Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 96 of the heroic investing show. We’re getting close to 100. Folks, on this show, we focus on those challenges that are unique to armed service members, veterans, and first responders. But we also focus on those things that we’re all seeking. And for most of us that is getting more time with family getting more time to focus on those things that inspire us. And so to do that, what we do is introduce to you the concept of replacing some of that w two income, hopefully all of that w two income one day with passive income from a variety of sources. I work with all kinds of alternative investments for my clients at paradigm life. Some of them are more passive than others. But my personal favorite is income producing rental properties, single family, wonderful family. But I have to admit, I’m also very interested in larger multifamily in mobile, home parks and self storage. I think they’re all viable and all extremely interesting. I also love the concept of providing student housing in college areas. I’m just basically a junkie of income producing assets. We do all different kinds, like I said, apart on life, it doesn’t have to be tenants and toilets, if that doesn’t fit you. But this gentleman, I’m going to talk to you today, a friend a close friend. Now I met in person actually just a month or so ago. But we’ve been you know, communicating back and forth. They’ve had a great relationship here for several months already. He’s a fellow Navy veteran. He’s graciously invited me and my wife Susan to come to his next ship reunion down in Washington, DC and next year, I think it is and I can’t wait to do that with them. A great friend, but he’s also an incredible real estate investor. We recently had john Schaub, on. That was a recommendation from Craig, my guest for today’s episode, Craig Horton. And it was a great recommendation. And he was a student of John’s and has, you know, really learned quite a bit from him. Craig’s background he’s from Medford, Oregon, was born and raised there, spent quite a bit of time in the Navy. His father was a real estate investor built a bunch of the buildings that they still own. He and his wife really run a management company now and are managing quite a few properties. But it’s extremely successful for them.

There are another one. No similar to john being students of john Schwab that liked to have their properties paid off. We continue to banter back and forth about that I understand his perspective. Absolutely. I think he would say he understands mine. But a lot of times people don’t come from a position of being able to pay properties often. So if you want to get there faster, how do you do that safely and prudently with long term fixed rate debt. And that’s really what I like to want to talk about extensively on this show with my followers, so that you can get down this path because it’s a beautiful path. I love having people like john Schwab and Jason Hartman and Craig Horton shine the light on this forest. You know, talk to us about what this can be, if we stay devoted to it if we keep sharpening our pencil and minding our knitting, you know, and sticking with it, putting prudent things in place like asset protection and mentors, and safe, long term fixed rate debt on properties that are cash flowing. We want to see you know, what the pot of gold at the end of the rainbow looks like? And my friend Craig Horton is going to show it to us. So thank you so much, please enjoy this discussion with a dear friend.

Gary Pinkerton 4:26
So ladies and gentlemen, thanks so much for coming back with us. And as I mentioned in the introduction, I’m here with a perhaps new but very, very good friend of mine, somebody that I think I could introduce as a twin and two peas in a pod when it comes to real estate and our philosophy. He was just talking before we came on the show about reflecting back to my speech at meet the Masters when I said that, you know, Atlas Shrugged was one of those books that really inspires me and, and it is a book that has made a big difference for Craig as well. And so please, warm welcome. And thank you so much for joining me, Mr. Greg Horton.

Craig Horton 5:01
Thank you, Gary. It’s an honor and a pleasure to be with someone that just loves atlas shrugged. I know that this may be part of the focus of our podcast interview. But that is a very powerful book for a lot of entrepreneurs. And I was so happy at meet the Masters in your speech where you, you had a picture of the book cover and you talked about the book because it just had a big impact on my life for so many years and continues to this day.

Gary Pinkerton 5:28
Yeah, as I mentioned in the introduction, Craig and I are both Navy veterans and in Korea, you is somewhat of a short stint, I guess, from between leaving high school, doing some Navy time there. But then getting right back into the family real estate business that your dad grew. And you and your wife have worked hand in hand and grown it considerably beyond that. And you were telling me that you’ll manage Did you say 230 220 units?

Craig Horton 5:57
219 units that are apartments and then we have, like 20 houses and duplexes, the houses and the duplexes. My wife and I own both our widths under the umbrella of our management company. And all those the apartments that we have, basically, my dad built all of them, and they’re paid off. And it’s just a really good stream of income. And then we have a separate Corporation. It’s that management company that my wife and I now own outright and we manage the units. They’re mostly two bedroom townhouses. We do have some one bedroom units, and we do have some three bedroom but most of them are two bedroom townhouses.

Gary Pinkerton 6:37
Nice and does your family have? Do you have a lot of commercial businesses or are spaces other than you know what houses your stuff there at Horton Plaza.

Craig Horton 6:47
We have a side business that my dad got into after the apartment is retirement communities Independent Living retirement communities. As an ownership interest in several those, we do not manage those. We have a separate management agent that manages those facilities at my mom and dad actually live in one of the retirement community. So they’re actually owners and tenants, and Horton Plaza in Medford, Oregon, wonderful facility. And that’s where our offices that we bought our office on a lease option from Horton Plaza, basically. And so my wife and I own own our office space.

Gary Pinkerton 7:23
Okay, so you and your wife wrote a wonderful book that you shared it, you gave a copy to my wife, Sue, and I talk a little bit about that, and what’s in the book and about your journey together.

Craig Horton 7:34
We wrote a book in 1990, called side by side, the married couples guide to a successful real estate investment. And my wife and I always have, we’re just very, very close. And she worked for a bank for about eight years. And then she went to work for med for better housing as our office manager and kind of worked with me side by side and in the real estate business. And she’s kind of semi retired now. But she still comes in the office two to three days a week. And she interviews applicants for apartments and just make sure that working with me that we make things, we make the business that sound and secure. And she’s been my rock for so many years, and we’re just so close. We’ve been married 45 years, I’m now on a five year plan. Starting last month in January, January 2023, we are going to celebrate our 50th wedding anniversary. I’m working on the five year plan. I actually got that idea from Jason Hartman with the most recent meet the Masters, we had the five year plan contest. So I just adapted that to our concept of planning our wedding anniversary 50th. And we’re working on that it’s kind of exciting. It’s a lot of fun. You’re gonna spend five years planning your 50th anniversary. That’s exactly right. invite me to that party. Oh, well, look, we got the DJ lined up, I made a list of the songs that we’re going to play for the dinner dance. And we’re going to have a mass at Sacred Heart Catholic Church, which is our church that we attend. And it’s really going to be a lot of fun. We did this with our 25th, about 25 years ago, almost 25 years ago, we did this with our 25th we spent a year preparing it and it was just one of the outstanding events in our lives. And it was great, but I’m like you and a lot of successful people. You know, we plan ahead and we set goals. And when you do that, it just really makes a difference. And it produces a lot of success in whatever endeavor you’re in, whether it be a 50th wedding anniversary or be a real estate investment. I’m a big believer in setting goals and making plans and dream in the dream.

Gary Pinkerton 9:36
It is certainly true that what you focus on expands Yeah. And that’s why it’s so devastating to focus on problems right. And I mean, people who complain seem to get more and more stuff dumped on top of them. And unfortunately, not too many of us have learned the lesson you just said but when I finally started focusing only on on things that I could be grateful for and focusing on goals and doing you know three points of gratitude in the evening and Things like that man, did that make a huge change in my life? it’s almost hard to put into words, the difference

Craig Horton 10:06
A saying that I’ll pass on to you that I heard and I’ve heard in the business over the years is a guy told me that was successful investor, he said, focus on long term benefits. And don’t think about short term problems, always remember the long term benefits. And that’ll get you through the short term problems. And I really think that’s just great advice. And I’ve tried to run my life that way. You know, I don’t, the short term problems can be challenges, but I don’t want to get me down. You know, I’m always thinking about those long term benefits, whether it’s marriage or real estate, and boy, it just, it really works.

Gary Pinkerton 10:36
Yeah, absolutely. You have another member of the family. So you qualify as as a, what should I say you are a qualified guest, having been a military veteran and good friend, your son also first responder. So tell us about Larry and you know, his journey so far. And what he’s doing now,

Craig Horton 10:54
Larry worked for the Phoenix Police Department as a police officer in Phoenix, Arizona for 20 years. And he retired, he had a good career. And he now has two rental houses. And he’s he’s actually working on buying a self storage facility, probably somewhere in Arizona. And he’s, he’s gone to a couple of seminars about that. And he’s got a he’s got a business coach that’s helping them. He’s made a couple offers. And it hasn’t happened yet. But I know what’s going to happen. And he’s really determined and dedicated. And I’m just very, very proud of him. I’ve tried to take him to a lot of seminars that I go to, and we’ve gone together and we just have a blast and like we were meet the masters and we had dinner with you the day before the seminar started. And we just had a really had a good time together. But we’ve done that several times as we went to one john shop seminar that highly recommend his summaries one of my mentors, but Larry and I went with together and we just, we just really have fun and we connect and he gets to meet these successful entrepreneurs. And it’s just a tremendous experience. And I want to leave a legacy for him. That’s part of the reason why I do that. And I’ve just been blessed to have the resources to make that happen.

Gary Pinkerton 12:06
Absolutely. And I really enjoyed meeting both you and Larry. When, how old was Larry, when you first started taking him to seminars and things like that?

Craig Horton 12:13
I would say it’s been within the last five to 10 years.

Gary Pinkerton 12:17
Okay. He’s always been an adult nearing the end of his his first career.

Craig Horton 12:20
Right? Right. It was probably mid to end of his police officer career got it. Okay.

Gary Pinkerton 12:25
I knew a lot of people who bring their kids to events like that, and I’m trying to start doing that with mine. Just curious, you know, how far back but I don’t think you can ever be too early with that.

Craig Horton 12:34
Absolutely. And it’s so important because I remember the book, The Seven Habits of Highly Effective People talk to Stephen Covey, he talked in there about leaving a legacy and that in my dad has taught me that too, that we want to have a living legacy that that lasts beyond our life on earth. And I think it’s particularly in families. I just think that’s very, very important. And I know you’re practicing that with your two sons, and I just think it’s great.

Gary Pinkerton 12:58
Yeah, I do too. I think it’s gonna pay big dividends in life. I already see it. They’re just so engaged and have a much different perspective than all the kids they go to school with, which is really super important.

Craig Horton 13:09
Right? It’s like an Atlas Shrugged, you know, and they talk about how you you stand out in the crowd and you do you follow a life philosophy that’s different than other people and you do it with strength and then I get back out with shrug, but I love it,

Gary Pinkerton 13:23
Well, you know, Pat Donahoe, you know, a mentor of mine is the owner and CEO of Paradigm life, and you met Pat and right, wonderful guy, but he’s taught me so much. And he did a presentation and back into life at this summit that we were at for advisors and, and he was talking about living the infinite game and and I can’t remember, forgive me, for the gentleman who wrote this book about the infinite game versus the finite game and people who live the finite game in business or in relationships or just in life, they’re never happy because they’re, you get to this goal. If you either achieve that goal, you don’t achieve the goal, right? And once you’ve achieved it, no, the rival syndrome falls or jumps in. And at best, you have an interruption at worst, you have a depression because you’re nothing left in life, you know. And so, if you’re playing the infinite game, which is what you know, Reardon was playing with his Rearden metal, you know, and Danny dagny Taggart was we know is doing with her railroad. Yeah. People are just, that’s what a true entrepreneur does, right? They’re doing this just to continue to improve. That’s right. Absolutely. When the iPhone three was was a success, you know, he didn’t stop with that, you know, that just kept going and going and going. So pretty inspiring, and it’s about continuing to improve and continuing to play the game for the progressive no being in the game.

Craig Horton 14:37
The additional comment I would make to that is, when you do that you need to have a balanced life and have it have balance in all areas of life because some people, Steve Jobs is a good example. He was very successful Larry’s life, but he didn’t take care of his health and he defeated taking care of his health. He could have lived a lot longer and done some great things. So you got to the lesson with that experience is you have to live try To live a balanced life, it’s so important. And I know, I can tell from being with you when we had dinner particularly and talking and hearing about your experiences that you’re, you’re good at that. And I really respect and appreciate that so much. The balance you’ve got.

Gary Pinkerton 15:12
I would say that I certainly work on it. But I am a workaholic. I had heart and going by doing fitness things doesn’t come natural. I have to force myself to get out there and get out. And you know, I just have to constantly remind myself, which I think everyone who knows where their blindsides are, they just got to focus on him. right and right, one of the things like, I’ve listened to Zig Ziglar forever, and and, you know, now his son and a friend of his are carrying on the Ziggler podcast.

Craig Horton 15:40
Right, right. I listened to that podcast a lot.

Gary Pinkerton 15:41
Yeah. And, and one of the themes they’ve been on for close to six months now is they’re interviewing people in there asking him like the five wheels of a successful life I think it is. But you know, it’s it’s health. It’s it’s spirituality, fitness in business and family, I guess. But it’s really interesting to hear this from just one person after another. So it’s a really cool way to do a podcast and to get different perspectives about that message

Craig Horton 16:07
Right. I highly recommend their podcast. I don’t listen to as many of these sessions I guess I should, but they’re the Zig Ziglar podcast is great. And I’m a huge fan of Zig Ziglar, I had the honor and the privilege one time of hearing him speak in person, and it was fabulous.

Gary Pinkerton 16:23
I missed that. I missed that. And Jim Rohn both. I really wish they were

Craig Horton 16:27
I heard Jim Rohn. But I heard Zig Ziglar. And it was fantastic. Really, really good. Yeah, crazy.

Gary Pinkerton 16:33
So how about a few minutes on your thoughts of kind of meet the masters and, and just the value of going to things like that?

Craig Horton 16:40
Well, I believe you never stopped learning. I’m just a huge fan of learning, you know, books, I read a lot of books. What I do now is listen to podcasts, I’ve got an iPad. And so I’ve got a couple of wise wireless earphones, and I get on the treadmill, I listen to podcasts, and I just, it’s really fabulous. But you can’t ever stop learning as to because you’ll you’ll just you’ll die as a person if you do. And I just think it’s really important, I believe in the value of learning and education and that I know you do too. And I’m almost like a preacher about that I got it. Sometimes I gotta slow down that because I just I love learning. I’ve learned so much, particularly from books and podcasts. And I just can’t say enough about it. Because the person that learns a lot and never stops learning or generally in a lot of cases becomes a very successful individual. I’ve got several friends that are that way like you and like john job and some others that I could Pat Donohue or Russell grade, Robert Helms, Mark Harrelson, who’s kind of semi retired now but I used to go I went to his several his seminars in the day, I just can’t say enough about the power of learning and education. It’s really, it’s, it’s so important. Even if you just start with a few books in your library, and you read those books. And then you can even fact you don’t even have to buy books, you can go to the library, and you can read a lot of really good books. So I just think it’s really, really important.

Gary Pinkerton 18:08
Yeah, and I started this list of, you know, my favorites, and I, it’s my plans to go read them every couple of years. It’s amazing when you go back and read them good. You know, it’s like somebody, somebody snuck in and changed the pages on you. Because, you know, it just doesn’t read like it did the last time because you’ve changed so much in your own experiences that it’s it’s again, a fresh new book, you know, so right. It’s really interesting, pretty experiential, you know, going through something like that.

Craig Horton 18:34
And I noticed that one of the another thing I like about talking about meet the Master Jason Hartman, he’s really into learning and education. His podcasts are just so interesting. And he gets guests from different walks of life and interviewing them and, and he’s, I really respect and appreciate that so much.

Gary Pinkerton 18:52
Yeah, you know, one of the things that I appreciated most about my time in the nuclear power submarines was before everything else, and this important thing, like, like, you know, you have priorities in your schedule, right. And when things conflict, you got to figure out what’s the highest priority and other than safety of ship, you know, and operations if you happen to be deployed or doing a mission. In the normal world, I’ll call it training always outweighed other things, and we would spend four to six hours kind of like firefighters, you know, always training for that thing that we really wish would hope didn’t happen. But I really gained a huge value for success through education and through practice and repetition. And that’s what I see from from Patrick Donahoe and from Jason Hartman. And I think it’s why I’m so attracted to both of them is that before anything else, they seek to educate, and it’s their philosophy that if my customer, my client, my follower, is well educated, then they will do the right thing and I think that they will, you know, join ranks with me and they will introduce me to friends and family and people that I can help because they value that Before I asked for, you know, to provide service, or do you get paid, I spent time to educate, you know, and give people so that they make the right decision.

Craig Horton 20:09
Right. And it’s like when you do that process, and you, you practice it over over the year, you build up a lifelong mastermind group, I can tell you, like, for example, meeting you at meet the master that was probably, I don’t want to buddy up, but I gotta tell you, that was a highlight from a particularly because of your background and in the Navy, because I, I really value my service in the Navy so much, but you, you build these relationships, and they become lifelong, and they just push you to success. Because with real positive relationships with a mastermind concept like this in thinking Grow Rich, it’s gonna happen. And I’ve seen it happen so many times. And it’s a real powerful concept of life. And it’s just like, again, it’s so so important.

Gary Pinkerton 20:52
Yeah, absolutely. And I’m cautious having had a few conversations with you, Greg, that you and I could end up with a four-hour podcast.

Craig Horton 21:02
Yeah, that’s right. Yeah, we could. My wife sometimes has to tell me to cool it a little bit. Because I just, you know, I love what I do. And I love, like networking with great people like you were doing on this podcast. Yeah, our memory. So I have to tone it down a bit sometimes. I really enjoyed it so much.

Gary Pinkerton 21:21
Yeah, of course. And so do I. And so we’ve made mentioned to john Shaab, he’ll either be right before or right after Craig. So if you haven’t heard him yet, you will soon or you need to dig back into your archive a couple, couple of them back in your library. And you know, forward over to that one, because it’s a great interview too. And I really appreciate you putting me on to john, and I can’t wait to go to one of his seminars, perhaps next next January down in Florida. Great place to be in January.

Craig Horton 21:46
Yeah, Gary, I appreciate that compliment so much. But john is a big mentor of mine, in the real estate business. And also as this conceptual individual, he’s very involved with Habitat for Humanity. And he’s a fine teacher, you’re just he’s top of the line on you know, I appreciate you following through with him, but I just have tremendous respect for him. And I refer a lot of people to his material, his books, and he’s got a newsletter, but his seminars, he only gets two or three a year. But all they’re wonderful.

Gary Pinkerton 22:16
So we didn’t talk too much, Craig, about your you know, really so much about your family and what you do, and when we talked about managing these properties, but really, this is an incredible story of, you know, over half a century starting back with your dad growing, owning, managing real estate, rental properties, income producing properties, and you know, some incredible things, I think it’s enabled for your family,

Craig Horton 22:38
it’s been a great journey. And it’s not easy, it’s a lot of work. But long term, why real estate is where it’s at. I’m just I’m like a preacher, I get on, it’s almost like the gospel of real estate, excuse my terminology there. But it’s, it’s, it’s like that, and you particularly, you get to the point where you have very low debt, and you’ve got strong, positive monthly income coming in, you know, after so many years, and you don’t have to do a lot for it. Wow, it’s just that’s a pretty good way to be provides incredible staying power, doesn’t it? Right, and it gives you a lot of freedom, because part of the real estate business is about freedom, you’re going to use capitalism to make you financially free and to make you also free as a person to do other activities with with what you have like one of the things that my wife and I have done, I’ve talked to you about this a little bit is we created our own foundation, we took one of our houses, that was free and clear. And we put in our foundation, eventually we sold it but we now give five to $6,000 a year to charities affiliated with our church, but anybody can do that. And I’ve tried to encourage people to do that. And then then again, the real estate business has enabled me to do that. And wow, this has been great. I really, and then we’re leaving a legacy. When we pass from this earth, my wife and I that foundation was still in existence. And every year, we will be helping others with donations and grants from that foundation. It’s wonderful.

Gary Pinkerton 24:08
That’s amazing. That’s incredible. I want to have you back on and talk more about that I am coming to the end of my allotted time. Thank you, Craig so much. Any any parting words? Or I didn’t ask you about a website. I don’t think your book is actually for sale, is it?

Craig Horton 24:22
No, no, but our website is med for better housing.com. And I’d be happy to if you go to the website, and we got an email address on there and you can send me an email, I’d be happy to talk to you. I always always like to one of my missions in life is to help others because I’ve had others help me over the years and I just tried to pass that on.

Gary Pinkerton 24:43
Yeah, I will tell you that guy will vouch for that. Greg is a wonderful gentleman who will will get back to you quickly with emails. Very, very prompt and courteous about that and he’s always ready to provide some good positive encouragement about every podcast that I do. I think he might be the only person that listens to everyone. Immediately.

Craig Horton 25:01
Oh, that’s great. Well, I get a lot out and I, you know, I’ve learned from successful people that you need to say thank you, you know, you need to just even if it’s in a brief email because people really appreciate that and I just think it’s, you know, my dad taught me that I’ve learned that Tom Hopkins another one of my mentors taught me that. Yeah, but they just the power of the thank you is so so important that I, I appreciate that feedback, but I need to say thanks, if somebody does a good job, it’s something that’s just really really important.

Gary Pinkerton 25:34
That’s awesome. Well, thanks Craig so much for joining me on this. We’re gonna have you back before too long. I’m gonna get Larry on here too.

Craig Horton 25:39
Okay. That’s great. He people eat love to do that. Be a proud dad if he if he was interviewed.

Gary Pinkerton 25:46
Absolutely. All right. Well, have a great weekend. Again, much appreciated my friend.

Announcer 25:53
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Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 93 of the heroic investing show, we’re getting close to 100. Folks Hang in there, we’re almost at 100. On this show, we focus on those challenges unique to military members to first responders and veterans. But we also focus on those that we all have in common all of us that go off to work and a W two job that perhaps is not perfect and ideal for us. Listen, if you’re an individual who is at that job that inspires you, and you would do it for free. That’s awesome. Most of us are probably not there, though, right? It’s not perfect, maybe it’s in the field that we love. Maybe it is doing things that we’re inspired to do. And certainly that’s where I was for my 30 years in the military, I certainly was proud of what I did, and what our people accomplished of what my of the incredible people I got to work with. But it wasn’t perfect. But I’m working very hard to make it perfect now to have a pursuit that I’m inspired to do every aspect of, and I’m really close to that. And I’m trying to help others get to the same place. So on today’s show in Episode 93, we’re going to listen to Jason talking about a concept of reducing risk by leveraging debt. I’ll call it the Donald Trump way. And he actually spend some time playing a clip of an individual talking about some research he had done on some trouble that Donald Trump had. And one of you know when one of his businesses went under and how having debt to secure that purchase both made it more of a reasonable solution, and one that basically saved him from total ruin, in that he had partners, specifically the lender to go through that event with him.

You know, I’ve talked about this many times with all of you, I think it’s an essential thing to consider when you’re starting to build your real estate Empire, or your businesses. Certainly imprudent debt debt taken on for the wrong reason, or heavy consumer debt taken on to buy doodads or just luxury items can get you in big time trouble. But if you’re taking on prudent fixed rate, debt that is backed by cash flowing, income producing properties, it’s a totally different ballgame. And in that case, debt helps you offset the impact of inflation. So instead of working against the government or trying not to get destroyed by the government’s decisions, instead, you’re working with them if you can’t, you know, a Bugs Bunny used to say if you can’t beat them, join them. And so, you know, Robert Kiyosaki talks about that a lot, you know, study what the Federal Reserve does, and then get on the same side of the table as them so that you’re not getting ran over by that steamroller of the Federal Reserve. So I have done a few videos, a couple of webinars, would gladly make them available to you, if you haven’t received them before or are interested, you know, please reach out to me at Gary at Gary Pinkerton COMM And I will send those your way. I show in these videos with the math with some calculators, that the ideas that the banks advertise frequently, of paying down your mortgage faster refinancing into a 15 year mortgage, making double payments, all of those put the bank in a better position, which is why the bank is doing the advertising, right, it doesn’t put you in a better position when you’re stuffing equity into your property. And let’s say you’re a couple of years from finished, you lose your job and you’ve put an extra couple $100,000 into your property. Are you in a better position? I mean, can you go to the bank and say listen, tough spot here, I lost my job. wife’s in the hospital needs an emergency medical procedure that’s not covered by our insurance that we actually don’t have insurance anymore because we lost my job. We’d like to get back that 200,000 you know, and the bank’s gonna save sorry, we’re not in the business of lending to people who can’t make repayments seem you don’t qualify for the loan anymore. Yes, sir. But I put that money in there in good faith following you know, the advertising that you did that this was going to set me up for success. So storing all of your wealth in a place where you don’t have any control is a risky move. Is it better to pay it off completely?

Well, maybe but let’s cover something else first. So that strategy of paying off you know and stuffing a bunch of equity into a into a place where you really They don’t have the control is the backbone of this concept that we’re starting to hear a lot about. And it’s dangerous. And it’s this concept of putting a HELOC in first lien position. So it’s really the same thing as having a primary mortgage, a long term fixed rate mortgage. But the difference is, it’s touted that you can save a lot of money, actually, you’re saving pennies, and I’ve got a couple of videos to help explain that as well. But you’ll save a lot of money by paying off your mortgage in seven years or by putting your your monthly w two income in there. And then using a debit card on your HELOC pulling equity slowly back out of the property as you spend, you know, on the monthly expenditures from there, so you’re kind of using it as your checking account. But the point I’m trying to make is that you’ve got all of your wealth stuck in this property again, just like we were talking about, about paying down a mortgage early. Yes, this HELOC thing supposedly has a 10 year window, where, you know, there’s a period of time where you can continue to do this, put money and take it back out. But you get to this point where you can no longer take it out. And then what I mean, if the lending conditions are such that there are good interest rates, then you can just refinance into another 10 year period of time or eight year period of time to get you know, an option to start pulling money out again. But what if the lending environment doesn’t support that or you don’t have the job anymore, or you just for whatever reason your debt to income doesn’t support taking the loan. Bottom line is, is that you’ve stuffed all of your family’s wealth back into a property and have no true control of it. In 2008, and 2009, banks cancelled most lines of credit that would have been opened by individuals. And if that happens in this situation, you don’t longer have money in your savings and checking for emergency funds, you’ve been talked into putting that inside your property, it’s not emergency fund if you can’t get to it. So please just be very careful with those types of arrangements.

Jason Hartman 7:01
Now, let’s talk about you know, completely paying it off. Well, a lot of people that seems to be kind of the American dream that your home is paid off by the time you retire. And people feel a lot of safe, no secure feelings about having a paid off, they’ve achieved the American Dream they have, they’re much more stable, they’re not worried about a mortgage payment. But again, the issue is you’ve got a lot of equity, got a lot of your family’s wealth locked up in a property that could go down in value, or, at best is just very difficult to get access to try getting a loan when you’re in your 80s or late 70s. And don’t have a job, right. So security is your only income, they’re not going to give you a loan to pull the equity back out of that property. But what if instead, you had just simply put the money in an asset that is private and protected, that maybe is even growing. And at any moment, if you needed to, for some reason, you could pay off the home by using the money that’s in the asset. But in this case, you’ve still got the money available, you’ve got both control of the asset, and you’ve got options, I think you’re in a far better position there. So again, I have a few videos, a couple blogs, some articles on those subjects. But please listen to him in here with Jason as he goes through this analysis of the situation that Donald Trump went through, you know, years before he was president, when he was heavily into real estate. And, you know, think about it for yourself about whether you’re safer with a fully paid off asset, or you’re safer, having the cash somewhere accessible, and control of the asset. I leave you with a quote that has been attributed to many, but I’ll use the JPMorgan one. If you owe the bank $100,000 and can’t pay it, you have a problem. If you owe the bank $100 million and can’t pay it, the bank’s got a big problem. And they’ll be your best friend to help you through that situation. So that’s all to say, if you got a big loan balance there, there are people there are institutions. There’s your partner, the lender, that will help you through that situation. And I think that’s, you know, kind of the theme that we’ll hear here with Jason’s discussion about what Donald Trump did when he was in a situation financial difficulty, but had had alone and how much difference that made. So enjoy this. And next time, we will be back with a really special guest, Mr. JOHN Schwab, who has 45 to 50 years of experience in single family rental properties as well as educating others on how to do it. You’re really going to love this one. So hang in there and enjoy this one with Jason Hartman.

Jason Hartman 9:39
Today, I’d like to talk mostly about debt. And we’ll have a little clip here talking about Donald Trump, who I think you’ll be interested in his philosophy on debt and hearing more about it. But a couple things before we get into our core content today. The first one is an interesting thing that Sarah, one of our investment counselors And also someone who does some of our rental coordination for us and for our clients gave me that I thought was kind of a good little thing to start off with. It has been a wild ride this week with the economy and Wall Street and the financial markets. And it’s just, it’s amazing what’s going on, I think the stock market is, is really nothing more than a gambling casino for business people. So glad that I don’t determine my mood, like some people do by what’s going on in the financial press and what’s going on with the the stock markets around the world on any given day, because it is a roller coaster. And he listened to the last podcast, you know how I feel about group investing, and investing in pools or investing in anybody else’s deal, or pooling money together, it’s just a bad deal. But suffice it to say that there is a lot of fear out there nowadays. And again, it reminds me of that great quote by one of the world’s most renowned investors, certainly, and that is Warren Buffett, when he said be greedy when everybody else is fearful, and be fearful when everybody else is greedy. And I tell you now, when there is a lot of fear out there, in my opinion, is the time to get real, real greedy, and start accumulating hard assets, hard assets that are built from commodities. See, if you think about it in 2006, in the United States, we broke the 300 million population mark.

Last year in 2007, we added over 3 million people to the US population, 3 million people that are counted 3 million that we know of not including various forms of illegal immigration. So the population of the planet increase. If you look on the front page of our website at Jason Hartman calm, you see that world population clock. And it is just incredible. go spend an hour on our website, listening to podcasts, downloading videos, and watching some of the great educational content reading articles, whatever it is, and just write down the world population when you visit the website. And then write down the world population when you leave the website. And you will see that there is good reason to be very, very bullish on packaged commodity investing, which we will talk about in a future podcast in great detail. But all of these commodities that it takes to build these houses, and build the commercial real estate that we’re helping people invest in, they are going up in value. So be greedy when everybody else is fearful. So when Sarah handed me this little quote yesterday, I thought it was interesting, because it’s about fear. And it’s from a calendar that she has on her desk that is based on the secret which we talked about a few podcasts ago. And it says that fear is the most debilitating emotion there is. And each and every one of us can live a life without fear. The key to absolute freedom and joy for each and every one of us is to let go of fear. Remembering you’re listening to flashback Friday, our new episodes are published every Monday and Wednesday. When you understand that fear puts you on a frequency of attracting more fearful events and circumstances into your life, you will understand how important it is to shift yourself. People are in fear of being late of losing their job of paying their bills of getting sick, the list goes on and on. But the fear of those things is actually summoning more of them to us. The law of attraction is impersonal. And whatever we focus on with feeling is bringing more of it to us. When fearful thoughts come stamp them out immediately. Send them on their way and replace them with anything that makes you feel good. Remember all of this stuff about the law of attraction. And the older philosophies of this, whether it be way back to biblical times, or James Allen or all the stuff I talked about on podcast number 40. About this is we’re just bringing more of it into our lives. So we need to focus on the opportunities.

The Chinese they have that symbol for crisis, which is identical to the symbol for opportunity. And it means crisis is opportunity riding the dangerous wind. That’s the literal translation. So every fear, every piece of bad news has a flip side of opportunity. And there is some market somewhere or some product somewhere or someone is creating wealth from it. Okay. Also, I think just last Sunday, I believe it was I got my first piece of hate mail. And I kind of like it when this happens because it really makes me think I like people who challenged my ideas. So I want to thank Jenny Jones, who I think sent me sort of a snide email, which was kind of a little hate mail piece I thought I’d share with you here. And I guess when you’re getting on someone’s nerves out there, it means that you’re doing a good job, right? in some way. Well, she says, Hey, Jason, here’s a good story, for you to read to bring you back to reality about real life, hope it’s affecting you too. And when you click on the story, the link that she sent, it’s about what’s going on in real estate and how tough it is for most people out there. And certainly, I’m sorry to see this. The real estate industry is a very dysfunctional industry. It’s massively overstaffed. And now we have a market in many areas around the country that is slowing down. And so this is a change, and it will be painful for some people. And remember, the key to minimizing this kind of pain in anybody’s life is to adapt quickly. And to make changes quickly and to be nimble and agile. When change comes in to expect change and be prepared for it in advance. I like to say expect the best, but be prepared for the worst. So anyway, this little sort of snide email that Jenny sent, I replied back to Biden saying, Hi, Jenny. That’s all true in many of the bubble markets, like California, Florida, and many others. We saw this coming years ago. And that’s why we never recommended these overvalued places. As bad as it is in the bubble real estate markets, it’s actually much worse than the mortgage business. We are doing business in 36 markets around the USA. And these markets make sense. We’re getting fantastic returns for our clients very conservatively. Last year was one of our best years ever. Actually, it wasn’t one of our best years, that was our best year ever, with a 50% increase in revenue to our company. So apparently, we seem to be doing something right here. At least that’s what our clients are telling us. It goes to show how there is no such thing as a national housing market, but rather hundreds of local markets in a country as large and diverse as the United States. Talking about real estate nationally, is like talking about the weather as if it is the same in LA, New York, Miami and Chicago all at the same time. Real Estate, like weather is local. Are you listening to my podcast? I asked her. I don’t know, I didn’t get a reply back to this email. And it’s been a week now. There’s a lot of great free info there.

And if you’re a listener, check it out at Jason hartman.com. We have listeners in 26 countries. And we’re getting lots of great feedback and much appreciation for our honest outlook on the financial markets. Let me know what you think and happy investing. So we’ll see if I hear back from my little piece of snide hate mail there. Okay, last show, we talked about how these overpaid, greedy people on Wall Street are just taking all the money off the top and leaving very little for us investors to share. And there was an article here in the May 21 2000 issue of Forbes magazine. I love Forbes magazine. It’s great magazine. But you know, it’s largely all about the lousy stock market. And it just talks about great while nobody’s watching, and it talks about how people are just taking money off the top, and it talks about overpaid bosses. This is unbelievable. This one CEO his tenure as chief was 39 years. average total return was 6.4% to investors. The last six year return was 4.5%. But the average compensation over the six years was $10.9 million and paid $12.6 million in 2006, including 1.3 million in annual bonuses while the stock was down 17% in the past year. Isn’t that ridiculous? And then it talks about the next one. The CEO of Walmart Lee Scott Jr. was paid $9 million in 2006. The retailer’s stock has been even more money in 2001. But here are the stats right? Seven years is chief during his tenure, the stock was down 3.4% in the last six years it was up point 1% only when the average compensation over this 10 year was $9.1 million. I mean, next one Amgen, Kevin share stock of the drug company firms slumped 18% in the past year, by chair and $7 million, including $250,000 for a company jet. It’s just on and on Eli Lilly Same deal. And by the way, they’re based in Indianapolis one of our markets, which we think is a great market but again, I wouldn’t want to be investing in their stock because the people making all the money Are the insiders, the people in the executive suite? Okay, let’s talk about debt a little bit here. And let’s hear how Donald Trump views debt and how we should too. In my seminars. I talk about a wall street journal article that is quite interesting to me. And this is an article in the Wall Street Journal, and it is titled stocks versus other investments and the date of the article so that you can reference it is September 30 1996. So it’s a pretty old article, and it is prior to the major real estate booms. And the article says stocks versus other investments average annual rates of return from 1926 to 1992, says Dow Industrials had been a wise investment decision. Now, the reason I liked this article so much everybody is because it is a very long sample. A lot of the people that argue the merits of investing in stocks or bonds versus real estate, will argue that I am only picking a favorable time period to take the sample. Well, first of all, I didn’t pick this time period, the Wall Street Journal did, and certainly the people that advertise in the Wall Street Journal are largely companies that recommend Wall Street investments, whether it be Merrill Lynch or fidelity or T Rowe Price or Janis or any of these mutual fund companies or bond companies, whatever they are Ameriprise all the rest, right? largely very few, very little of the Wall Street Journal’s revenue comes from real estate advertising.

Okay. So in this article, says Dow Industrials wise investment decision. But really, are they wise? Because what they say is that from 1926 to 1992, a very long sample, what did we have in this timeframe, we had a great depression, we had several wars, we had a lot of things happen in the US economy and the global economy during that very long time period. And it says that over this long time period, small cap stocks performed at an average of 12.5%, while real estate nationwide performed in an average of 11.1%. And the Dow Jones Industrial Average was in even 10%. Now, by the way, just for comparison bonds, averaged 5.2% treasury bills 3.7% and inflation 3.1% over this very long period. Now, I won’t get into the inflation subject, because we’ve talked about it on many past shows. But you know, my feelings about how the inflation numbers are manipulated. Here’s the problem, everybody, that even if you take what the Wall Street Journal says, it says Dow Jones have been a wise investment decision, you would have done better in real estate. But the reality is that nobody who is investing the right way in real estate ever pays cash for real estate. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday. So if you put 20% down to acquire a property, that means you are financing 80% of it, and you have a five to one leverage ratio. The real estate massively outperforms all the other investments. Because what happens you take that 11.1% that is the Wall Street Journal’s number, and you multiply it times 520 percent down 80% financing gives you a five to one leverage ratio. That means that the comparison now looks like this. Those small cap stocks that were number one before are still giving you 12.5% over this very long time period. But real estate is now giving you 55.5% that’s an annualized return on investment. Now you need to understand that is simplified because it doesn’t include buying the property and the closing cost on the way in. It doesn’t include selling the property and the closing cost on the way out. And it doesn’t include the cash flow or the tax benefits. Now closing costs in and out. You have commissions when you trade stocks and bonds, same deal. But on real estate, the closing costs are a little bit high. So of course, if you flip properties, you’re going to eat up your profits with closing costs. So don’t flip properties. We’ve talked about that on past shows. But the tax benefits real estate is the most Tax favored asset in America, bar none. So the tax benefits will make you a whole lot more money As long as you qualify for all of them. And there are ways to do that listen to that on prior shows. But the real estate just dramatically outperforms.

So assuming you have a slight negative cashflow on the real estate, you might chip away at your 55.5% return and bring it down to 40%. So what, okay, and if you sell the property, you might chip away at your return as well. But if you sell the stock, you’re going to have to pay capital gains. There’s no 1031 tax deferred exchange on stocks. Real Estate has that benefit, but stocks don’t. So you’re going to have another benefit there. Real estate is a much more favored asset. Okay. 55.5% with real estate at a five to one leverage ratio. What about the Dow Jones, still 10%? Okay, you could buy the stocks on margin, you could get a 50% margin on your stocks. But guess who pays the interest? You do on real estate, your tenant pays the interest for you? Because so far, I have never and I don’t know anyone else who has rented out their stocks so that the renter will pay the cost of the debt. All right. And then the other investments, same performance, you get the idea. Real Estate blows it away. Okay, here’s the return with 10%. down, and a 90% mortgage, same numbers quoted in the Wall Street Journal, September 30 1996. Now you have small cap stocks at 12.5% Dow Jones at 10% bonds at 5.2. Treasury bills at 3.7 inflation at 3.1. Over this very long period. Real Estate which was 11.1% 10% down gives you a 10 to one leverage ratio. Now you have a simplified annual return on investment of a whopping 111% you multiply times 10. But if you use more leverage, you will have more negative cash flow fine and dandy. chip away a little bit at that. So Fine. Listen to our show on deferred downpayment and you will see in detail how we calculate this. But what if that negative cash flow or that deferred downpayment brings your return down to 70% 80%? I don’t know 40%. So what you still have tax benefits, the real estate just massively outperforms any other investment. Remember, when you buy a property, you have a choice, you either put the money into the property or you put it in the bank, I say that the property is the worst bank. Real estate is a lousy bank, it does not perform well as a savings vehicle or as a cash flow vehicle. It performs well as a lean, highly leveraged vehicle for so many reasons. Now, many of you are probably readers of Robert Kiyosaki his books. He’s the author who wrote the Rich Dad Poor Dad series. And you know what, he’s a terrific educator. I like his material a lot. The last one of his books that I read is called who took my money. And in many parts of it, he’s kind of bashing the financial services industry, I agree with him. And he compares real estate, over 10 years $10,000 invested in a single family home, versus $10,000 invested in s&p 500 index fund.

Well, if you put $10,000 in 1992, in the s&p 500, by 2002, you would have back $17,400, approximately. But if you put that $10,000 into a piece of property, you could buy $100,000 property rented out, let your tenant pay most of the carrying costs of the debt, the property taxes, the insurance, everything, all right. And over the years, you’re going to raise your rent every year. So this is a simplified example again, like the other example was, but at the end of that 10 years on the average single family home, it would be worth over $158,000. So your gain on your $10,000 investment very roughly here is over $58,000 versus your gain in the s&p 500 have only $7,000 in change. And this is not including the incredible tax benefits. Real Estate offers as America’s most tax favored asset. Now I have talked A lot about the virtue of debt, real estate, because we put the real estate label on it, the entire US banking system and nowadays, many banks around the world in different countries see how favorable real estate is as an asset class, and they will offer much more financing on real estate, because they know it is a much safer investment than stocks. Why do you think it is banks will loan you 90 95% of the value on a piece of property, yet, they will only loan you 50% margin on stocks, because real estate is a safer, better asset class. Okay, so what if you get into trouble, leverage or debt needs to be treated with respect, it is a powerful tool for wealth creation, you can accelerate your wealth creation much faster by using leverage in a smart, conservative, prudent manner. But if you’re not careful, and you don’t respect leverage, you can also get yourself into trouble with it. So we have to respect it properly. Now, I ask a lot of you and I have before, how many of you have ever loaned money to a friend or a family member? Guess who was in control of that transaction? Was it you the lender? Or was it your friend or family member the borrower, it’s the borrower, the borrower has the position of strength whenever they borrow money. So I say borrow money. Shakespeare was only half right when he said neither a borrower nor a lender be being a borrower is a good position to be in, as long as you are borrowing money on assets that create wealth, and not assets that decline in value and do not create wealth, like consumer goods, bad borrowing, good borrowing, constructive debt, destructive debt. But the other thing that happens is that the lender, when you get into trouble, if you ever do is to a large degree, your partner, and your advocate, and the party that can help you through these troubled waters.

So let’s listen in to a clip from a great book entitled all the money in the world, or the author profiles, the Forbes 400 richest people in america. And here’s what he says in this short clip about Donald Trump. When Donald Trump the big real estate investor, the big real estate guru got into trouble in the 90s. What did his bankers do? Well, his bankers became his ally, his partner and his advocate. If he was not leveraged if he was not in debt, he would have had nobody to turn to except himself. So listening to this clip, and I will be back with you in a few minutes, and we will talk more about the virtue of debt.

‘Audio Clip’ 33:08
Donald Trump, he has learned the hard way that in the casino and real estate industry, it’s best to share the burden among as wide a group of people as possible, one of the highest profile victims of 1980s over leveraging and one of the few who lived to fight another day, Trump still emblazoned his name on many projects springing up around the country, but it is often other people’s money that bears the brunt of the risk. Trump began building his empire in the early 1970s by buying the railroad yards along the Hudson River of the failed Penn Central Railroad. Then he began investing in land in Atlantic City, eventually buying two hotels, the Trump Plaza and the Trump castle. Both were described as deteriorating and problematic. In 1987, Trump added to his Atlantic City gamble by borrowing $80 million to buy a controlling interest in resorts International, a company that included the Atlantic City Taj Mahal among its properties. The purchase was a first step in wresting control of the company. In addition to wrangling with shareholders, Trump also face competition from Merv Griffin, the TV tycoon who had recently pocketed $250 million from the sale of his television production company, which had created Jeopardy and wheel of fortune. Griffin outbid Trump for control of the company, and the two ended up in court. In hindsight, being outbid by Griffin was a godsend as Trump later admitted to Forbes resorts was in bad shape. Griffin’s company finance the deal using $325 million of junk bonds and went bankrupt a year later when it couldn’t handle interest payments. Trump who had retained only the unfinished time Mahal Hotel Casino, along with a $12 million cash settlement survived. But then he further added to his debt burden in 1988 when he bought the Plaza Hotel in New York City for $390 million, and the Eastern Airlines shuttle, which he renamed the Trump shuttle for $305 million. By 1990, Trump was more than $3 billion in debt. As Mark singer wrote in The New Yorker in 1997.

Trump’s excessively friendly bankers infected with the promiscuous optimism that made the 80s so memorable and so forgettable had finance Trump’s acquisitive impulses to the tune of $3,750,000,000. Through the early 1990s, Trump and his organization went through a debt restructuring. He lost the Plaza Hotel is Boeing 727 his yacht and the Trump shuttle. Worse still, Trump was personally liable for $900 million of the debt and was forced to agree to a personal spending cap of $450,000 a month in the opening pages of his 1997 book, Trump the art of the comeback. Trump recalls walking down Fifth Avenue one December evening with a holiday lights a glow, seeing a homeless bum on a corner and thinking that this unfortunate man was richer than Trump. It would take years for Trump to work his way back. In the mid 1990s, Trump took two of his heavily debt laden casinos public. The resulting company Trump entertainment resorts, filed for bankruptcy in November 2004 and reemerged the following may with Trump’s stake in the company reduced from 47% to 31%. And with James B Perry replacing Trump as chief executive, but the Trump Organization survived. Nowadays, Trump and his eldest children Don Jr. and Ivanka make their fortune overseeing other people’s projects and bestowing upon them the Trump name and brand. Trump gets eight to 15% of other developers condo sales usually puts up no money and gets upfront payments of several million dollars. According to Forbes, the Trump name can command a premium of 20 to 30% in added revenue for any project, and in 2006, the magazine reported no fewer than 33 Trump franchise projects underway.

Yet, when asked what was the biggest risk he ever took, Trump didn’t talk about his brushes with bankruptcy. Instead, he replied, I took a big risk when I decided to star in and co produce the apprentice. The statistics show that 95% of all new shows fail. Those were not great odds, but I had a feeling the show would work. I wasn’t expecting the show to become the number one show on television. That was a nice surprise. But I did think the concept had merit and knew we’d encounter some level of success with it. So how could a man whose businesses were once mired and billions of dollars worth of debt with $900 million dollars of that owed personally see his biggest career risk as the apprentice? As weird as it seems? It also speaks to the Supreme Self Confidence shared by Trump and many others on the Forbes 400. When asked about that time in his life, Trump says pressure can bring out the best and worst in people. And in my case, it made me stronger and more determined than ever. I also employed my blip versus catastrophe theory. Yes, I had some financial problems. But it wasn’t a war, an earthquake or something truly horrific. That allowed me to keep my equilibrium and perspective intact, and make my company bigger and better than ever. Then he adds, I was already planning for the future and what I would be doing, and I just knew that I’d pull through and continue working at what I love doing.

‘Audio Clip’ 39:10
In case after case, self confidence and fearlessness save the day for members of the Forbes 400 but it also helps if they are obsessed with their vision. Take for example the case of shipping magnate Daniel Ludwig. Born in 1897. Ludwig started out at age 19 with a $5,000 loan that he used to buy and convert a paddle steamer into a barge. Later he moved on to chartering and eventually building tankers, becoming the owner of the fifth largest tanker fleet in the United States. By the end of World War Two. Ludwig leveraged his tankers to build a fleet that peaked at 60 ships, which he then used as collateral for loans that financed business ventures throughout the world, including real estate and mining wasn’t

Jason Hartman 39:59
Interesting, by the way, there’s a lot of interesting stuff in that book or on the audio CD, which is what I played a clip of. And I’d encourage you to get it. It’s called all the money in the world. And it’s about the Forbes 400. It’s really quite interesting. Here’s the thing. Now, you may think after listening to that, gee, what if Donald Trump didn’t have that debt? The debt is what got him into trouble. Hmm. It does not make the opposite point. You’re wrong about that, if you think that because the debt is what allowed Trump to create so much wealth. And remember, the debt is what gives us the inflation hedge the main part of it, you’re paying the debt back and cheaper dollars. I mean, it’s kind of funny how they say that Trump said, Well, I was in so much trouble, I was under so much pressure he had he was getting his bankers put them on an allowance of what $400,000 per month, gee, it must be tough to live on that kind of money. And just remember, you can grow a lot faster with the prudent use of leverage. But I want to make something clear that anything that does not create income, does not qualify in my eyes as an investment, but rather a speculation. I’ve given the example on prior shows about when I bought those gold coins from the monex. dealer. And I said, I’ll pay cash for them because I have to you won’t finance them over 30 years, at the lowest interest rates. And for decades, I don’t get tax deductible interest, and I can’t rent them out to anybody. Remember, we don’t recommend vacant land, because it doesn’t produce income. Your house is not an asset the house you live in, because it doesn’t produce income. Anything that is a consumer item, a new car, a new plasma TV, a vacation, new clothing, that is not something you should use debt for, because it does not produce income. Only use debt for income producing assets like rental properties, because someone else pays the debt back for you. That is the key to creating wealth with debt. Otherwise, you’re a speculator, you’re just planning to buy low and sell high. If you buy stocks, you’re a speculator buy low, sell high, maybe get some dividends along the way. If you buy precious metals, you are a speculator Now, granted, I’ve made some good money in precious metals recently. And you might have to and a lot of people have, but did you know it was going to happen for sure.

Now, no one is ever Sure, predicting the price of gold or platinum or palladium or silver is nearly impossible. Ask all the gold bugs when 1980 who thought the price was going to go up forever. for 18 years, it’s out there and did absolutely nothing but decline. So speculative, buy something that has universal need. Everybody needs food, clothing, and shelter. And when it comes to shelter, the only choice they have is they either buy it or they rent it from you. Someone else pays for it, the bank pays for it, your risk is very low, because you’ve only put a small amount of money into the deal. And by the way, let me mention something else about risk and debt. When talking with people in some of my seminars and so forth. I’ve said before that the best insurance is a high loan balance. And you know what, I hate to say this, but it seems to be true, at least in past experience. Look at what’s happened after natural disasters like the Northridge earthquakes here in the 90s. In California, Hurricane Katrina, Hurricane Rita, the people that got hurt the most were the people that own their properties free and clear, because they were the ones that had to go fight with their insurance companies to get them to pay the claim. Where is the people that were highly leveraged, their lender became their advocate. Their lender was the one that helped them battle with their insurance companies to go recover the money and pay the claim after Hurricane Katrina, the states of Louisiana and Mississippi, I believe it was the Attorney General they’re sued all the big insurance companies because of their unwillingness to pay the insurance claims. You don’t want to go down that path. You don’t want to be arguing with your insurance company. You don’t want to have to go hire the attorney to bicker with the insurance company for you. Let your lender do it. your lender becomes your friend, your advocate, your partner who is in there with you, just like with Donald Trump, but the thing about it is that your lender doesn’t get any of the profits. They just collect a small interest rate paid for by somebody else your tenant pays your lenders interest rate you don’t pay it And then the value of that debt goes down over time with inflation. So you keep paying it back and depreciating dollars. listen to the podcast where I talk about inflation, especially the great inflation payoff. So I hope this was helpful to you to keep the concept of debt in perspective, again, a powerful tool for good, but it needs to be used prudently, conservatively and with respect. And you need to follow all the other rules for this to work. You need to make sure you’re not a speculator, you’re only buying properties that make sense the day you buy them.

That’s commandment number five. All right, so there are 10 other things you need to do, right? To make sure this works. Go see my show on the 10 commandments of successful investing, for more details on that. And in the meantime, we’re getting a little long here. So I want to say Happy investing to you. And Tune in next week. We have another great show coming up for you on a whole bunch of different interesting topics in the future. So this is Jason Hartman over and out happy investing.

Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are 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.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 92 of the heroic investing show where we focus on those challenges unique to members of the armed services to veterans, first responders, police, firefighters, and EMTs. Hey, we also focus on those challenges and goals that are consistent with everyone out there who is looking to finish that w two job and get something that provides more free time, more time with a family more time to focus on those things that truly inspire you that I’ve referred to as that unique genius of yours. So on episode 92, this one’s pretty close to Gary going off topic, if you Oh, it is very interesting to probably most members of the military and anyone who has, you know, gone back to the times of the cold war or followed Russia at all, after the breakup of the Soviet Union, all of the land grabs and other corruption that has kind of taken over that country even after the Soviet Union. We’re going to interview today and hear from Mr. Franz Sato. Our subtle Meyer and fronds is a German citizen grew up in Munich, went to the Munich International School, and then later came over and attended the University of Utah in Salt Lake. And ironically, I was interviewing and when I was interviewing him, he was visiting friends and was back in Salt Lake City, Utah, for our discussion, fascinating talk with Franz. So Francis history is that he moved to Russia in the late 80s. And was there for five or six years, while the new regime was coming to power. And there was some nationalization if you remember, that occurred, Boris Yeltsin put in place in the late night and 1994, I think it was. And he basically nationalized the resources that France had when that he had built up while he was in Russia and basically got kicked out of the country. During that period of time that he was there, though he was working for the government that the Russian government and was helping them with legal disputes, municipal, government, department, etc. And he then started a corporation following that the corporation I think, is under its same name. Now, if I if I understood him correctly, it’s its name is the multinational asset recovery company, or mark, for short, and he CEO of that company, it’s a US based company, but he works with individuals with across, you know, across the globe, many different countries trying to recover assets that are in a foreign country, and probably pretty difficult to get your hands on. If you can imagine, he is still the only individual who has successfully won a case against Russia and received compensation for his clients for assets that Russia had previously expropriated. The only person who’s gotten assets from Russia that they owed, someone, I guess, is the right way to say that he has gone on to reproduce that success in numerous different countries. He’s written a book about his time there in Russia. I love the title, the title is welcome to Putin grad.

So I think you’re really going to enjoy this perhaps it’s not heavily on buy and hold income property investing, but I have some, I think it’s fascinating and really enjoyed and had a great time talking to friends. But in case you’re pushing for the the income properties and the lessons to be learned there, there’s I have a couple of really good episodes coming up on that topic. One is from a gentleman who has been doing this for 43 years down in Florida, Sarasota, Florida. His name is john Schwab. And he runs a an interesting education program that we’ll talk about, but I mean, he’s got some seat of the pants experience having done this for five decades. And then the other is a student of his a follower of his and a very good friend of mine, Mr. Craig Horton. So both of those, there’s nearly a century of experience between those two gentlemen when you think about their combined time in operating large portfolios of rental property, so I think you really get a lot of value out of those two. We’ve got some discussions from Jason coming up as well from Some of his creating wealth shows. And I want to implore you one more time, please take a moment go to iTunes, or to heroic investing, but I think iTunes is best and leave us a rating. I’d love to hear from you. And if you have any feedback for me, please don’t hesitate. You can send it directly to me, Gary at Gary Pinkerton.com. Thank you so much, everyone. And please enjoy this fascinating discussion with Franz settle Meyer. France. Thank you so much for joining us.

Franz Sedelmayer 5:38
Thank you very much for having me.

Gary Pinkerton 5:40
Absolutely. So what I want to jump right into is this amazingly titled The Book of yours. Welcome to Putin grad. And for those who are not students of history, you know, of course, Stalin and many others in Russia’s history have figured out a way to change cities names to themselves. And so this is a little bit of a pond. I don’t think there is a gluten grad quite yet. But it’s a nice title to talk about your time in Russia. And I think being still the only person who has ever won a case against President Putin and Russia. Is that true?

Franz Sedelmayer 6:09
we’re not the only ones to win a case against Russia, or the president’s office, but the first ones were actually were able to domesticate the judgments and actually enforce them. Uh, wow. Okay, tell us more we have handled in excess of 140 cases, over a period of 18 years, we prevailed in most of those. And we succeeded in taking away real estate that belonged to Russian trade missions in Sweden and in Germany. And we managed to foreclose on that. And we actually got paid and no one else so far got paid ever.

Gary Pinkerton 6:43
Wow. So the Russian government paid out on on a lawsuit in a foreign country.

Franz Sedelmayer 6:48
Exactly, exactly. The background of this was that we had holdings, I had a company in Russia in St. Petersburg. And we got nationalized by then President Boris Yeltsin in 1996. And we managed to go to arbitration under a so called bilateral investment treaty, which is basically comprised of a private tribunal, which issues an arbitration award, which then we domesticated, for example, in Germany, and we also could domesticated in Sweden, and we enforced and Russia tried to do everything in their power to stop us from doing so. Wow.

Gary Pinkerton 7:26
So you mentioned 18 years of work on this. When did you first start doing lawsuits or representing lawsuits against Russia?

Franz Sedelmayer 7:34
We started on January 15 1996.

Gary Pinkerton 7:38
Okay, about a decade after the Soviet Union came down, so And when the Russian Federation was pretty well established, I guess, at that point,

Franz Sedelmayer 7:46
Right, exactly. Okay. And we were we were very hopeful that, you know, especially at the beginning of the 90s, that Russia would develop slowly but steadily into a democratic society. And that all went very fine until 1993. And then we had the so called White House push, which led Mr. yeltsin to send tanks and actually shoot at their own parliament building. Yeah, after that, Moscow was back in charge back in control, all the local initiatives ceased. And when we knew we were heading for different time, it was also a time where it became apparent that the yeltsin family was engaging in massive corruption through the privatization process. And they got worried there for a while, that things will catch up with them. Then they discovered flooding may put in who after 1996 started working for the presidential administration for the so called probably need alarm, a president. They saw that he was predominantly a very loyal person to whoever he worked for, he initially worked for an authority sub Chuck, who was the mayor of St. Petersburg, who was equally corrupt, and he served as his fixer, and that were qualified him for the yeltsin family, made him the chief of KGB, then appointed him Prime Minister, and then acting president in 1999. It was, you know, in the year 2000, he won the popular elections.

Gary Pinkerton 9:12
Yeah. So then he went for a while and stepped back a little bit. But of course, he’s now back strong. So what why did he do that? What What was it about the Russian society that required him to stand aside and kind of put a puppet in there for a short period,

Franz Sedelmayer 9:26
it was the Russian constitution that was crafted and enacted in 1994. And this prescribe the term limits, just like you have in the United States have two consecutive terms. And then he has to step down. So in that case, it took what I call the clone person by the name of innovative, identical in size, if not identical in character, and put him in this president and remain the Prime Minister for one term and then came back

Gary Pinkerton 9:52
so he’s nearing the end of another two terms. Do we see that happening again, or has has their legislation changed?

Franz Sedelmayer 9:59
No. The legislation has not changed. What has changed is the time period. It used to be four years, and now it is seven years.

Gary Pinkerton 10:06
So he’s

Franz Sedelmayer 10:08
absolutely. So he’s, of course, very hopeful that he has got the election process under control is the Russians like to say, which means I don’t think any other candidate will even stand a chance, especially the most dangerous candidates that he has against him as Mr. nnamani. Mr. Navalny was convicted of a crime of graft and corruption and fraud and the judgment, the Russian judgment was actually lifted by the European Court of Human Rights. So under the Russian constitution, in principle, Mr. Romney should be able to run, but they will not allow him to run.

Gary Pinkerton 10:46
Okay, so that’s 2019. We’re talking about there, I guess. Right.

Franz Sedelmayer 10:49
2018? Is the elections. It’s going to be in two months, actually, it’s rather close.

Gary Pinkerton 10:54
Okay. I guess I should follow Russia a little closer. actually mentioned something to me in the in our when we were discussing before the meeting, that the Americans shouldn’t be too worried about Russia, or Vladimir Putin? Can you expand on that a little?

Franz Sedelmayer 11:08
Well, you know, I’m in a comfortable position I’m looking in from the outside, I’m from Germany. So I’ve been following this so called Russia collusion story that has been implied by many people. And I’ve been amazed how blown out of proportion, this whole thing becomes, people tend to think of Putin like a superman dictator, a cold warrior that has a plan set out for the next 10 or 15 years, that he has the capability to destroy the West, etc, etc. I mean, nothing could be further from the truth. The Russians are very good in influencing other societies. I mean, their interference in the US elections is a given. It’s not something that requires a special order from Putin, as a president, it is in their DNA, the DNA of the intelligence services to try to disrupt Western societies wherever they can, what they have done in the United States, they’ve done in dozens of other countries. I mean, just look at Hungary, Poland, the Czech Republic, they are financing any and all, Alt right or left parties. Yeah, the more radical, the better. They’re giving out money, they support them through social media, they support them to their own propaganda channels like Russia today, Sputnik, and you name it, anything to disrupt the West, anything to destroy our confidence in the rule of law, in freedom, freedom of speech, etc. So they have been discovering social media as a very efficient tool. And as you can see from the headlines in this country in the United States, people take it far too seriously. Yeah, Russia only has 1/20 of the GDP of the United States. Yet, we feel as if they will take over the world tomorrow. It’s not going to happen.

Gary Pinkerton 12:57
Yeah, great points, great comments, I find it really surprising how much we give the Dark Knight, you know, how much power we give their countries. So you have a very interesting company that you run. It’s called mark. It’s multinational asset recovery. And so we talked about a little bit of that, with respect to Russia and the domesticating judgments you operate around the world or the globe, or is it really aimed mostly at Russia,

Franz Sedelmayer 13:25
it’s not aimed at Russia at all. I do take a lot of my professional experience, of course, for my last 20 years, but we have partners in the business. We have lawyers, we have accountants, we have intelligence people, we have experts in the field of law, also international law, who will handle disputes of international character, especially investors that go into difficult countries, where you will not find your, your classical western style rule of law with a partner, local partner that will try to take over their investment that are afraid of nationalization, etc. So we will make sure that we can secure the assets that they have on the ground, which at times also involves physical security, we will make sure that we provide them with a forum where they can go and sue for damages if the damage has occurred. We make sure that they can domesticate the judgment, the arbitration award, whatever it is, and actually be able to enforce that.

Gary Pinkerton 14:30
Wow, that sounds like the Wild West. It sounds like a very specialized trade, I guess, specialties. The best way to say it, but I doubt there’s a lot of competition in your world.

Franz Sedelmayer 14:40
It’s always the same. You know how law firms operate. They love to go out and win cases in a courtroom and that’s usually where it stops. But when it comes to actually collect horsing when it comes to collecting money, this is going to be the difficult part because usually the debtor sits outside, outside of our jurisdiction. So the art of the trade is to get to his assets. Yeah, that’s what we specialize in. Wow.

Gary Pinkerton 15:06
That’s amazing. Well, I’m glad there are people like you out there trying to spread rule of rule of law across the globe. That’s certainly what makes the wheels turn here in the West, right?

Franz Sedelmayer 15:16
Absolutely. Absolutely. In the relationship with Russia, right now, the biggest problem that we have is Western democracies, the United States, the European Union, we should not take the Russian bait, they have been very successful in sowing this trust between us, you know, transatlantic relationships, Europe, in the United States, Canada, in the United States, European countries, in the members of the European Union, everybody seems to be on a different path. These days, it’s high time we come back on the same page, much like we had in the Cold War, realizing what the facts are on the ground, who is the enemy in Russia is clearly not our friend right now. And we should reunite and we should tackle that beast, and we should change the world to make it a better place.

Gary Pinkerton 16:02
What do you suggest? Are you talking sanctions or just political involvement? Or what are you thinking?

Franz Sedelmayer 16:08
You saw that United States government has issued the sanctions list just the other week, even though they chose not to enact it, which I thought was was rather interesting, why, why the prepare, list and not do anything with it? The names aren’t on the list. All translate, I know quite a few few people on that list personally from my days. And I have to tell you, most of the names on that list are fleecing Russia, at a level that you will not believe it’s right at theft, the problem we have is that stolen assets end up in our economies, they end up in the United States In the United Kingdom in Germany and other places and affect us, right? They directly affect us, right? These funds are used to destabilize our own democracies, right? The Russian dream at the moment is that they will change us, they will change our rule of law, they will change our freedoms, to their benefit. The assets they have are here, they’re not in Russia, because there’s no money to be made with investment in Russia. It’s it’s made here. And the families are here, the children are here. Some of them have a second and a third passport for the time after the gravy train stops running in Russia. And we just sit here and we let it happen. And they’re using our rule of law to protect their stolen assets. Check this out. It’s amazing.

Gary Pinkerton 17:32
Yeah, that’s true. They certainly are doing that. But then they’re also trying to attack the one thing that we have, you know, which is is that the rule of law is effective, you know, that you can actually maintain freedom. And, you know, I think back to the actions of our military in places like Iraq, and Afghanistan, and, and all of the wars that came before Vietnam, and there’s been this resistance to subject our to lower ourselves to the actions of our enemy. And the real reason is because the only way that we are ever able to spread freedom and democracy is if we demonstrate through continuous action that no, we’re above that that kind of activity, right? So absolutely, it would be so much easier to combat this stuff head on. But

Franz Sedelmayer 18:21
right, but what’s one thing that belongs there to do that is the public opinion. Yes. When you read the headlines these days, and all the commentaries, in now, it’s like everybody seems to be said in panic mode. And there is no reason for doing that. There’s no reason at all. If you look at the cold facts of the matter, guess what, we’re in good shape. We are sitting in stable countries and stable democracies, and we’re going to be around for a long time to come. It’s high time we get our confidence back.

Gary Pinkerton 18:48
Yeah. So tell me about I have long believed or felt that the ability or the frequency of terrorist acts, small terrorist acts, you know, garbage can bombs and things like that has been far more common in Europe, with the you know, the many borders between many countries and close to Asia. And my way off there or the reason I ask the question is because we’re also very fascinated in America with, you know, being safe everywhere we go, you know, the bomb event at the Boston Marathon was just on believable in America. And I think we live such sheltered lives here. But can you speak a little bit to what life’s like in Europe before and after 911 911

Franz Sedelmayer 19:27
has changed everything. I mean, I for one, I saw the towers falling I was in. I was in depression for days and weeks. It was amazing. It was just changing times. But thank God we had we worked our way out of it and it became active. One thing people have to understand about Europe. I mean, it’s you take the distances in Europe, and you will see it’s very easy to cross borders. We have an influx of at least 2 million people, political refugees from Syria, from Libya, from North Africa for many, many other places and the security As a main concern, but we are not able, simply physically not able to control every single person that comes in. We cannot let these people when they come to the border, and when they say I’m a political refugee, a great number of them have disposed of their passports. So we can even identify them, we cannot check their backgrounds. So it is a lot easier for bad guys to use that process, which is a, you know, a humanitarian duty to take in people that suffer from political repression in their home countries. So it has just been so many people in volume, that it’s just hard to control. And that’s why we are fighting an uphill battle. Hopefully, we’ll get it under control. But it’s not anytime soon, unfortunately.

Gary Pinkerton 20:46
Yeah. Well, that’s been a fascinating discussion about Russia and putting them in perspective, I think that will bring a lot of perspective in solace, actually, to Americans. Anything you wanted to cover on President Trump and Putin and all of this stuff that has come out after the election? Any any thoughts on that?

Franz Sedelmayer 21:04
Absolutely. I mean, again, here, I follow the news. And I’m an avid reader of many American publications. And I’m amazed about this whole Russia collusion story. I mean, the Russians are known to try to recruit many people of any sphere of life, especially politics so that they reach out to people in the Trump camp, to sitting people in politics here in this country is not unusual at all. Again, it’s it’s a standard operating procedure for the intelligence services. So I’m fascinated that everybody seems to be taken by surprise. Yeah, it’s quite another question how efficiently they went about it, and if they really got any mileage out of it. But they have been very successful in making this a big subject here. So as far as the Russian mission is concerned that we’re very successful in disrupting the electoral process. In the aftermath, as you can see, with the Muller investigation, I’m sure there’s going to be certain convictions, but I don’t think anything is going to be perceived anything to do with, with giving up secrets to Russia or anything like that. I think it’s the fallout more of the obstruction of justice part that will lead to convictions, but I don’t think anything else yeah, so

Gary Pinkerton 22:19
the distraction the disruption was the ultimate goal probably to begin with, right, just as you said, standard operations of their services or secrets, or

Franz Sedelmayer 22:27
any Look, when you look at the reality, we had a chairman Chancellor by the name of GitHub trader, he now works for Russian oil companies since many years since he retired from office. He is one of the best known lobbyists who runs around Europe and the world in price the lobby for the Russian cause. The Russians are known to have recruited over 50 people, mostly from politics, press in the legal field, to lobby for them in Germany alone. So what is true for Chairman it certainly would be true for the United States.

Gary Pinkerton 22:58
Wow. Interesting. So well, this has been fascinating. What plans have I forgotten to ask that you want to talk about

Franz Sedelmayer 23:06
Where we can buy the book?

Gary Pinkerton 23:07
Yeah. Of course. A fascinating book called Welcome to Poon grad. And I’m sure it’s on Amazon, you have other choices. And also, please add how people can contact you.

Franz Sedelmayer 23:18
Please visit our website www Welcome to putting graad.com and you will find our ebook audio book in hardcover, Birkin. Of course, look us up on amazon.com just type in putting rod and I think you will find it a great read. It’s written with a good portion of humor. You know, life is serious as it is, but there’s always a good story to share. I love reading it.

Gary Pinkerton 23:41
I love it. So and is there a contact information on that site? Or should they go to mark

Franz Sedelmayer 23:46
they can go to mark as well just type in franchisee it’ll, man. And that will come up.

Gary Pinkerton 23:52
Awesome. That’s wonderful. And then of course there’s the info at Mark company.com as well that will work so up front. Thank you. Thank you so much. Enjoy the rest of your time here and a safe trip back to Germany.

Franz Sedelmayer 24:02
I will thank you so much for having me. This was fun.

Announcer 24:06
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out this shows specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 91 of the heroic investing show where we focus on the challenges unique to members of the armed services, veterans, first responders, including firefighters, police officers, EMTs, and everyone else out there, that goes in harm’s way 24 seven, to keep the rest of us safe with our families. My hat’s off to all of you, ladies and gentlemen, I used to stand beside you. But I’m glad you stand there for me now, because I’m enjoying my time with family and my new pursuits in life, you might have noticed a little bit of a motivated 91. There I graduated from the class of 1991 from the US Naval Academy. And when we were plebes, we would have to show some motivation when we yelled out our class of 91. And now my classmates across the globe every time something with the numbers 91 show up, they take a photo of and put it on her Facebook page. So it’s still alive and well with our class. But I’m sure anyone else out there, that’s a service Academy graduate, I brought back some memories for you. So 91 sir, thanks, everyone for persevering through my quirks, I guess I would call it today we’re going to listen to Jason talking about one of the most fundamental things, I think one of the things I guess unique that he has come up with talked about educated people on with respect to purchasing of rental properties. And he calls it the Hartman risk evaluator. And what he’s doing is he’s basically highlighting the land to improvement ratio, which again, is another term that he has certainly, he’s trademarked it, I think he created it, and it’s in it’s another really important concept, specifically that if you can keep a low land to improvement ratio, then the risk is low on the Hartman, risk evaluator, and really, there’s a certain amount of money that you have to put into construction, the cost per square foot of construction, right, and that’s the bricks and sticks, the commodities that go into building a house plus the labor, and that creates the cost per square foot of building any property. And so if you can buy below costs of construction, then you know, you probably have a pretty safe investment.

So here, here’s an example Jason talks all the time about properties he’d purchased in California that went up a few $100,000, right, and they could just as easily go down a few 100,000. My examples is similar about six years ago, we were looking to purchase a house here on the east coast on the Jersey Shore. And we found a house that was about 560 570,000, and a couple of others that were you know, in the ballpark. And I was just looking through Zillow and I found a property that was 425,000. And I thought, Oh, my gosh, I found it, it was real close, right in the same neighborhood, you know, in the same area within a buck or two, I went to the overhead aerial photo, it was raw land. So I chuckled a little bit. And that brought back that Hartman risk evaluator, there’s no way that I can make the numbers pencil out on this coast or any coast, California, Seattle, you name it. I mean, see, I was not really the coast, but it acts like the coast, when it comes to being a very, very cyclical market, but you get within sight of water, pretty much any of the oceans. And we’ll throw Seattle into that, and you are going to be in very high land cost area. And the issue is that that $425,000 plot, half acre plot that I looked at, could easily be $100,000, or 50,000. Just ask Detroit, it’s very difficult to lose $400,000 in the structure that’s put on top of a property and it’s possible, if he built a $2 million mansion, you could certainly you know, lose quite a bit in that but difficult when your cost of construction is maybe $120 a square foot or something. It’s tough to lose several $100,000 in that scenario. So that’s the Hartman risk evaluator in a nutshell, Jason does a much better job of talking through some numbers, and explaining its impact on ensuring that you’re not getting into a risky investment. So please enjoy this. This is one of Jason’s early, early early ones, as he was starting up podcasting, oldie but a goodie, right? Then that phrase that my father used to say all the time, when he talked about you know, 1950s music, it still rings true. And this is an example Have an oldie but a goodie, please enjoy Jason with the Hartman risk evaluator.

Jason Hartman 5:04
Today, I want to share a live clip from one of my recent seminars with you. On the subject of the Hartman, risk evaluator, folks, it took me 19 years to discover this, it is totally new thinking in real estate investing, as I have never heard anyone else talk about it, I have never read about it. And I’ve read lots of books on real estate investing benta, lots of seminars, and spoken with lots of people. So I think you’ll really find this refreshing. It is new thinking it is cutting edge and innovative. And I sort of stumbled on it by accident. What this is, is the Hartman risk evaluator, which is something that allows you to basically limit any downside risk in a real estate investment. To make sure of course, we follow all of the other rules we teach here, in terms of making sure the properties make sense the day you buy them, making sure the metrics work, don’t buy anything on a speculative basis, no gambling, follow the 10 commandments of successful real estate investing. That is in a prior podcast, I believe that might be number 15, or 16. And by the way, while I’m thinking of that, want to mention to you, many people are listening to our podcast now, but they are listening to only the more recent podcast. And I tell you, we have some terrific content available on the podcast in the past. So please go back and listen to the last few at least starting with number 14 or number 13. And go forward, you know, go all the way back if you have the time. Anyway, today, the Hartman risk evaluator let’s talk about limiting any downside risk, and maximizing upside potential of our real estate investments. This very cool thing, which is based on what we call the El TI ratio, LTI ratio, and that is the land to improvement ratio. This is a hard one to demonstrate without the visual aids used at the seminar. So if you have questions, contact any of our investment counselors here at our office, the number is 949-640-0505. Again, that’s 949-640-0505. And any of our investment counselors would be glad to explain it in further detail. If you want to come in and meet with him provide visual aids to help convey the ideas in this podcast or any of our podcasts, because we realize that the podcast is audio format and does not give you all of the visuals which are quite extensive in our seminars.

Jason Hartman 7:42
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. Anyway, listen in enjoy. And for further information. Also be sure to visit Jason Hartman calm our website where we’ve got lots of interesting articles, videos, PowerPoints, just a load of information and other audio content. So that’s Jason hartman.com. at your convenience, and enjoy this small vignette from one of our recent live seminars. Let’s listen in.

So this is the risk evaluation model. There are several things here Remember, we talked earlier about bifurcating your investment into two components improvement value and land value. This is something that took me 19 years to discover. And what happened is this. My insurance broker, Jennifer called me I was buying this house in Georgia, it was my second out of state property. Remember before two and a half years ago, I never purchased a property outside of Orange County. I own several here made lots of money on them. But never before two and a half years ago outside of Orange County. I was buying the second one in Georgia insurance broker Jennifer calls me up and she says Jason, we’re going to give you $135,000 of insurance on your Georgia property. And I thought, wow, as an insurance company, you only insure the improvement, not the land. Because the land can’t be destroyed. Right? The land can’t burn down. The house could flood it could burn down it could be vandalized, whatever the house is what they insure they don’t insure the land $135,000 insurance on the house, I realized wow, I only paid 159,000 for the whole thing including the land. So the land value was only $24,000. And that really made me aware of something that for the prior 19 years in the real estate business I never understood. I understood then this was a way to minimize any downside risk almost eliminate downside risk in my investments. Here are the things that go on here. The improvement value is determined By the cost of build it, and the builders profit, those two components go into the cost of the house sitting on the land. That’s the improvement value. Now what affects the improvement value? Well, environmental ism and building restrictions affected. Why? Because when the environmental movement gains more steam, and it becomes more restrictive, to build out existing plots of land, improve land that already has a structure and the associated entitlements to build that structure on it becomes more and more valuable. And the old riddle for this is, what do you call a developer? Someone who wants to build a house in the woods or at the beach? What do you call an environmentalist? Someone who already has a house in the woods or at the beach? Isn’t that convenient hypocrisy there. As this environmentalism continues to grow in strength and power, improved, real estate becomes more and more valuable, kind of to what you were talking about industrialization of China in India. This is huge. This has never ever before happened in human history.

You might want to look this article up on the internet. Richard, who’s sitting in back, who is my favorite pessimist emailed me this article thinking it would be negative probably a while back, but I really drew something really positive out of it. It’s a Business Week article, I’m sure you can find it on the net. I don’t have a copy for you. But it’s called a boom or bust. And the date is April 27, of 2006. And they interview Jeremy Siegel and Michael Milken. Remember Michael Milken, the junk bond King, aka crook, okay, the guy that spent some time in jail? Well, he’s definitely a brilliant guy, criminal or not. And here’s what he said. He said this, he said, Now look at wealth, most accumulation of wealth has been in the last 200 years, technology has driven it, many people predicted a more serious problems would be who would buy the assets of tomorrow, in the 70s, they predicted mass starvation, that didn’t happen. Now we see people that have moved out of farms into cities, because agriculture has become so efficient. Each farmer today feeds 350 others the idea we can’t produce enough food to feed humanity is no longer in Vogue, okay? We constantly underestimate life expectancy. In Japan today, the quality of life last longer than anywhere else in the world. They have 73.6 healthy years before becoming disabled by old age. So people are working longer. He talks about two major trends going on in the world today. And I’m skipping back actually, one is that there is a growing middle class population outside the US, which is where most of the world’s population lives. And two, there is a chronologically aging population in the developed world. So what is he saying here? I’ll just kind of sum it up for you. And then I’ll quote a little bit more later, milken says that basically, there are two huge generators of wealth around the planet now. One is that people are living and working longer and being healthier longer. So they are creating more value in world economies. all agree with that. Number two, technology, technology is creating more and more prosperity around the world. Now, the next one is globalization. And this is me talking. You’ve got two and a half billion people in China and India that are approaching, no matter how fast or slow they are a middle class lifestyle. Think about what happened over the last 100 years. And this is just me talking. This is not the article. Over the last 100 years. If you take the free developed economies of the world, you take Western Europe, you take the US, you take a few others scattered around the world, you had what maybe 400 million people 500 million people that were really the major contributors to the economy. And those people in those economies cause the price of every commodity on earth to get to where it is today. Basically, whether it be oil, copper, glass, steel, concrete, lumber, whatever it is, those are all commodities gold several years ago, it wasn’t Chinese people weren’t allowed to own gold. Now they are what happened to price gold when I’m not saying that’s the only reason, but I think it’s a contributing factor. Now, instead of having four or 500 million people, we’ve got two and a half billion potential consumers of resources and commodities. My mother went to China, just about a year ago. And she said I couldn’t believe it.

Jason, you know, you fly into these Chinese cities. It’s fly like flying into 10 New York cities. It’s unbelievably just go on forever. There’s just skyscrapers as far as you can see, and then you get on the ground and you look up. And you see there are cranes everywhere and more and more building going on. In fact, the national bird of China should be the crane. So then you look around the streets. And 10 years ago, everybody in China was driving what a bicycle. Now they’re all driving a car, lot more traffic, a lot more consumption of materials that build cars. And what else oil? Of course, what’s happened to the price of oil, you’ve got more demand. The basic theory of economics, of course, is supply and demand. So now you’ve got all of these consumers that are constantly increasing the demand on existing supplies. Look at what happened. raw material costs, the government tells us that in 2004, inflation was 3.3%. How do they tell us that the consumer price index, the CPI, but look at what happened to steel and iron prices? They went up 34% in the same year 10 times well, no 11 times almost the rate of inflation. lumber went up 17% wallboard this stuff went up. 20%. Think about what is happening. How many of you know someone who builds houses or offices or is a contractor? Anybody? Do it yourself? What’s happened, the cost of construction materials have gone through the roof. I did my landscaping on my current house a couple years ago, three years ago. And I couldn’t believe the bids. I’d done landscaping jobs numerous times on other houses iPhone, and I couldn’t believe how the prices were so high. I said to every contractor I got a bid from I said, Why is it so expensive? He said China? Hmm. They’ve driven the cost of concrete through the roof. So think about what happens when you buy a house today. Houses are made of simple low tech bricks and sticks, glass, copper wire, petroleum products, steel, maybe certainly lumber, wallboard, all of the concrete, all of these materials are getting more and more and more expensive. Because you have two and a half billion additional people starting to drive up the prices of them. A very good thing for us. Because think about what really happens. When we buy a house today. What do we do to our construction costs? we lock it in don’t wait. We lock it in for how long? Well, depends how long you think the house will last? I say five decades. I say a good 50 years is how long a house laughs IRS says 28 years whatever. Depends on the tenant, you know, I don’t know. But the point is, we lock in our cost. And everybody that comes after us has to pay a higher cost for these materials, because of the massive consumption of them. Just a reminder, you’re listening to flashback Friday, our new episodes are published every Monday and every Wednesday.

Jason Hartman 18:07
A lot of petroleum products go into house, copper goes into a house, coppers got to be mined, petroleum products have to be paid to come out of the ground. So that goes up what’s happening, the cost of labor? Is labor cheaper today or cheaper. 10 years ago, labor is going up. Certainly if you build anything or know anybody who does, they will complain about the cost of workers compensation insurance, right? really expensive for those people, energy costs are going up. Every time the cost of energy goes up. Really the price of your assembled house goes up that you own. I don’t like to invest in commodities. You know, I like I don’t buy commodities on the exchanges and things like that. But you know what i do like packaged or assembled commodities, where they bring it to the land, I own and build the house on it. All of these commodities, these materials. I’m basically a commodities investor in a way. And the better thing about my type of commodities investing is I get the bank and the tenant to pay for it for me, mostly, when the cost of energy goes up, the cost of your house goes up. I was complaining to my mother who’s quite a stock market freak. When the price of gas started to escalate so dramatically. I was complaining to her and she says Jason, Quit complaining just buy some oil company stocks. I made a fortune on Valero that’s the thing. hedge your bet. When the cost of other things go up. Just make sure you’re investing in that commodity so that you’re making money off of it too. So two components improvement value, land value, let’s look at what this means in real life does. Here’s a copy of my tax bill. Now look, I’m a single guy. I could afford a better house but I don’t want a better house because it’s going down in value. Frankly, I’d like to rent the better house if I had time to think about moving. Here’s my tax bill when I bought my house. Just over three years ago. I paid 815 1000 for it. Okay, why do I show you my tax bill? Because our tax collector divides the improvement or structural costs the house from the land cost. And here’s what the tax collector said. They said that the land was worth $660,000. And the improvement or the building sitting on the land was worth $156,000. What’s this gonna mean to us as an investor? Well, a lot, I think, here’s how it looked when I bought my house 81% land value 19% improvement value total of 815. A year went by, I got concerned because I noticed a lot of sold signs in my neighborhood.

So being in the business, I kept tabs on the values. And I noticed that the value of my house seemed to be increasing dramatically. And I got very concerned about this. Now, why would I be concerned that the value went up? Well, because I know that if the value went up, I’ve got what equity and I don’t like equity. The reason I don’t like equity is because it’s not FDIC insured. The best insurance is a high loan balance. And I know it’s earning exactly 0% rate of return. Nothing. I want to put my equity to work. I call up the bank, they send out this appraiser guy, appraiser guy says Mr. Hartman, congratulations, your house is now worth 1,000,003. Wow, too. I love real estate. Only a year goes by and I make $485,000. Nothing beats real estate. Did I know that would happen? No way. I have no idea. I got lucky. When you’re investing in bubble markets, you get lucky sometimes. But I can’t hang my hat on that. That can’t be my strategy to be lucky. So I want to take that money out put it to work in investments that you don’t have to be lucky in. That just makes sense. This investment doesn’t make sense. question I have for you is this when it went up? 485,000 in a year? What went up? land or improvement? improvement? Who votes improvement? structure? Okay, who votes land? We got more land voters. You’re right. Both went up. Look at it’s more expensive to build my house today than it was three years ago. No question about it. My house today, instead of costing 156,000 to build probably cost 200,000 to build, most of the increase was in the land. Now, most people agree that the market in Southern California is going down? We know what went up the most. But when it goes down in value, where does the decline come from? Does it come out of land or improvement?

Jason Hartman 22:50
I say that when it goes down in value, the risk area is the land. See the land is where is the only place the decline can come from, in my opinion, because the improvement keeps getting more expensive to build. Look at the great thing about houses is through low tech. Why is that great? Because you know, this laptop, the next one I buy is better and cheaper and faster. There’s always new disruptive technology in the tech world. But in something low tech, like a house where it’s just made of simple sticks and bricks, there can’t be any big innovation. I mean, at least not that I can see. Unless we’re gonna start living in you know, like a forcefield. You know, I just come home and turn on my house and it, you know, is a forcefield maybe that could happen someday. But I don’t see that anytime soon. Right. So if we know that the risk areas in the land now tell you something interesting about this. I called the appraiser again One year later. And it was the same guy from the same lender. And you know what, he came to my seminar and he sat right where you’re sitting now vj just about two months ago, he was sitting in that seat and I’m telling this story. He came over again. And he said I hate to tell you this A year later, your house has now declined in value. It’s only worth $1,215,000. It went down at 5000. I’m still at 400 still pretty good. But I hate it to give back the 85,000. But where did it come from? It came from the land. So what do we do with this knowledge? Well, if we know that the risk areas in markets with high land value, all we have to do as smart investors is stay away from this kind of market. This is all by the way the bubble markets around the country. Now. Did you notice that? This is Miami, California? It’s Vegas, it’s all of these overvalued bubble markets. This is why Arizona Nevada Oregon, it’s all looks like this. We want to stay away from this and go to areas that look like this where the ratio is largely improvement see my Georgia House 135,000 improvement 24,000 land if the land value gets cut in half on the Georgia House. How much am I gonna lose? Oh $12,000 I can live with that. What if I lose half in California? $500,000. That’s gonna hurt. A simple way to minimize downside risk took me 19 years to figure this out. And if it wasn’t for that call from my insurance broker, I would have probably never seen this. It just, I just suddenly discovered it that day. New thinking, hmm. But you never heard that before. Give me a hint.

Jason Hartman 25:29
Just kidding. So here’s what milken says at the end of this article. That’s really interesting. He says, with all this, well, the problem is not going to be who’s going to buy assets? The problem is, Are there enough assets for people to buy with all this liquidity around the world? Take housing, for example. We don’t have efficient mortgage markets around the world. But we’ve had a $20 trillion increase in housing assets between 1997 and 2004. If developing countries can fully borrow, what are they going to buy? Where are the assets for them to buy? That’s Michael milkins. Works. He’s a bright guy, criminal or not. The Milken Institute does a global capital access index every year, which shows China and India still very low on the rankings. Imagine what will happen when these two and a half billion people get access to capital. their economies are already growing at a rate of eight to 10%. Without efficient mortgage markets. Imagine when they can borrow. I mean, folks, the type of prosperity that will be created over the next couple of decades, I think is going to astound all of us. I think 6% appreciation in real estate assets with the commodities issue is like nothing. And that’s been 6.4 is the average for the last 38 years in the United States. The real issue milken says is rate of return. If that increases it solves the problem. In other words, attracting investors to invest and loan money in these economies. The issue will be quote, where can I invest? Not who is the buyer, unquote. The trend has already begun. Already. We’re seeing ads saying Help Wanted we need older workers. The only offense nowadays is calling someone aged 60 or older instead of midlife. Think about that. The rest of the world is growing so quickly. They’ll be looking for anything they can to buy. I couldn’t believe it, folks, the global economy and how incredibly pervasive it is. I’m sitting in a realty executives office. I’m looking at that market about a year and a half ago. I’m sitting with a realtor. They’re very experienced, very intelligent guy. He’s with realty executives in Knoxville, Tennessee. He said that a lady from St. Petersburg Russia, came to Knoxville not exactly a first tier city. It’s not New York or LA or Chicago, or even Dallas, which is kind of a first tier city and bought 37 houses from him. Yeah, the money is just sloshing around the world that there is so much capital out there looking for a place to sit, looking for a place to go. This is going to drive up the value of your assets in the years to come. And I think it’ll be a lot more significant than we’ve seen in the past, especially when you add inflation and all those other things into it.

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Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 94 of the heroic investing show, where we focus on those challenges unique to members of the armed sources, servicemembers, veterans, first responders, individuals that laid down their lives, and that put themselves in harm’s way, answer the call, so that the rest of us can spend time with our families and have some confidence in our way of life. We also focus on those challenges that we all face out there, those of us that are looking to back away from that w two job to get some time back with our families, and with those things that inspire us, those things that we’re uniquely gifted that that we would rather be doing. And we know we could provide more value to the world if we had time to do it. And so we’re looking for that passive income, I choose income producing real estate, as you all know, well, but there are many options out there, there’s passive investing, there’s being a lender, having royalties from some intellectual property that you’ve created, whether it be music, or a book, or prose, whatever you are good at, and that people will compensate you for adding value to their lives, then you should focus on spending time and getting better at that mastering that genius to provide to provide it to the world. So this talk today is an individual who has certainly mastered a genius, he is a genius, at single family income property investing, he’s taught it to 1000s of people over greater than four decades of operating in the Sarasota, Florida area. owning rental properties in his hometown. Sounds like a pretty simple model. But he has been wildly successful, he’s endured five or more cycles, economic cycles, and the most recent one was devastating down in the state of Florida, but probably not the worst that he’s seen.

For all of the rest of us, you would have thought that Florida had turned into a ghost town. But he went through all of them, he will attribute a lot of that to some things that perhaps go against what I talked about here on the show, and what Jason talks about. One of them is having some paid off houses. And I completely understand his perspective. I also observe in the discussion with him that it seems the more senior individuals become the more I don’t know, if it’s really experienced, it’s just kind of longer in the tooth that individuals become they want to be in a more cash position. So I understand that I’m setting myself up for that one day. But right now, I’m still trying to get as many of these amazing 30 year fixed rate Fannie Mae mortgages as I can get, because they’re an asset. And he also talks, john will talk a bit about that, you know, and that helping him out in his early years. So you know, to each their own, I feel you can safely use that the right kind of prudent long term fixed rate important fixed rate debt to your advantage, as long as you’re using it on a house, that’s still cash flows. But I think you’re gonna find some incredible value in this interview with john. And then coming up following the interview with john is an interview with a student of his and good friend of mine, Navy veteran, Craig Horton, and I think you’re really going to enjoy that one as well. So in this discussion with john, you know, we get into, you know, his really his lessons. So that’s where he can provide the most value for all of you. He’s got a book out there. That’s, I think, a wonderful book. It comes highly recommended by Craig, I have yet to personally read it. It’s called building wealth, one house at a time building wealth, one house at a time. And you can find that at his website, john shaab.com. He also works for has worked for Habitat for Humanity and he works for the fuller center created by the same individuals who started habitat many, many years ago. fascinating discussion. I think you’re really going to enjoy it and I think again, you will also enjoy the one that follows his in a couple of weeks here, so please, tighten the seatbelt and enjoy this discussion here with john Shaab.

Gary Pinkerton 4:55
Everyone, please help me in joining john Shaab to the heroic and Investing show. So john is actually the second only the second individual that I’ve had guests I’ve had on my show that is not someone that I previously knew beforehand. But john brings a wealth of experience. And I believe insights for all of you, new veterans, military investors, first responders who feel that perhaps it’s just a little A Bridge Too Far with your difficult, unusual work hours and lifestyle. But I don’t believe that’s true. I started while active duty, as you know, well in my history, and I think that listening to more and more individuals with approaches and long experience, lots of lessons like john, be very helpful. So john, thanks so much for joining us.

John Schaub 5:44
It’s my pleasure. Thank you, Gary, is served.

Gary Pinkerton 5:46
So john is coming to us from Florida, as I mentioned in the introduction, and has a few cycles, a few real estate cycles and a few decades of single family home investing. One question I had john is have you remained exclusively with single families,

John Schaub 6:04
I didn’t start a single family, I started in a land business, I sold lots and then I bought some duplexes, and some apartment buildings and a commercial building and a motel in a restaurant. So I’ve owned a little bit of everything, actually. And I bought my first house by accident, and I still have it. And what I noticed with the houses is they required less work, you know, everything else I owned, was really a business operation, a motel or restaurant, even duplexes, and apartments that have a lot of time to manage. And then I got where I didn’t have enough time to do all of it well, so I was looking for something more passive. And the houses were more passive, the people tended to stay longer. And you know, the whole different kinds, a lot of different types of houses a lot of different price ranges of houses, like I finally found a sweet spot my town where people like to stay long term, yet my profits were, you know, higher than some other investments. So the combination of a higher return. And lower management was very attractive to me. Plus, there was a lot of inventory. When I was buying motels and restaurants and that type of property, there’s very little inventory. Actually, my partner, I have a guy I was in business with back then he took off on another tangent, he bought mobile home parks. But his problem was he only bought one every three or four years because it was so hard to find one. That made sense. And then when he found one, he had raised a lot of money, because his average down payment was four or $5 million dollars. So it was a whole different game. And today, we stay in touch. And you know, we both been successful, but I wouldn’t trade with him. I like what I have, you know, I have my houses, they’ll have most of the ones I bought and most overpaid for now and the cash flow is good. And the management is pretty light, you know, I can manage them in one or two days a month. So don’t make a lot of time. So john, thanks for that. And you have all of your properties locally there and you personally manage them is that is that accurate? That’s true. I own property in 10. States, Gary, when I first got started, I thought it’d been a good idea to diversify. But that experience taught me that it was better to stay closer to home because you have better information, notes in the military, they get transferred around, sometimes you buy a house in one city, and you get transferred across the country. And many of those folks have held on to those houses worked out. But of course management is more of a challenge when you’re a long way away. But you know, military connections a good one, because, you know, if you’re reading somebody else in the military, you know, you know how the system works? And they do too. And you have a little bit better information. And then you went on some folks?

Gary Pinkerton 8:27
Yeah, absolutely. So I’ve noticed that in my decade here of real estate investing, which is, you know, not not even through one correction yet. I just bought coming out of the previous one. But I’ve noticed that if I had to put people into buckets, I would say that individuals who’ve been in real estate a really long time, are ones that would tend towards paid off houses, cash flow, no debt, individuals who are either in multifamily or have been in maybe a little bit shorter period of time, or more into carrying more leverage so that they can have more properties. And I kind of I’ll be the first to admit that I talked about that I’m in that category, can you give me a little bit of feeling about why or if you do, you know, feel that it’s best to have them fully paid off?

John Schaub 9:12
Sure. Well, you know, when I started, like you, you know, I had, I had no money down as I could, and then taking subject to and then finding an investor money and doing all the things I could do to the buy into properties, you know, and I did that with all kinds of properties. So you know, when you start leverage as your friend, first of all, you don’t have much to lose if you’re starting off broke and you go broke again, you didn’t change much, you know, started with sort of like playing poker once you start winning. Do you want to pull some money off the table? Real Estate is the way you do that, as you look for safer that you get smarter about how you borrow money and go for safer debt. The folks that went broke during the last recession were typically people that have a lot of bank loans and the banks wouldn’t negotiate with them so they took property away from them. I’ve always advise people to stay away from banks when they borrow money just because it does Much more dangerous. I have some bank loans, but I don’t have many. The ones I have are loans that I’ve refinanced, you know, after I bought a property subject to or something. But most of the houses I had to start with were not with banks, they were with individuals or private parties with financing for me. So when we have bad recessions, I’ve been through five really serious recessions, you know, we were able to survive because I was able to renegotiate with people, and I had private money, who would work with me and actually give me more money during the recessions. Not everybody gets poor during a recession, you know, there’s some people, the rich people still have money. And of course, that’s one of the best buys show up. So if you have access to some money during the recession, and who knows won’t have an excellent, but you can count on the fact that we will have another one, come every so often, it’s like hurricanes, they just show up every so often, when you least expect them, you just want to be prepared. So if you’re highly leveraged during a recession, you know, you’re at risk, if you had the even one house paid for or one out paid way down, where your payments are very low. And then you’d be a stronger position, and you’d have some cash flow, and you’ll be able to make some really good buys during the next one.

Gary Pinkerton 11:02
And I think that’s great advice. That’s awesome advice. I have a couple other, you know, related questions. How can you know really anyone accumulate $1 million worth of houses debt free? I think that’s one of the things that you talk about during some of the seminars you do?

John Schaub 11:18
Well, it’s it’s pretty simple, actually about to man over the houses, and you had your cell phone and video or half off to get the $2 million of the houses? Well, you mind one of the time, you know, my book talks about buying houses one at a time. And that sounds oversimplified, but it’s absolutely the best way to do it. Because you’ll learn every time you buy one. Yeah, you’re rarely going to get up hit a homerun. And hopefully it only hit a homerun your first time back, you know, because then you think you’re good, right? It’s better to struggle a little bit. But you know, as you continue to buy property, two things happen to you, you remember your last couple of deals, and you’re trying to make your next deal a little bit better, you know, maybe a little bit lower down payment, or a little bit lower monthly payment or a little lower interest rate or a little bit better price or a little bit better property, you just try to make it better in some way. And if you’ll continue to do that, over time, buying one house at a time, pretty soon, you’ll be pretty good at this, you know, after you’ve bought a half a dozen or a dozen houses, you’ll have a lot of experience. And you’ll be making better deals and you’ll be smarter about what you’re doing. So simply, if you ended up with a million dollars for the houses and a million dollars for the dead, you know, you want them all with nothing down. You don’t want to just start making bigger payments, it’ll take you forever to pay off that million dollars doing that. But if you’ll keep buying properties until you have another million dollars worth of equity, you can take the first million dollars in equity and pay off the other debt. And that was some free and clear. Time goes by pretty fast in this business. I’ve been doing it for over 40 years, I’ve owned houses, we’re now 40, I’ve got one house, I’ve owned 45 years. And I foresee that a 20 year loan on it. So that paid off 25 years ago. So for 25 years, that house has been given me a lot of cash flow. And I can use that cash flow to pay off other debt. So you know, you have some choices you can make once you acquire some property, you can either use the cash flow and the excess cash flow to the producers to pay off debt. Or you can simply sell a house and use the profit from that house maybe to pay off one or two or three Long’s The nice thing about inflation. And it looks like we’re gonna have some more here in the next 10 years. Is that a match the debt easier to pay off? Because your rents will go up? But your loan payments stay the same? Right? Well, you know, if you have one payment a day of 1200 bucks a month and the rents are 1500 bucks a month, you may come back in 10 years, and your rents may be 2500 a month. And you know, if you use that excess cash flow to pay off your debt, you’ll pay it off faster.

Gary Pinkerton 13:31
Okay. Makes sense. One of the things that I hear you I read that you talked about a little bit is the difference between a boom and a bubble. What kind of a distinction Are you making there?

John Schaub 13:42
Well, boom is what we’re in right now. I think where the economy’s strong, where employment is unemployment is low. And a lot of people have jobs, that people who have jobs are starting to make more money. They’re working overtime, and people are bidding more to get people to come in to work for them. So everybody’s just making more money now than they were four or five or six years ago. And then there’s a boom of bubbles when people are mined because the credit is artificially loose. You know, and that’s what happened is that at the end of that last boom, is that, you know, people might had tenants who didn’t have good credit and had no downpayment, move out of my houses and buy other houses that look just like the ones they lived in. And they lost almost everyone on Lawson because they were paying $300,000 for a house it really was only worth probably two or two and a quarter. But people were paying too much for them because the bank would lend them the money and they could afford the payments because the rates are artificially low. So you get these credit booms or new bubbles, credit bubbles. And the other thing that can cause a bubble is oversupply you know if we have right now, a lot of people are building apartment buildings, you know, they may may over build them and they overbilled them, there’ll be too many apartments too many condos and prices will come down just because of oversupply.

Gary Pinkerton 14:55
Yeah, I just said you teach a seminar once a year now. You’re down there in your hometown. I think in Florida, January timeframe, I think you entice us to come down to the beautiful Florida in January.

John Schaub 15:08
of our beautiful Sarasota in January. Yeah. Yeah.

Gary Pinkerton 15:14
So it’s a two day seminar and you go over a lot of the stuff that’s in your book we’ll talk about here. In a moment, how many people come to that seminar each year,

John Schaub 15:22
we limited to 65 people

Gary Pinkerton 15:24
65. Okay, so it’s really it’s a personal hands on situation. That’s pretty neat. And you also do kind of a field trip afterwards, or at least maybe in the middle of it, there’s some where do you go out to your own properties? Or what do you do their

John Schaub 15:36
own properties, and eight neighborhoods that are really like here in Sarasota, nursing. So my houses are not all on one street in one neighborhood. They’re scattered around this town, and it’s not a very big town were 60,000 z limits, and a couple 100,000 and the integrator Sarasota area, I have the students go out into neighborhoods where I know property values, and I know rents, and I know they’re good places to buy them identify opportunities in those areas, I have them go go walking up and down streets, and I tell them what to look for. And they find these things, they come back to class. And they see that even in a hot, we just did this, you know, a couple months ago, even in a hot market, they can find opportunity. So the lesson is, when you get home, first of all know your neighborhoods, you know, I teach them how to define which neighborhoods are the best to buy in, and that’s the rent in. And then the second thing is, once you identify those neighborhoods, there is always an opportunity to those neighborhoods, if you’re worried enough to divide, it takes some work, sometimes you just can’t sit at home and hope somebody’s gonna call you you’ve got to go out and beat the bushes and talk realtors and talk to lenders and you know, talk to develop leads. But if you’ll do that there’s always an opportunity in those neighborhoods. So that is a two part strategy. First of all, you want to buy good properties in good areas. And second of all, if you look in those areas, you’ll find them. That’s wonderful.

Gary Pinkerton 16:51
Okay, so let’s talk a bit about you have a few books, your your primary, or your original book, the one that’s still certainly out there and available. And I think probably the one that you would say, before you get the others go get this one. And it’s called building wealth, one house at a time. And and you wrote that one now, you know, 15 years ago or so,

John Schaub 17:10
I bought 1006. I rewrote it in 2016. So there’s a new edition out the second edition was out last year published by McGraw Hill. And so make sure if you buy it on Amazon, you get the new one.

Gary Pinkerton 17:21
Got it? Okay, who is this book, right? For the new investor, the person who’s trying to get to a higher level, more more properties, maybe a little about that.

John Schaub 17:30
I didn’t hold back when I wrote that book. It’s not a teaser book, trying to get you to buy something else. I wrote down everything that I could and you know, a few 100 pages that I’d suggested for anybody who’s investing in, especially in single family properties. But I’ve had a lot of people who buy apartments, and then other things by the book and find that my management ideas and financing ideas work in different types of properties. So it sounds a little self serving, but I think it’s a good book for anybody to read. I really wrote it for my kids, because someday I won’t be here and I want the kids to be able to know what I know. So in addition to that book, I recorded some courses I knew one day courses and record them on specific topics. And you can see all that on a website. I will talk about it but you know the website, john shop COMM And you’ll see articles and newsletters, other things on that that I write. So I continue to write I continue to teach a pretty low level because I’m occupied here with my own properties, I manage my own properties. And then I have kids and grandkids all over the world. So I travel around similar time.

Gary Pinkerton 18:31
Sounds wonderful. So for the listeners, it’s john chab schaub.com and nice website with lots of information and like he said some kind of home study course options on there. JOHN, you talk about well, I mean the title of the book is building wealth is not just about numbers in a bank account someday to pass on. And you just alluded to the freedom of life to be able to travel around to see the grandkids what else has building wealth meant for you and your wife

John Schaub 19:00
has given us the ability to be involved in community activities and give back be better citizens because of that. But it really does give you a lot of freedom you know to do other things, attended all my kids plays all like all our ball games, all that stuff I coached I wrapped I did all that stuff and it gives for growing up and now that I have grandkids I get involved with them. So it just gives you the time to do things that are important in life the freedom to go go places, I would just ask them last week scheme and you know, we we do a lot of fun stuff that well don’t you do that?

Gary Pinkerton 19:31
Yeah, I think that’s very well said. This is the kind of thing that people who are in our audience, the veterans and more importantly though, the active duty members, the military that are gone for months at a time the members the firefighters, police officers and EMTs that are working, you know, 24 hours on or a couple 24 shifts, you know, they have the flexibility but they also are busy and and I think they have this a lot of them have this misconception or this feeling that it just not achievable with their pace of life. And I am trying to get across the message that I that it is achievable. And so I appreciate certainly the help from individuals like yourself that provide resources to be able to do that. But it also has enabled you, you mentioned give back to the community, but you’re doing a wonderful thing with Habitat for Humanity and some other programs. Can you talk a bit about that

John Schaub 20:23
I got involved with Habitat for Humanity back in 1986. At that point, I’d reached all my financial goals, I was looking for something, you know, to do something that would help the communities. And then in the last 12 years, I’ve been involved with a group called the fuller center for housing. The fellow who started Habitat for Humanity was Millard Fuller. And he split off and started a new organization about 12 years ago, and I chaired that board and serve on that board for a number of years. And I’m involved with my local boards and our board. And what we do locally here is we help people stay in their houses, both the elderly and the infirmed. And voted have can’t maintain our houses. So we will do our best to help folks by doing repair work to houses. And we can do a lot of work to buy a house with a relatively small amount of money because we have all volunteer labor, and we have absolutely no overhead. We don’t have any office overhead. We don’t pay any salaries anybody. So the cost of our of us fixing the house up is is pretty low compared to most people. So we target people who who need our help. Some of them are veterans. Some of them are elderly, some of them are ill. But these are people in houses that without our help, they couldn’t stay in that house. So we help them stay in that house. Yeah, international basis for center builds houses and a lot of overseas countries. We’re in 60, some houses 60 some cities in the United States, and we’re in 16 countries overseas. So it’s a big organization. It’s not as big as habitat, but it’s doing good work. Both those organizations are excellent organizations.

Gary Pinkerton 21:47
And he said, fuller is internationally they’re building houses from ground up like habitat no more more like the habitat mouse model.

John Schaub 21:54
It’s a lot like the original habitat model most most all of us involved in the forests that were originally with Habitat. So we’ve got to go back and recapture that original habitat model. We’re building smaller, simple, basic houses overseas and in in the United States.

Gary Pinkerton 22:09
Got it? Okay. Well, that’s I was involved with Habitat for Humanity in the early 90s, as well. So that’s probably what I’m remembering it is I don’t know what it is and how at the moment, but I’m sure it’s still a wonderful organization. I participate and have talked with my listeners about a group called the siller Foundation. It’s a family who lost their son who was a firefighter in New York City. During 911. He was in one of the towers, helping trapped individuals. And that organization has grown substantially. And now they focus on building smart homes. So new construction smart homes for catastrophic Lee wounded veterans. And if you haven’t heard of that organization is called the tunnel to towers race or the siller. foundation. It’s a it’s a pretty neat organization as well, again, focused on disabled veterans. What else should I be asking? Or should our listeners know about the idea the concept of how easy it is, or at least how reasonable of a plan it is to start building wealth with single families?

John Schaub 23:09
Couple things. Number one, you don’t have to go out and buy a whole bunch of houses. I mean, people sometimes have big goals, and that’s okay. But most people don’t need 20 or 30, or 40 houses, most people just need a couple. My dad came to me when he was in his early 60s. And he said to me that, you know, my retirement is not gonna be enough for mom and I live on. So I said, well, let’s buy a couple houses. And we went out and bought three houses for him when he was in his early 60s. And we use the extra rents to pay him down. So by the time he retired at the age of 70, he had free free and clear houses. And they weren’t fancy, they weren’t big houses, they were just nice little houses. But those three houses paid him about $1,000 a month apiece throughout his retirement years for a long time. You know, $3,000 a month is a lot of money to most people. So you don’t need to buy 20 or 30 houses and make a significant difference in your life or somebody else’s life, if you have parents is a grand idea to help them buy some houses just like I did my dad, because when dad died, I inherited the houses, there was no bad news here, you know, I bought the right house, I manage them for him while he was alive. He has some downpayment money, so it made it easier for him to buy. So you can think a little bit about the generation ahead of you, you know about helping them get through and you only get one chance to inherit property most of us do anyway. So when you inherit property, you get a stepped up basis. And of course, if you want good property with good tenants, they’re good investments for you too. So you don’t have to get make it too big. The other thought I would have for you is that you should be buying in any market. You know, people try to time markets, they try to figure out what’s going to happen tomorrow. And honestly, nobody knows what’s gonna happen tomorrow. I don’t know. If I knew, you know, I’d have a lot more money than I have now. So you know, you can’t predict the future very well. But you should always be trying to buy because you can find an opportunity in any market and prices will come and go you know, but what typically happens in a house business is the next Whoa, we’ll be probably about the same as the previous highs. So they keep creeping up in price. And I’ve been doing this long enough to see my rents go from 250 a month to about 1850 a month on the same house. So time is is your friend in the real estate business, you know, when you start to buy, if you can buy the best property you can afford, you’ll be happier because you’ll have less work. And you’ll have more money invested in that one property than you would if you buy up a really inexpensive house. Sometimes people start in the house business and they buy very inexpensive houses. And they’re not bad investments. But they do take more time and they don’t go up as much as one reason they’re inexpensive. So find the quote, the highest quality property you can make sense out of when you start, I think is good strategy.

Gary Pinkerton 25:42
That’s awesome advice. And I especially appreciate your comment there about helping our parents purchase properties as a retirement solution, that I have never really considered that. That’s a new one for me, john and fits perfectly with my current my in laws, actually my wife’s parents and their situation they live not too far from me, they’re in Florida. And I appreciate also you bring it back around what we talked about before recording, which was that we’re certainly in alignment on the concept of newer, nicer homes, and that that’s just a much better experience for you those those rehabbed, you know, maybe multifamily older properties sure look good on the performance that they don’t play out to be a good experience, in my opinion. So I appreciate you bringing that back around. JOHN, thank you so much. I just want to finish up again by mentioning your book Building Wealth, one house at a time, and then your website, again, all of that all of that and more is available on john shop. That’s john s ch a ub.com. JOHN, thanks again for joining us.

John Schaub 26:44
My pleasure. Thank you for having me.

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Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Jason Hartman 0:40
Welcome to the show, this is Jason Hartman, your host and every 10th episode, we do something kind of special kind of different. What we do is we go off topic so regardless of which show it is on the Hartman media network, whether it be one of the financial shows economics, real estate, investing, travel, longevity, all of the other topics that we have every 10th episode, we go off topic, and we explore something of general interest, something of general life success value. And so many of our listeners around the world in 164 countries have absolutely loved our 10th episode shows. So that’s what we’re going to do today. And let’s go ahead and get to our guest with a special 10th episode show. And of course, on the next episode, we’ll be back to our regular programming. Here we go. It’s my pleasure to welcome Nicholas Christakis. He is an MD PhD, and a Master of Public Health. He’s a sociologist and physician who conducts research in the areas of social networks, and bio social science. He directs the human nature lab. His latest book is Apollo’s arrow, but he’s author of several other fascinating books, including connected the amazing power of social networks, and how they shape our lives. And blueprint, the evolutionary origins of a good society as well as several others. Nicholas, welcome. How are you?

Nicholas Christakis 2:09
Thank you so much for having me.

Jason Hartman 2:11
It’s good to have you on and where are you located? Are you at Yale

Nicholas Christakis 2:14
today? Uh, well, let’s just say I’m up north in the mountains. North of now I’m in Vermont.

Jason Hartman 2:21
Good stuff. Good stuff. Well, tell us a little bit about Apollo zero. That’s your most recent book. And let’s just dive into that one first.

Nicholas Christakis 2:29
Well, I think everyone who’s listening to this is, is probably been spending a lot more time than they want to thinking about the coronavirus pandemic. And I think one of the messages I would try to get across this, this, this very unnatural, and alien way we have come to live now, all of us, you know, working from home and not seeing our friends and having schools close down and millions of Americans have lost their jobs. All of this experience, this awful experience that we’re having is not new to our species. It’s just new to us. plagues have always been a part of the human experience. It’s just the case that these types of serious respiratory pandemics that we are now experiencing are rare. They come about once every 50 or 100 years. And so we are having a once in a century type experience. You know, it’s like, it’s like flood insurance, you know, you most routine stuff is not a problem. But once every 100 years, you get a big one, which is nearly 50 100

Jason Hartman 3:24
year flood zone. Right?

Nicholas Christakis 3:26
Exactly, exactly. So that is sort of what we’re having. We’re having a kind of once in 100 year, respiratory pandemic, which is also outside of the living memory of many people. So what I tried to do in the book is I tried to provide a deep understanding of the origins of Coronavirus, the current status that we’re facing, and how it will end you know, how the how the pandemic will end and I, I position this pandemic, this experience that we’re having in the history of 1000s of years of pandemics where people you know, bubonic plague, or polio, or HIV, for example, or the 1918, influenza pandemic, or Ebola outbreaks, you know, these are features of human experience. And we have evolved biologically and have also developed the kind of social and historical memory for how to cope with these types of plagues.

Jason Hartman 4:15
So I guess my first question on that is, does this rise to anywhere near the level of severity of these other pandemics and plagues that we’ve had? I mean, you take the Spanish Flu 102 years ago, that seemed far more serious than this, or, you know, a lot of people now are starting to really believe that this whole thing is totally overplayed. And, you know, never let a good crisis go to waste type thing. But you’re an expert. You’re a public health expert, right? You’re a doctor. And then kind of my follow on question to that is, is the cure worse than the problem, or at least the reaction, it’s not the cure, but the lovely

Nicholas Christakis 4:55
downs and so forth. But let’s talk about both of those things. First, let’s acknowledge that about a quarter Have a million Americans are known to have died of Coronavirus. And there’s some people who question those numbers. But really those numbers are quite solid. And if one of your listeners is thinking yeah, but those people would have died anyway have something else.

Jason Hartman 5:11
comorbidity?

Nicholas Christakis 5:12
Yeah, well just ask yourself how you would feel if you had cancer, and you were hit by a bus? Would we say that you died from cancer? Or would we say that you died because you were hit by a bus you wouldn’t have died if you’ve not been hit by a bus. So just because you have diabetes and you die of Coronavirus doesn’t mean we can just say Oh, never mind, you would have died of diabetes anywhere? No, you weren’t here by Coronavirus

Jason Hartman 5:35
that that is certainly a fair statement, because you might have lived with diabetes for the next five years or 10 years depending on how serious it was. But I and I get it. I totally agree with you.

Nicholas Christakis 5:44
But it’s that’s that’s the same with all causes of death. So you could have multiple conditions. You could have cancer and a heart attack. And if you die of a heart attack, we say you died of a heart attack you you had a you also had cancer. It’s true. But the thing that killed you that but for which you would not have died was the heart attack. So this this idea that we can somehow define a way the problems Oh, yes, a quarter million Americans have died of COVID. But it doesn’t count. It’s just wrong from the point of view of how we met have measured debts for hundreds of years. First point.

Jason Hartman 6:16
Fair enough. The issue though, gets into one of it’s always follow the money, right. And there’s a financial incentive to call these Coronavirus.

Nicholas Christakis 6:27
There’s not that’s awesome. Okay, no, absolutely not. In fact, hospitals are losing money. One of the deep ironies of our healthcare system is that our healthcare system is organized in a fashion that many small hospitals around the country are closing or are a threat of closure. And many large hospitals have lost many millions of dollars, because we pay for elective procedures. And so at a time in our nation’s history, when we most need our health care system. We don’t pay well, for taking care of people with infections, you get much more money by having these highfalutin procedures, which is already a pre existing screw up in the way our healthcare system is organized. So many, many hospitals were dying to reopen their hospitals to start doing more knee surgeries and elective, you know, plastic surgery procedures doesn’t make a lot of money on those. But you don’t make a lot of money taking care of someone who’s dying of an infection. So now this is also a myth. But what I want to frame for you is is that we know of a quarter million Americans have died that have died of COVID because they were infected with COVID. And that is what caused their death, regardless of whatever else was going on with them. But in addition to that there are many other Americans we know from some statistical methods which we can discuss, although it’s a little boring, that probably the numbers around 300,000 Americans have already died of Coronavirus. Right now the pandemic is filling hospitals around the country we’re in the middle of the or the beginning of the second wave of the of the pandemic which is very typical of pandemics. We I’m unfamiliar with a respiratory pandemic in the last 100 years, that hasn’t come in multiple waves. And incidentally, there’ll be another wave a year from now, even if there is a vaccine, the vaccine will just make the wave smaller. So I predict that between half a million I and other experts predict that between at least half a million Americans will die of this infection. And maybe maybe as many as a million, it is impossible in my eye to look at that toll of death and try to sort of pretend that it’s not happening or define it away, because those people would not have died. Now, if this pathogen had not arisen in China in November, those people would all be alive right now. But they have all been killed by a new germ, just like germs have killed people for 1000s of years. If you have cancer, and you get infected with a germ that gives you pneumonia, we say the pneumonia killed you and we would have tried really hard to avoid you’re getting pneumonia, we would have given you vaccines, we would have treated your pneumonia with antibiotics, we would have just said Oh, it doesn’t matter. You had cancer anyway. It’s just not how the system works. So just to frame it, between half a million and a million Americans are going to die of Coronavirus within the course before this pandemic ends. Okay. Now let’s go back and look at the 1918 pandemic.

Jason Hartman 9:08
Before you do that, though. And so we’ll know we

Nicholas Christakis 9:10
can compare them so people can understand like, How bad is this? Which is fair enough?

Jason Hartman 9:15
Yes, I definitely want to get there. But I just want to ask about the frame on the financial incentive thing for just a quick second. I agree with you that the hospitals seem to be suffering from the loss of those lucrative elective surgeries like a knee surgery and you know, so forth like that. But, you know, maybe that’s not the right way to look at it. Maybe the way to look at is look, once the patient is there, they’ve got something and if they pass, calling it COVID gets them the $30,000 from the government, right versus, you know, battling with the insurance companies over whatever else they might call it. That’s all I’m saying. It’s a small distinction, but it might Important in the stats,

Nicholas Christakis 10:02
it would require a level of misbehavior and fraud on a scale that to me strains credulity. The way these systems are organized as speaking of someone who is certified hundreds of deaths, I mean, it sounds lots of death certificates. I’ve done this. Speaking of someone who has studied insurance claims data in the diagnostic data, this would strain credulity in my view, there is your right and elaborate bureaucracy for reimbursing hospitals according to different things. And you are right, that if you die of two different things, and if the hospital believes that you can plausibly be assigned to have died have to, you know, equally plausible without lying, that you’ve died of those two things, they might pick the thing that pays more money, which itself is an indictment of our whole healthcare system and how we’re organized certainly,

Jason Hartman 10:46
yes.

Nicholas Christakis 10:48
Okay. All of that is nuts. Okay. But all of that proceeded Coronavirus. And this idea that somehow we are falsely inflating the number of deaths is just does not fit with all the data. And besides which, even if you don’t want to rely on the death data, which is what I take as the most reliable source, you have all the case data, you have the hospitalization data, you know, you have data that isn’t subject to this potentially perverse financial incentive, which also shows millions of people with his infections. And then coming back to your original question. Now, 10 months into the pandemic. We know quite a bit about this virus. There are at least a number of important epidemiological properties that one can understand about a virus. Let’s start with just two of them. The two most important ones. One is how deadly is the virus. This is called the infection fatality rate or the IFR. Now, a lot of there’s been a lot of hot debate about this and so on. But I can tell you that now, there have been something called meta analyses where people combine information from many different studies using many different approaches to try to really understand how deadly is this virus? Keep in mind, we do this not just for Coronavirus, but for many viruses. This is there’s a whole group of scientists whose whole careers for decades has been devoted to this topic. And when they deploy the methods they’ve used for multiple other conditions and they study this condition. We know that the virus will kill between point five and point 8% of the people that it infects. So it’s IFR is between point five and point eight. Now one of the weird things about this virus is that about half the people who get it have no symptoms, which is good news on one level but bad news on another level. It’s bad. It’s good because great it doesn’t kill you. It’s bad because it confuses people into thinking maybe this isn’t such a good bad virus because many who get it are spared. So people aren’t the man on the street thinks Oh, well, you know, it’s not so bad. No, this is a bad virus, a pathogen that kills between half a percent. And point 8% of the people who get infected with is very bad. And if you get symptoms of it, because half the people don’t get symptoms. If you get symptoms, then your risk of death is double what I just told you between 1% and 1.6% of the people who get symptoms of Coronavirus will go on to die. That’s a bad pathogen. Now it does vary by age. This is also true and we can discuss it. But overall it’s about let’s just say 1% of the people who get it will die of the condition. So that’s the first number. The second number is the contagiousness of the pathogen. And this is something that the person on the street is now familiar with or if you don’t understand you used to watch the movie contagion or World War Z which is another great movie or three watching. I didn’t see World War Z but I saw contagion Yeah, they’re both really good. Now in contagion the pathogen there by the way, the lethality of the pathogen is about 30% of the people who get it not 1%, one in three approximately die. Now, just to understand as a tangent on our conversation, we are lucky that the COVID-19 is not more deadly, there’s no God given reason it’s not more deadly. It could be killing 10 times or 30 times as many people and if it were so deadly, we would be having today an experience like Europeans had during the Middle Ages with a robotic plague, we would be annihilated. And people need to understand that we are just lucky that this pathogen bad as it is killing 1% of people. In fact, it is not worse, it could have been much worse. Okay. So the next thing is this. So that’s in the movie contagion to kill lots of people. But let’s go back now to what we were talking about, which is a v v comparison of 1918. Yeah, the how contagious the diseases. So this is quantified by something called the R not the R sub zero, which is what is the intrinsic capacity of the virus in a normally interacting host population that has no immunity to create new cases. So in the case of this virus for approximately, for each person who gets it, they create between two and a half and three and a half new cases, let’s say three. Okay, so each case, the intrinsic spreadability of the germ is that each case can create three new cases. Of course, if we all live apart, if we spread out and do physical distancing, then it can’t do that. But the intrinsic infectiousness of the pathogen is still the same regardless of what we do. So If you take these two numbers, how deadly is the jerk is a germ and how spreadable is a germ and you plot them on a graph. And you look at all the respiratory pandemics from the last 100 years, the worst one would be 1918, the most deadly and the most spreadable up in the right hand corner of the graph. The second worst one, up until now was the 1957 influenza pandemic, which killed about 110,000 Americans back then, which would be about 220,000. Today, that’s the second worst one. And then there are all the others. For example, there was the 2009 h1 and one pandemic that nobody remembers, because it didn’t kill people. It’s spread a lot. But it was mild. It was like the common cold. So no one remembers that that’d be down low here. This pandemic that we’re experiencing right now, by those two numbers, is the second worst pandemic we have had in 100 years, it’s not going to be as bad thank God is 1918. But it’s worse than 1957. And it will kill as I said, between half a million and a million Americans. We as a nation need to take this seriously. We can’t wish it away. We can’t pretend that our generation of people compared to all of human history, for what reason? I’m not sure people would think this would be spared a plague. Why? Why? Or why would Why are we?

Jason Hartman 16:17
Because the modern mind thinks that technology and science have solved every problem. Yes, but

Nicholas Christakis 16:22
then when the science correct, but then when the scientists tell you, this is serious pay attention, you know, do X, Y and Z people think oh, well, you know, people are making up No, no, no, I’m telling you the truth about what is happening to us. And there are 1000s of scientists who’ve devoted their entire careers studying these exact things. Now it’s true. Scientists get things wrong. They debate among each other. And we can talk about that. But the principle of science is that it’s self correcting, that if I say something wrong as a scientist, some other scientists will come up and say, no, wait a minute, here’s my evidence for why you’re wrong. And so slowly, we get more and more knowledge and the things that I’ve told you so far, have been robustly demonstrated. They’re very uncontroversial from a scientific point of view.

Jason Hartman 17:05
Okay. So what is the solution? Is it more lockdowns and quarantines? Is it the vaccine? You know, when you look at these vaccines, you know, what are your thoughts about them there? It’s still very early, obviously. And then how does this whole thing end?

Nicholas Christakis 17:21
Yeah, so I discussed that in a policy arrow at length. And

Jason Hartman 17:25
that’s why I brought it up. Because if you had a chapter with that title,

Nicholas Christakis 17:29
exactly. So just as a sidebar, the our ability to invent vaccines in 10 months and show that they work is miraculous. And we are lucky as that our time in the crucible happens to occur at a time when humans actually have the capacity to invent these countermeasures in real time. No previous generation ever has had this capacity. So but the vaccine is not going to be a panacea. I don’t want people listening to this to think, Oh, well, nevermind. First of all, many more Americans are going to die. And it reminds me a little bit there was a New Yorker reporter who wrote recently about this. And she pointed out the very poignant fact, that in the six hours between when the armistice was signed to end World War One, and the actual time the news reached the front and the fighting stopped. 12,000 additional Americans died. needlessly in six hours, 12,000 Americans died. Just because the news hadn’t gotten stopped fighting, okay, similar things happened during the Vietnam War. And it would be a deep irony in our country if we lose another 100,000 or 200,000 Americans, because people don’t behave well right now, while we wait for the vaccine to be rolled out. So yes, the vaccine has been invented. But we need a bunch more steps. We need to manufacture millions of doses, this will take time, hundreds of millions of doses, we need to distribute them. Not every hospital or pharmacy has the right for refrigerator refrigerators to store these vaccines, then we need to get people to take the vaccines. So Meanwhile, while all of that’s happening, the virus is still spreading. So we have to continue to behave well until such time as we can vaccinate at least half of the American population. Okay, so define behaving? Well.

Jason Hartman 19:13
I think I know what you’re gonna say. But

Nicholas Christakis 19:15
well, we have to if we wish to avoid death in ourselves and in our communities, we have to do minimum things at a minimum, wearing masks, keeping physical distancing, avoiding needless congregations of people, don’t go to restaurants, don’t go to bars. If you consolidate your shopping trips, you know, instead of going out to shop twice a week, go once a week, make a list, be efficient, minimize your exposure, thin out the density of people in public places because you’re only going out once, not twice per week, etc. All of these sort of basic things, tolerate school closures, don’t complain about them. We need to as a nation grow up. We need to have faced this enemy with with maturity and wisdom. And we’re not going to we can’t be like children and put our heads in the sand and say Oh, well, it’s probably nothing or I know I wish to I deeply wish that we didn’t have to have this pathogen among us, I want my life back that I had a year ago. But that’s not the world I live in. I live in a real world in which viruses sometimes afflict us. And incidentally, cholera and other epidemics, like Ebola afflict other parts of the world all the time, we in the United States seem to somehow think that we’re gonna have this. So from my perspective, as a nation, we need to band together, we need to work as we have as a nation before to meet serious challenges, and let our experts and our scientists and our military and all of the other people that will be required to deal with this threat, do their jobs, and do our part as well. Now, so what’s going to be required then is we’re going to still have to live in a temporarily changed world, I would say, at least until the end of 2021. In the book, I say, sometime in 2022, before the biological and epidemiological impact of the virus is behind us at that point, it’ll be behind us. But it’ll still then take another couple of years to overcome the psychological, social and economic impact. So for example, in the real estate industry right now, just like with every other pandemic for 1000s of years, people flee the cities and go to the rural areas. And so you’re seeing I’m sure your listeners are seeing evidence of this the prices, I live in rural Vermont, you know, all of a sudden, you know, a 10% shift in the number of buyers is totally changing the market. Oh, sure.

Jason Hartman 21:27
And it’s not really even rural, you know, they can just go to suburbia, because that’s an adequately distance in suburbia. And that’s Yes.

Nicholas Christakis 21:33
But then people are also saying with working from home, why should I live in a two bedroom apartment in a city with two children and be really cramped?

Jason Hartman 21:42
When I have a class that cost $5,000 a month versus 15 $100 a month in suburbia will get you a three bedroom, two and a half bath house with a two car garage? Yeah,

Nicholas Christakis 21:53
exactly. And I’ll still work from home and so on. So plagues always reshape economies. And one thing I want your listeners to understand is, is that it’s not what’s happening to us economically, it’s not so much what we’re doing to ourselves. It’s what the virus is doing to us. Economy shut down for 1000s of years before there was state action. When there’s a deadly contagion effect, people don’t go out and about that deal. For example, in doing the plague of Justinian 1500 years ago, that john of Ephesus, a priest talks about how the everything slowed and ceased in the economy stopped, okay. So most of what’s happening to us is not what we’re doing to ourselves. It’s what the virus is doing to us. It’s not our, if anything, the weak responses of the politicians beginning at the White House, and many governors, the weak response to politicians, because they’re lagging there, they did not show leadership, they did not do what they should have done early on. If anything that responses they’re implementing, like closing schools or closing restaurants, and so on, is too little too late, and is intended to reduce the toll of death, we are in some ways, the economy would be even worse. And the toll of death would be even worse, if, for example, we had not closed the schools, or we had not closed the restaurant. So what I want listeners to understand is, is that the economic impacts of the virus are primarily due to the buyers not our responses to it. So the real estate industry is being reshaped, and it will be reshaped. Now, for a while for a number of years. If I were a very wealthy man, I would wait a couple of years and buy real estate in abandoned cities, let’s say because they will come back eventually. But for a while, we’re gonna see

Jason Hartman 23:28
may take a long, long time, though. That’s the only thing but yes, I agree.

Nicholas Christakis 23:33
Exactly. So. So what so what we’re talking about then is when will life return to normal, so 2022 the biological and epidemiological impact of the virus will be behind us, but it’s still gonna take some time to recover from the economic and social shock. Let’s not forget 10s of millions Americans have lost their jobs. We have printed money up, you know, we’ve printed billions and billions of dollars to it as an economic stimulus to report report from this inflation might come back, we might have all kinds of other economic aftershocks, the the debt, the federal debt has skyrocketed. And people are psychologically traumatized or children who have not been in school, they’re going to have experienced an adverse childhood event as children have for 1000s of years and times of play. These things will take time to unravel. So my prediction is that judging from past plays, that it’ll be a couple of years, it’ll be 2024. Before we begin to have what I think will be the 21st century equivalent of the roaring 20s after the 1918 pandemic. So, um, let me say one more thing, and then I’ll shut up.

Jason Hartman 24:33
So that’s what I’ve wondered about that. And I’ve really studied and thought a lot lately about the roaring 20s It’s interesting, you should say that because, you know, I’m sort of wondering if part of that roaring ness if you will, of the roaring 20s was actually a response to the Spanish Flu that by the way, should be called the Kansas City flu, I guess, you know, because that’s where it really started

Nicholas Christakis 24:57
probably we don’t know for sure. But yeah,

Jason Hartman 24:58
yeah. We don’t know anything for sure. But you know, probably, you know, was it sort of like people felt this sudden burst of optimism and thought, Oh my gosh, you know, this weight is lifted off of our shoulders. And now let’s go out and have fun spend money. like there’s no tomorrow. That that is the thing, right? I was thinking that.

Nicholas Christakis 25:17
Yes, that’s true. Exactly right. And that’s what I think is gonna happen. So for example, during times of plague, including now, things like religiosity goes up right there. No atheists in foxholes. So, for 1000s of years when the epidemic is afoot, the plague is an ancient threat. It’s in the Bible. That book is called Apollo’s arrow because this is the opening of the Iliad, you know, one of the canonical writings of the Western canon, that Homer’s epic poem, The Iliad, which describes events from 3000 years ago, was the plague. That’s how the book ends, okay. Shakespeare talks about playing so, but during times of plague, people get more religious, may get more abstemious people save money, they get become risk averse, for example, and usually, when the plague ends, those things reverse. So people return to their prior level of religiosity. They spend liberally, there’s often sexual licentiousness, people relentlessly seek out social gatherings, nightclubs, bars, pubs, political rallies, music and sporting events, and so on. There’s often an artistic efflorescence that occurs. So I think it’s something similar is likely to happen in the 21st century, beginning around I mean, these are approximate dates 2024, not dissimilar from the roaring 20s. And it sounds like you and I think alike about this topic.

Jason Hartman 26:33
Yeah, interesting. Well, I’d like to switch gears and talk about a couple of your other books. Just we’ve got a few minutes and talk to us about blueprint, you know how that a good society is created. I mean, I’m just share with the listeners or viewers your thesis behind that book, you would,

Nicholas Christakis 26:51
I mean, that was a book I published in 2019. And it took like 10 years of work there, what I’m interested in is how our evolution has shaped not just the structure and function of our bodies, and not just the structure and function of our minds, but also the structure and function of our societies. And I look at a host of traits that I call the social suite, our capacity for love, and friendship, and cooperation, and social learning and teaching the fact that we teach each other things and traits like that traits that we manifest between ourselves, I’m not interested in whether you love yourself, or are kind to yourself, or adjust yourself, I’m interested in whether you love others are kind to others are just to others. Those are traits that we manifest between people. And I’m interested in how evolution shaped those traits. And I show in the book, how we have come have been shaped by natural selection, to have these wonderful qualities, which are lies at the root of a good society. And I look at a number of things I look at, for example, the history of people who have, you know, shipwrecks the book opens with a chapter on shipwrecks, where I say, Okay, what if we you if you were like, a crazy scientist, and you wanted to do an experiment on like, what was the natural social order that a group of people would make? What you’d love to do was take a group of babies and abandon them on an island and somehow miraculously have them be fed and raised, and then come back and see, well, what kind of social organization did they make for themselves? Incidentally, this experiment has been conceived of by wealthy emperors and kings for 1000s of years. It’s been called the forbidden experiment. But other stories that some kings have tried this, they typically have been interested in, what kind of language comes naturally to us. And so what they would do is they would take a couple of babies and give them to a mute Shepherd to raise up in the mountains, and then see What language did those children speak if they’ve never been exposed to language?

Jason Hartman 28:49
They’re miniature experiments you can’t ethically do.

Nicholas Christakis 28:52
No, that’s right. That’s why it’s called the forbidden experiment. So I said, well, what’s a proxy for that, and a proxy for that might be shipwrecks. And I look at all the shipwrecks that took place between 15 119 100. And I found something like 20 cases, where at least 19 people were stranded for at least two months on some faraway shore. And I looked at all available records.

Jason Hartman 29:13
This is almost like the Blue Lagoon movie.

Nicholas Christakis 29:17
A little bit like that, except with a larger number of people and

Jason Hartman 29:20
adolescent sexuality. smaller sample, yes.

Nicholas Christakis 29:24
But yes, anyway, so in the book, that’s just the beginning of the book, the book does a whole bunch of things blueprint does, and, and then attempts to provide an account. I also looked at those were those were inadvertent experiments in social order. And I also looked at advertent, or deliberate attempts of social order. I looked at the history of communes, you know, for 1000s of years, people have said societies screwed up, let’s go and make a new society and a group of people go to the mountain somewhere and try to make a new society, but they almost always wind up reinventing the same kind of society, and on and on and on. And so I, I look at all of this and I try to explain what are the fundamental reasons And meaning of how people live together.

Jason Hartman 30:04
And so what what are some of the insights from that? I mean, like, share, share something with us on that, because, well, you said when you said communes, I’ve got a question about that. But go ahead.

Nicholas Christakis 30:16
Well, no, I’m just I mean, there’s a whole book. So it’s hard to summarize. But But the point is, let me just let me go

Jason Hartman 30:21
to

Nicholas Christakis 30:23
Well, okay, let me let me give you one one little story or idea in 18 4019, I think it was either 1849 or 1869. I can’t remember right now, there was almost a perfect natural experiment. In the South Auckland islands south of New Zealand, just north of Antarctica, very godforsaken, very cold place. Two different shipwrecks occurred on the same island in the same year on opposite ends of the island. It was almost a perfect natural experiment. On the southern part of the island, the Grafton Rex, five men are swept ashore. And as the boat crashes onto the shore, the captain is sick with a fever in his in his cabin, the other four men make it ashore. And they have to decide what to do about the captain. And they set up a rope line. And they risk their lives to save the captain’s life by firing him sick as he was through this rope from the surf onto the shore. And these men then proceed to work together. And they do a bunch of things. They set up a school among themselves, where they can teach each other things. There was like a Norwegian and a Portuguese and French men and a Brit. You know, they were sort of ethnically diverse as well, which is sort of interesting. So they taught each other foreign languages, they built a cabin, they were very resourceful. They live for about two years on the island. And then eventually were able to fabricate a boat sail away and bring back help. And they all survived. At the same time on the northern part of the island, the in Rico crashes, 19 men makers ashore, and one of them is injured. He’s at the bottom of the this cliffs there at the bottom of the cliffs. And they have very late, just what’s in their pockets, a little bit of hard tack, one of them has some matches, they’re able to light a fire. And then in the kind of disaster, that is the stuff of like comic strips, they’re trying to dry their matches by the fire, and then matches all Ignite. So they lose their whole supply of matches, you know, after getting fire started with one match, and they decide that they’re gonna have to scale the cliffs, but the injured man is abandoned, to die at the bottom of the cliffs. And of those 19 men, all but three of them die before they are eventually rescued off the island by a passing ship.

Jason Hartman 32:29
So this sounds like there’s a very interesting Moral of the story here

Nicholas Christakis 32:32
there is it’s not just the moral of the story, though. But the point is, with the reasons these groups had differential survival related, in large measure on their capacity to manifest this social suite that I described, this capacity to make a good society, because the making of a good society contributes to our survival, which is why natural selection has shaped us to have these wonderful qualities other animals, very few certain animals, elephants, whales, and certain and certain dolphins, certain primates, for example, have friends, many listeners are taking it for granted that they have friends. Why other animals don’t form long term non reproductive unions to other members of their species, but we do we do it elephants do it, elephants independently evolved to have friendships, dolphins independently volunteer friendships, and we do it in certain other primates. So it’s astonishing this capacity for friendship that we have where we have we would make sacrifices for people who are not genetically related to us.

Jason Hartman 33:30
Is that really out of a quid pro quo kind of idea? Or, you know, do we just realize that there’s a greater good? Well, you’ll

Nicholas Christakis 33:40
have that’s discussed that there’s a very subtle point that you just made, the quid pro quo, the friendship is a not a market type exchange? Because think about it, a quid pro quo is exactly the antithesis of what friendship is, if you said to your friend, well, fair enough, but

Jason Hartman 33:57
it’s maybe like a layaway, right? Certainly friends do things for each other. And some people sadly enter the bargain that way, and you can usually ferret them out, because they’re, you know, two on the take, if you will, but you know, there’s certainly an element of that, right. And then,

Nicholas Christakis 34:15
generally,

Jason Hartman 34:15
what I’m getting at, by the way, in bringing that up, and I know we’ve got to wrap it up fairly soon here, but it’s I’m getting at how far do you take this idea? You know, if you look at like the kibbutz II Israeli Kibbutz, and then you look at, you know, Karl Marx, and you know, communism and the disaster that that was, you know, where do you go on that? Yeah, so go ahead. No, no, I

Nicholas Christakis 34:36
discussed key blitzes at length in blueprint. That’s a very good and interesting example. And, and I also discuss some extent I discuss and take to task certain communistic ideas that I think are unnatural, you know, they don’t work actually. But that’s a different point. The origins of friendship are very interesting. The cooperative interactions that are quid pro quo also exists in our species. I’ll give you this. You give me that lies at the foundation of market exchange. But friendship is altogether different. If your friend says here, let me borrow, here’s my car, you can your car’s broken, you can use my car for a month, you know, I don’t need it, don’t worry about it. And you say, That’s okay, Bob, I’ll repay you next week. That’s not a friendship. But you would never say that if you said that. Your friend would be what do you think this is? You think I’m you know, I’m renting you my car? No, you were friends, of course. And not only that, but friendship typically, not only do they often have asymmetric, but they have heterogeneous exchanges. In other words, friends do different services for each other. For example, you might, you know, take my child in for a summer internship. And then five years later, you might ask me for some totally different favor, you know, can you borrow my house for your daughter’s wedding or something, you know, they’re completely dissimilar, separated in time and nature, in extent that to say how big the favors are, sometimes they’re never repaid. And not only that, but we evolved to feel good in the presence of our friends asking this, when you get together with friends, you get that good feeling. That good feeling you get in the presence of your friends, was shaped by natural selection. Anyway, there’s lots of examples or discussion in the book about the origins of friendship that provides a deep explanation for why we do that, and why it’s different than certain other kinds of interactions people might have. Incidentally, it’s that capacity for the the free exchange of information. And for working together and for cooperation, these are the tools we’re going to use, in order to beat the virus. The way we survive. this epidemic, is by working together, you alone can do nothing. To stop the epidemic. We have to work together to stop the epidemic. We have to exchange information with each other and our capacities to work together and share information. And the origins of those capacities are in fact, the subject of blueprint as compared to

Jason Hartman 36:52
Apollo zero. Yeah, very interesting. Well, I know we’ve got to wrap it up. Nicholas, thank you so much for these insights. And that was a good way to bring it back kind of full circle onto the pandemic discussion. give out your website or a Twitter handle or whatever you’d like.

Nicholas Christakis 37:07
My my Twitter handle is n. A Christakis? Ch ri St. A k is na Christakis Apollo’s arrow. The profound and enduring impact of Coronavirus on the way we live is of course available on Amazon and bookstores everywhere. And if you’re technically interested in my website is human nature lab dotnet human nature lab dotnet. And you can find all our scientific papers and a bunch of other stuff there if if you’re so inclined. Nicholas, thank you so much for joining us.

Jason Hartman 37:42
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Jason Hartman 0:51
Well, what do we have here, everybody, we have a Christmas Eve broadcast for you Christmas Eve, Merry Christmas to all, and we have something really special, you’re gonna like it, you’re gonna like it, because we talk a lot about inflation, one of the three major economic maladies. And when we talk about that, we should adjust the 12 Days of Christmas. for inflation, yes, the 12 Days of Christmas, adjusted for inflation. So we’re not going to go when we talk about turtle doves and Five golden rings. We’re not going to talk about nominal dollars, we’re gonna adjust for inflation. And consider the 12 Days of Christmas in real dollars, the only way anything should ever be considered. So Merry Christmas to all and let’s get into it. But first, I don’t know. I need a little more of this tune. It’s so catchy. Christmas. So what do you think those things all cost adjusted for inflation? What do you think those things cost in today’s dollars? Not in the old dollars? Not when the song was written. Which by the way, when was the song written such a great song? It’s such a catchy tune. post below, comment below and tell me what your favorite Christmas carols are. Chad says Merry Christmas. Merry Christmas, Chad. Thanks for joining us. And this, by the way will be today’s podcast episode. So I figured I should do it live. Because visually, there’s a lot to show here. So let’s get into it. Let’s get into the 12 Days of Christmas adjusted for inflation. But first speaking of inflation, The Wall Street Journal yesterday published the average us home price Not to be confused with the median price. They’re usually not that far off. But they could be you know, median and average are different. There are those who don’t know that, which is pretty scary. But the average us home price was 14.6%. higher than the price the same time last year. Yes. People have been making a lot of money in real estate. What happened to the crash bros? You know, all the folks saying the markets gonna crash. I suppose there’ll be right eventually because, hey, a broken clock is right twice a day, isn’t it? It’s true, they will eventually be correct. Peter Schiff will be correct. Someday, it may not be in our lifetimes. But someday, he will be right and all the other duman glimmers will be right to. That’s the way it goes. But hey, the 12 Days of Christmas.

Well, before we get into that, we got a contest coming up because I guess Trump vetoed the stimulus bill. I did a whole rant about that on the podcast a couple of days ago. And what a complete epic scam it was. And I tell you, even if you hate Donald Trump, you got to check your beliefs and your ego on on the Trump hatred because that guy has made tremendous personal sacrifice for the country. And now he’s going to get tons of hate, because he wants you to get $2,000 not $600. So he might stand in the way of you getting $600 next week, but maybe you’ll get $2,000 instead, which would be much better. You know, we can send $10 million to Pakistan for Gender Studies, or we can give the American people 2000 bucks instead of $600. Well, not actually Because if you do the math, you get the idea. It’s the sentiment that counts. I’m being sentimental. It’s Christmas. Okay. Well, tomorrow’s Christmas. But um, yeah. Can you believe all of that money going to foreign governments corrupt foreign governments, instead of to the American taxpayers? Absolutely. Read ticketless ridiculous, but that’s the way you have it with what’s called pork barrel legislation. No good. And that’s why the President should have what ronald reagan wanted many years ago. And that is a line item veto, because then they could send the President 50. How long was this ridiculous bill? It was 5700 pages or something the longest bill ever full of pork pork barrel legislation. And they could send them that. And then the President could just go through line by line and say, Nope, I’m not doing that. I’m not doing that. I’m not doing that. And whether the President was Republican or a hypocrite, I mean, a Democrat, they would really be held accountable. The president would, because they wouldn’t be able to have the excuse. Look, you know, we had to negotiate with Congress. And this is the best bill we could get. And, you know, the American people needed the money. And so I just signed, the president wouldn’t be able to get away with that any longer. And thank you, Chad, for posting that it was 55. You can’t make this up, ladies and gentlemen. 50 593 pages. Now compare that to the health care bill, Obamacare, you know, the one they passed it like 2am, on Sunday morning, or really Monday morning, Sunday night, whatever you want to call it. That was like 2700 pages. And that’s the one where Nancy Pelosi said, we got to pass the bill to read what’s in it. You know, you can’t make this stuff up, folks that the fact is better than the fiction. So she said that, and that was ridiculous, of course. And then Dodd Frank came and the Dodd Frank come before Obamacare, no came after Obamacare. And Dodd Frank, the one that really, really made all these ridiculously stringent, incomprehensible banking rules and real estate rules and lending rules and all this kind of stuff. That was like 2200 pages, I believe. So it’s all ridiculous. It really is. But enter our contest, and you can win 500 bucks. Okay.

And I just want to let you in on a little secret here, folks. We are a small business. There will not be a million entries into this contest. So your chances of winning are actually quite good. Yeah, they are quite good. All you need to do is make a quick little simple video super easy. Tell us about your real estate and your investing goals for the new year and beyond. And, you know, you can throw in some other goals, health and fitness, professional goals, family goals, travel goals, leisure goals, new hobbies, new skills, whatever, all those goals, any goals you have, you know, throw them into your video just for added flavor. Or if you don’t think there’s enough to talk about as far as real estate and investing and in your financial growth. We help you create wealth here. That’s what we’ve been doing for many, many years. And just go to Jason hartman.com slash contest right now. open another browser tab while you’re watching me, go to Jason hartman.com. Slash contest and enter in you could be one of the two lucky people that win 500 bucks. And again, I’m gonna tell you, your odds are good. There will not be many entries. Okay. So, you know, we our reach is limited. We only have like seven listeners to the whole podcast. There’s hardly anybody listening. I’m just kidding. We have a lot more listeners than that. We have listeners that 189 countries. So when you’re 500 bucks, just go there Jason hartman.com slash contest. And let’s talk about inflation because we’re going to talk about the 12 Days of Christmas, adjusted for inflation. Alright, so first, and if you followed my work for any length of time, you’ve heard me talk about some of these things. But every time I talk about it, you know, there’s a new distinction that you make. So keep on listening. And if you’re new, I’m going to tell you where you can get a lot more information, a lot more background on all of this stuff, but to understand inflation, we need to understand the difference between real and nominal between price and value. They are not the same thing. Nominal means the name of something in Only is the actual definition of nominal. So it’s just the name $1. Bill is called $1. Bill, it was called $1. Bill 30 years ago, but the value of it is lower today than it was 30 years ago. Right? So nominal and real, very different inflation is this insidious, hidden tax that destroys our purchasing power of anything, including these things. For calling birds, Three French hens, turbo turbo turbo bows, or a partridge in a pear tree, see any of those things? Oh, this one, I like this one the best. This is the best one. golden rings for friends, turtle doves, And a partridge in a pear tree. What does inflation do? It destroys the purchasing power of everything, including for French hens, to turtledoves, Five golden rings, and partridges and pear trees and everything else on the list. So we’re gonna get to that in a moment. But thankfully, it destroys the value Well, not thankfully, on the first things, it destroys the value of our savings, our stocks, or bonds and our equity in real estate. But thankfully, it also destroys the value of our debt. And that makes us richer. So it’s a good thing. It’s a really good thing. If you get it working for you, instead of against you. It is the most powerful method of wealth redistribution, ever. Not taxation, but inflation, much more powerful way to redistribute wealth. It redistributes wealth, from lenders to borrowers, because borrowers pay the loans back in cheaper dollars. And it redistributes value or wealth from old people to young people. It’s an intergenerational wealth transfer mechanism.

Alright, so here is an example. Because I’m going to fly through this so fast, your head will spin. Hey, wouldn’t it be cool if I could do like an exorcist movie? Oh, that was a scary movie. shouldn’t talk about scary stuff on Christmas Eve like that. But anyway, and Linda Blair spinning her head around. It was freaky. Alright. And I don’t want to see that movie. Again. By the way, I saw it years ago, don’t need to see it again. Alright, so say, for example, you are really smart real estate investor, you went to Jason hartman.com. you clicked on the Properties page, you contacted one of our team members, and you purchased 10 properties. And those properties cost a whopping $120,000 each, because we do have some cheaper properties like that. And you got a million dollars in mortgages against those properties. And then say you waited one year or two years or three years or whatever, you enjoyed your positive cash flow from those properties. You enjoyed your tax benefits from those properties. You enjoyed being a landlord, and you know that this is creating wealth for you. But guess what else? Let’s assume that those $1 million in mortgages or interest only mortgages, meaning you paid zero principal, they were not amortized. Sarah says I sing like her. Oh, Sarah. I’m guessing that’s not a compliment. But duly noted. Because God did not give me the gift of singing, unfortunately, because I actually really do like to sing and I love music. And I’m going to drive to meet some people to get Christmas started here. I got about a three and a half hour drive ahead of me, in my semi self driving car, an amazing tech, technological game changer for real estate. I’ve talked about that a million times on the podcast. And if you don’t know how that’s going to change real estate, it is a game changer. Massive game changer, my semi self driving car, but soon they will be fully self driving. I’m going to drive that about three and a half hours or it’s going to drive me and I’ll see if I can get some music in and do some singing. Hark the herald angels sing Glory to the newborn King. I like Hark the herald a lot. That’s a really good Christmas Carol, but the 12 Days of Christmas, that’s good too. So we’ll get to that. So inflation comes along, you’ve got these this million dollars worth of mortgage debt. Inflation comes along, you’re paying interest only so you haven’t paid the loan down at all or the tenant has it because really the tenant pays the loan off for you. And after that 10% inflation comes along in real dollars. You only owe $900,000 Not 1 million. So inflation has paid off $100,000 of that debt. And that is awesome. Yes, it is. It’s totally awesome. And I demonstrate this example, in many podcast episodes where I go over a real life example, not a theory of somebody. And there were millions of people who did this, of course, who bought a house in 1972. For $18,000, in change, they were paying 7.37% on their mortgage. And they lived there for three decades, for 30 years. And guess what happened? They actually got paid to live there, because they got paid to borrow that money. And I’m not going to tell you all about that now, because we don’t have time because we have 12 Days of Christmas to cover folks. And we got to inflation adjust each of these things. And it’s going to take a minute, but I have a resource for you. If you’re new to my incredible work. Pat, on the back here. Yes, someone’s got to say it, someone’s gonna say, Well, actually, you guys say it all the time. And thank you.

Because that’s why we do what we do. Because we love hearing that it impacts lives and it changes lives. But if you are new to our work, or you just want to review the fundamentals, and of course, today is Episode 16 123 1623, you might be saying to me, Jason, I got to go back and listen to 16 122 episodes of your podcast. I’ve got good news for you folks. Many people have listened to all of those episodes, even two times, or three times, they have told me and the reason they were able to stick with it is because I almost never, almost never on any of those episodes sing. Only today, am I singing and maybe like one or two other times, so it’s really quite tolerable. You can just listen. So if you want a short version, you can go to Jason hartman.com slash start, or on any podcast platform, just look for my quickstart Podcast, where we’ve hand picked some of the sort of fundamental episodes for you some of the core content, not all of it, never pick all of it out of so much work. And you can you can get a little faster orientation to our work there. Of course, if you need us, you can reach out one 800 Hartman if you’re in the USA, that’s only a US phone number and or Jason Hartman, calm around the world or even at the International Space Station. It even works their astronauts listening. Okay, so for 37 years, PNC has been indexing the 12 Days of Christmas, and I thought I’d share it with you because I love what they do. You might be a customer of PNC, you know, their big, big organization, a friend of mine works for PNC in New York City right there in the Wall Street area. And anyway, they they’ve been doing this study for almost four decades now. And they’ve been indexing the 12 Days of Christmas for inflation. So you can go check out their website, PNC of course. But I’m gonna give you the abridged version. With my sometimes brilliant, sometimes ridiculous and sometimes hilarious commentary. snarky, always, for sure. It’s gonna be snarky. Okay, so a partridge in a pear tree. Now, here’s the funny thing, folks. The partridge in a pear tree. And many of these others, it’s of these other things you’re going to notice. There’s no inflation adjustment. Why is that? Well, because the partridge in a pear tree remains unchanged. Okay, since 2019. So there’s been no inflation in this particular commodity. But some of the things we will discuss as we go through the 12 Days of Christmas, some of them you will discover can’t be obtained. We live in a planned emic era COVID-19 84. You can’t even get some of this stuff anymore. So they don’t know how to adjusted for inflation.

So you’re gonna see that as we go through all 12 items. Alright, so they say PNC says, Well, well, 2020 was anything but predictable. The Partridge sheltered in place, right a lot of us at the shelter in place right. As the price freedom in his pear tree remains unchanged. Zero inflation. Let’s go to the next one. Okay, how about to turtle doves? Well, they got a lot more expensive. The Two turtle doves are way up, you’re gonna pay 50% more 50% more. Okay, that is just from last year. So turtle does expensive. Now, one of the takeaways here is not just about investing, but it’s also you know, it is Christmas Eve. And you might be thinking, wow, you know, I’m in big trouble, because I didn’t buy a gift for my true love. So, you know, maybe you don’t buy 12 things. But if you want to be a smart gift buyer, you want to buy the things that haven’t had any inflation, right? Like a partridge in a pear tree. Because it’s the same as last year. And maybe last year, you had a different true love. You know, you might have changed your true love year over year, just like inflation changes year over year. And here you’ve seen no inflation. I don’t know that wouldn’t be very thoughtful to buy your true love the same gift you bought your other true love, right? That’s probably not going to go over well, especially if one of them finds out. Yeah, you’re gonna be in trouble for that one. Okay, so, so the turtle doves are up. 50% turtle doves are getting expensive. How about Three French hens? while they’re up a little bit, but not as bad as the turtle does. Okay, the three French hands are up more than the price of housing. Okay, because we just went over that. And how much was that up? Well, that was up. Let’s go back. There it is. 14.6%. Well, Three French hens are gonna cost you more than that, aren’t they? Yes, they are. Let’s go back to the French pins. There we go. 13.7% increase in price for the Three French hens. Okay, how about Four calling birds 0% increase, you can still get those Four calling birds for the same price as last year. Now remember, this index does not show you? Well, at the end, I’m going to show you the chart that will show you this. But each of these is just your over here. Right? It’s not going back 37 years to when they started the index for the 12 Days of Christmas. But this is just year over year. Okay.

All right. How about Five golden rings? way up. 14.5%. Now, you might be saying, well, Jason, what about gold is an investment. If you follow my work, you’ve heard me talk to talk about golden Sara saying talk about silver. Precious metals, overrated, highly overrated. I’ve told the story many times before, but I’ll just sum it up to say this look, if you could rent out your gold, and it would produce income, if you could mortgage it for three decades and artificially low interest rates. If you could get great favorable tax treatment, then I would be a gold bug. But you can’t do any of that stuff. That’s why income property is the most historically proven asset class in the entire world. Because that is a multi dimensional asset class. Gold, silver, platinum, palladium, Bitcoin, Ethereum, any other cryptocurrency any of this precious metals? one dimensional strategy one dimensional, the whole game is simply buy low, sell high. That’s the whole game. Okay. And even if all the theories are right, about fiat money, and inflation, and currency collapse, even if all of that is true, it’s a one dimensional asset class, buy low sell high income property. On the other hand, you’ve seen me put up the acronym about ideal, of course, but it’s multi dimensional. I mean, think of there are so many ways you earn your return from income property. Unlike Five golden wings, you don’t get it from those things right. You don’t get it from gold. You don’t get it from precious metals, one dimensional asset class income property. You’ve got cashflow, appreciation, depreciation, meaning a tax benefit. You know, you’ve got all of these things. You’ve got my trademark philosophy, inflation induced that destruction, which we so quickly touched on in this little quick episode, but it’s there. Okay. inflation and debt destruction. Go to the podcast. Find out more about that because it’s the hidden wealth creator with income property. Okay, so Five golden rings is up. Inflation shows a sign of inflation, we’ve been printing money like crazy. Remember, when money is created out of thin air or currency, the more accurate term when dollars, yen, Euro, whatever are created out of thin air, all that already exists becomes less valuable. Remember to value drivers for anything. scarcity, and utility, scarcity and utility are the two value drivers for anything according to yours truly. Okay, so Five golden rings is way up. Now Six Geese a Laying. That’s up more than Five golden rings. I mean, this is up 35.7% all of you gold bugs, you would have been much better off, you would have been much better off buying Six geese Elaine than Five golden rings, you would have been up 35.7% Now the problem is of course you can’t. You can’t finance those Six geese are laying over three decades with an artificially low fixed rate mortgage. I don’t know if the geese Elaine give you any tax deductions. There are some sort of odd farm laws.

So they might, hey, by the way, folks, there’s a whole bunch of you watching. I see you, I see you. We’ve you’re watching on eight different Facebook pages and one YouTube channel. And you got to tell me where you’re watching from, type in the location and type in what you want for Christmas, okay, or type in any of your goals for the new year. All right, because that’s what our contest is about. And the link for the contest is scrolling across the bottom of your screen to win 500 bucks. And again, I want to say not a lot of people will enter the contest. So your odds are good. There will not be 1000s of people entering. We’re a small business. You folks listening like if all of you watching right now, or all of you listening on the podcast entered the contest, you would have a very good chance of winning 500 bucks. So do it. Okay. Six gisa Lane so far performed pretty well. That was a good asset class don’t. Okay, how about Seven Swans a Swimming? Well, no inflation and Swans a Swimming? Okay, even seven of them. You know, your true love would pay $13,125 to buy them all in 2020 and that was about the same as last year. So 0% inflation in Swans a Swimming which, by the way, Swans a Swimming are surprisingly expensive. I had no idea they were that expensive. Okay, wow. All right. Well, how about Eight Maids a Milking? This one’s funny. So as the federal minimum wage remained unchanged, so does the cost for the eight milking holding steady at $58. This year. These lady labor’s are happy to oblige, assuming social distancing practices are in place and face masks are aplenty this holiday season, folks. Oh, they’re entertaining. I mean, these guys, they’ve done a really good job of creating this index and, and making it making it timely and entertaining. Okay, so. So your Eight Maids a Milking? I guess you’re only buying them for an hour. Right? So yeah, what is that? 58? Eight times eight? Is that what they’re doing? Or something like that? Or what’s what’s the federal minimum wage now at 25? Maybe or something? I don’t know. Anyway, do the math. So there you go. I guess they’re saying they’re hiring for two milk for an hour. Okay. But you know, really, you do have to have some cows for them to milk, some equipment. And I would argue that probably all of that went up in price. So there’s probably some hidden inflation there in the index that you’re not being told about. Okay, so red meat isn’t Edinburgh, Scotland. Ooh, I love it. I love that accent from Scotland. So we’re meat. That’s awesome. You know, I have been to England, but I got to go to Scotland. I’ve been to 87 countries and have not been to Scotland.

Now some would argue that Scotland is not a separate country. I guess. That was a referendum you had recently, but we’ll see what happens with it. I think that has to happen in California. The Socialist Republic of California needs to split up into three states, three states that would be better, because then maybe you’d see some rationality and some competition for governance. Okay. And Sarah is in Maryland, touching Yes. Sarah trudging and and Jill is saying buffalo or I think you’re in Buffalo you’re asking me about the buffalo real estate market. I don’t think it’s great in Buffalo. You know, I used to live in Rochester as a little kid and I you know, I’ve been to Buffalo many times. My grandparents are from upstate New York, you know, that’s just not where the action is, you know, in those cold, cold, bitter cold climates, you want to be down further, you know, changes in latitude, changes in attitude, be in the south. That’s where all the southeast that’s where all the business friendly markets are. Go to Jason hartman.com slash properties. By the way, we’ve added a whole bunch of new markets to the website at Jason Hartman comm slash properties. So check those out bunch of new markets there and more being added over the next week. Alright, so key to lifestyle is in Raleigh, North Carolina. That’s a great place. I love Raleigh, North Carolina. Omar is in Bend, Oregon. That’s a beautiful place. Ben is very, very nice place very popular. And, boy, you’ve had some good run up in your real estate prices there too. So that’s good, good stuff. Scotland is merely a nation within the UK. You should visit It’s beautiful. Yeah, I know. I agree. It’s definitely beautiful. And I gotta I gotta get there. We gotta get traveling back. Traveling has to come back. Okay, so we went over the Eight Maids a Milking. Let’s move on. Now, here is the problem. Nine ladies dancing, not available in 2020. You can’t even buy it. Right? Because there’s all these restrictions due to covid 1984 1984. It’s not 19 by George Orwell 1984. Which you know, if you have time, read the book. watch the movie over the holiday watch. There’s several movies about George Orwell’s 1984 that you must see because we are living through it. Maybe you don’t need to see it because we’re living through it.

Okay. All right. So as COVID-19 has caused the curtain to drop on most live performances, the Nine ladies dancing will not have to dash through the snow to entertain in person. Advocates for the arts are not out of options for the performance lover on their guest list as virtual performances provide a pandemic proof alternative for audiences. So you can’t adjust the Nine ladies dancing for inflation because it’s just not available. Alright, how about 10 Lords a Leaping. not available, not available. You’re out of luck there too. So you can’t adjust those for inflation either. 11 pipers piping? Definitely not available because out of their pipe will come droplets. You know now we’ve all learned about this stuff. And, you know, even when this whole plan demmick ends. Do you think we might be kind of like grossed out and germaphobes I think everybody’s become a germaphobe now, right? Which, by the way, probably, we could use a little germophobia I think so. Little more germophobia maybe not more than now but more than before is appropriate. But yeah, no, no pipers piping. Because of their piping. All kinds of droplets are coming out of their, their horn their pipe. And hey, no live performances, so you can’t even get it. So no inflation adjustment on pipers piping, and drummers drumming. You can’t even get 12 drummers drumming, because now you could get one drummer alone drumming, I suppose and watch them on zoom. But yeah. So you’re out of luck there too. It’s gonna be really hard to do the index this year and adjust things for inflation on the 12 Days of Christmas. Okay, so here is the true cost of Christmas in a song. But remember, a lot of the stuff you’re not going to be spending any money on because you just can’t buy it at any price. It’s actually down 38% $105,561.80 is the total cost of the gifts for your true love when you count each repetition of the song now See, that’s interesting, by the way, that’s like government math. It’s got a multiplier effect. Okay, it’s like, Now, the thing I want to say is it’s more like fractional reserve banking, or fractional reserve lending, because it has that multiplier effect, right? So every time they lend out $100,000, there’s a multiplier because remember something and this is very hard to comprehend. It took me really years to kind of get this. Now. You understand there’s a difference between like, sort of getting it intellectually and getting it like viscerally right. I guess that’s not visceral. Lower is visceral, right? You know, getting it in your gut, right where you really kind of like having deeper understanding of it. So money is lent into existence. That’s the way our system works. Money is lent into existence. For more on that, listen to the creating wealth podcast wherever you get your podcast, and we talked about that extensively. And you’ll really learn some new stuff. So anyway, that’s the deal on the index. But this is what I really want to show you. I want to show you the chart.

Okay. And again, this is from PNC. This is the Christmas index through the years. Sorry, this is a little bit blurry. But it starts at 1984. We’ve been talking about George Orwell in 1984. Okay, and it goes, you know, here, we got some inflation, the index started, it was about $20,000 to buy everything in the index. And remember, that’s including all the repetitions of saying it over and over, right? Because in song, they repeat all of them before each time they do a new one. Okay. So then, you saw we had definitely some inflation here. And it was about $25,000. And then it came down, and then I just want to make sure I’ve got the years right there. That’s why I was looking at the screen. See, my screen I’m looking at is over there, you can probably tell it’s not the right way. No, it’s that way. Oh, see. I don’t know. It’s not the same for you as it is. For me. It’s too complicated for my dyslexia. Okay, so. So here, we see it go down, and things got cheaper, and then inflation hit again. And then there was another little dip. But then we went on this rampant inflation craze, remember here is here is the sort of the end of the Alan Greenspan era. We go into the Bernanke key era. These are who was the chairperson of the Federal Reserve, we have the Janet Yellen era. And then, of course, we have our rich uncle Jerome Powell. Right. And, and, and we’ve seen massive, massive Money Creation during this time that we’ve seen all this inflation, no surprise there, the more money they create of thin air, the more inflation we’re going to have. But now, we have actually seen a lot of inflation, but we saw a decline in the index. Why is that? Well, it’s because some things just can’t be purchased. So they’re not counted. Because he can’t buy him at all. reviewing what you get by, you’re not gonna buy 12 drummers drumming, they’re not available, or 11 pipers piping, or 10 Lords a Leaping or Nine ladies dancing. But you can get your Eight Maids a Milking. And I think there was one other thing you couldn’t even buy anymore. Right. So there you go.

Okay, so that is the whole 12 Days of Christmas for you. We just wanted to share that because I thought it was really interesting. And let me see there’s a question here. Okay, Pamela, I’m thinking of selling my primary home in Vallejo, California, near Oakland and buy properties around the country. Is that a good idea? Well, as long as you buy the right properties around the country, and you get this fantastic three decade long, fixed rate debt, Pamela, I think that is an excellent decision. And I don’t know what the price of your home in Vallejo is. But it’s in California. So I sure it’s kind of expensive, as everything in California is expensive, and Oakland is certainly expensive. So you could rent, if you have to stay in the Socialist Republic of California, you could rent a house for a much better rate than you can own a house there. Because remember, the higher the price of the home, no matter where it’s located, the more favorable the RV ratio, or the rent to value ratio is for the tenant. Okay. So that’s why you want to do what I call double arbitrage. Okay, you want to basically rent an expensive home for yourself. Now, you know, the question is, compared to what, what does expensive mean? Now, that varies by market. But I can tell you this, for sure, Pamela, that if the house is over 350 or $400,000, it really really becomes a better deal to rent it then on it. Because the rent to value ratio starts to really fall off the cliff in favor of the tenant, and not in favor of the landlord when you get to about $300,000. Now that number used to be lower, it changes over time. Because if you would have asked me that question 10 years ago, I would have said 250,000, but I’m adjusting for inflation, just like the 12 Days of Christmas indexes. Okay. So yeah, keep that in mind. But generally speaking, you’re going to be much better off having a lot of inexpensive rental properties that other people rent from you at a favorable RV ratio or rent to value ratio for you, Pamela, and an unfavorable RV ratio for the tenant. Okay, you know, those less expensive homes just have much better economics, and they’re much less risky, and you’re going to be diversifying your risk. And remember something else. This is a good question that Pamela asked, because you gotta always remember another thing.

Your home is never, ever, ever an investment. Now, does that mean nobody ever makes money on the home they live in, of course, not. That they, they get lucky your house goes up in value, they make money, great. But you can usually do better on the low price rental properties. Remember, in order, my definition of an investment is that it produces income. If it does not produce income, it’s not an investment. And of course, your home does not produce income. So it can never be really considered an investment. It always has to be considered an expense, okay? Your home always has to be considered an expense. So you always have to consider your home and expense and not an investment. Okay. Okay, so I’ve got another one from Buddha Hill Ranch, Idaho. Let me get back to that one. I just put the contest link in the in the chat. So that depending on what platform you’re watching, that should appear. So Bill Hill ranch Idaho says we are in a deflationary environment, not inflationary debt to GDP studies, studies show that the higher debt loads are massively deflationary money supply does not create inflation, we need velocity. Also, I agree with you that we need velocity, but I disagree with you about inflation or deflation. And, look, I’m not gonna have time to go into this now. But I have studied this extensively for almost 20 years. And we talk about this ad nauseum on the podcast, I interview tons of experts. I know what the consumer price index says. And I know they manipulate the consumer price index in three major ways weighting, substitution, and hedonic indexing. And all of those things artificially suppress the CPI. Okay, to make it inaccurate, and there’s a very big incentive for the government to manipulate the consumer price index and make inflation seem lower than it really is. Why is that? Well, because, of course, all the government entitlements, and the government salaries are indexed to inflation. So it costs the government more money. And also, generally speaking, it makes the populace upset, right? The voters don’t want to hear that there’s a lot of inflation, right? That’s not good for their standard of living. And then if you look at asset inflation versus consumer price, inflation, those are dramatically different, dramatically, dramatically different. So asset prices have skyrocketed, there is massive, massive inflation and assets.

One of the things I’ve talked about this, my own theory that I’ve talked about many times on the podcast, is that there’s a huge knock on effect to asset price inflation. And that knock on effect comes in the form of an entire generation or two generations. And I’m talking about millennials and Gen Z’s that are, to some extent, left out of the investor class, due to high asset price inflation. Okay, now I get it that electronics become cheaper. You know, this is called progress. And it’s all hypnotically indexed to make it seem less expensive. And there is some logic behind that. But when they had gone ugly index, inflation, what they’re saying is we are not entitled to progress. You know, think about it, if they had the consumer price index, back in the day, when Thomas Edison invented the light bulb, and the light bulb changed the world. And it changed so many people’s lives. What if they had dhanak li indexed candles, versus light bulbs, or had optically indexed old, you know, those old lanterns with kerosene in them, you know, the, the kind in the western movies that always gets thrown into the hay and the fire starts, right? If they endodontically indexed candles or kerosene lanterns, versus the light bulb, light bulbs would be free. In fact, you wouldn’t be getting paid to take a light bulb, right? But that’s just not reality. So you know, I understand that inflation is moderate. If you’re not talking about certain things like food and asset prices, and energy is artificially, artificially cheap right now. There’s a lot more inflation in the system. And, you know, we can agree to disagree on this, of course, like you said in your comment, so thank you for that. And that’s fine. This stuff is very nuanced, and it’s very complex, as we both know, you know, if you’d like to come on broadcasting, you’re knowledgeable about this stuff, it seems like you are from your great comments. I’d love to talk to you about it. Because, um, you know, these are these are just fun topics to talk about. It’s like my hobby. I love this stuff. I love it. I love it. Let’s see what else here as we wrap up, we’re gonna wrap this up. Our our says one of the homes that duplex and the tenants are paying your mortgage and utilities? Well, yeah, but the question is, are are is what is the opportunity cost on the half of the duplex you live in, and you’re not receiving income from so you have to consider that an opportunity costs. So there’s always an expense, it will always cost money to live somewhere. And you know, you’ve got to just get that home you want at the lowest possible cost. And it might be half the duplex. I don’t like the idea of living next door to my tenant, that’s for sure. I definitely don’t like that idea. But you know, if you’re okay with that, then, you know, just understand the rent you’re not getting is your cost of of that home.

Okay. Jerry says Merry Christmas, Jason and team are et al. Are you a lawyer? That’s the way lawyers write. always enjoy your podcast and YouTube and your live cast. Hey, thanks, Jerry. Appreciate it. And Merry Christmas to you, too. And Jill says, What do you think? Does technology going to change the market in the coming future? The housing market? Well, every technology influences the housing market. I mean, just, you know, the means of builders and developers and property managers managing their supply chain and realtors managing their supply chain and, and better data and software. You know, it was said that, quote, software is eating the world. Right. And it’s true. It is. And it’s amazing. No question. So, yes, there are impacts everywhere. But the one impact they really haven’t been able to disrupt is his construction. It’s still it keeps getting more and more expensive. And you know, for all this talk about 3d printed homes and all these new technologies, I have yet to see any of them actually come to market. I’ve been hearing about him for 15 plus years. And still, we’re seeing much higher construction costs, and very little technological innovation in home construction. On one of my podcast interviews, I remember a guest that I was interviewing he said the biggest disruptive technology in homebuilding is you ready for this? Ready for this? I’m gonna get a sound effect for you. Here it is the big disruptive technology in homebuilding is a nail gun. Wow. So you don’t use a hammer. You got a nail gun, right? Oh, wow. Big, big, big technological disruption, right folks? Not so much. Not so much. Okay with that, I will leave you with the 12 Days of Christmas song on the way out and just want to wish all of you you don’t celebrate Christmas Happy Holidays, whatever you celebrate, but since it is Christmas Eve This is appropriate. And there is the index of the 12 Days of Christmas. Hope you enjoyed it and wishing you all the best and happy investing. Six, five, coronaries, rainbows Three French hens to turtle bars. Free Okay, bye, everybody. Merry Christmas.

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Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day, our financial security is under attack. Our pensions are in a state of emergency, a single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Jason Hartman 0:39
Happy New Year. Happy New Year, Happy New Year, happy new year, it is going to be a fantastic year for real estate investors. Last year was phenomenal. I mean, we just booked all the trends, the fight all the odds, and real estate investors did so so well, last year, our clients prospered just fantastically last year. So congratulations to all of you who have been following my plan. I know things have been working great. Granted, there are a couple of problems here and there. There’s, you know, some forbearance opportunity. There have been a few moratorium issues, a couple of tenants sick here and there. But overall, it has been nothing short of an absolutely fantastic year, as so much of the world and so much of the country is in distress. And there are so many sad things going on. The one thing that we have found to be incredibly resilient, and reliable is income property, the most historically proven asset class in the entire world, the asset class that has universal need, everybody needs food, clothing and shelter, and let them rent that shelter from you provide rental housing to other people provide a place where they can be safe, where they can be in a suburban market, where they can shelter in place where they can make memories that will last an entire lifetime. Think of what an important role you play. As a landlord, as a rental housing provider. Think of what an important role you play in people’s lives for their entire life. They will remember your property that they lived in your property, 10 years, 20 years, 30 years later, they will remember things in their life that happened in the property that you own. Think of how significant the role you play in people’s lives are, they’ll think, remember when we lived in that place on Main Street, you know, and guess what that place was owned by you. And you were a big part of their life. Amazing. It’s an amazing what we have the honor that we have as real estate investors as landlords and we are paid so well for being in that position, we are rewarded, so so generously for being landlord. So today, as is normal at the beginning of the year. And as we did last night on our live stream, we talked about goal setting. And today I want to take a different take from what we did yesterday on the live stream on goal setting.

So we’re gonna play a very small clip from last night on this podcast today, this is going to be different. We have you know, some different angles on on that topic. So we’re going to dive right into hopefully helping you with some frameworks, some ideas, some ways that you can set goals, make them achievable, make them as the old acronym goes smart. And so we’ll do that’ll be a little bit of a clip from last night. Just a very short clip. And we’re also going to play one of the winning videos from our contest. And by the way, if you haven’t entered our new contest, I’m here to tell you, your odds are extremely good. This is a small business small company. This is not you know, this is not Microsoft or Apple you’re talking to. This is a small business doing a contest, where we are giving out a stimulus payment a stimulus payment for you our dear listeners to have you win. 500 bucks cash, yes, cash. That’s the sound of cash, folks. Oh, I amuse myself with sound effects, don’t I? So two of you win 500 bucks cash, all you need to do is enter go to Jason hartman.com slash contest. That’s Jason hartman.com slash contest and enter to win. So we’re giving away 1000 bucks in stimulus money. It comes a lot faster than it comes from Washington DC, that’s for sure. So be sure to enter our contest. It’s super easy. Jason hartman.com slash contest. But let’s get right into this goal, achieving topic, okay, and figure out how we can achieve our new year’s resolutions, our new year’s goals and make it a fantastic new year. As you know, I am pretty darn bullish on this market. I just finished recording a couple of YouTube videos and podcast episodes with Ken McElroy to be on his show. And he was interviewing me about it. And you’ll hear those probably if you look for them, or maybe we’ll replay them here on this show. There’s a lot of reasons to believe this market has a couple of good years of juice behind it. A lot of good stuff going on in amongst the bad news. You know, you hear the bad news, the media sensationalizes, the bad news, they’re talking about moratoriums, and so forth. And that’s out there. But by and large, with our investor class, which is different than the institutional landlords that are focusing on lower price, lower class workforce type housing, where there’s a lot more people affected. Our tenant base in the Properties you’re buying through us is largely workers that are unaffected by everything that’s going on in the world. I mean, everybody’s affected, but their jobs aren’t affected, they haven’t lost their job, their business hasn’t shut down. You know, they’re they’re not in as many of the service industries that are so sadly affected. And you know, one of the things I talked about on Ken’s YouTube and podcast is how the wealth gap is widening and widening. And folks, 17 years ago, when I got into this business, I used to say at my very first conferences that I was doing at our Newport Beach office in Newport Beach, California, we used to have them in our office, and then in our Costa Mesa office to back in the day, you know, many, many years ago, I was saying that the middle class is disappearing, it is under attack.

And then I shared some passages from lou dobbs, great book war on the middle class, I think that book came out in 2004, maybe 2005. It is really true, it is something that is very, very disheartening, no question about it. But look, the only thing you can do about it, you don’t have the power to change all of that I don’t have the power. But I do have the power, to help make sure that the people following my work, listening to my podcast, attending our events, you know, on our courses, and investing through our network, those people are going to move up the socio economic ladder, many others, sadly, will be moving down the socio economic ladder. And it’s like the old saying, Don’t curse the darkness, light a candle? The best way to help the poor is to not be one of them. Be the person who is self sufficient? Who doesn’t need the government? And by the way, I think we’ve all seen the government isn’t really there for us. How long has it been since a stimulus payment has gone out? It’s been way, way too long. You know, if someone got 12 $100, over half a year ago, you think they can live on that for all this time? Of course not? Of course not. And then they’re going to get another measly $600. Again, and maybe if Trump gets his way, it’ll be $2,000. Okay, great. But it’s still not enough folks. We have to make our own way in the world. And the next big tidal wave of crisis coming at us, is the pension bubble. It is about to pop. And it is going to be just devastating to people. So you’re in the right place, you’re listening to the right content, you’re doing the right thing, investing in the most historically proven asset class in the entire world. It’s income property. So let’s talk about setting and achieving goals for this new year. And let’s dive into it right now. So, you know, I think these are just some ideas of how we should look at the new year right and how we should look at our new year’s resolutions. Now, the other thing is 80% of Americans they say don’t have any goals, no goals at all 80% of the population, right? So if you have A goal, or hopefully a few goals, you’re in the top 20%. Congratulations, now of the people that have goals in that top 20%. Guess what? How many do you think have written goals? You know, they have a vague idea of the goal in their head, right. But when it’s written, it becomes much more real.

‘Audio Clip’ 10:22
So I’ve been thinking, you know, you’ve heard people at this point have said, Oh, New Year’s resolutions are so cliche, that’s kind of true. But our minds do work in a way that when there’s a clear board, like, you know, one 20, our minds seem to get it right. Like, if you look at the store, and pretty much any store around the world, you see, like, everything’s $1.99, not $2. And it’s stupid, because it’s only one cent, but mentally, it does make a difference. And so what I want everybody to do this year, is to make a commitment to make a resolution, to sit down and have a talk either with yourself, or with your significant other or whomever helps you or works with you and making your financial decisions, or your investment counselor or your investment counselor, you know, that would be included. And just figure out what you want to do you know, realistically, what can you do? Realistically, what are you willing to do? So maybe, you know, if it is safe for properties, and you want to do one a quarter, figure out, where am I going to get the money? You know, how much every month Am I putting away here? How much am I putting, you know, if you do invest in your 401k, let’s say how much you’re going to put there, how much you’re going to put away in your savings for real estate. If you have to cut back on anything? What are you willing to cut back on, and just make a conscious effort to plan for the year, don’t go out and say I’m gonna buy 10 properties, if you know, you’re more likely to buy five, you know, don’t make your goals unrealistic, but just figure out what you can realistically do and how you can realistically get there so that you can become financially free. You know, I love what Denis waitley taught me at age 17. He

Jason Hartman 12:00
said a goal should be just out of reach, but not out of sight. And five years, I think is a really good timeframe for this. Now, a five year plan would be different if you’re talking about, you know, fitness or a workout plan versus real estate investing, right? Because real estate investing is you know, it’s the tortoise and the hare it’s a little slow, you know, it’s the tortoise. But Elizabeth has just done such a fantastic job. And I enjoyed the time I had her on the show just recently where we talked about this. So if you didn’t hear that, please go back and listen to it. But wait, there’s more. Elizabeth, there’s more. Tell us more.

Elizabeth 12:34
Right. So you know, one of the things that we were just talking about is the deep thinking process. And actually taking the time to put pen to paper or video record something or just jot down your thoughts really does help you envision the future but also really thinking through? What are the possibilities? And what are the appropriate targets for yourself. But the other thing that I really love about the goal setting and and as I mentioned on the on the earlier podcasts, you know, Neil and I actually carve out time to do this every year. But we also take the time to reflect on how the year performed, right. And so we think about the past we think about, you know, it’s funny, because it’s so easy to remember the bad things that happened, oh, no, we, you know, a tree fell on a roof and I got to pay for that. But then when you actually look at the performance of your portfolio in aggregate, the progress you’ve made against your goals from the prior year, you get to actually see the scale and the scope of all the things that you actually did achieve. And it just, it’s really exciting, because it just completely rubs me up for making more you know, audacious goals, more big, crazy goals coming up. Because I see how much I actually already achieved.

Jason Hartman 13:50
Let’s dive into this topic of goal setting and goal achieving tonight, or today, depending on where in the world you happen to be. And I hope you had a happy new year, you probably stayed home, save some money, and you probably didn’t have a hangover. So hey, there’s some good things to this. Maybe you stayed home and had a hangover anyway. But it probably wasn’t as bad as it would have been had you gone out right. Let’s go ahead and just kind of dive into some some content here. So what I want to start with is, you know, a couple of years ago for our meet the masters of income property conference that we have held now 22 times we’ve had 20. We have that we had it last August and it was the 22nd anniversary of our meet the masters of income property conference. And the one in two years ago, where we had ron paul as a distinguished guest speaker. He delivered a keynote there and we had some other great speakers too. We hosted a contest, and it was asking people to do their five year plan of what their goals are. their income property portfolio. So I want to play for you to sort of kick off our topic today. The winner of the five year plan contest. It’s one of our clients. Her name is Michelle. She just did a phenomenal video that really laid out how she and her family intend to achieve their income property goals. And at the time, she did this video, they were well on their way to building an awesome portfolio of income producing real estate properties. And that’s what we do. We’ve been doing that for many, many years, we’ve helped 1000s of people buy properties nationwide build fantastic income property portfolios. So let me play this short video for you because I think it’ll really, really tee up this topic very, very nicely.

Michele 15:51
Hi, my name is Michelle. And this is my husband, Phil.

Phil 15:54
Hello.

Jason Hartman 15:55
Hi,

Marcy Nina 15:56
I’m Marcy Nina.

Sophie 15:57
I’m Sophie.

Michele 16:00
We’re family. And this is our five year plan. Our five year plan centers around three main areas of focus, health, wealth, and family area number one health. It all starts here. I’ve learned that healthy habits are the cornerstone for a successful life. If you don’t have your health, it’s really hard to achieve your other goals. So in these next five years, we will focus on getting quality sleep, daily exercise, and eating fresh organic meals. We enjoy eating a paleo inspired diet. Area number two wealth, we want to achieve financial freedom in five years. Step one is to build passive income through rental properties because

Jason Hartman 16:48
income property is the most historically proven asset class in the world. Thanks, Jason.

Michele 16:54
Our current portfolio contains 10 units, it brings in passive income of about 30 $500 per month. That’s about 29% of our monthly expenses. However, if we want to cover 100% of our expenses, we need about $12,000 a month in passive income. So how will we achieve that in five years?

Michele 17:17
It’s simple. If we buy eight units per year for the next five years, we will end up with a total of 50 units. With 50 units, our monthly passive income will be about $15,000. Assuming an average of about $300 a month per unit. That’s enough to pay our expenses with room to spare. Step number two is to fire Phil’s boss.

Phil 17:43
I’m going to retire early from teaching and build a media production business producing video and audio from my own studio.

Michele 17:49
Area number three is family. We want to spend our time doing what matters most making memories, traveling the world and becoming the best possible versions of ourselves. With our increased financial security, we can achieve a better work life balance. We want to explore the world together and share it amazing experiences. In the next five years. I want to take my mom back to Korea and meet my relatives.

Sophie 18:17
I want to go to Paris.

Marcy Nina 18:19
I want to eat sushi in Japan.

Phil 18:21
I want to travel to Tierra del Fuego and seeing Antartica and the penguins.

Michele 18:26
And when we’re not traveling, we’ll be pursuing our passions. I love reading going to see shows with my friends and trying new restaurants and exotic cuisines. And I’m going to start a blog.

Marcy Nina 18:39
I’m going to publish my first novel and learn how to drive

Sophie 18:44
I want to add to this show.

Phil 18:47
I have lots of music that I want to record and perform. And I’m going to earn a degree in kinesiology.

Michele 18:52
But most of all, we want to spend time with our family and friends. Because that’s what really matters.

Jason Hartman 19:00
So there is just a fantastic five year plan, right? That gives you hopefully gives you some ideas of how simple it is to lay this out. And by the way, got a mention we are giving away two, we will have two winners of $500 cash each. You can go to Jason hartman.com slash contest and Enter. And let me tell you something, folks, you’re ready for this. your odds of winning are extremely good. It’s not like we’re some big giant company. It’s not like we have 1000 people entering this little contest. There’ll be two winners, win 500 bucks each. So going into the contest, and you can actually increase your odds by doing some easy little actions. And, you know, make a five year plan video. I mean really declare this stuff publicly. It makes it more real. It makes it more achievable. You know about, I don’t know, 20 years ago, maybe 21 years ago, I had the privilege of going on a speaking tour with Zig Ziglar, the late Zig Ziglar. We lost him. But he was such a great influence in my life. He said, and I remembered this quote differently. Maybe he has two quotes about this. But this is the only one I could find tonight. It’s not what we get by achieving our goals that counts. It’s the kind of person we become, just by trying, just by trying. Now, that was a little different. You know, from what I found tonight, what you get by achieving your goals is not as important as what you become by achieving your goals, right? So it’s not about what you get, you know, a lot of people might think, Oh, it’s just about what do I get out of it? Well, okay, I want a new house or a boat or a plane or, you know, whatever, right? It’s who you become, by making the effort. That’s the important part of it. This is an example. We won’t do this one. But maybe we will. If we have time. We’ll circle back to it. But this is one of our entrance in the contest, made a little video. Again, very, very good odds that you will win 500 bucks. In fact, your odds are probably better, that you’ll win 500 bucks in our contest, then you’ll get a $600 check from Washington, DC. There you go, folks. Oh, gosh, it’s such a mess and government, isn’t it? Isn’t it a mess? Yes. It’s a mess. You’ve probably all heard of the idea of smart goals, right? Smart being an acronym. Okay. And that acronym is, you know, Specific, Measurable, Attainable, Realistic, and time bound, right, you’ve got to have a time limit on the goals.

Otherwise, you’re on Sunday, I’ll Denis waitley has done this great poem called someday I’ll like I apostrophe L L. Not like an island. But it is like an island, right? It’s both. And so check that out. I’ve shared that on my podcast before. But SMART goals, okay, specific. It’s the who, what, when, where, which, and why. And you know, the thing I want to say about this, and by the way, I got this from a great website called Smart sheet. And you can go there and for free, you can get some free spreadsheets and goal files, basically, that you can run on your computer to help you set SMART goals and make them very specific. One of the things I want to say there besides what’s on the screen, and there are actually I think two books with his title, Manny, you’ll know, because you’re the book guy, okay, in two books with his title. And the idea being, that it’s not how it’s who. And I want to tell you, that is such a powerful idea. So much of my life has been wasted, frankly, on the house, trying to figure out how to do everything myself. huge mistake. And when I started joining mastermind groups, and going to a lot of conferences, maybe 810 years ago, that dramatically accelerated my life success. Because I started finding the who, and the who was the shortcut. Certainly, we can become very qualified and very knowledgeable. There’s a lot of information out there a lot of great gurus that can teach us a lot of things. But we can’t know everything. And we don’t have time to implement everything ourselves. So if we can, if we can find the who’s out there, the Who’s that will help us accelerate the achievement of our goals. And when it comes to real estate investing, we are the who my company is the who that can help you and connect you with lots of other whose sounds like a Dr. Seuss book, doesn’t it? Remember, Horton Hears a Who, I love that book, by the way, it’s great.

Anyway, there’s some thoughts on the specific the who, what, when, where, which and why. Okay. And then measurable, achievable. It’s got to be, as Denis Waitley put it, just out of reach, but not out of sight. You know, it can’t be so ridiculous that it can’t be seen. But it should be far enough that you can’t reach it now that it stretches you It makes you become more it makes you become a bigger person and the measurable concept back to that for a moment. How will you quantify it? How will you know when you got there? Here’s one of the things and Lisa I’m sure you can attest to this. Many investors in the real estate world, they own properties. Okay? These are investors who are already in the game. They have properties. And many times they think they’re losing when they’re really winning. And they just don’t know how to do the math. With income property. It’s this beautiful multi dimensional asset class. And I hate to use all these cliches, but it’s like the iceberg. Most of the iceberg is where it’s below the waterline, we can’t see it. It’s below the water, only a little bit of the iceberg is above the water, most of it is below. And that’s how income property is most of the ROI, or the return on investment is below the waterline, if you will, you’re making money, you’re creating wealth. But if you don’t know how to do the math, if you don’t know how to calculate return on investment, from a multi dimensional asset class, you might think you’re losing when you’re actually winning. And that would be a huge shame to give up when you’re actually winning. Lisa, any thoughts on that?

Lisa 26:17
And if that’s why it’s important to hang in there and stick with it, not give up not first of the first house. That’s why you need a couple houses. So balance out your portfolio.

Jason Hartman 26:23
Yes, yes. balance out your portfolio and take advantage of the law of large numbers, where you diversify risk, you diversify results over a portfolio. Definitely. Good point. Lisa. Definitely. Good point. And then relevant, okay. Relevance refers to focusing on what makes sense with broader goals. Now, this says business goals, this is from the website. But I would say for the context of what we’re talking about, just brought her life goals, right. One way I’ve heard that expressed is is it ecological? Does it fit into what you’re doing with the rest of your life? Is it? So that’s important? And then is it time bound? You know, it can’t be a goal that says, Yeah, I want to be a rich real estate investor, I’m going to have 100 units. Okay, well, you better put a time moment on that. Otherwise, it’s just this amorphous thing out there in the ether. It’s just someday I’ll someday I will write someday I’ll Denis waitley starts off that fantastic poem. I don’t have it in front of me. But he says, there is an island fantasy. A someday I’ll, we’ll never see where a recession stops, inflation ceases, our mortgages paid in our pay increases, that someday I’ll wear problems and where every piece of mail is from a friend, I can’t remember the rest of it. So that’s just from memory. That’s not bad. I’ve obviously read that a few times. Because it’s a great lesson. You know, it’s a great lesson about not living in the future. Or in the past, we can only control the now we must live in the now we should have plans for the future, we should appreciate and learn from the past. But we can only live in the now. Because the Now is the only time over which we can exert any actual control over what we do now. Now when it’s gone now, and it’s gone now and it’s gone. See that moment ago is gone now. And I can’t do anything about it. I can only learn from it or reminisce about it. So he says also that someday I’ll poem people who live in the past become senile, and people who are stuck in the future live on someday I’ll you got to live in the now.

Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman 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.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 99 of the heroic investing show, where we focus on the challenges unique to members of the armed services, first responders, active duty and those retired. But we also focus on those issues that are common to all investors, we aim to provide the tools that enable our listeners to secure their family, their future, and their retirement. And we help them put in place a solid plan to replace that w two job with passive income so that they can start to focus on things that if it’s true, or more exciting to them, hey, a lot of us get 100% satisfaction out of doing the job that we’re doing. I got pretty close to that at different times during my career, certainly when I had the pleasure of commanding an awesome crew on the USS Tucson. But there’s also times in our career where we’re ready to move on, you know, I was an entrepreneur at heart, which is why I loved commanding my own little submarine. And taking it you know, places where we could operate on our own with our own decisions, obviously not free of all the requirements. But he did certainly have the ability as a unit as a cohesive unit to make decisions, plan our own destiny, and control some stuff. And I absolutely love that. Because that’s what an entrepreneur does, right? They have a business, they have a vision, and they’re able to guide their team and their business in a direction where they feel that they can be most successful make the largest impact on their audience. So that’s what we try to do here heroic investing with through suggestions through advice from guest speakers, or guest, podcast interviewers or interviewees. But also simply through some prudent passive investments and teaching individuals, lessons that I’ve learned and other real estate investors I’ve learned using the passive source of income producing rental properties. But listen, there’s more than just rental properties as well. There’s all kinds of alternative passive income, I help people do different versions of that, you know, whether it be real estate or being a lender, intellectual property, oil and gas, things called Life settlements. So there’s, there’s lots of options of what you can do to bring passive income into your life. I just happened to put real estate at the very top of that list, as you know, Jason Hartman does, for many reasons, because as he says, it’s a multi dimensional asset. But it certainly has lots of tax benefits, that will, you know, if you can protect yourself from taxes, again, that’s part of my day job helping people protect themselves from taxes, you can grow wealth at a rate that you can’t achieve in the normal tax environment that we have found ourselves here.

So on heroic investing 99, Jason is going to talk with us for quite a while about eight financial rules that apply to everyone, whether they be real estate investors, Wall Street investors, again, just trying to bring some assistance in your fledgling real estate world unless you’re a big time real estate investor with lots of experience, and then I need you on this show, helping me help others. Jason has quite a few of these lists, like the eight financial rules, you know, for example, His 10 commandments of successful investing. That one’s coming up actually two episodes from now on heroic investing 101 I thought that that was a really a perfect title. If you think of 101 as kind of the college level entry course, the beginner’s course. Certainly, the 10 commandments fall right in line with that. He also had a little lesser known next 10 commandments, the you know, commandments 11 through 20. I haven’t ran those yet on heroic investing, he came up with those and one of the meet the Masters that I went to several years ago, and we just haven’t highlighted them quite as much, but I will get those on this show coming up soon. We also did 30 financial mistakes that every investor makes or that investors make not every investor but that investors make and that was a two part episode here on the heroic investing show. Jason started with the first half a little over half of them on heroic investing 55 and then I followed up on heroic investing 56 with the second part, a little bit of overlap. there between that and the 10 commandments, and maybe these eight financial rules, but they are all gems that someone else learned. And that’s the key. Someone else learned those in spades so that hopefully you don’t have to repeat them. If you can learn from others mistakes, in my opinion, that is demonstrating true intelligence and maturity, these lists of eight, My favorites are numbers four, and five, and I’m not going to ruin the surprise, I’ll make you listen to them to see what they are. But once you do hear them, you will say yep, that makes sense. That sounds like getting one that I will kind of run as a spoiler is number six, I thought this one was really timely and consistent with what I’ve spoken about at the beginning here, and we have on recent shows, and that is specifically to spend more time on failures than you do on successes. So there’s really kind of two subjects there.

I mean, we just talked about spend time learning from others failures. And if you do that, and listening to these podcasts, I think you will be far more successful. That’s really what these lists of 30 mistakes and 10 commandments and all that that’s what they’re doing is teaching you what others have have done throughout history incorrectly, and what they’ve learned from it. But it’s also a personal thing about don’t, you know, listen to too much of your own press, right, you know, avoid hubris, and spend more time thinking about how you can improve, evaluate, and then improve places where you’ve, you’ve had some mistakes. You know, in the Navy, at least in the submarine force, we have really rigorous mature program about doing something we call the hot wash, which was evaluating every evolution every exercise every mission, and comparing them to what we were supposed to do, what the requirements were what we said we were going to do in our plan, you know, what went as expected, what didn’t, and then even that stuff that did go as expected, how can we make it better next time. And then we capture those lessons learn. We share them with everyone in a post event training. And then when we’re going off to do that event, again, we dust that stuff off and remind ourselves what we did wrong last time, or how we figured out we could be more efficient than next time around is a really, really good process. It’s a process that I think in my business, and a lot of people in their businesses out here in the real world don’t take the time to do we know it’s a good idea, we just end up getting caught up and not taking the time to do it. And that’s certainly to our own peril, or at least to our own inefficiency. So please think about those kinds of things. When you have that kind of an opportunity with your team, take it seize that opportunity, figure out the lessons learned by doing a hot wash, and then recording them and dusting them off before you try that thing again. So alright, so enough of all that, here we go, Jason sharing some wisdom for the ages.

Jason Hartman 7:51
Today, our guests will be yours truly Jason Hartman. What I mean by that is that we made a little bit of a mistake that was on the last episode. And we always endeavor to correct our mistakes as quickly as possible here, we are not infallible, we make them just like everybody else, the differences, we’re going to be here and we’re going to try and fix them when we do. So we will do that here in a few moments. And I will explain that to you in further detail. It will all become apparent. But first, there was a really interesting little article, you see all these things in the news media, right? Seven rules for this 10 tips for that I’ve got the 10 commandments section, I’ve got 20 now there’s there’s two versions of 10 commandments, the first set and the addendum. And there will be another addendum forthcoming, by the way. So we’re gonna have 30 this investing stuff, I don’t know, it’s kind of simple, but in some ways, it can be a little complex, occasionally, too. So this one was good. And then of course, the great book, The Seven Habits of Highly Effective People by the late Stephen Covey. Boy, I wish we could have gotten him on the show while he was still around what a great thinker and just put out a lot of fantastic material. I was a huge Stephen Covey student for many, many, many years. And I had the pleasure of meeting him on a cruise ship in Russia Once there was a little event on the cruise ship. And they mentioned his wife’s name, and I can’t remember but so and so covey from Salt Lake City, Utah, and I thought is that Stephen Covey’s wife? And so I went to my state room on the ship, and I called the front desk, and I said, may I speak to Stephen Covey, and they patch me right through to his room. He answered the phone and I talked to him. And then we met up on the ship and talked for a while. What a great guy. Anyway, seven habits, 10 tips, 10 commandments, whatever. Well, this one was eight financial rules that apply to everyone and their money. And it was a Business Insider article. And as I was reading it, I was kind of thinking you know, these are pretty good tips.

A lot of these things that you see like this are just junk in the mainstream media and, and part of the vast Wall Street conspiracy. You read some of this junk, and I hate to pick on it, but like Money Magazine or like pop culture for investing just really amateurish, in my humble opinion. There’s some good stuff in there too. So I’m not going to completely throw the baby out with the bathwater, but a lot of it is just junk. Okay, let’s just come to that conclusion, because it is, but these were pretty good. And I thought I would go over them with you, and then add my own take on them, because I thought they were pretty solid. So these eight financial rules that apply to everyone in their money. And this is by Morgan housel. I hope I’m pronouncing that correctly. It’s a Business Insider article. And it says, number one, spending money to show other people how much money you have, is the surest way to have less money. I couldn’t agree more. We’ve all probably been guilty of that at one time or another. And we all have an ego and an ego is a very important thing. I think ego is much maligned, in our culture. Everybody likes to say, Oh, that’s just ego, that’s bad. No, the ego really is a great catalyst for progress. But it needs to like everything, it needs to be kept in check. So we need to keep our ego in check. And how many times have you seen or engaged in spending money to impress other people? Now, this is, as they say, in tip number one here, the surest way to have less money. And I couldn’t agree more, I think that you should spend a little bit of money to impress yourself, though. And I’ll get to that in just a moment. And as I talked about in the creating wealth seminar that I do, and we just did the recent one in Little Rock, and then one before that in Irvine, California, you know, I always talk about how most people go into debt. And they do that by spending money on the appearances of wealth, rather than the things that create actual wealth. So don’t be in that trap of spending money on the appearances of wealth. It’s the guns and butter kind of philosophy, spend your money on guns, and in the investing world, the guns are things that will make our money work for us things that will give us a return. Income property certainly is a great gun. The butter is that expensive depreciating car, that expensive, depreciating clothing, that big house that you live in, that is costing you a fortune. Because we know better, we know that our home is not an investment.

Our home is simply an expense. If our home produced income for us like income property does, then it would be an investment. But if it costs money, it is simply an expense. So we’ve got to make sure we’re spending money on the things that will create wealth for us. Now, that doesn’t mean being a miser or a cheapskate. Because I think we can go too far with this, obviously. And I think that the miserly cheapskate philosophy is really counterproductive, also. And here’s one of the things that I have found that although I don’t do it enough, myself, but here I go, again, not practicing what I preach, I yes, I do that occasionally. I say to my listeners, you should all get really organized. And then I look at my desk and I think and my luck on my computer. And I think maybe I should get really organized to human failings, we all have them. Okay. But one of the things that I think is very effective, and when I’ve done it, I think it’s been very effective for me to I haven’t always done it, and I probably need to do more. And that is celebrating little victories, and rewarding yourself for little victories, okay. So when something good happens when you have a property that’s going well, and you’re making money on it, have a little celebration. And the reason you should have a little celebration or reward, say you want to buy that consumer item, you know, you want to buy a swanky new car or a swanky new outfit, or go on a nice dinner, you know, or a nice vacation. I think it’s okay to do that, to some extent, the differences don’t get into things that depreciate in value or cost expense that have a fixed overhead. You want to celebrate these things with ideally small treats. And those things do not create a three or a five or a 10 year obligation. There are just little treats along the way. I even mentioned a car, you know, it all depends how big the win is. But one of the reasons I think this is so important is that we set up our subconscious mind to be basically like a Pavlovian dog. Of course we all know pavlos famous experiment with dogs, where he rang the bell and fed the dogs and rang the bell and fed the dogs and rang the bell and fed the dogs and did that over and over and then he would just ring the bell, and the dogs would start salivating as if they were going to be fed, even though he didn’t feed them. And so our subconscious mind, you know, we can play some tricks on it, we can play some tricks in setting up this reward response cycle. And I think that’s important because I think that will ultimately lead us to do things that increase our return on investment, and help us make prudent financial decisions. So the miser doesn’t do this, the miser just hordes and hordes and hordes and investment in investment invest. And I’d say that the miser does not ultimately get as far in life, as the person who prudently and conservatively rewards themselves along the way, for those small victories, I think they will have a bigger, more abundant, more expansive life if they do that. So that’s my advice. I don’t always do it, I should do it more, you should do it, too.

Okay. So number two, wealth is completely relative. Well, I talked about this as well at the creating wealth seminar. And by the way, of course, you can get that as the home study course you can get the physical version of it for half price. Yes. When do you ever see the digital version of a product at normal price and the physical version of the product on sale? Well, as I mentioned, on the last episode, if you heard it, well, you’re about to hear part of it again, that we’ve got a big sale on that at Jason Hartman calm because I have this access delivery that I didn’t know about, have to have my physical products, and they’re in my storage unit. And I really don’t want to even have that other storage unit, I’ve got a whole bunch of storage units. Anyway, so buy those, and you can hear more about this stuff. But wealth is completely relative. that’s point number two. And what I mean by that is, look, if you look at the doom and gloom ORS who say the wind is going down, the dollar is going to collapse. And those are the people listening to my holistic survival show. And I think there is some validity to that. It’s not completely valid, I thought it was more valid when I started that show. And now that I’ve done, you know, 200, plus interviews, interviewing all the people who think the world is coming to an end, I really kind of don’t think it is coming to an end, I think it’s actually going pretty well, even though we have very imprudent financial things going on in the world. And I think there will be another shoe dropping, I think that will ultimately be a very inflationary shoe. And I’ve outlined a good investing strategy for that. And even if it doesn’t happen, I’ve got two other strategies where you’ll do okay, but the point is, wealth is relative. Okay, so think about it. If the doom and gloom scenario happens, and everybody goes broke, all you need to be is a little less broke than everybody else. If everything goes great in the future is massively abundant, all you need to be is a little bit ahead of everybody else. Because all of the products you buy, and all of the services you buy in the economy, are based on relative pricing. So they will adjust either an inflationary curve or a deflationary demand curve, depending on the relative wealth of the general population.

Okay? So if you’re in a westernized, advanced country, and I know we’ve got listeners from 164, countries listening, so we do have a pretty good variety of people, it probably very different socio economic levels throughout the world listening, and we welcome all our listeners. And the one thing to understand about that is that if you’re living in a westernized advanced economy, you are already wealthier than about two thirds of the world’s population. So consider yourself very, very fortunate in that respect. Okay, wealth is completely relative, just understand that. Alright. Number three, the goal of investing isn’t to minimize boredom. It’s to maximize returns. Wow, that is a good one. Now, what I take that to mean, is that if you look at the gambling mentality, you look at the people who are always tinkering with the stock market, who never seem to win, who are always talking about the next big deal. This week. They’re doing day trading next week, they’re doing options next week. They’re doing a different variety of auctions. They’re doing covered calls, or naked, straddles, or naked shorts or whatever the heck they call them. They’ve got so many creative names just to minimize boredom. That’s the same way it is gambling, why I’m on my way to Las Vegas in two days to a conference on discounted mortgages and notes and paper and hard money lending and private lending. I know I’ve been talking about that a little bit on the show, and I got to tell you, that world is fraught with potential problems. And I am really trying to do unlike some of my competitors out there, really really deep, broad investigation, and I’m taking one of our clients with us actually one that you may have met. But he’s been in a lot of our life events, and he’s going with us as well, to check out this event. And in Las Vegas, think about it gambling, it’s so complicated. I mean, I never got into gambling, number one, because I’m just too darn conservative. But number two, it’s just so complicated and hard to learn. There’s all these different names for things and the different cards and this and that. And if I ever did get interested in gambling, I guess I’d be interested in poker, but that one’s really complicated, too. I mean, all of these funny names they have for stuff, you know, like the turn the river, where do they get off and stuff from, but this is really like the stock market, it’s the same thing. It’s the same thing with a house flippers, and the options traders and the stock people and all of their ways to minimize boredom. Okay, that’s, that’s not what investing is about investing, good investing is really pretty boring. So good, prudent long term investing should be somewhat boring. That’s the way it should be, you shouldn’t have to watch it all the time, you shouldn’t have to pay a ridiculous amount of attention to it, it shouldn’t become your day job. Unless you have a huge portfolio. That’s the thing, okay, it should be be a little bit boring. And the point is not to have it entertain you. The point is to have it create wealth for you.

Okay, number four in this article, is the only way to build wealth is to have a gap between your ego and your income. Well, this really relates to the earlier point, right. And it just says getting rich has little to do with your income and everything to do with your savings rate. Remember, you’re listening to flashback Friday, our new episodes are published every Monday and Wednesday. Now, that is ultimately true. However, you’ve got to be an investor, because you know, nobody ever got rich saving money, okay? And the reason you save is so that as soon as you have enough capital to invest, if you’re buying your first property or your 100th property, you need anywhere from 20 to $100,000 per property somewhere in that range. Okay, if you’re buying a big apartment complex from us, maybe you need more, okay, but I’m just using the good old standard, dependable reliable, safe investment, single family home type investment, okay. And when you do that, you need to save money to accumulate the capital. But as soon as you save enough to purchase that property, and have adequate reserves of about 4% of the value as your minimum, then you need to invest, you need to move that money out of savings into investment. Okay, because, as we know, saving money will destroy our wealth if we are in an inflationary environment, and if we pay taxes, so saving money is a dangerous thing. You know, sometimes the biggest risk in life is not to take the risk. Sometimes the riskiest thing is to do the thing that is perceived as the least risky, right? And so that’s point number four. All right.

Okay. Number five, the most valuable asset you can have is a strong propensity not to care what others think. Now this one I would agree with, okay, it’s so easy to get distracted by all the armchair quarterbacks. All this seemingly well meaning but possibly envious and jealous people who are our friends. Yes, that’s one of the human traits we have to watch out for and guard against, even our friends and loved ones will not always really want us to do the thing that’s going to make us succeed. Why is that? insecurity is one of the reasons for sure, right? misery loves company, you’ve heard the old saying, it’s hard to soar with Eagles when you work with a bunch of turkeys as the saying goes, so we’ve got to make sure that we don’t care too much what other people think about what we’re doing. Okay, we’ve got to follow the tortoise and the hare path and just move along and create that wealth with our day to day discipline to just put our money in the game. Be good managers of our managers. Now most of us have property managers and we don’t manage our own properties directly. And just be a good steward of these assets for the long term. The buy and hold investor, as I’ve always said, is the one who comes out on top. Okay, I’ve just noticed over my many years of experience in this and the 1000s and 1000s and 1000s of people I have trained and met and spoken with the people who are in the Flipping in the speculation business, they have spending money. The people who are the buy in holders have real long term wealth. So you decide which one you would rather be, hopefully you’re in that second category, the real long term wealth people, okay? So have a strong propensity not to care too much about what other people think. I think that’s good advice, okay? Because everybody else, they’re wooed by the siren song of the Deal of the Day, the flavor of the month, the hot trend. And you know, those people chasing those Hot Trends, all you got to do is live a few years, and you realize that that rarely, if ever, actually works. Number six, spend more time studying failures than successes.

Now, that’s an interesting one, it seems that we all look to success. And we look at these role models, especially of extreme success. And I don’t think there’s very much to learn, usually from extremely successful people, the people you can learn the most from, I think, are the people who are about two or three steps ahead of you, like I’ve said before, on the show is that great quote by Jim Rohn, the late great business philosopher, Jim Rohn, who I was fortunate to learn about and follow at the ripe old age of 17, he and Denis waitley, and Zig Ziglar, and Earl Nightingale. And then later, Brian Tracy, to some extent, who’s By the way, we’ve had Denis waitley. And Brian Tracy on the show before in past episodes, they taught me a lot. And one of the things that Jim Rohn said is, he said, your income will be the average of the five people you spend most of your time with. And one of the great things about that quote is that we don’t have to be influenced too much by our five close friends, because now we have the opportunity to reach out and have a call it virtual friends and virtual mentors, you’ve got me, right. I mean, I know a lot of people listening are ahead of me in the financial game, I’m not that big a deal. I mean, I’m doing all right. But there are lots of people who are doing much, much bigger things than I am. And one of the things we’ve got to do is we constantly want to be in an environment where we’re listening to, and being mentored by and hanging around with, even if it’s virtually hanging around with people who are more successful than we are. Because they allow us to see the possibilities, and they help bring us up, they help foster maybe a little bit of that competitive spirit, that competitive spirit will drive us maybe that ego drive is like, Hey, you know, I don’t want to let them beat me, I got to perform better, I got to do more. And that can be a very good thing.

So study failures, as well as successes. So I guess my point was, don’t be the studying only the extreme successes. You know, the the super famous people. You know, if you’re looking at Warren Buffett and Donald Trump and Mark Zuckerberg, how much can you really learn from them? A little bit? Sure. But the most of the learning will take place from people who are just a few steps ahead of you. It’s reachable and realistic. One of the other interesting things though, about actually studying failure. I’m talking about studying moderate successes there. In this article, it talks about economist, Eric Fock Steen. And he summed it up well, and now a quote from the article here and from him. It says, In expert tennis, 80% of the points are won, well, an amateur tennis 80% are lost. The same is true for wrestling, chess, and investing. Beginners should focus on avoiding mistakes, experts should focus on making great moves. And you know, that is so true. And that’s what I love about my own investment strategy, my own buy and hold investment strategy. And really, it’s not my strategy. I mean, look, I’ve added some thought to it. And some new thought to this strategy, certainly through the inflation and debt destruction technique, the risk evaluation technique and the land to improvement ratio, the LTI ratio, which I’ve talked about before, but basically this old buy and hold strategy. I mean, William Nickerson bill Nickerson way back a long time ago, I don’t know when he wrote his first book, but he was like the king of buy and hold real estate. And he wrote it back in. I don’t know if the 50s the 60s, you know, a long time ago. Okay. So the strategy is so proven and so renowned. It’s well worth considering. Okay. Number seven. People are flawed. So a lot of stuff. Makes no sense. That’s a good point. All right. You’re in the article it’s talking about Be careful who you follow and understand that You know, you might get one piece of good advice from a person in one department, but it doesn’t mean you should make them your life role model. Different people can serve as role models for different things.

Okay. James grant put it and then he says, quote, to suppose that the value of a stock is determined purely by the corporation’s earnings is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin, and believed Orson Welles when he told them over the radio that Martians have landed on quote, and you know, that’s so true. I mean, people fall for all sorts of silly things. In the investing world in the speculative world, look at the tulip bulb bubble, look at the last housing bubble. You know, from just a few years ago, the subprime mortgage bubble, the most sophisticated people fall for incredibly stupid, stupid things. So understand people are flawed. And there’s just a lot of nonsensical stuff out there. Okay. And finally, the eighth point, anything can happen at any time, for any reason. And the article just goes on to say you might be laid off next week, you can be sued tomorrow, or win the lottery, maybe you’ll get cancer, or a huge promotion, stocks can rally for twice as long as you think and crash twice as fast as you assumed. History is one damn thing after another. Most of it involves money. And there’s nothing you can do about it. And you know what? I think that’s a good point. It’s good to understand, you’ve got to have contingency plans. And that makes sense. So you know, maybe you’ll have a big surprise repair on a property, maybe you’ll have a bad tenant, and you’ll have to go through an eviction and make ready. As the old saying goes, sh it happens, right? It does. We do not know what the future will hold. But what a long term prudent buy and hold strategy, we can really mitigate a lot of these problems with prudent conservative investing, where we’re buying properties, we’re following my 10 really my 20 commandments of investing, what’s number five, Thou shalt not gamble, buy properties that make sense the day you buy them. Number three, don’t invest in other people’s deal. You know, thou shalt maintain control is that commandment, follow those commandments, and you are going to be in pretty darn good shape.

Okay, let’s get to our guests segment. I’m joking when I say that. We’re just correcting a mistake here from Friday, folks. So we are going to play what we did not play on the last episode. So listen in. And I know that sounds a little funky, because we’re doing it backwards. But this is the intro for the last episode. That was not posted on Friday. So here it is. And Gosh, we got a lot of good shows coming up to so many good ones. You know who I’m interviewing today? The Great, the great bill Bonner. Yes. A guy who almost never does radio interviews, Bill Bonner. He’s a great writer. He’s written many, many books. He is the founder of a Gora financial, and I am interviewing him today. So we’ll have that on an upcoming episode soon. Here we go with the intro for last episode. Hey, welcome to the creating wealth show. This is your host Jason Hartman. And thank you so much for joining me today for episode number 421. I sure hope you enjoyed our last episode a 10th show, with Mark Devine talking about the way of the seal, which was really interesting. I also just finished an interview for probably my holistic survival show with john tieghan, who was a Blackwater contractor and a former Marine Blackwater contractor, who was right there on the ground at Ben Ghazi at the time of the tragic incident there. And he wrote a book called 13 hours I think is the name of it. What really happened in Benghazi, and it’s been on the New York Times bestseller list for the past few weeks. And that was a very enlightening interview. So just speaking of military people, I just scrolled 13 hours, the inside account of what really happened in Benghazi. And he’s a former security contractor for Blackwater, which you know, is a huge, huge military contractor that is controversial, to say the least. But for whatever that’s worth, it is a great interview. Anyway, look for that when it’s posted if you’re a follower of any of my other shows, and I think you’ll be interested in that. Again, we try to give you some broad good content on a lot of things, but especially personal finance and real estate investing, which is of course, our main focus on this show, and a few of my other shows as well. And Gosh, what We talk about today.

Well, a few things. Number one, and most importantly, we have a fantastic video on my YouTube channel. If you go to YouTube and type Jason Hartman, media, Jason Hartman Media and we got a couple YouTube channels but that’s the one where we’re posting a lot of content right now and video versions of our shows as well of several of the shows. And this video on how to read a performer is just critical. And I played the audio of it several episodes ago. And I tell you, with some of the questions I get, I really just want to play it again and again, but I’m not going to do that to you, I’m going to ask you to go review that video on our YouTube channel. And I was really upset with YouTube because they took that video down and re posted it, I guess it was getting too many views. And they thought that was suspicious. We had like, I don’t know, 3300 views really quickly when that video was originally posted. And YouTube said that they thought the views were fake. And I guess a lot of people kind of game the system on this stuff. So anyway, I was quite upset with them, we had spent a bunch of money to advertise that video, which I think is a really just a critical foundational understanding with investing. Okay, that is just fundamental stuff that how to read perform a video. So please, please do check that out on YouTube. Or check out at least the prior episode if you want the audio only version of it. But it really does help to see it and see what I’m looking at and highlighting on the performance. So please check that out fundamental knowledge and help for you on being a better real estate investor and understanding how to analyze a deal. So check that out.

And a couple of interesting articles here, I haven’t had time I just accumulate all these things I want to talk to you about. And it feels like I’m always behind on this stuff. And I just never have time. This one published in Business Insider on September 15. So it’s not that old, only two weeks or so. And it is a really interesting thing. It’s talking about the different states throughout the country that have the highest percentage of single adults. And it talks about how singles. And this is something I’ve been saying for quite a while are a huge, huge demographic cohort. And why is this important to us as real estate investors? Well, I’ll tell you why. Many, many years ago, when I first got into the business more years ago than I even care to think about now it’s been so long, it’s amazing how a couple decades will just pass the snap of a finger in the blink of an eye but they do many years ago, you would never want to consider buying a one bedroom property that was just like the curse of death. And it still is a one bedroom property is never going to get you the kind of the ideal most stable tenant. However, it’s not as bad as it used to be. In fact, there are some decent opportunities in one bedroom properties. And the reason I mentioned this is because of the massively increasing single population, for the first time in the history of the country, from what I understand, there are actually more single adults of marrying age, we’ll call it then there are married couples, it’s like 54%. And this is a major, major thing to think about as a real estate investor. Now, there are some interesting kind of broad conspiratorial theories about this about the government wanting people to be single the government disincentivizing through tax code and welfare and so forth marriage.

And we’ve certainly seen this in some certain racial components of the society where there’s some realistic reason for this belief that they’ve encouraged in single households with children’s and discouraged marriage through the tax code, and so forth and through many other things. And this conspiracy also relates to good old Madison Avenue, the advertising community, Mad Men if you watch the show, and it relates to them, because if you think about it, if you’re in the business of selling consumer products, or you’re in the real estate business, heck, Isn’t it better to sell two toasters and two blenders rather than one? Well, certainly, it’s a much bigger market if you have more single people, right? Because a single household will buy all the same basic things that a married household will buy their two households instead of one. So they’re going to have to have everything rather than one of everything rather than sharing things. So this is a big deal. And I’ve talked before on prior episodes, about how in the last three presidential elections, the largest voting bloc, although it’s not aren’t really considered a voting bloc, oddly, was single adults. And most people think of voting blocks, they divide them by racial and ethnic categories. They divide them by age, like the AARP, that’s a huge demographic or a huge voting bloc, and a huge lobbying organization, or they divide them by Generation Y, or Generation X, my generation, which is very small generation, or the baby boomers, and all these different things. Really, the biggest, broadest cohort, if you will, is singles, that’s the biggest one. And so when you look at this, it means that smaller properties are more desirable than they’ve ever been in human history in terms of what that household would contain. being just a single person household.

Of course, I’m single, and I guess I’m just ahead of the trend on all this stuff, folks. Now, now, I’ll probably get married, or hopefully I’ll get married sometime soon. And then I’ll be ahead of that trend when the pendulum swings back to marriage being more popular, but But yeah, it really is amazing. This is an amazing article. And it’s, it’s by Richard Florida, who I’ve been wanting to get on the show for a while, admittedly haven’t tried very hard. But I’ve talked about him a lot, where he talks about the creative class cities, and what that means to real estate, investors and so forth. But get this, I thought I’d share a couple these rankings because they’re pretty interesting. And kind of counterintuitive in some ways. In terms of singles, it says singles make up more than half the population in 27 of 50 states. And the share of single adults ranges from a low of 43.7% to a high of 55.7%, as the map above shows, and here are the top 10 in the bottom 10 states. So the states with the most single people, this one really kind of amazed me in some ways. Number one, most single people, you’re not going to believe it, Louisiana. But if you think about that, and you think about the conspiracy theories about the government promoting single households, right, because singles tend to be more skewed toward the left. They tend to be more democratic, and they’re voting, and they tend to receive more government aid and more government benefits. So Louisiana ranking number 150 5.7%. Rhode Island number two, the same number New York. Now that one doesn’t surprise me because when you take into account the highest populous part of New York State, which would be New York City 55.5% lots of single people in New York City, Mississippi, number four New Mexico, California, that doesn’t surprise me, Florida, number seven, California was was number six, Massachusetts, Number eight, and you look in the cities, and there’s a lot more single people in cities of course. So you got Boston there, Nevada, number nine. I guess a little surprising. I don’t know Vegas, baby. What happens in Vegas stays in Vegas, Maryland number 10. And then the bottom 10 with the fewest single people, these don’t surprise me too much. I guess Montana, number 41. North Dakota 42. Minnesota, Kansas, New Hampshire, Nebraska, Iowa, Wyoming, Idaho, and Utah being number 50. You don’t want to be single in Utah. You’re definitely a minority there. And that’s really no surprise Utah, very family oriented state. You’ve got the great Mormon religion, which I don’t care what people say.

Listen, I’m not Mormon. But I think every Mormon I’ve encountered has been a good person. Sure, there are bad ones out there. But pretty good group of people and very family and community oriented, very self reliant people, and I applaud them for that. Anyway, that’s kind of interesting about single people. Okay. And I know, by the way, a lot of my fellow Christians think the Mormons are cult members, blah, blah, blah. I’m kind of not buying into that. So there you go. For whatever it’s worth. I remember. I do remember though, an ex girlfriend years ago brought over a videotape. Yes, a videotape, not a DVD, and showed me this big tape about the Mormon religion and all of these idiosyncrasies and so forth. And I don’t know, I just know my own personal experience has been pretty positive. And if Romney were running for president, I’m not saying I like everything about him, but I do like his business savvy. And a turnaround specialists would probably be a pretty good thing. It least financially for the country. So that’s my story. Hate me or love me, but that’s what I think. Okay. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday.

Now Another thing, which is interesting, I talked about this before, I believe, but it was a USA Today article from a while ago about why $1 million may not be enough to retire. And if you’re investing in income property, I’ll tell ya, you can easily achieve financial happiness and financial independence with good investments. And you know, because I’ve talked about refi, to you die before, and how absolutely excellent that plan is for investors. In this article, they talk about assuring that you’ll have enough to retire. They look at a million dollar portfolio, and a scenario and now this is of course, part of the vast Wall Street conspiracy here and towing the Wall Street company line of absolute stupidity. And it says, In the past 10 years a portfolio equally divided between the Standard and Poor’s 500 stock index, can your Treasury notes and three month treasury bills returned an average of get this folks don’t fall asleep on me because this is disgusting. 4.24% a year, where inflation Of course, they’re believing the idiotic official statistics, most of these people, they’ve been losing money, okay, in this portfolio, but they think they’re slightly winning, because inflation averaged 2.4%. So basically, their margin of return here before taxes take away, probably a good 40% of it, okay, their margin is 2%. And then you impute inflation and you know, what are you left with? You’re left with what 1.2%, above the official inflation stats, after you pay taxes, and then you put in the real inflation rate, and you know, you are losing money, you’re completely underwater. Okay. So that’s what’s going to happen to you, if you’re investing in the vast Wall Street conspiracy in the typical absolute disgusting stupidity in the financial press.

If you invest in income property, in the most historically proven asset class in America, you can easily make retirement work, especially if you got a few years before retirement. And by a few I mean, you know, 10, or 20, would be ideal. If you’ve got more, that’s even better. But remember, I’ve cited before that pretty famous study that was done, and I believe it was back in 1994. And it was about can money buy happiness, and I have talked about this before, and I’m gonna pick 1994. Again, it’s just from memory. But what I remember from that study in reading it, and it was pretty kind of revered at the time, and I do agree with it, you know, in 19 $94 $1.5 million would be kind of the number that would you in quotes, buy happiness, okay, that would be the number that would buy happiness. And if that’s true, let’s just adjust that for inflation. And based on the official statistics, which of course, understate inflation, that would mean that today, you would need 2.0 Well, I’ll tell you exactly how much you need. $2,407,408.91 is how much you need to, quote, buy happiness, can money buy happiness, well, no, it can’t. But it buys a lot more happiness than poverty, that’s for sure. And it’s hard to argue with that one.

Okay. So two and a half million bucks basically, is the number you need. Well, through the plan that I’ve outlined, with a modest start, you can really, really achieve that by or before retirement, depending on what age you are. And remember, retirement isn’t really something I think that any of us should be considering in any real way. Because retirement, my humble opinion, it’s just not a good thing. It’s not good for us. We need to be engaged, we need to be active, we need to be stimulated, we need to be challenged. That’s the way the human animal works. So retirement, not ultimately a good idea. I think we should stay active and keep working and do whatever our passion is, but it’s sure nice to be able to choose to make our own hours and do something that inspires us and something we’re passionate about rather than being Dilbert and work in the corporate job in a cubicle right. And so to be able to have that choice, you can achieve this pretty easily and you only have to beat real inflation and real taxation, and returns and other investments because all the returns like these idiots getting the 4.4% per year return in the USA Today. Outline portfolio. Do terrible deal, right? But let’s say that to keep up with inflation and to pay taxes and to have kind of a net, that you really have to earn about 8% on your money, okay? That’s we’ll call that the breakeven number, I’d argue that it’s even a little higher, but I’m gonna go with a lower number just to be more conservative and more in line with the vast Wall Street conspiracy. And so if we can earn from our income property investments, if we can just earn 12 to 14% annually, we are vastly, vastly beating the rest of the human race, you’re going to be in a very comfortable position, if you just let some time go by, and you can earn only 14% on your portfolio.

Of course, if you go to Jason hartman.com, and you look at the property performance there, you can see that properties have performer returns have easily into the 25 3035 40% annually return and if it only goes half as well, well, what are you earning, you’re earning say, 20% in that example, and you can encounter quite a few problems and still earn 14% on your income property portfolio, you can encounter unexpected repairs, you can encounter, evictions you can encounter make readies between tenants where they mess up your property. Now, of course, you should get a judgment against that tenant, you probably eventually collect on that judgment and you’ll collect with interest, okay, but you can encounter a lot of problems and still come out a big big winner. If you’ll let 510 15 or 20 years go by and just keep running your portfolio.

Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out this shows specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency, a single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society, we are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Hello, and welcome to Episode 95 of the heroic investing show, where we focus on those challenges unique to members of the military, veterans and first responders. But we also help with those challenges that we all face. And one of those specifically is trying to get back more free time to focus on things that we want to do in life, like spend time with our family, and those activities and those businesses and those opportunities that inspire us. And sometimes that is our w two job, those are the lucky few. The rest of us, it’s not a perfect scenario. And so we want to improve, we want to start spending that time on things that do inspire us. And we need passive income from another source to help us get over that hump to be able to have the resources to take care of the family’s needs, while we master our unique trade and our ability to start that business to start that service to become the expert in what we know inspires us on a daily basis. So hopefully you share my feeling that income producing real estate has a part to play in that what I do at paradigm life every day helps people put in place, their solid financial base, their protection layer, as well as more efficiently use the money that they’re going to put into rental properties more efficiently fund those properties to help grow wealth faster, more efficiently, and with a lot more options. You know my feeling as though the last episode I talked quite a bit about it that having money locked up in an illiquid asset is not a very safe position to be in. I’m not a fan, I’m not a fan to have money sitting in a paid off property or large downpayment in a property. So if you’d like to find out more, please reach out to me Gary at Gary Pinkerton comm you can also see some of the specific things that I do and approaches unique approaches that we take a paradigm live by going to paradigm life dotnet paradigm life dotnet or sending me in an email over on that side as well at G Pinkerton at paradigm life dotnet. So glad to help you out from that perspective as well. So this discussion is a topic that I thought was pretty timely.

And so I searched in the archives to find a lender panel discussion on interest rates on trends and interest rates. This one’s a couple of years old, maybe three years old. But it’s a bunch of lenders in a panel discussion similar to the one that was held at this year’s meet the Masters topicals. A little bit different on this one, though, it was about will interest rates go up? And if they do, what is the impact of that. And I thought it was really timely, because right now interest rates are rising a little bit. But I can tell you that I’m going to do four new loans this year, and I’m not in a hurry to get them done fast. If you remember what john sharp said, you know, in our recent, most recent podcasts, he said, You know, people need to learn how to purchase properties in good times and bad continue purchasing properties throughout, you can’t time the market. And it’s not a bad deal because you have rising rents to help offset any rising interest rates on your loan. And the difference between a 4% loan and a 6% loan. Very, very small difference. People made these properties that we’re purchasing now. And we’re owning those same exact properties made sense and work just fine. In 15 16% interest rates in the 1980s landlords didn’t go out of business in the in those periods of time. So it still makes sense there. Can you get crazy deals right after market crashes in 2009 10 and 11? Absolutely. And I would certainly stock up when you’re there on the sale that’s happening. But it doesn’t mean stop buying throughout here waiting, you know, five or six years on the sideline for the next big event to come. I certainly am storing up you know warehousing some money in my life insurance policies, but you can do it in your in your checking account. That makes sense, but I think completely sit on the sidelines doesn’t make much sense.

And I believe this video taken from the archives of a couple of years ago will help hammer home that that perspective that that you should not be overreacting about these interest rate changes. They’re just not going to have a big impact on their performance of your rental properties. And if you’d like help going kind of through that math, I’d gladly take you through that discussion. I have a couple calculators there beyond the basic financial ones, may help out a little bit more in providing perspective to that. So reach out if I can help you. And please enjoy this lender panel discussion about interest rates about purchasing capabilities, and hopefully with the intent of keeping everything in perspective and keeping you on path. Thanks so much. And I will see you next episode from my good friend, Mr. Craig Horton.

Jason Hartman 5:44
First of all, maybe if you want to pass back to Steve here, I wanted to ask you all what is the sentiment you’re hearing from investors? What is your what is the feedback? What is the your take on the market right now, I just wanted to get your thoughts on the market, the real estate market, the economy in general, maybe any feelings about where interest rates are going, and so forth. And just kind of a minute on that one. And, you know, we’ll just get everybody’s, and we’ll go into some specific lending stuff after that.

Panelist 6:10
Right now we’re in we’re in record lows as far as rates, and you know, it could really go either way. And that as far as going up or down right now, I think what we’re gonna see is we’re gonna see the rate starts to slip, you know, stay down a lot of the investors that do come to me, and that they’ve had experience with other lenders, good and bad. And, you know, my job is really to, you know, just kind of help them through it, because let’s face it, the lending, you know, lending arena right now, we’re back at what it was 20 years ago. I mean, they’re looking at everything. And so it’s it’s important to have somebody that’s got some experience, can see some of the problems up front. You know, nobody likes getting that getting that call, saying 3045 days in the process that you don’t qualify, something happens, again, really, really important. And the complexity and what what the investors are trying to do right now is to get those people that get up in the 10 properties and want to get to 20, they want to get to 30. How do you get them there? years back when I was in banking, what we used to do, and that was we used to bond one commercial loans, having former Corporation do it that way there. And, you know, the banks lost a lot of their appetites for the you know, for the real estate, real estate investing. Now, we’re going to start seeing some of that come back. I’m talking to a couple lenders right now that I want to be able to refer over to refer my clients to an ad and you know, it’s kind of where I see things.

Jason Hartman 7:27
So you think rates will stay low? In other words, that’s correct. And by the way, I agree. And Doug mentioned that earlier. Remember what low rates mean, people buy properties, not on the price, they buy it on the payment. So if someone can get alone and rates are low, that means price pressure is definitely upward.

Panelist 7:44
Well, can I can I comment on the rate thing? So I don’t know how much you guys spend on figuring out what your payments are going to be? It’s probably a lot per property, right? And then the price points that we’re finding are in the market right now. And having been through the last cycle, I mean, the sweet spots are what, on average, 80 to 121 30, single family residence? Would everybody agree with that? So let’s figure an 80% mortgage on that purchase price? Do you guys know the difference between a 4% interest rate and let’s say five 6% interest rate? It’s negligible. And in the in the big picture, if you’re looking into the future, the difference? Even if rates did go up a little bit, which I agree with Steve, that that’s probably not likely, I don’t like to predict past. What time is it? You know what I mean? It’s it’s very difficult. There’s so many different variables that go into how the rates are going to go from one day to the next. They change daily, sometimes a few times a day. So I would advise my recommendation, and I used to get really hung up on interest rates, is I wouldn’t focus so much on that number. I think that it’s a lot less important than the actual process and kind of understanding financing, and how to position yourself through education. Hopefully, that’s what we’re here to do for you guys. So that you know how to take one property 10 if that’s your goal, and make sure that you can still qualify in the process. It’s it’s can be tricky,

Jason Hartman 9:02
right. Just so you know, what I was kind of getting out there is the investor urgency issue, because when rates are this low, I mean, we’ve seen prices in Phoenix are up about 34% off the bottom. I mean, prices are rising and pretty much every city now. That’s the thing that that’s cause that needs to create urgency with all of us to buy up more properties is that that issue of the low rates now, it’s kind of an odd thing that we have right now because we have very, very low rates, which usually and so housing affordability is the best that’s ever been okay since NAR National Association of Realtors started keeping statistics. However, people can’t get the loans, a lot of them. So it’s kind of like a real quandary here, where you know, you’ve got these incredibly good interest rates, but it’s also still at the same time hard to get the actual loans. Eric, your thoughts?

Panelist 9:53
I think that actually caught those one exists because of the other because it rates our supply and demand of money. If you’re not tearing up that supply, of course, the the cost stays low. So because of the fact that we’re preventing so many people from getting these loans, that’s what I think is contributing to it, I would say it’s the total, the total reason, but it’s definitely contribution. When we’re talking about the financing piece, what a person needs to do is be pre emptive. With this, take the time to sit with somebody, whether it be one of us or somebody and figure out your financial profile well ahead of time, you’ve spent the last 1015 2030 years setting up your financial situation, we are giving a matter of moments to dissect it and tell you whether or not we can get something done. And a lot of times things can creep up in the process that we don’t find until we really dig deep. And that type of process can eat up into your escrow time, take the time ahead of time to get that figured out. Because it’s not a science anymore. It’s a moving freaking target is what it is

Panelist 10:52
freaking target.

Panelist 10:54
I’m trying to I’m trying to it is it’s a mess. So that being the situation, let’s sit down, let’s go through everything in great detail well ahead of time before you want to waste your time. Don’t be paperwork, apprehensive. That’s the biggest problem we have. At least I have. I don’t know about you guys. But people are very paperwork apprehensive. They like to say, Oh, this is my private information. I don’t want to hand it in right away. We’re going to need it. You’re gonna have to get, you’re gonna have to expose yourself, literally. Yes, you and when we say you do have to do all this, unfortunately. And one thing you also have to know, please, we don’t? We don’t want to see it anymore. Do you want to give it? Because if you give it to me, I got to read it. And I don’t like reading, just to be honest with it. We haven’t a question back here. Jason. If you’re asking me personally, there’s not a money issue that we’re talking about. Because if I’m working with when you guys one time, I’m working with you three, four or five times. So I’m not worried about one price point being low personally, but we do the banks do have limits it with the institution’s I’ve worked with, it’s depending upon what you whether you’re the first four loans, or the five to 10 loans or higher, it’s 40,000 for one and 50,000 to the other. That’s just where their breakeven points are. Because they’re

Jason Hartman 12:01
so that’s remember, that’s 50,000 loan amount, not property price, that’s the minimum loan amount they’ll do, because think about it, they don’t want to hassle with these small loans. They’re not very lucrative for them. You know, $50,000, if you live in Orange County is a car loan. Okay, you know, so

Panelist 12:18
there’s lower income people.

Jason Hartman 12:19
Yes. microphone,

Panelist 12:24
sorry. Just to add to that sentiment, the $50,000 loan amounts to there’s something now, in the powers that be decided that high cost limits loan limits, it becomes very problematic to make any kind of money on the smaller loan amounts, and be able to have compensation. So there’s Fannie Mae tests that either fail or pass and most often those $50,000 loan amounts, you’re failing. And so what you think you’re making 1000 bucks or whatever is really more like half that it gets complicated. So 50 1000s, or minimum,

Panelist 12:54
do you have a minimum I’ve done for my, some of my investors, and that because I have a tough time turning somebody away that wants to buy a property for 55. And they’re gonna put 25% down, you know, look, it’s alone. My branch manager, Randy over here, not really thrilled with the idea, but I’ve done a lot, I’ve done a lot

Jason Hartman 13:11
right over here. So he doesn’t look thrilled.

Panelist 13:16
I’ve done $30,000 loan for the customer, you talked about the high cost, you know, we we get well basically, but I charge you for it, okay, you know, what you’re going to do is take my rate caps out at for three quarters, 4.8, that’s where you’re gonna end up, you’re gonna get the highest rate I’ve got on my ratio, that’s where you’re gonna end up, I’m going to hit you, I’m going to charge you back, because we get hit for the loan sighs you’re going to pay that I’m not. And I’ll charge you 1% loan fee. So we get back in at basically, even with the high cost test, and that, that one and a quarter, I charge you for being under $55,000 that absorbs the majority of that. So I do make a little bit of money. But at the same time, I had don’t look at the the customer is coming back. If you’re gonna if you’re telling me you’re gonna bring me five or 630 $1,000 loans, we’re gonna have a talk. Because I’m just not going to do that as

Jason Hartman 14:04
he doesn’t want to do. But isn’t it interesting what they’re saying about this? Remember the covenant, the second next 10 commandments this morning? It’s the same thing as a landlord. You don’t want to deal with super low quality, super low end properties. Because if they have to, if the lender, not they, but you know, the actual ultimate lender has to foreclose on that property or the servicer. It’s like not worth it. If it’s too cheap of a property. That’s why those ultra cheap properties, you can’t finance them. There’s just no point no bank wants to do it.

Panelist 14:30
If you if you have a need for that smaller loan amount. Usually what I’ll tell my clients is find the on the ground smaller bank in the area that the property is located in Detroit. Invariably, yeah, they’ll be able to do it for you.

Panelist 14:41
Thank you. Thank

Panelist 14:42
you do it. Yeah,

Jason Hartman 14:43
right. If they haven’t left the city yet, anyway. Okay, so next question. So the question is, how do I know you know, when I’m getting alone, that I’m not being nickel and dimed to death? You are Okay, next now Yeah,

Panelist 15:02
we’re in, we’re not the ones trying, it’s more or less we’re getting hit with it, we’ve got to pass it on the end result is you’re gonna have certain charges, if we can minimize it, we’d love to, because believe me, we don’t want to hear that question. We don’t want to have to answer that question. But I’ve gotten very good at answering that question. Actually. Now, after my career, I’m easily I can just throw a black suit, go to the hospitals, and tell people the mom just died on the operating table, because I have no feelings left.

Jason Hartman 15:28
Okay, pass the mic over. Steve, Steve, at least you’re compassionate go.

Panelist 15:39
You know, what, you don’t

Jason Hartman 15:41
rescue people when they fall off a cliff. When you get down there, you’re on the helicopter, you know, on the line, you have some money sign over your house, or there’s no equity, it’s upside down.

Panelist 15:59
You know, you you talk about the fees and a lot of the fees that we have in it regardless. So you know, you go here, you go there, you’re gonna get charged. Now the thing with the fees, though, and understand too, that a lot, a lot of the third party fees like your credit report, your appraisal fees, title and escrow and that those are fees, and that that, you know, as lenders we can’t make money on. So if we get charged 18 bucks, you get charged 18 bucks,

Jason Hartman 16:22
it’s it might be a different kind of credit

Panelist 16:24
report vendor.

Jason Hartman 16:26
But it might also be a different type of credit report.

Panelist 16:32
Many times I know because people ask me that same question. I’ve gotten that many times recently. With us, we have to verify so many things with the types of loans that we’re doing, we have to update many of a bunch of your accounts, update all your mortgages. And if you’re an investor has got several mortgages on there, we’ve got to update them to the most recent payment. So we have to have our credit reporting agency, call your mortgage company, update and make sure you’re current up to the very day that we’re doing the loan. And many times you’re going to be on a conference call with them. And you’re going to be saying, now I’m wasting my time I sit in on the freakin conference call for an hour talking to people about the stuff I already know, because I made the payment myself. But that’s what it is. And they charge for that. So if you’re talking $10 credit report, actually, it’s 15 bucks, we charge five bucks for every for every repository. So we got Equifax, TransUnion, and Experian, so we got 15 bucks there. Plus to get charged every time they got to make a call, every time we have to do a supplement, update one of your accounts. Anytime you have something on there, we need to verify so 65 bucks, it gets ramped up to that pretty darn quick.

Jason Hartman 17:26
So that’s the different that’s what’s called a tri merge report when it’s all three. Okay, I believe you were next. I’m not sure but Okay, so the question is, can you offer some options on investors trying to get more than 10? loans?

Panelist 17:40
Yes. And I can’t speak for them. But our portfolio product allows us to do another four after you’ve reached that 10 threshold, we can do another four you can have up to 20 finance properties, but this particular investor for us will let us do four of those.

Jason Hartman 17:54
And what kind of rates Very

Panelist 17:55
good question the terms of this particular loan are as follows. And one of the bigger I think, deterrence that I’m finding and I can’t get them to budge on it, the minimum loan amount for them is 100,000. So you’re looking at I think, and the LTV maximum, you’re gonna lose some leverage on this is 65. So I believe I’ve done the math $154,000 purchase price is what you would be at a minimum to qualify for this particular product, six and a half percent interest rate. This is a 30 year fixed. Not bad at all. The only other thing that I’d like to mention as a bullet point is this particular product has a three year hard prepayment penalty. So what that means to you is that for three years, 36 months, it’s really doesn’t mean much, but you should be aware, it’s a three to one. So in year one, if you go to sell or refinance that property, which isn’t going to happen, you’re going to pay 3% of your existing balance as a penalty. So if you owe 100,000, you’re paying 3000 in the first year, second years 2% 2,003rd year is 1% 1000. But you’re not going to be doing anything refinancing or selling that property in the first 36 months. almost guaranteed. 35 Yes. 65%. LTV 35%. Down.

Jason Hartman 19:01
Yeah, LTV means hard to value ratio loan

Panelist 19:04
to value. Yep.

Jason Hartman 19:05
Okay, wait, not yet. We have one over here. Yeah, you may not know this, because probably none of you listen to the podcast like you should. Okay. So, so mortgage sequencing. So what I’ve talked about on the show several times is something I just gave it the name mortgage sequencing, meaning when you’re trying to execute a plan and buy, you know, a whole bunch of properties, it’s how you sequence the mortgages. And the advantage there may be if you know, if you can only get 10, regular Fannie Mae loans, you want to buy more expensive properties like plexes. So for example, you know, you want to get as much since they go by loan number of loans rather than loan amount, it might be better to buy 10 for plexes and get 40 units. That would be and you know, maybe those are more expensive than buy 10 single family homes and only get 10 units, you still have only 10 loans, you see what I mean. So, you know, we’ve talked about that and then and they really can’t necessarily address this, although they can have added a moment. But the reason that mostly came up is because we had some special financing at the time, which has now run out. So far as I know, maybe Sarah Stever already can address this in Dallas. And with that lender doing these, it was a small community bank, they didn’t care how many financed properties you had. So the first thing you want to do is run out and get your 10, Fannie Mae financed properties and not buy in Dallas First, you want to buy after that? Okay, because you don’t want to have other finance properties, where they the Fannie Mae would say, Well, you’ve got four, you can only do six more. So that was kind of the mortgage sequencing thing. You guys may have some stuff to say about that. And I’m sure you do. But that’s where why he’s asking the question, I think, right?

Panelist 20:45
Well, it is it is a common question. And that is how do you get past 10? And and it’s, it’s it right now is tough. I mean, it really is. But the solution is, and that is that you have to get out of the mindset of thinking yourself as a single family, real estate investor and quit thinking Fannie Mae, because once you go past 10, you’re really into the commercial realm. And that’s really the the mindset that you have to put yourself in 10 years ago, I started working with a guy through foreclosure auctions in Seattle, came to me, he had had half a dozen restaurants, he was working, he wanted to buy a bunch of properties. So we got him to 10 banks at that point in time, and that what they would do is I took him to a community bank that I had some relations with, and what they would do and as they went ahead, they bundled them together, he formed an S corporation. He dumped him into there, we started the cycle over again, six years later, he owns 44 houses. Now, he’s not going to get the same terms. Just absolutely not. You’re definitely not as you’re not going to find 30 year money. If you’re dealing with some of the smaller community banks. Yeah, seven to 10 years, they’re going to reprice

Jason Hartman 21:48
it and I want to give a shout out to to Zach Henderson, over there, St. Robert in the corner, because he’s got an excellent community bank. And Joe has taken advantage of that. I think you have, I think so where he can do some commercial financing on non commercial properties, which, of course isn’t as good as the fant the Fannie Mae thing is the best it’s subsidized by the stupid government take advantage of socialism, real estate here has always been subsidized by the government. Since the depressions, that’s the thing, but your mortgage sequencing? Yeah, I

Panelist 22:15
have some comments on that. But quickly, are you guys is anyone aware of how many countries in in the world that actually offer a 30? year fixed mortgage?

Jason Hartman 22:23
Think one the United States?

Panelist 22:25
Yeah, there might be one other in in one of the European countries. I’m not remembering which one it is. But everybody else’s? I’m 10 years is a long time even or any mortgage at all, right?

Jason Hartman 22:34
I mean, I, you know, I’ve said this on the show folks, exactly what Charlie’s saying. I’ve been to 64 countries and I have looked at real estate, I’ve gone around with real estate brokers, a lot of them aren’t licensed. They just saw I’m a real estate broker. And I’ve gone around and looked, I did it all over eastern Europe, Central America, South America. And mortgages are like a totally foreign concept to them, even any mortgage at all.

Panelist 22:55
So we’re very lucky to have an opportunity. I mean, think about what the difference between a 15 year mortgage and a 30 year fixed mortgages, it’s huge to have that amortization at 30 years makes a big difference to what we’re talking about today. Huge difference. It’s the difference between $300 a month in cash flow and maybe 100. It’s a big deal. So I have a

Jason Hartman 23:15
massive amount of inflation that will take place in that second 615 years.

Panelist 23:19
Right. But just to go back to your question about sequencing, that’s a fantastic question. And a lot of what we do, I was touching on earlier about the education, sequencing is actually pretty important. So let’s just assume that the scenario is we have an investor that wants to get to 10. And they have a primary residence. And that’s all they have to start with their clean slate, they’re new to this, the first thing we’re going to do is we’re going to take your blood type and some DNA samples already qualified, right, we’re going to go through all of that we require what most might consider an inordinate amount of information upfront, we do a tremendous amount of due diligence on the front end, so that hopefully in the middle, in the end, it’s a little less painful. So we go through that. And then we spend some time talking to you about what your strategy is giving you the information about where your qualification is today. So that when we talk about that sequencing, the first four, let me give you a just a quick if anyone wants to write this down, this may be important for those that don’t know, properties one through four financed and that is one to four units that include your primary residence does not include commercial or bare land, you can leverage as an investor to 80% loan to value on a single family residence. So which properties Do you want to get in spots 123, and four, if you can leverage to at the most expensive exactly, you want to get the highest end properties in those first four spots. If you can, then you’ve got five through 10 properties five through 10, you’re going to lose 5% of leverage, you’re at 75%. Again, we’re talking to single family residents. These numbers are different for plexes. So it’s it’s really important to work with somebody that really understands the non owner occupied model because if you just go to your VA loan officer that’s sitting there counting paperclips here, she’s probably not going to be able to help you strategize this The other thing I want to mention you guys real quickly and I’ll turn it over to somebody else. One of the things I want to mention you guys and this is a pretty big deal and if you want to take notes, great, we can talk about it. One on One qualification. The acquisition here is very simple when you’re calculating a debt to income ratio specific to the rental income that we can use to offset that debt to income ratio. This is a little off off topic, but it’s very important in the acquisition year of purchasing property, the formula for calculating the rental income is a very simple 75% of your rents. You take your rental income, the gross rental income and multiply it times 75%, then you take that number and subtract it from your principal interest tax and insurance. Very simple, right? What happens though, when those properties hit your schedule, if your tax return, very different, very complicated, these guys can probably speak to this financial formula that is going to potentially inhibit you from getting to that number 10 goals. So it’s very important that working with someone that knows what they’re doing related to non owner occupied, so that they can set up that appropriate strategy. So for example, we’re in the beginning of 2013. Okay, you bought three, four properties last year, we want to look at a draft copy of that tax return before it’s filed to make sure that those losses that you’re going to be taking, cuz you’re going to take your depreciation, there’s going to be some maintenance, let’s say that those properties went on rented for two months last year, you’re gonna have less income to offset those things. We want to look at that draft copy to make sure that before it’s filed once that bell is rung, that’s it, it’s done. But we want to make sure that you’re positioned in that debt to income ratio to be able to achieve what goals you have planned for this year. So that’s a really important piece, and it kind of plays into the sequencing.

Panelist 26:33
So to repeat the question, sorry, she asked if you were on the fourth property, you had four properties already going on to the fifth and you’re going to buy another primary? Are you stuck that 25% down? And the answer is no, you’d fall into the primary guidelines, no matter how many properties you have, you can have 40 properties, and the primary is still your primary, you can still get away with 5%, down 10% down whatever your intentions are.

Jason Hartman 26:55
So the primary residence loan is much more desirable than your investment property loans. And it’s the same, regardless of the sequence is what he’s saying. Right?

Panelist 27:04
Exactly. doesn’t fall into that one.

Jason Hartman 27:06
We need to belabor that. Okay, you

Panelist 27:08
know that that what he said was, if you’re if you’re married, and you can both qualify separately, that might be a strategy to look at. And again, talk up front with somebody and let’s talk about the goals. Let’s talk about the options, let’s get the strategy down. Let’s talk about the sequencing. Too often, you guys start seeing the the dollar sign signs in your head and you get excited, you start signing contracts like crazy and buying property like crazy, without taking the time to look and see what you’re doing. So then it’s left up to us after the fact. And those that you’re working with, whether it be Ari or, or Sarah, whoever you’re working with to sit down and try and help you strategize with what you already have this got closing dates coming up. So it’s important that you sit down and get the strategy put together first, and decide what your end goal is, and how to get there in the smartest way possible, and not just start shotgunning property, you start doing that there’s a lot of opportunity missed. Yes, I’ve got several clients going in tandem like that. As long as you guys are not on that, I mean, you may have a different situation, how we how I have we’ve done up to this point, this how I have done to this point, if you guys are completely separate, are both separate on your on your your credit reports, filing, and I’ve actually seen him file jointly, we’ve had to file jointly and be able to make that work, we just have to separate get all the paperwork, it’s a paperwork nightmare. So if you’re all about paperwork, and you just get off on that kind of thing, you can do it. There’s a cost to getting off on 20 properties, and it’s called paperwork.

Panelist 28:33
I’ve talked on this subject for several years right now. And when I tell married couple a significant other, if you’re going to buy separate you build a wall. I mean, that’s exactly what you build a wall. So and when I say that, because what I’ll see is clients, what they’ll do is they’ll come back and they try and get sophisticated, their tax attorney, their accountants told him to set up an LLC, they do this, and the husband is 99, you know, 99.9%, owner of the LLC, and the wife’s got a 10th of a percent ownership in the LLC, guess what? You just knock your wall down. Because now all of a sudden, you’ve tied it back. I had a gentleman and that that the he created a corporation Good move, moved all of his properties into the corporation. Guess when the corporation his trust? And so guess what, guess who was on the trust him and the wife? So you’ve really got to think this thing you really think it through the end? What what what Fannie Mae is looked at and is it they’re looking at the obligation, they’re looking at seeing who’s obligated on it. Now, the other thing to take into consideration and add is if you’ve got a joint mortgage, and that’s one of the things that I look at, can this spouse qualify with the mortgage and the debt that she has? And if the answer is no, then it’s probably not going to work. But again, it’s very, very important in that that you create that division between the two of no assets. Majority of the married couples that I deal with, they have joint joint accounts. And so what we’ll do And as we’ll have the the non borrowing spouse sign Access letter that they’ve got access to the funds in the account. And then we’re good for the good for the funds. But again, there’s got to be that division, if you’ve got anything that ties the two of you together, we’re probably going to find it because somewhere it’s going to be in your tax returns, there’s going to be a document that’s floating out there, that’s going to tie the two together. So you’ve really got to be careful with that with him

Panelist 30:19
bring up the asset thing that brings another thought process into this, that’s not to say down the road, they’re not going to say, well, you guys have a joint account, and you’re making the payments on all 20 properties out of that account. So in reality, she does have a stake in it. So yes, we’re going to count that as part of it. So they’re getting really picky. And again, like I said, before moving target. So think about that, even though up to this point I’ve been able to do it with on joint tax returns, it’s you know, others have a different situation doesn’t mean tomorrow, they’re not going to pull the rug out from underneath me because they’ve been doing it on other things. So quite literally, Steve’s advice on build a wall is build a wall and make that sucker really thick

Jason Hartman 30:53
back here. Yes.

Panelist 30:55
The over 10 I want to be able to do that. I do right now I’m in a unique position of I am not affiliated right now I was was with a lender, and they successfully screwed me out of a lot of things in the last 1215 days. So I am I’m in negotiation with two entities right now one of the ones I’m working with, we’re actually working with a fund on 20. I don’t know if it’s going to come through we’re working on it. So that’s my take on it. It’s something I’m working towards, but whether I’m going to I’m going to get there. I can’t say the 10 is still an attainable thing.

Jason Hartman 31:27
So in other words, you’re saying in the mortgage sequencing issue, buy your primary residence is property number 11. Is that

Panelist 31:35
property number anything?

Panelist 31:38
Are you willing to rent out to buy the last, right?

Panelist 31:42
I don’t think for a primary, there is no limitation to how many that you can own as long as you still qualify. And that’s something that we would want to look at closely. It’s going to be individual. Did everybody hear his question? I’m bad about that. I’m sorry. Now the quote his question was, at what point do you want to buy let’s say you’re renting right now? When do you buy the owner occupied? When do you buy the primary residence? Do you buy it first? Or do you buy it last? I would say you probably want to buy it last because the primary will eat up one of those 10 spots. So yeah, number 11. Seems like a good spot to me. Because the four number after the fact for us can go to 20. So it wouldn’t, it wouldn’t mess that up. And I say rent your own high end primary and rent lots of low end properties to other people. But you already heard that one. Can you do a 1031 exchange on property? 11? Yeah, if you’re paying cash, yeah, so you can take let’s say property number 10. You mean right, and sell it and into a 1031 exchange, you’ve got one spot for conventional financing. The rest of it would be cash, or the for portfolio.

Jason Hartman 32:41
The 1031, though, really has nothing to do with it. We’re just talking about lending it’s 10 properties. So what’s the question LTV, so debt to income ratio, dti?

Panelist 32:52
Well, 50% is where we cap in other words in that I cannot get I don’t care how good your net the D you stops at 50%

Jason Hartman 33:00
desktop underwriter desktop underwriter is no acronyms folks come on

Panelist 33:04
Fannie Mae’s fanmade is automated underwriting system. So 50% if you’re 50.01, I don’t care if you got 3 million bucks in the bank, you got 850 credit score, it is not going to prove it. Okay, right now. Now, that’s not to say it wasn’t interchange, because back in 2007, and 2008, we were going 65. I mean, it was I mean, it was just it was to the point of being stupid is what it was,

Jason Hartman 33:27
of course, obviously, the results. Wow.

Panelist 33:29
Yeah, that’s true. But 50%. That’s what that’s where we stopped at.

Jason Hartman 33:32
Let me take a brief pause. We’ll be back in just a minute.

Panelist 33:38
What’s great about the shows you’ll find on Jason hartman.com is that if you want to learn about some cool new investor software, there’s a show for that. If you want to learn why Rome fell, Hitler rose and Enron failed. There’s a show for that. If you want to know about property evaluation technology on the iPhone, there’s a show for that. And if you’d like to know how to make millions with mobile homes, there’s even a show for that. Yep, there’s a show for just about anything, only from Jason hartman.com or type in Jason Hartman in the iTunes Store.

Panelist 34:21
I just I had a comment to your question. I think that what you should do before you file 2000 twelves is speak to someone and have them look at your schedule E and calculate the rental income for you figure out where you are and how it’s affecting you. And you know, you can make adjustments. You can make adjustments to your tax return before it’s file.

Jason Hartman 34:41
And what I think what she’s saying is that your dti may be better than you think if you add up all those schedule, ease and count the income. What’s the limit on how many properties I can acquire. His issue is that it’s not really the limit of 10 Fannie Mae, it’s that he’s bumping up the debt to income ratio limit So there are different limits. I got a question I don’t want to forget to ask. So just to hang on to that for a second, what about credit repair? A lot of people have done some strategic defaults. Are these all scams? or do any of them work? Do you have anyone that you want to refer? I mean, I know some of them really work out their credit repair issues. I guess since you got them though.

Panelist 35:19
There was word in our industry that for a while there, I don’t know what the the standing is now, but that it was illegal, they were actually calling the credit repair companies, they were driving them out of town faster than you can please. This has been some years ago. I’m not sure the status on it right now. But I can just tell you, the guidelines will tell you if you had issues in the past, I’m one of those, I lost several properties of short sale and things like that. The rule of thumb is for a short sale, you’ve got 24 months from the sale of that short sale before your mortgage eligible again, if by chance in that short sale process, you went into foreclosure or pre foreclosure, that two years goes to four. So if that is the case, just

Jason Hartman 36:00
okay. Let’s just define this a little bit. So if you did a strategic default, and the property went to foreclosure now that here’s where people get confused. The foreclosure actually stays on your credit report for I believe, seven years, but you can get a new mortgage in four years, even though it shows up on the credit report. Okay, so people always ask that question that confuses people. Aaron, do you want to dress the credit repair,

Panelist 36:25
just to define one the foreclosure thing that’s if you ever made it to the point of 90 days delinquent, that’s when they could go to the point of being able to go into foreclosure didn’t have to walk in and take the property, you just had to be in the position where they could exercise that had they wanted to. So if you’re 90 days delinquent, while you’re doing a strategic sale, a short sale something to that effect, then you are subject to foreclosure roll. Now, on the credit repair thing, if you’ve got somebody that can get it done, that’s great, cuz I’ve never seen it happen. I’ve talked to 1000s of these guys have come to my office, they sent me stuff I’ve never seen one actually repaired. I’ve seen people spend a lot of money on repair, but ended with the exact same thing they would have otherwise, really? Yes, that’s that’s my experience. I’ve never seen it happen. Now the credit repair that I have seen done is stuff that’s just stuff that should be repaired. They send me the paperwork. I have my credit reporting agency, cleaned it up. It takes five days to do a rescore and we’re done with it. It’s stuff that’s erroneous. But if it’s something that you committed, I mean, it’s something that you literally did that would that it should be on your credit report. I’ve not seen anybody magically erase it yet.

Panelist 37:26
I’ve got I’ve got a credit repair guy that I do work with it. But but let’s face it in that if you’re 38 lights on something and you think your credit repair guy is going to get a remote is not going to happen. If that if there’s a judgment on your report, and it’s valid. They’re not going to remove it. I mean, it’s there. What I’ve utilized my credit repair gentlemen for and that is stuff that is a ruinously been put on your credit report, I’m working with the lady in Chicago right now had a judgment and she had a rental property. She was sued by her tenant. And she interned countersuit. And so it basically wiped the judgment out, but they still recorded it on her on her credit report. And if you call if you call the Cook County Magistrate’s office, they’ll tell you that a judgment was never entered. So they give me the they give me the document, they sent it to me, guess who wouldn’t accept it, the Bureau’s will absolutely will not accept it, because it was handwritten. So now what I did was I talked to my credit repair guy, and I said, and I talked to her attorney, and I said, you guys figure it out? I mean, because I’m, you know, I mean, there’s nothing I can do. But that’s where I’m gonna utilize a credit repair. I mean, I’ve seen a lot of people that have promised the world they can’t deliver anything, the only thing they do is have you open up your checkbook and start writing a bunch of checks,

Jason Hartman 38:38
just so you know, I know there’s a ton of those that are scams out there. But some of our clients have had some success without they pay $700 or $800. And then they do like a one year program where they’re dinging the credit report agencies sending the letters and they have to respond. And a lot of times they will the way it works. Basically, I’m no expert, but the way it works is if the creditor that put the derogatory thing on the report doesn’t respond in 30 days, it automatically comes off. And so you know, it’s playing a game, there’s no question about it. But the fact is, they sometimes win,

Panelist 39:09
though, but again, where I’ve where I’ve utilized them, and that is if there’s if there’s errors on the credit report, it shouldn’t be there. Right. That’s right. Yeah.

Jason Hartman 39:16
And they’ve been really good. Our question was over here,

Panelist 39:19
the typical the typical rule is two years.

Jason Hartman 39:22
The question is how many months income to qualify for mortgage? It’s, they average it over two years, right? Yeah,

Panelist 39:27
self employed net, they’re gonna look at two years, but typically, in that you’ve got to have two years on your application. And that’s what they’re going to look at two years of income.

Jason Hartman 39:35
So if you started making a bunch of money,

Panelist 39:37
there’s exceptions to the rules. Okay. And now, where you know, you get a teacher just recently graduated, and that from college, okay, so she’s when she’s got a contract for September, they’ll utilize that I’ve got a guy that just finished up his residency. Now he’s a doctor, he went to an ER he’s only been an ER doctor for three months. Those are,

Jason Hartman 39:55
those are pretty secure jobs though. Medical, you know, Doctor, dentist, that kind

Panelist 40:00
But the normal role is two years, right? Oh, so

Jason Hartman 40:02
that’s a good question. So to do a cash out refi How long do you have to have that loan or let it season? That’s the terminology. How long do you have to let the loan season before you can do a cash out? refi? Or can you even do a cash out refi anymore? Does anyone have any equity do cash out refi, but

Panelist 40:20
cash out refinance, you’ve got got to be entitled for six months. And the other thing is, you cannot own more than four finance properties. And so that’s very, very important to do. Now, Fannie Mae came out about a year and a half ago. And with with investors that pay cash for their properties, now they’ve got a program is called the delayed financing exception, which states that if you pay cash for the property, you can get your original purchase price back, plus rolling your closing cost, and we can utilize the appraised value to drive that loan to value. You’ve got a six month window to accomplish that.

Jason Hartman 40:53
Oh, that’s really interesting. So this is right away.

Panelist 40:55
Yeah, correct. Yeah, yeah. So I said, You’ve got a six month window that completed in once you go past six months, then it falls. Let me

Jason Hartman 41:02
frame this for people. So if you buy a property with cash, and I know a lot of you are doing that, and you want to finance it, this is not a refinance. It’s a delayed financing, you’ve acquired the property with cash. And then you finance it after the fact. And you have up to six months to direct. But is it 10 loans for loans, you can

Panelist 41:21
have up to 10 loans. And so that’s what that’s what the variation comes in. And that’s the distinction between that and an actual cash out refinance. Okay.

Jason Hartman 41:28
And shaylee, it looks like you had something to say about that.

Panelist 41:30
Yeah, just I just wanted to clarify the wait time on the delayed financing rule, there is no seasoning, there’s no six months, you have to wait or have ownership for six months. And you can actually use the delayed financing rule. Even if you don’t have more than four finance properties, you could use that for property two or three so that you wouldn’t have to wait. And the rule of thumb is is that 70% loan to value. And let’s say that your property appraises for more than what you paid for it. You figure what 70% of the appraised value is as long as you’re not getting back more than what you put into it originally, you could theoretically get back every penny that you stuck in. If it’s on the HUD,

Jason Hartman 42:05
if there is so the question was does it sorry, rehab in the purchase price? And yes, if it’s on the HUD, side of escrow or settlement, is that? Okay, I’ve got a

Panelist 42:16
question. One thing that a ridiculous amount of paperwork still applies. Yeah. So just because you own it, for some reason, people getting the idea because they already own it, and that it’s worth more than what they paid for it that all sudden, it lightens the load, no, the load is still just as heavy if not heavier.

Jason Hartman 42:31
Now, here’s one that I really want you to address, because I know everybody in this room, you know, one time or another is having a challenge with this one. I know our local market specialists are and that is the issue of appraisals. Ah, nobody’s asked this. This one needs to be discussed for sure. So appraisals are they’re just tough. It seems like the banks are just there. They’ve overcorrected. At the height of the financial stupidity, they were valuing properties way higher than they should have been. And now the pendulum instead of swinging to the middle, it swaying back completely the other way. And property value is there, and they won’t even give you an appraisal so you can get the loan.

Panelist 43:09
Yeah, that comes up. A lot of some of the changes to the industry include big changes to the appraisal h back h Vcc. And what does that mean? Home valuation?

Jason Hartman 43:21
Oh, someone actually knew that. Who said that? Okay. Are you in the business? Okay, well, no acronyms, folks.

Panelist 43:32
So now all all appraisals are ordered through third parties called a MCs appraisal management companies, all of them, one of the things that we’ve been able to adopt is we have our own self managed amcs, in many of the markets that we’re in. So we have been lucky in being able to do that, because what happens is, is that we maintain just a little bit extra control. When you’ve got the problem. I think, in a lot of cases, with the appraisals coming in low or having issues with that, as you’ve got appraisers that are first of all, they don’t really understand rental properties, they don’t understand the rehab that goes into it. They’re scared of their own shadow these days, because of all the new regulations. And maybe they live 100 miles from the subject property, they don’t know the area, they don’t know the neighborhoods. So it’s, it’s problematic. So we were able to adopt our own self managed AMC. And in certain markets, what we’ve done is we’ve gone to our vendors and our agents that are on the ground and said, give us five or 10 appraisers that you know, that are within a 10 mile radius that know your work that know the market that know the neighborhoods, and we put them on our panel. So it’s still a random selection. But we’ve narrowed the playing field a little bit so that we’re getting nine times out of 10. We hope, good solid appraisals. I mean, it still happens but that’s helped us kind of combat that kind of touchy issue. Anybody else

Panelist 44:48
lucky to have the same situation we self managed our own ordering. Talk to the people in marketplaces, find out who is doing a good job in that area. Have them send those names in have our appraisal ordered. review them, put them on the panel. Again, we can’t pick the exact appraiser. But at least we’ve been able to narrow it down to the six eight people that know what they’re doing in that area. That is a huge difference. So I haven’t seen a lot of problems with appraisals lately. I don’t know about you guys, I don’t know I’ve had one or two in the last five, six months that’s had this come in lower than the than the purchase price. I think also, the individual selling the homes are getting realistic about what they’re selling it for. And the appraisers that we’re choosing are a little bit better than what we had in the past.

Panelist 45:29
We don’t we don’t have our own internal AMC, we actually use a company out of Canada called solidified. But what I what I’ve done, and that is every one of the markets that I work in, and that I’ve done basically the same thing, set up a panel, we put them on the podium on the approved list, and those are the only people I traveled all my markets, I know all my appraisers. And and they have to understand because the product that you folks are buying is unique. And when I won’t mention any names here, but when we had some of the other appraisal management companies that were out there, what they would do is, you know, you’d get an appraiser would go out there and say okay, so if you buy it for 40, you put 10 into it, it’s only worth 50. And that’s not the case, because a lot of times these may, you know, these properties are bought or foreclosure auctions are bought from banks, the banks themselves that when they sell and they can’t make a profit, they can only sell it for what’s worth what the property is owed to them. So if they’ve got a property that’s 40, that’s worth 60, there’s a perception or at least some equity that’s in that property, that’s not being taken into account. And so I ensure that the appraisers that we have in that, you know, they recognize that they they’ll get the information as far as like the sales history, they’ll see that is and we’ll get, you know, get some good values. The other thing that I see right now, and as I’m seeing a little bit more prevalent in we’ve seen with some, you know, other companies is is sometimes lenders charge, you know, they’ll have two appraisals done, or maybe they’ll do a desk review. Now, one of the issues that you have right now is when you send an appraiser, another appraisers work over to see like a desk review, or he may not see at the same. So I’ve had a few issues in that area, not a lot of them. But we can still continue to see that because an appraisal really is it’s just an opinion of value. But sure,

Panelist 47:11
the question is, he’s getting ready maybe to file his 2012 tax return. And I had mentioned earlier that it’s a good idea to have someone if you’re if you’re building your strategy for where you want to go with your your real estate investments, before that tax return is filed, let us take a look at it. Because the computation for figuring out that schedule a rental income is very specific. And if we don’t look at it, and tell you where you stand, then you may file and be put out of the game for for qualifying this year. Because it’s very difficult to file a tax return and then say, oops, I want to amend it, I, I probably wouldn’t mess with something like that you want to if there are going to be changes made, maybe take less of the the loss last year and forward it over to 2014 if it means that you can continue to invest this year. And that’s the primary goal, then that’s probably what you want to do. And we’re really good about I mean, that’s what we do, we should be able to look at your scheduling and tell you that, um, I would I would rather talk to you about it just so that we can we can get get down to specifics, I’ll answer your questions different to try and answer them. Yeah. Well, and and, you know, I’ll, we’ll talk

Jason Hartman 48:17
sounds like a backroom deal here.

Panelist 48:20
But ultimately, that in that situation, your accountants trying to get you to pay in a position to pay the least amount of taxes by having they’re trying to

Jason Hartman 48:27
get you to pay more so you can qualify for loans.

Panelist 48:29
Yeah, trying to get to the most write offs, we’re trying to show you where sometimes those write offs can impede your ability to show income.

Jason Hartman 48:35
And that is very legit.

Panelist 48:37
Well, let me repeat it, why are theirs? Why are the rules switching so much? So when he started on his path to 10, at one, two, and three, the rules were one way now is getting closer to 10. It seems like it’s changing. He has to provide things differently, things are getting more difficult. The reasons being is we have to keep adapting with what’s happening in the market in the sense that we were not adapting that’s we’re adapting to Fannie Mae and the rules as much as you guys are. What’s happening is you’ve got fraud schemes, things like that. What I’ve been running into, personally was one fraud scheme in a particular area, a lot of some lenders had to buy back and eat some things. So they take a look at and say, What are the elements of all those loans that we had to eat? That several million dollars are going to take whatever element that is and apply it to our guidelines across the board. Now, is that good strategy for them? I don’t think so. But what they’re doing, because what is one What is a wounded wounded animal do it backs into corner and bites everything. That’s what they’re doing right now. It’s a knee jerk reaction. So some of these responses you’re gonna see, you’re gonna see changes that we won’t even know until we get your file into underwriting, it will look perfect. We’re proud of ourselves, we finally got one of these things built because some of you suckers have that deck, and we send it in to get underwritten and it comes back with more conditions than we’d ever seen. And because of situations like that, they adapt things before we have a chance to even see him because of the fact that things go south on other loans. So they’re constantly evaluating the loans on a minute by minute basis. As they take them backwards, they foreclose on them and add those elements into the guidelines and keep adapting them. That’s why I keep saying it’s a moving target. Well, the question is, is you guys will leave here with three people’s contacts? And how do you go into the multiple different markets that you’re going to go into, and not spread yourself between three different people four, or five, because you think one may be better than the other. What I always tell everybody is, it’s a relationship business, you it’s gonna suck, whether you work with me, him or her either, either, it’s just not going to be fun. So pick who you want to deal with, you’ve got to pick up some because when it comes down to it, you’re both you’re going to be standing in the ring next to one of us on our knuckles, we’ll be up there gonna be bloody, we’re going to be hurting, and we’re going to be tired. But you’re going to get to the finish line somehow, but pick who you want to be fighting with. That’s what it boils down to. We’re all bound by some rules. So do you want to fight with me? Do you want to you want to be in the in the ring with me, by your side, her by your side? Or Steve, by your side? It’s up to you. That’s what I say.

Jason Hartman 50:54
Let me mention something about that property tracker. That is, by the way, if you go to Jason hartman.com, and you click on Resources, and you scroll down, property tracking and analysis software, that’s where you get property tracker in holds your entire 1003 loan application. And your schedule of real estate owned, it makes it so much easier. Just use property tracker, I’m telling you, the really you need to use it. So Zack, I think what’s next?

Panelist 51:25
Well, depreciation is an item that you can add back. Um, what I what I’m going to do is I’m going to expand upon the tax returns, you know, a lot of times the clients, obviously, I’d love to see a draft, I don’t get to, you know, I don’t get them. And so what I’ll do is I’ll get the finished product. There’s some tricks that I shouldn’t say tricks, but there’s some things that I look at that go back, first thing I go back is I go back to the depreciation schedule and look at when the property is placed in service. So I’ve had people come to me and says, My lender says, You know, I bought it in September, that because it’s on a tax return. And so I’ve got to utilize that figure. And that’s not true, there’s a certain amount of common sense is allowed, because let’s face it, my job or our jobs up here are necessarily disqualify us to try and get your loan. And my I guess my, my comment to the customer, or the underwriters is when I’m looking at this, if you bought a property in September, I know right off the bat, when you had repairs, you probably have some additional constant, you’re not going to incur that one time expenses. And so you’ve had some added expenses that aren’t going to be the norm. The other the other thing that we look at too, and that is is it if I utilize that figure eating and so if I’m only utilizing formulas, is that really a true representation as far as the property’s ability to cash flow? And the answer is probably no, it’s probably not. So in my in my side, what I’ve been able to do, and that is substitute and utilize a rental agreements in those situations. So there’s a little bit more I really don’t feel that when I look at a set of tax returns that I’m looking at somebody there’s my place to tell you how to how your accountant to do your tax returns, because one, I’m not licensed. I’m not definitely not going to prison for that one. But you know, it’s so, you know, my expertise is landing your account and your account, he does your tax returns for you, you know, I’m going to look at him if it works, it works now. Can I give my two cents? Absolutely.

Jason Hartman 53:17
Okay, I think that’s good on that one. Fernando gets the last question. And we’ve got to adjourn for dinner. Okay, so the question is basically, investors, if you’re following our plan, you want to diversify. And maybe you want to be do 10 properties in three different markets, that would be kind of a logical amount of diversification, in my opinion. And the question is, if you go with one lender, and do three properties, and another lender and do four and another lender and do three, there’s your 10. How do you do the closing order of those? Can you do all those apps at the same time pick Tim this weekend? And do that? Is that what you’re getting at? Yeah, you know, in other words, you’re you’re going to be in the purchase process, and closing them all over the map, basically. Yeah,

Panelist 54:04
the answer is yes, you can do that. Do I advise that? No, I think that for ease of brain damage or or limiting brain damage for all of us, you probably want to do some due diligence. And I believe all of us can land in all the markets that you’re going to be in correct? Yes, yes, we’re going to be in all those different markets. So what my recommendation would be is speak to each of us and or a few others, find who you’re comfortable with and that’s where you want to stay. It comes down to ultimately you can do this but it’s going to be very challenging for you to do so. I think you’d be opening up a can of worms that I don’t, I don’t think you would enjoy that process of already a very convoluted process as it is. And the other thing is is very important, you guys this is so important. disclosure. If you do do this, if you decide you want to buy two from Memphis and I’m going to close those for you and and two more in Missouri and Steve is going to close them. It is highly important that you disclose to all of us what going on, because you could lose deals by not disclosing. That’s really a big deal. Fannie and Freddie have gotten really weird about that.

Panelist 55:07
So that type of situation, you’re not going to hide it. It’s like my mom, she always knew. So we’re going to find out, and then it’s going to slow, it’s going to slow down your process. So really a worst case scenario, you tell us that you like chocolate, vanilla, and strawberry. And you’re going to do all three. And so what we’re going to do is, we’re just going to conference call a lot. And we’re just going to need you to say, Hey, you guys are open to talk. And we’re going to share information like crazy that we would get them done on time. Otherwise, I find out two weeks later that she’s got a couple and then two weeks later, I find out he’s got a couple of Well, I’m delaying the heck out of your loans, because I have to keep updating your paperwork. So if that’s the situation, like you were told, just disclose, if you disclose everything and keep it out in the open, and we’re able to do our job because everything’s in the open, then it makes it much easier for you to hit your target date. It’s when we have to start finding stuff out two weeks later, three weeks later, that it just becomes a maddening mess, and you start to hate us,

Jason Hartman 55:56
Steve, any comments? And then we’ll wrap up this is it?

Panelist 55:59
Well, it definitely is a headache. And yes, you can do it. You know, I’ve had a couple of situations now where there’s been a couple of states where I’m not licensed in, they’ve tried to buy a couple properties, they’re they’re doing a couple properties with me say like in Memphis, and their purchase transactions, when I tell him everything’s got to close at the same time, they just have a cow. And it says and working with another lender is not always the easiest thing to do. Because a lot of times those other lenders when these two can probably agree with me on this one. And a lot of the people that out there in the industry just don’t have our level of expertise and just don’t understand how to get this through. So a purchase transaction, they all have to close at the same time. And I know I get a lot of people to come back and say why is that? And I said because really, the only way to paint you paint that picture of you financially is to have them all closed. That means I’ve got to have a settlement statement on the ones that you’re closing with the other lender in the first payment letter to be able to calculate your payments. The other thing we’ve get into an ad if you buy if you buy buy a property cash, I still need to know about it, because they still need to hit you for the taxes and insurance if you utilize private money. Now that’s a little bit different story. So if you’re buying a cup, if you’re buying for properties with private money and they’re spread out, I’ll hit you with the private money payment. I’ll hit you with the taxes on that property. And then I can close a mic and I can stagger to the close.

Jason Hartman 57:19
Good. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.