thing I talked about somewhat frequently, you know, my four major mentors in life, Jim Rohn, Earl Nightingale, Denis waitley, and Zig Ziglar, those guys changed my life, right? They changed my life at age at the tender age of 17 years old. And as I was once again at yet another venture Alliance event in Hawaii in beautiful Hawaii and on the island of Hawaii, just last week, and we wrap that up and got back here. I’m back in San Diego now. It’s so nice to visit California, when you don’t have to pay taxes here. Yes, that is an awesome deal. You know, if you move out of California, you can still visit without paying 13.3% income tax, just pay the feds and they’re happy live in a no income tax state. My recommendation, you must get on that train and get that plan going for yourself might take you years, but get it going. Anyway, that’s not the point of my tangent here. And I was reminded again of that Jim Rohn quote, that I say all the time, you know, your income will be the average of the five people you spend most of your time with. And that’s why it is so vitally, vitally important to really strategically choose your friends and associates. And that’s why a mastermind group is so valuable. It’s one of the things I personally love, even though.
Hey, it’s my group, right about the venture Alliance mastermind. But regardless of that, you know, I was in many other mastermind groups, long before I started the venture Alliance. I liked them so much. I thought I got to start my own group. This is awesome. And you know, you just, you’re uplevel your associates. Now, maybe not. Maybe you are in the situation where you don’t need to uplevel your associates because you’ve already developed your own in essence mastermind group by very strategically picking and choosing who you spend your time with, but for the vast match have us in life that happens by accident and circumstance. And you know just where you happen to find yourself and where you happen to find your friends. I really want to encourage you to do that strategically. Okay, the tragic tragic fires in California here. Wow, the death toll has has risen and risen, and the number of structures that have burnt up in Northern California and paradise. Over 7000. Over 7000 structures have burned. Last I checked. Sadly, the death toll was I believe, 43 people people trying to escape in their cars. Can you imagine that? I mean, it’s just tragic. Unbelievable. So hopefully, we will find as a society an answer to some of these fire problems. And you know, don’t accuse me of being a Trump fan here when I say this, okay. But I think Trump has a point when he called out the National Forest Service. I remember years ago, I was in Lake Arrowhead. And I was with my girlfriend Monique at the time many years ago. And we were up there. And they had just it was the year after they had those huge fires in the arrowhead area. They said that one of the reasons these fires were so bad is that the environmentalist wouldn’t let them remove all of the brush on the ground around the trees because it would disturb, you know, a bug or something, right. And, of course, we need to be conscious about the environment and the ecosystem. That goes without saying, but some of these things are just, you know, they’re just dumb. And these problems get worse and worse. And they’re compounded by some of these crazy agendas out there. So that’s that. But you know, many years ago, in maybe 1994, I remember I had just purchased a new home in Turtle Rock in the Turtle Rock area of Irvine, California, which is earliest was I should say, at the time, maybe still is the most exclusive prestigious area in Irvine, and Turtle Rock, just a gorgeous area. And I remember when they had those big fires in Laguna Beach, I had to evacuate.
Now, it was a very eerie sight. I evacuated, the fires were getting closer, and they said people need to leave. Some of my friends just showed up with their cars and minivans without me even calling them and it was very heartwarming that they did that they just came over to my house and said, you know, here, can I help you? Do you know, is there anything you want to take? And of course, what did I take right? photos, because back then they want all digitized 1994 I took photos that was you know, one of the things I took my computer photos and you know a few other things. I loaded this stuff into friends cars and and then loaded my own car and went and stayed at my mom’s house that night. But I remember when I came back in the morning, the house was still there. It did not burn the fire did not make it into Turtle Rock. As you probably remember, it burnt a lot of Laguna Canyon, it was really a tragic fire. Not as bad as this one, though, are these really not this one. But these these several fires that are raging in California. It was such an eerie sight. The next morning, when I came back, there was ash all over the ground, the streets were just ash everywhere, just all over the place in the sky. It felt like I was on Mars. I mean, the sky was just so weird. It was like this pink sky. But it was in the morning, you know, you see that at sunset, but you don’t see it in the morning. You know, late morning like at 10am. It’s just really terrible. These these fires are something else. So we will hope for the best there. And I want to wish all of our veterans a happy Veterans Day. Thank you for your service. Of course, we acknowledge that yesterday. And having just come back from Hawaii. I remember I was in Hawaii in Pearl Harbor for Veterans Day several years ago. Got to see the you know, the memorial there and the USS air I guess it’s the USS Arizona, I believe is the name of the ship, right? That is underwater, and so many people died underwater there in the Arizona. So that was something to see. And I’ll never forget that and seeing it on Veterans Day was was really quite something. So thank you for your service. Definitely we appreciate that. And hopefully we will find a time when we can take the profit out of war and make war unprofitable for central banks. So we can avoid it completely. Fifth, the world can do that. That would be very nice. But like I say, as long as war is profitable, there will never be peace. So that is the world we live in. financing. We talked about financing some FA Q’s. Let me grab a couple of these before We get to part two of our guests from Monday’s episode, we continue talking about self management, the booming economy, a little bit on cryptocurrencies and some other things. We will get to that here in just a moment. But contest winners and a couple more financing things. So let’s talk about financing for a moment.
Okay. Another question. These questions came up at our profits in paradise event in Hawaii on Waikiki Beach over the weekend, while the weekend before last, can I do a cash out refinance? of my properties of my investment properties? Remember, investment, property financing? and personal residence or owner occupied financing? are two different animals? Not completely different? But they’re a little different? For sure. And yes, you can. That’s the good news. So many of you listening I know, I know, who are you are, are bold and daring clients who purchased many properties from us back in 2009 2010 2011 2012 2013 2014, even 2015, or 16, and you’ve made some money, some of you made a lot of money, congratulations touching, you’ve got a bunch of equity sitting in these properties. You can refinance them, of course, you can pull cash out, and you can buy more properties. Because that’s the thing to do with your cash, right, definitely, definitely the thing to do. Fannie Mae will allow you a cash out refinance on the first 10, properties finance. And you can always take cash out of your primary residence, regardless of how many properties you have finance. So that’s great news. Don’t allow equity to become lazy. Use your equity. And I want to also remind you of that idea that I have been talking about for many, many years, probably 15 or 16 years. Now, it’s the concept of a balance sheet, a balance sheet, we’ve all seen a balance sheet, right? On one side of the balance sheet. on that one column, you have your assets. On the next column, you have your liabilities. And the way you know your net worth, of course, is to add up all your assets, and subtract all your liabilities, and whatever that number is, that is your net worth. But a lot of you are forgetting about a major asset you have. And if this asset has a really high number on it, you’re actually hurting yourself. You have an unused asset that you should be using more. What is that asset? It’s what we talked about on Monday, and what we’re talking about a little bit today, two credit score, your credit score, you know, I love now this is counterintuitive. Okay. So a lot of my stuff is counterintuitive, you know that if you’ve been listening for the last 14 years, you know that a lot of my stuff is not what the typical guy in the street thinks, right? He doesn’t get it, he doesn’t get it. So I try to bring you a more counterintuitive different perspective on a lot of things. And this is one of them. If you have an 850 credit score, or an 800 credit score, or any credit score above, what’s the magic number, your FICO score 720. If it’s above 720, you need to borrow more money. But you need to borrow money for investment grade things with investment grade debt, not consumer debt, borrow more money, use your asset, use your credit score, it’s just like this unused equity sitting in your properties.
There is no such thing as return on equity. You’ve heard that metric return on equity. It doesn’t exist. It’s a myth. Woof. It’s false. It’s Bs, return on equity does not exist. Okay. Yes, I know there is a metric and you can do the math for it, I get it. I know I get how they do it. But here’s what I mean by it, I mean, something a little different. Okay. And what I mean is this luck, the property will go up in value or down in value, regardless of how much equity you have, it will get a certain amount of rent, regardless of how much equity you have. So the best thing to do is to have your properties properly leveraged to treat leverage with respect and to have good solid fixed rate financing on your properties. Now, with a little caveat to that. Sometimes, a little Adjustable Rate loan isn’t totally a bad idea. And we’re going to explore this more as we see rates going up. And we see a little bit more of an interest in the adjustable rate market for so long rates have been so massively artificially low. Did you know it wasn’t even worth talking about an adjustable rate mortgage, but I will teach you again, as I have in the past how to evaluate an adjustable rate mortgage using the five major criteria that goes into an adjustable rate mortgage. Okay, we’ll do that in a future episode. We don’t have time for it today. But that is coming up. And I think you will really benefit from it. Because occasionally, occasionally, it’s not my first choice, usually. But depending on the rates at any given time, an adjustable rate mortgage makes sense to consider it. Okay, it does. But the point of this question is, do your cash out, revise as long as you can get good financing on them? The mortgage is a part of the asset of the property. Most people think it’s a liability, but it can really, really be an asset. Okay, can I finance a primary residence, you know, your own home? Regardless of how many properties I own? Yes, you can. So you have a whole bunch of financed income properties, rental properties, finance, you can still finance your own property, so don’t worry about that. It’s not a problem to do it. Okay. Can I use projected rental income on the property that I’m buying and financing to offset the projected mortgage payment? Yes, yes, you can. Good news there, right. The rental income is something the lender will consider to help you qualify. So a lot of people think you need really, really high income to buy income properties, and you don’t because guess what? They produce income. Isn’t that nice? You can use that. And you can use 75% of it. So what the lender basically says when you’re financing is they assume that you will only receive 75% of the income for qualifying purposes. And they will count that into your debt to income ratio. So that’s really good news. Very good news for you, that the property can help you buy the property. It’s kind of like in the old days, you know, especially in the 80s.
Remember, that was the era of the corporate raiders and Ivan Boesky and T. Boone Pickens, and Carl Icahn, you remember all those names, right. And what those guys would do is what’s called an L b, oh, lb o standing for leveraged buyout, leveraged buyout. And basically what that means is you use the company, you’re requiring you use the income of the company to pay for your purchases, the company is in this beautiful with income properties, we get the benefit of what’s called self liquidating debt, and that self liquidating debt can help us buy the property. In other words, we use 75% of the income of the property to buy the property. How cool is that? Can’t do that with stocks? Can’t do it with precious metals. Can’t do it with cryptocurrencies. But you can do it with the most historically proven asset class in human history, income property. So that’s that, okay, contest winners, we got to get to our guests per two today. So first contest winner is Tate launchbury. Tate, you won, congratulations. And you can choose between the ring doorbell, or the Amazon Echo, whichever one you want, tait said and I got it. We had a couple questions here that we asked you when you entered? What is your monthly cash flow goal from income properties in five years? And 10 years from now? And how do you plan to achieve this goal? Okay, so you said five years, 16 $100.10 years 20 $600. Now, I gotta say something. That may not sound like a lot, but I have a feeling that Tate gets it and wants to keep those properties fully leveraged. And that’s why you don’t want that cash flow to be too high. Remember, you get taxed on that cash flow. You want to properly leverage your properties because my refi till you die plan shows that there’s no tax on borrowed money, and you want to use the refi till you die plan. Tate has purchased three properties in the past one and a half years and intends to buy one property each year going forward. You know what, Tate, I have a feeling in a way, you’re not going to achieve your goal, because your cash flow is going to be a lot higher than that. So congratulations. That’s one time you actually don’t want to achieve your goal. You’re going to pass your goal.
Okay, the next winner and I hey, I said let’s get one extra winner. Why not? Why not have one more winner than we promised? Tim Davidson. Tim, you won. You said when talking about how you plan to achieve the goal, although the goal itself is blank, you said by the following moves, raise my employment income to contribute saving to $1,000 more per month towards a down payment for rental property extract equity out of my principal residence. Oh, pay doing exactly what we just talked about, and consider moving to a low Cost area, possibly to the States? I don’t know, maybe not live in the US now, maybe, maybe that’s what you meant, and listening to the creating wealth show. So Tim and Tate, hey, two T’s, T and T. One today, let us know, you can just follow up with your investment counselors. I think those are all over in Sarah. In both of those cases, let them know if you would like the ring doorbell or the Amazon Echo. And by the way, folks, we will be announcing now that our Hawaii event is out of the way, we will be announcing in the very near future here, meet the Masters 2019. This will be our 21st anniversary meet the Masters event. And we will be announcing that very soon. The dates are tentatively looking like late February, early March, somewhere in that range location is looking like Southern California. Just look for more to come on that on upcoming episodes. And we will announce that and have ticket sales available for you.
Okay, let’s get to part two of our guest from Monday and dive into that right now. Like I’ve always said, When Bitcoin has a standing army, it will take over the world. But until it does, it will not it may still be a thing. And just to make a distinction. cryptocurrency could certainly and probably will be the future. The only distinction is it’ll be the cryptocurrency sponsored by the governments and the central banks. That’s the distinction. I’m afraid of that but you’re probably right. And it may be a one world cryptocurrency, which is even more scary, because then no one will have any financial privacy. And they can inflate unilaterally and equally around the entire planet, which is really scary. I mean, they could just the powers that be the central banking cartel, the governments of the world could just impoverish everybody. Overnight, right?
Drew Baker 22:04
I mean, think about Bretton Woods, and you think about everybody using the dollar as a reserve currency pegged that gold and then them removing that. And you have to say that, I mean, basically the dollar is the One World currency, everything gets traded through the dollar. I mean, so in some ways, it’s kind of scary that we have that. And the more money the government prints, it seems like the more asset prices go up, but at the same time, you still hear about deflation. So I think we’re in this very strange pickle that no one could have expected. So in some ways, there’s deflation and other ways there’s inflation. So it’s like, how do you fight a Jekyll and Hyde economy? I do not know. Yeah,
Jason Hartman 22:47
I know. It’s a weird thing. It’s a weird time. You wanted to talk about a couple other issues, I think. And just before we wrap it up, I wanted to give you a chance to do that. Was there anything else on your list,
Drew Baker 22:58
I kind of have more of an open ended sort of dialogue I want to have with you about college. I know we talked a lot about, you know, the college bubble.
Jason Hartman 23:07
That’s the college debt bubbles, probably specifically. But yeah, maybe there’s a college bubble in general, but the debt bubble for sure.
Drew Baker 23:13
I was talking to my wife. And I was saying how it felt like our parents version of having a stay at home parent will be our children’s version of going off to college. So it’s like a luxury that is to be obtained, but is not an entitlement. And I’m sorry, if that’s a confusing thing to kind of sort through in your brain. What do you mean, but I’m saying that if you think about you know, today, the idea of having a single parent at home is an expense, it’s a luxury, and it’s a sacrifice, right? It’s something that’s not normal, if you think about our children’s generation in the future, because it’s so impractical to Bill $100,000, for what the internet and technology could do for 1000, that life experience is going to be impossible, or very rare to duplicate if the government gets out of education, but if they did, I think the prices would come down, but I don’t expect they will. So you have to ask yourself, like, is the college bubble ever going to break or burst? Or, you know, what are your thoughts on that whole thing? Do you get what I’m saying? As far as like, I think people are gonna have to reject putting a mortgage on their back for their education in terms of how much it cost, right? It’s like a mortgage size debt. And that’s just going to it’s so sad that you’re preying on kids basically. And so, I don’t know that in the future. I think there’s gonna have to be some Titanic shift, where one of these big tech companies wants to undermine this huge bureaucratic dragon that they could create. Their own standard that is seen as more superior, more refined.
Jason Hartman 25:06
The problem and you know, the missing link, in my opinion, is accreditation. You can get all the education yourself now, you can probably get better education yourself. I mean, look at all these people homeschooling their children, right? You know, that’s a lot of work for parents to do that. But apparently many people think it’s worth it because the public education system is such a disaster and such a brainwashing institution at the same time. And the University System certainly is that the government student loan debt industrial complex, the debt slavery complex, it’s ridiculous. It’s a scam of epic proportions. But the problem is, you can’t tell there’s not a good way to judge, you know, at least if someone goes to college, they get that credential, and it’s accredited. And this accreditation thing is where the lockup is, in my opinion, that’s where the real scam is the Khan Academy online. And by the way, my foundation, the Jason Hartman Foundation, donates to the Khan Academy every year. I love that concept, you know, along with Kiva, and many other things I’m passionate about, but it’s an empowerment. Right. But there’s no accreditation, you can’t, no employer really knows how much that person knows. And let me tell you, college isn’t that credible, either. Because I know a lot of people who are in their 20s. And believe me, I look at their posts on social media and they can’t spell. Their grammar is terrible. It’s scary. You know, and they went to college. They’re college graduates. It’s mind boggling. Really, it is. And you know, colleges is a lot of times just a drinking club. It’s just a party, which is ridiculous.
Drew Baker 26:47
Yeah, I heard you went to college just a few years ago.
Jason Hartman 26:51
Yes, listeners, if you’d like to hear the story you’ve already heard, and we don’t have time to repeat it. But yes, I sort of had my college experience. It was fun. But I’m jealous. Yeah, yeah. No, I mean, it’s just a big marketing scam. The fact that universities are hiring branding consultants and marketing departments is ridiculous. They’ve gotten completely away from the mission. It’s, it’s terrible. So
Drew Baker 27:15
yeah, I just wonder if there’s some big with a name behind it, like, you know, Apple university or something, somebody that big companies where, you know, you think about the technology today without reading your face? They could do it? Yeah. Yeah. Was it reading your face? I mean, you can, you can make sure that the person that’s taking the classes is who they are. And there’s so much technology that can, you know, accredit the person is who they are. And by the way, there could be a real skills test associated with testing this person. Let’s say you want to create a certain job position, and you just go and check mark, which ones you have one, and then you can do a search according to who has passed a particular test. And you could administer a test and see if they’re the right fit. So I just think that you’ve this much money. I wonder if someone’s got to give?
Jason Hartman 28:04
Yeah. It’s, it seems like it does, you know, the either Google Company A few years back said that they’re not going to require college degrees anymore. So they see it, you know, they see it. But again, I think the lockup is in the accreditation scam. And yeah, they’ve got to be able, you know, Apple University, right, if it ever occurs, could become accredited. And when that happens, and they look, you can notarize a document with your iPhone. Okay. Why can’t like you said they can verify that person is actually taking the test or taking the class. The technology can do it. And yes, it has to happen. It needs to be displaced. The college thing has just too much of a stranglehold on on our economy. It’s it’s got to change. So hopefully, we’ll win. We will. Yeah, I
Drew Baker 28:54
mean, when we talk about all this stuff, I think the one distinction is what should happen. And what does happen, rarely a quiet lineup. So it’s always funny how these things kind of manifest themselves in a way that you don’t expect, but may come true, but in a way that you’re like, Well, technically, I guess I’m not right still. Right. Now. Well,
Jason Hartman 29:15
we’ll see. Well, hey, let’s wrap it up with a thought for investors, real estate investors, and what it all means to them. We’ve kind of jumped around a lot on this show today. Where do you think things are going for real estate investors? What should people do? You’ve got your portfolio I know you’re buying more rental properties and looking at more stuff. And obviously, you’re self managing about half of your portfolio. What should investors be looking at
Drew Baker 29:39
now? What I thought was interesting was I sent you that link with Harry dent who’s called every crash that’s never happened.
Jason Hartman 29:47
He’s been right a few times. Yeah.
Drew Baker 29:49
Well, you know, I guess clocks right. Twice a day. Yeah, right. A broken clock. But um, but anyways, he was talking about how you know people today that can’t afford or hire income individuals that live in these bubble cities are buying in the non bubble territory. And it’s funny when I was a kid, if you told someone you were from California, they thought you were from, you know, Hollywood and you’re, you’re friends with, you know,
Jason Hartman 30:19
it was a status symbol. Is it that way anymore?
Drew Baker 30:22
Is that where you’re going? Definitely with? Yes. And you think about it today. And most people, if you tell them from California, they want to like hiss at you and stick their fingers up and across, you know, because they in a lot of that doesn’t seem like a lot of that has to do with the assets in those territories going up because people are fleeing California or buying rental properties, or just capital outflow from California to all these other places. So what Harry was saying was people are taking their assets and investing in these non bubble areas that are not so susceptible to crashes. Right?
Jason Hartman 30:57
The good solid cash flow markets. Yeah,
Drew Baker 31:00
exactly. I mean, that’s the thing is, those are the bread and butter. I mean, that’s what how what turns the world, those areas that you have people that are driving the trucks, maybe not for too long, but you know, working at the airports, doing those type of jobs that make the economy turn, you know, if you can rent to those people, who maybe wouldn’t be able to buy a house themselves, but want to not live in an apartment, you can find that sweet spot of somebody that’s, you know, in that stage of life where you can provide them a home. And I think that’s, I think there’s a lot of value there. Yeah,
Jason Hartman 31:39
I think so too. I think the good conservative, boring linear markets are still the thing, even more. So nowadays, I would argue, because the bubble markets are so over frothy. And so past the point of any fundamental valuation, that makes any sense. Just do the conservative thing, folks, it’s always the safe bet, and don’t pay too terribly much attention to it. Don’t worry about timing the market, the market timers just never seem to succeed. They always have a good pitch, though. It’s always very sexy sounding. But it never seems to really work in real life,
Drew Baker 32:15
does it? One of the things when you had Ron Paul, as one of the guests at your event, you know, I remember him getting interviewed at one time, where he talked about how, hey, the government’s doing this stuff, or Oh, this is happening to a certain asset price. And he said, I don’t care because I think that it’s immoral, or it’s against my philosophy, to accept this as fact. And so I think, to invest like for us to invest in the California market, it just goes against my philosophy, even though I might be able to make more money, or that could have the wind blow in my face at any moment.
Jason Hartman 32:52
Yeah, I don’t think you can say you’re gonna make more money now. But you certainly know, you know, in the rearview mirror, if it were 2008. You could say that, but nobody knew.
Drew Baker 33:02
No, and I yeah. And back then, I mean, I bought pretty close to the bottom, and I bought in a linear market, because I said, I don’t care. I’m doing it for cash flow. And it needs to make sense today. And I’m not going to go against my investment philosophy. Yeah, to go in some of these other markets that are a little more speculative, that have been hit really hard. Yeah. Okay, so I can make more.
Jason Hartman 33:24
Let me talk about that for a minute. So a few years back, I did an analysis. And you know what, I really wish I could figure out what the episode that was on because I did an analysis of San Diego versus one of our linear boring markets. And interestingly, you know, one of our clients who’s probably listening now, Hi, Richard. Hi, Derek. Well, two of our clients, I went and had coffee with them. And then I came back and recorded the podcast after we met for coffee on a Saturday morning in in La Jolla, California. And, you know, I was thinking about what Richard said, and Richard was pretty sure that the market was going to go up a good 15% annually in San Diego. And you know, he, I don’t think he was very off, I think he was close to being accurate. But what’s interesting about that, is I analyzed the monthly cash flow of being, you know, slightly positive in one of our boring linear markets like Memphis or Indianapolis or whatever, right? They’re all kind of similar in terms of the numbers. And I compared it to a San Diego property that would have been a sensible San Diego investment right now, I don’t think anything ever makes sense in a cyclical market like San Diego, or orange county or any high end market, right. They’re great places to live, though. Well, if you don’t have to pay the taxes, but other than that, they’re great places. So I compared it though, and even with very enhanced, phenomenal appreciation, and the negative cash flow you would have there versus the positive cash flow and I was only taking like a 300,000 Dollar or $350,000 san diego property not an expensive one that had really bad cash flow, you know, by cyclical market, high flying market standards. That was a pretty good property. Okay. It was about the best you could do in a place like California. And I compared it with one of ours. And interestingly, with the cash flow, which most people don’t pay much attention to, they only look at the appreciation because it’s so much more sexy, right? are boring market investment beat the sexy market investment in San Diego in that example, and I got to find that show because that analysis was pretty interesting. I could do it again. But I did it pretty well. I thought then, so I really need to find that episode. Yeah. Good point.
Drew Baker 35:45
Yeah, yeah. Well, I think that people in San Diego, I mean, I went down there, because I wanted to get a house in Coronado. And I mean, it is so expensive. I mean, it’s, if you wanted to rent something, it would be, you know, probably a third of what it would be to own it. It’s just incredible. So you know,
Jason Hartman 36:06
I get it. I totally get it. Well, well, interesting stuff. Drew. Hey, we got to wrap it up. We’re going pretty long here. But thank you for talking to us about this today. Any final word that you want to mention?
Drew Baker 36:16
So yeah, I think the final word that I would say is if you think about 2016, I think most people thought Oh, I don’t know, the economy’s getting pretty dicey here. And so, you know, everyone had thought maybe the downturn was going to happen then in stocks are real estate. And it is not happening. Now. I think if you look at the appreciation that has happened since then, if there had been a crash, if you had gone into the market, and had that cash flow accrue, I think you’d be out of the weeds by now. And you would save all that appreciation, or you you know, you get all that cash flow that would get built up that you know, the opportunity costs of keeping your money on the sidelines, just goes out the window if you just wait. So having that be on your side, collecting the tax benefits of you know, scheduled depreciation, all that stuff is powerful when you have time on your side, right? If you don’t deploy the capital, you know, I think Warren Buffett says, a Full Wallet is like a full bladder. And so if you’re not using your money and putting it into assets, you know, you’re just gonna lose the game.
Jason Hartman 37:23
Very interesting. Very interesting. Good stuff, Drew, happy investing to you and all our listeners when thanks for joining us again.
Drew Baker 37:30
Jason Hartman 37:32
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