“Every dime online in real time.”
That was Adam Andrzejewski’s slogan when he ran for Illinois governor in 2010. Though garnering endorsements from conservative radio behemoth Rush Limbaugh and former Polish President and Nobel Peace Prize Laureate Lech Walesa, Adam lost in the Republican primary. However, as you will soon hear on episode #366 of The Creating Wealth Show, Andrzejewski’s enthusiasm for holding government at all levels accountable for spending has not diminished.
These days Adam has taken his fight online, founding the website OpenTheBooks.com. The mission is to create a realtime database that tracks local, state, and federal government spending, and make it available for anyone to find online or through proprietary apps for your smartphone. Adam estimates the project will be complete in one year, containing more than a billion lines of spending information. As Jason says in the opening monologue, this may be the most “ginormous” project undertaken in all of human history. Former President Ronald Reagan famously said, “To say the government spends like a drunken sailor is an insult to drunken sailors.” Visit OpenTheBooks.com to find out just how right he was.
The logical question is what the heck does this have to do with real estate investing? Host Jason Hartman addresses this very issue before he gets into the meat of the interview with Mr. Andrzejewski. To Area Agnostic ™ investors who follow Jason’s principles, the quality of government fiscal management at the state and local level is critical. Think of it like this. A dead broke government is desperate to raise funds, often in the form of fees and/or fines at a sometimes astonishing rate. Another consideration, which is more legislative in nature, is whether the legal decisions tend to favor the landlord or tenant. Obviously, as an income property investor, you should prefer the former.
In This Episode:
Jason kicks off the festivities with a fun and thought-provoking discussion about things today that are less meaningful than they used to be. What does this mean? Listen in for his take on why geography, age, pedigree, a college education, physical prowess, integrity, and more don’t matter as much as they used to. For fun, Jason reveals a few of the more ridiculous questions he encountered on the real estate agent exam when he recently renewed his license.
The Interview with Adam Andrzejewski:
If you’ve ever suspected that your local, state, or federal government might not be the wisest stewards of your tax money, Mr. Andrzejewski is here to confirm your worst suspicions. Listen in to find out all about how::
– Out-of-control California public salaries are threatening to bankrupt the state
– One city spent $2.3 million on a no-bid contract for cab rides for teachers and students – and some of the cabbies were sex offenders!
– Farm subsidies have devolved into the worst example of crony capitalism
– Planned lawsuits to force stubborn government agencies to REALLY open the books
– A whole lot more…
* Download the Open The Books app for Android or iPhone – Windows coming soon.
Links:
Adam Andrzejewski on Wikipedia
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ANNOUNCER: Welcome to Creating Wealth with Jason Hartman! During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing: fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it! And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show! This is your host, Jason Hartman, this is episode number three hundred and sixty-six, and today our guest will be the gentleman who founded a website—really, it’s really not a website. It’s a giant—actually, let me rephrase that. It’s a ginormous project, how do you like that word, ginormous, right? It’s a ginormous project, and the project is to quantify and account for government spending. This is the largest project in human history—it’s pretty amazing. With over one billion—that’s with a ‘b’—over one billion lines of government spending, at every level of our government. Whether it’s federal, state, or local spending. So I think you’ll find this interview to be pretty darn fascinating.
And you might be saying, well Jason, what does that have to do with real estate investing? Well, it has a lot to do with real estate investing! First of all, on a local level, it has to do with how well local governments are managed, and we are very attentive to that, because certainly on the first count, we want a place that isn’t broke. We try to invest in places that aren’t broke, because my opinion is that places that are in trouble get into this situation where the government is really “in business,” if you will, against its own citizens. And one of these places is the Socialist Republic of California, my former home for pretty much all of my life. And in a place like that, when the government is broke, it becomes a less and less pleasant place to live. Because God forbid you might get a ticket, where virtually everything is illegal in a place like California, and if you get a speeding ticket—and I haven’t had a speeding ticket in I don’t know, 16 years.
So you’re talking to somebody who just doesn’t get them. But when I was younger, I used to get a few. It’s something funny about aging; you get the lead out of your foot, which is just a lot safer way to be. So, driving fast is kind of overrated, in my opinion. And I think sports cars are also overrated, because you can’t drive them the way they’re meant to be driven. But I digress. I hear that speeding tickets in California are insanely expensive. And so, you know, that’s one reason we’re concerned about government spending. But we also want to invest in places that are landlord-friendly places, and in a place like California, or New York, or any more left-wing-oriented place, the tenants have all the power! They have all the rights! I mean, one of our clients told a horror story on the show recently—well, not recently, but a couple of years ago. Time flies when you’re having fun. And he told a story about how we had a property in Washington, D.C., a very left-wing—and regardless of who’s in office, and what administration is controlling the government at the time—but a rather big government left-wing type of place.
And he had a bad tenant, and tried to evict the tenant, and found that it was almost impossible to get them out of his rental unit! Because it is so tenant-friendly. And you had to give all this notice, you had to go to court, and the tenants knew just how to play the game, where they would bring you right up to the court date, and then they wouldn’t show up, and then you’ve got the order from the marshal to evict them, and then you couldn’t evict anybody on a day where there was more than like a certain, I don’t remember the number, but like, a 50% chance of rain. And in a place like Washington, D.C.—and I think they had a temperature criteria in there too, so you couldn’t evict them when it was too cold. I mean, just unbelievable. These places are just too hard to do business.
So, the political—suffice it to say, the political environment does matter to us as investors on a local level. But it also, of course, matters on a state and a national level. Because if that state is in dire straits because they’ve overspent? If the federal government is in dire straits because they’ve overspent. And of course, they’re in a very enviable position, because the federal government has the reserve currency, and they have the printing press, where they can just create money to infinity and beyond, as Buzz Lightyear would say. And as they do this, we can invest for this. We know how to game the system, if you’ve been listening to the show, for the past 365 episodes.
So, these things are good and bad, but we need to know about them. We need to be aware of them as investors—that’s critically, critically important. Well, one market where you’ve got a very landlord-friendly environment, and a very good climate, is Houston, Texas. And so, you know, I’ll be talking about a couple of properties real quickly before we get to our guest today, from Houston. Or in Houston, I should say. I guess the properties aren’t from Houston. People that used to live there are from Houston. But the properties are in Houston [LAUGHTER]. Or in the greater Houston metropolitan area, as I should say. And so, that’s pretty interesting. But before we get to that. I have long talked about how geography is less important than it’s ever been in human history, and how it really amazes me constantly how just 15 years ago, how local my mindset used to be. Versus how national and really, global, it is today.
And of course, the Internet has had a big influence on this. But, many other things have had influences on this as well. And I just interviewed Doug Casey. Doug Casey’s been on the show before, and he’ll be on the show again, because I interviewed him today, and we’ll publish that show in the near future. Investment guru and author of many, many books, Doug Casey, and he was really the first guy back in the 70s to write about, and probably pioneer, the concept of being the international man. Now, of course, the comedic character Austin Powers used to call himself an International Man of Mystery, right? And Doug Casey really pioneered this concept of living and internationalizing your life, and what he meant by this is, having assets, and access to multiple jurisdictions around the world, just as a plan B, as a backup plan.
Now, he’s one of the doom and gloomers that says the world is coming to an end kind of thing. Very much a gold bug certainly, and we talked a lot about gold, and Bitcoin, and cash flowing real estate as a way to get yield in a deflationary environment, and as a way to invest so successfully in an inflationary environment. So, some interesting stuff there. But I, again, say that geography is less meaningful than it’s ever been in human history. I mean, think about it. If we wanted to go somewhere in the days where we were riding horseback—I mean, say we wanted to go and get a free homestead when they were giving away land, homesteads, in the western United States.
Well, we might take this journey with horse and carriage, or horse and buggy, and we might do this with friends and family and people that we could associate with, and people that had different skill sets. We want to take them with us on the journey. And going across the country back then, you would almost certainly have people die on the journey. And I don’t know about you, but nowadays, it’s really, really extremely rare that anybody dies crossing the country. Whether it be by car, train, bus, or airplane. It’s very rare. We usually get there in one piece, and we usually get there in good health, minus the hassle of going through the ever invasive and obtrusive TSA, which is our government’s way of creating fake crises to restrict our freedom. But nonetheless, I digress. And we get there in one piece. So, geography is easier to cross than ever. So, that opens up big opportunities for us, when we’re investors.
We can invest anywhere pretty darn easily. In the olden days, when I first read the book Creating Wealth by Robert Allen, which was really one of the big influencing books in my real estate career, and I read that book three times, and I really liked it a lot. And he said in there, try to keep all of your rental properties within an hour of your home. Well, that was before Al Gore invented the Internet! That I was reading that. It’s certain very different nowadays. And the Internet, of course, is a disruptive technology. It has changed the game in so many ways. And the tools available on the Internet—not just video conferencing on Skype, or with any number of other methods, or the opportunity to share your computer screen with other people, or the opportunity to go on Google Earth, or Google Maps, and see satellite images, street view images, the opportunity to get comps on Zillow or Trulia, or Realtor.com, the opportunity to contact and vet and get reviews on property managers on Yelp or just Googling them and looking at their reviews on Google, or just doing Internet searches, or looking at complaint websites about them.
I mean, geography is less meaningful than ever. We don’t have to physically be there anymore. Now, granted, the in-person meeting certainly has its place, and it’s not going away, but gosh, geography—less meaningful than ever. And we started this thread, and Michael, who you’ve heard on the show, one of our investment counselors, and I were really brainstorming on this conversation thread on our company Intranet. And the other said that I said that’s less meaningful than ever is borders. Country borders! I mean, I don’t know about you, but nowadays, I have friends, and do business, and have contacts, with people all over the planet nowadays. I mean, borders used to be a big deal, but they’re just not a big deal anymore. In fact, I was reading a really interesting blog post from a guest that I had who founded an organization—oh, forgive me, I hope I don’t mess this up—I think it’s called YSN, and it’s like an young entrepreneur organization. And there was a really interesting blog post on that website that talked about, why do we even need to debate immigration anymore?
Immigration is almost unneeded, in a lot of ways, because so much of the work nowadays is knowledge work. And that knowledge work can be done via the Internet, across borders at light speed. 186,253 miles per second! I mean, it’s a phenomenal time in which we live. Okay. Here’s another thing that’s less meaningful than ever. And I’m not saying these things aren’t meaningful—I’m just saying they’re less meaningful than they’ve ever been in human history. A person’s age. Well, you’ve heard me talk a lot about how I’m launching a new show called the Longevity Show, because this topic is of interest! It has major social, health, and economic impacts to us, and I just interviewed a guest talking about that this morning, and also yesterday, another guest.
Of course, this has been impact on inflation, retirement age, rental property demand, big, big things! But a person’s age is less meaningful than ever. 60 is the new 40, and 40 is the new 25. It is really, truly amazing. I mean, my mother, who’s been on the show several times, is in her 70s! And you know, she just jumps around, and runs around, like a person who’s 40. A person’s age is less meaningful than it’s ever been in human history. Because not only because lifespan increased, and the gains in lifespan really, in the aggregate, haven’t been that big. At least not in the past few decades. But the gains in health span have been enormous. So, that is less meaningful than ever. And all of these things have an impact of real estate investing. Okay, what’s the next one?
The next one is, pedigree. Well, what do I mean by that? Well, being born into the right family. I mean, that’s less meaningful than it’s ever been in human history. Nowadays, a nobody, like me, frankly, a nobody can rise up and become incredibly successful. Look at the stories of the founder of Hotmail. Look at people like Richard Branson, Elon Musk, Mark Zuckerberg. I mean, these people—they didn’t have, so far as I know, at least—maybe I haven’t done my research here—but so far as I know, these people didn’t come from wealthy, super-successful families that gave them all the advantages in life. I certainly didn’t. I mean, I was a lower middle class kid growing up, and I’m not kidding when I say this—who bought his clothes as Pick N’ Save. Remember Pick N’ Save? Well it’s now called Big Lots, but back then it was called Pick N’ Save, and that’s the company that bought out inventories from other companies that were going out of business, or just had too much inventory on hand.
I remember when my mom bought her very first new car. It was the first time she ever bought a new car in her life, and I remember we went and we shopped around when I was a kid. I remember doing this. It was very money conscious, because I was poor, and so I really paid attention to money. And I guess maybe it’s because my mom paid a lot of attention to money. And I remember looking at this Honda Civic—this ugly little blue Honda Civic that she ultimately bought, and I remember this car—I think it cost $2900. I’m not kidding. You can try and figure out what year it was. It was a little ugly, tiny, Honda Civic hatchback, and it had—of course it didn’t have air conditioning. Of course it didn’t have power steering. Of course it didn’t have automatic transmission.
And of course it didn’t have electric locks and windows. And I’ll tell you what it didn’t even have—it didn’t even have a radio! Not even a radio. So in this car, we had this little transistor radio that would have a little antenna that you would pull out, and that’s the radio we listened to. I remember we hung it on a knob, right above the open space. It was probably the knob for the vent in the heater. It did have a heater. Cars had a heater back then. But we hung it on a little knob, and it would swing around on that little knob, and bump when you turned and stopped and accelerated in the car. So, amazing. Anybody nowadays—I mean, especially in America, but in other countries too—pedigree is less meaningful than it’s ever been in human history. Anybody can have upward socioeconomic mobility nowadays. And that’s a great thing. Okay, another thing less important or less meaningful than it’s ever been in world history: college. I’ve talked about this extensively.
Now listen, I’m a big believer in education. You know that, from listening to prior episodes. But college itself—of course, it’s totally overpriced nowadays. Of course, one of the next big bubbles in our economy, besides the bond bubble, which is going to pop, is the student loan bubble, at about $1.1 trillion. Nowadays, look at all of the highly successful college dropouts, or people that never got a college degree. Remember, what was his name? Dave, the founder of Wendy’s, who I’m pretty sure passed away several years ago. But he used to be on the Wendy’s commercials. Did you know that Dave could not read? Yeah, amazing. Dave could not read. He learned to read late in life, as an adult. And I think his name was Dave. But, amazing. And I mean, he created that whole chain of restaurants, an amazing thing. And so, another part of that thing—it’s not exactly college, but it sort of is college less meaningful than it’s ever been in human history, is credentials.
There was a day when you could call a restaurant to make a reservation, and say hello, this is Dr. Hartman, and I’d like a good table for two at 8PM. And because you used the word doctor in front of your name, I mean, that was a big deal! There weren’t that many doctors back then. It was special, okay? And it’s still special, obviously, and doctors are obviously very important people in society. But the credential is just—it just ain’t what it used to be. It’s still important; it can still open doors for you in life. Your pedigree is still—it’s great to have one if you do. But you can’t choose that. It’s great maybe to be a little younger than a little older, except for the wisdom that comes with age, and hopefully the wealth that comes with age. It’s great to live in the right place, and live in the right country.
But all of this stuff is less meaningful than it’s ever been. And here is another one that’s kind of interesting when it comes to business and investing and success in life. Another thing that is less meaningful than it’s ever been in human history is access to capital. Now, you might be surprised that I say that one. Access to capital. Less meaningful than ever. Well, think about that one for a moment. It’s because you don’t need traditional access to capital the way you used to have, or need, to get ahead in life. Nowadays, you can raise capital in a lot of different ways, not least of which is the crowdfunding revolution that is upon us. Very, very exciting. Now, you know how I feel about crowdfunding, and I think there is going to be a ton of litigation to come out of that.
There certainly will be a lot of fraud, and a lot of bad apples, and I’m sure there already has been, but it’s still a pretty interesting trend that is here to stay. So, you don’t need to be born rich, okay? You don’t need a lot of capital. I mean, look at my story. I bought my first income property, that little crappy condo on Coventry Lane in Huntington Beach, California—I bought that with almost no money down. Almost. And then my second property, at 147 West Remington Street, in Irvine, California—why don’t you look that one up on Zillow just for fun—that was the first property I lived in! It was a little 944 square foot condo, and I bought that one with very little of my own money. How’d I do that? I borrowed the money from my grandmother, and I paid her back, and I saved up a little money myself. I mean, I was only—how old was I when I bought that? Maybe 22 years old.
And then I sold it a year later to someone who actually became a very good friend of mine—my friend Mike, who bought it for $160,000 when I paid 102. And 11 months later, I made, by putting 10% down, a 600% return on my investment, pretty much. But I really did better than that, because most of the money was grandma’s money, that I borrowed. So my return was much, much higher than that. And listen—again, that’s speculative. I got lucky, and I always say, it’s better to be lucky than good. But because you can’t depend on luck, you gotta be good. And good means, invest for cash flow. Because appreciation is speculative. Sometimes you make it, and sometimes you lose a whole lot. Alright, what’s the next thing here? So, we got access to capital. Okay [LAUGHTER]. Now, here’s one that actually is kind of the opposite, okay? Some of these things are snarky, and they’re the opposite of less meaningful than ever. Integrity! And this is a bad one. You used to be able to do a deal on a handshake.
But that handshake ain’t what it used to be—I’m sure we’ll all agree on that, right? A handshake ain’t what it used to be. And that’s because nowadays, we live in a much larger, more transient society. At least this is my theory on it. And so, even a contract is less meaningful than ever. Because enforcing a contract is pretty difficult! I mean, anybody who’s dealt with the legal system knows this to be true. You can write all you want in the darn contract, by try and actually make the person live up to it! Try and enforce the contract, and that’s not as easy as it looks.
So, in a way, integrity is more meaningful than it’s ever been in human history, because if you find the people that you can do business with who just have integrity as part of their soul, and you know you can trust them, then you don’t have to stress about the contract, or even worse, stress about enforcing the contract. But, I think one of the problems with society today, and why people I believe—I’ll just throw this out: I think we have people who have a lot less integrity than ever before, is because society is large, mobile, and transient. Really, the same thing as mobile in a way, but not exactly. And what I mean by that is that is look, if someone screws you over in a business deal, there’s so many people in the world, they can just move on to the next person, and take advantage of them.
Whereas, in the old days, if you’re in a small community or a small town, you live or die by your word! Your word was your bond. Because if you were a bad apple, and you cheated people, the word would get around really fast, right? Well, it does get around really fast on the Internet nowadays, and maybe the Internet is a good way to hold bad people accountable. And there certainly have been some good cases of that. Heck, I tried to do it with that property manager, the guy in Kansas City that some of you know. And again, maybe that’s a way. But it’s not what it used to be. I remember watching an episode of Little House on the Prairie with Michael Landon, right? He was the star of Little House on the Prairie, and I just remember being struck by the way people dealt back then, and the way they dealt with each other. I know I can trust you, because I heard from my neighbor, who was two miles down the dirt road, and he told me that you were a man of integrity. And so, that one cuts both ways.
Integrity—well, matters less than ever before in a way, because you can’t count on it, but when you do find someone of integrity—gosh. Cherish that person, and make sure they are your lifelong friend, because I don’t know, I’ll just say, throwing this one out, it’s my opinion that there are fewer of those people than ever before, okay? So, treasure them more and more. Less meaningful than ever; here’s another one that kind of cuts both ways: privacy. Well, we have in so many ways less privacy than ever, nowadays. Certainly the company Facebook, and the other company Google, have been accused of massive abuses of our privacy. And I am sure they will continue to do whatever they can to push the boundaries of privacy. So, again, that one kind of cuts both ways.
We have less of it than ever, and we’ve gotta protect it more and more than we’ve even done before. Here’s one that’s less meaningful than ever: physical prowess. That’s kind of interesting. So, being physically capable is less important than it’s ever been in human history. Well, why is that? Because in the old days, if you were physically capable, and you were strong, you could beat people up, and you could take their stuff! Or at least you could intimidate them into just the threat of that. I mean, look, nowadays, even in a business situation, people use their physical size as a way to intimidate people. I mean, look. I doubt that in a business deal, any of us really believes that someone’s gonna beat us up. But still, a large and imposing person kind of has the upper hand a lot of times in a business deal! Because of their presence, because of the way they fill the room, or stand with good posture.
You know, and look at Obama! Obama—isn’t it funny that all our presidents, usually, they’re tall? They’re pretty tall guys, right? And Obama, one thing that a lot of people say, he’s a great public speaker, and I happen to differ with that—I don’t think he’s a very good public speaker at all! I mean, he’s good at reading a teleprompter, that’s for sure. But you take the teleprompter away, and the guy is dumber than George Bush! I mean, he doesn’t know what to say without a teleprompter. Everybody criticized Bush, but, I don’t know. Obama’s worse. But all these guys are tall! And Obama has great posture, and when he walks up to the podium, he’s always got those kind of square shoulders. And I don’t know exactly what that element is, but it’s pretty important to isolate. The other one who does that is George Clooney. You know George Clooney—I looked it up, because he always seemed so tall in his movies—all these guys, they’re short! I mean, George Clooney’s only like 5’11. I mean, he’s not short, that’s my height, but he’s not tall, okay?
He’s not 6’4. But he just—doesn’t he look tall in movies? He just appears that way, at least to me. But something about these presidents—they’re all tall. They’ve done surveys about business executives, and how height—actually, income increases by height. So, physical prowess. Now, that may still be somewhat meaningful. But it’s less meaningful than it’s ever been in human history, because certainly nowadays, thankfully, we live in a civilized environment. And you’re not worried about whether someone’s stronger or not. It’s really nowadays, who’s smarter. That’s who wins the game. And not just really smarter—smartness isn’t enough. It’s wisdom. It’s not knowledge. It’s being able to use knowledge, and apply knowledge. It’s applied knowledge—that’s what’s really important. Another one in this one Michael wrote down, and I’m not exactly sure what he meant by it, I wish I had him on the show to talk about this one.
But, self-reliance. And I’m gonna just take a stab at that one. It’s the last one we’re talking about here, before we get to a couple other points, and our guest. But, self-reliance—nowadays, we’ve got these big social safety nets in almost every country on earth. Even in less developed countries, there’s all kinds of social safety nets. So, self-reliance is less important than it’s ever been in human history. And so, take all of these things for better or worse, but I’d like to see you add to the list about things that are less important, and things that matter less than they’ve ever mattered before in human history. And shoot me a note through the website, or on our Facebook page, and let us know what you think about that. Or call into the show! Remember, you can still call into the show. I haven’t mentioned that much lately, but we’d love to have people call into the show, especially via Skype, and you can catch me at JasonHartmanROI on Skype, and I’ll put you on the show if you have any ideas or things to add to this list.
Or any personal finance or real estate investing questions in general; I’d be glad to answer them. So that’s enough of that. It all started with the geography being less meaningful than ever. So be area agnostic, as I always say in my 10 Commandments of Successful Investing, and diversify your real estate holdings geographically, because all real estate is local. And that’s very, very important to consider. Now, another thing I wanted to talk to you about before we get to our guest is, you know, I recently renewed my real estate license, a few months back. And it’s just funny, folks. I would say that in my trade, and I can make fun of it, because I am one of these people, and so I can poke fun at my own industry. I think I have license to do that. And it is amazing. About 80% of the realtors out there are just, frankly, pretty darn lame. And if you hold a real estate license and you’re listening to this, you figure out which group you’re in, okay?
But I would say if you’re listening to the show and you’re interested in learning, you’re probably in the 20% group of people who know what they’re talking about. But, it just—it amazed me how incredibly simple—you know, you have to take six different tests in the state of California to renew your real estate license, and you have to do this every four years. And it constantly amazes me how silly and literally stupid these questions are. The last time around, before this one, four years earlier, I had to renew my license, and I remember one of the questions on the test was, true or false—the IRS has a website? The Internal Revenue Service, one of the largest government agencies on the planet, has a website. True or false? Well, that’s true, folks. Yes, the IRS has a website.
Their very own website. I’m just gonna share with you a couple of these real quickly, okay? So here was one of the questions. And this was on the agency portion of the test. And this was multiple choice. An agent must always show: A) honesty and fairness. B) adequate income. C) suitable transportation, or D) all of the above. Hmm, let me see. Do you have to make a certain amount of income to be an agent? No. Do you have to have a nice car? No. Do you have to show honesty and fairness? Yes. I would hope that would be the answer to that question. Okay, let’s do another one here. And this is on the trust accounting portion, and it’s about security deposits, right? Security deposits for rentals are controlled by: A) the property owner. B) the tenant. C) the Secretary of State of California. Or D) the Department of Real Estate of California. Hmm. I would hope the answer would be A), the property owner.
I mean, this is mind-boggling, how easy this stuff is, right? It just—I mean, it just goes to—if they want to improve the quality of real estate agents out there, why don’t they make the stupid test harder? I mean, it’s just so easy. So don’t even have to study for this stuff, it’s so simple! It’s unbelievable. Okay, here’s another one. This was question 18. A major problem causing broker violations is: A) outdated business cards. B) lack of reasonable supervision. C) old office furniture. D) a messy office. What do you think the answer is, dear listeners? I hope it’s B), lack of reasonable supervision. Now, it actually kind of could be A) in a way—if your business card is outdated, and it doesn’t have the right information on it, that technically could be one. But you know what they meant. It’s reasonable supervision. The broker has to supervise the agents, right?
Okay, last one for you, just for your sense of humor here. Is a property—okay, now, we’ve talked, by the way, on past episodes about fair housing laws, and how as an owner of rental property, you need to know about fair housing laws, and you need to make sure that you and your property manager obey fair housing laws. They’re really quite simple. Don’t discriminate, that’s the basic tenet. And rightfully so. You have to know a little about these. They’re really simple to obey; you can read a few paragraphs about fair housing, just search it on the web. It’s really easy to be a good landlord and obey the fair housing laws. Well, here’s one of the questions on the test to renew a real estate license in the Socialist Republic of California. Number 19: Is it proper to advertise certain type of accommodations to: A) only Catholics. B) only Asians. C) dual income no kids, otherwise know as DINKS—dual income no kids—or D) none of the above? Hmm. Can you see this? You put your rental property up for lease, or your property manager puts it up to lease, and it says, beautiful property in Houston, Texas, or Atlanta, Georgia; three bedrooms, two and a half baths, $1300 per month, Catholics only. Are you joking? Asians only. Dual income no kids only. I mean, my God. Does anyone actually get this question wrong on the real estate test?
None of the above is the answer. You cannot discriminate, obviously, dear listener. You know this. I mean, look it. All of you, without taking a single real estate class, I bet you could pass this test very, very easily with flying colors. It would be a cinch for you, right? Okay. Let’s move on here, and the last thing I wanted to cover, and where did it go? The last thing I wanted to cover it, I wanted to cover some Texas-sized return on investment. And a couple of properties—and again, we’re still working on the property tour in Houston, which is a market that I’ve owned property in. I have property there now. And I love Houston; great market. The only downfall of Texas is you do have the higher property taxes. However, those pass through to your tenant. So, here’s a great property in Houston. This property is $133,990, you can find it on my website at www.jasonhartman.com. Subject to qualifying, it’ll cost you just under $40,000 in total cash to get into the property. Projected rent, $1400 per month, and projected cash flow is just over $3000 per year, or $250 per month. And your overall return on investment here is projected at 32% annually. 32% annually. So, pretty darn good. Even if it only goes half as well, you’ll make 16% annually—pretty darn good.
Okay, let’s look at one more property in Houston. By the way, I think that one, although I clicked off of it—I think that one was a brand spanking new property for you. So here’s another one, and this is in the Houston metro area, and this one is $124,000. It’ll cost you about $37,000 total investment to get into it. Projected rent, $1250 per month. Subject to qualifying, your overall return on investment: 30% annually. Because remember, with income property it’s a multi-dimensional asset class, so we earn that return on investment from multiple sources, unlike other what I call flat investments that are not multi-dimensional. Those would be precious metals, they’d be most stocks that don’t pay dividends, but even if they are dividend-paying stocks, you only have two elements of potential profit: your dividends, and capital appreciation. Terrible tax treatment, on and on.
So income property, by far the most historically proven asset class in America, if not the entire world. So, without further ado, let’s get to our guest, and let’s talk about Open The Books, and check out more of those properties at www.jasonhartman.com, and some of our great products, and we will be right back with our guest in just a moment here, talking about Opening the Books.
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JASON HARTMAN: Be sure to call in to the Creating Wealth Show and get your real estate investing and economics questions answered by me personally! We’d love to have you call in, share your experiences, ask your questions, and a lot of other people listening have those very same questions. So be a participant in the show! At 480-788-7823. That’s 480-788-7823. Or, anywhere in the world via Skype: JasonHartmanROI, that’s JasonHartmanROI, for return on investment. Be sure to call into the show. And we are going to enter all of the callers in a drawing for some nice prizes as well, so be sure to call into the show, and I look forward to talking with you soon.
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JASON HARTMAN: Well, I’ve got a great guest for you today, and I think it was Ronald Reagan who originally said, to say that the government spends like a drunken sailor would be an insult to drunken sailors. And with that, I have the founder of OpenTheBooks.com, and his name is Adam Andrzejewski, and he’s with us today to talk about government spending in a dramatic level of detail. Adam, welcome. How are you?
ADAM ANDRZEJEWSKI: Well, great! Great! It’s freezing cold just outside of Chicago here, Jason, but I’m really happy to be on your program. I think we can be true to the moniker of Chicago—this is definitely the windy city, and we’re gonna have a great chitchat today.
JASON HARTMAN: Well good, good. So, how old is this company? The company name is actually American Transparency, is that correct?
ADAM ANDRZEJEWSKI: This is true. So, I founded OpenTheBooks.com simply to fulfill my mission. I had run for the republican nomination for governor of Illinois in 2010, and my tagline slogan in that race was to put every dime online in real time. And so I lost the race, narrowly—I came within 5% of winning—and I still effectuated on my promise by founding OpenTheBooks.com, where it’s our mission to post every dime—not only in Illinois, but now across the country, at the local, the state, and the federal level.
JASON HARTMAN: That is an amazing task. I mean, so, have you done it? You’ve achieved it?
ADAM ANDRZEJEWSKI: Well, we’re getting close. We’re about a year out from actually making our mission happen. So, right now we’ve got three-quarters of a billion lines of government spending. And your listening audience can come to our website, at OpenTheBooks.com, they can download our free mobile application for Apple and Droid—we’ve pushed it all to your cell phone; you can actually track government spending on your phone now, using our app. And we think we’re about a year out from having about 90 cents on every dollar at every level being fully searchable.
JASON HARTMAN: Amazing. But this is such a dynamic thing—it changes every day, every time the government writes a check. So how do you—do all of these—do you just get like an RSS feed from every government agency’s accounting office or something? How do you do this?
ADAM ANDRZEJEWSKI: Well, it is a rare government agency that would set up an RSS feed for us.
JASON HARTMAN: Well, that’s what I would think. So how—this is a mammoth project.
ADAM ANDRZEJEWSKI: Yeah. The federal government’s pretty good about it. They post on a quarterly basis. It is government work, so oftentimes, certain tranches of the data are wrong. The government does make mistakes. Buy by and large, the federal government does a pretty good job, ever since 2006, at posting their spending. We also add to that federal farm subsidies—the 2.5 million federal workers with five year salary histories—we have 41 of the 50 states with at least one year of their checkbook. Illinois we go back eight years, and in other states we go back five years. We’ve added 36 of the 50 states with at least partial public employment and pensions in their state. And we just went live this week with the state of California.
JASON HARTMAN: I always like to say, California my home state, fortunately I have escaped the Social Republic of California. But I always like to say that California is the new Michigan. It’s such a disaster.
ADAM ANDRZEJEWSKI: And that’s good news, Jason! Because Michigan flipped, and they’re on a good economic path now.
JASON HARTMAN: Oh, they are? Wow! I did not know that.
ADAM ANDRZEJEWSKI: And California—yeah, about two years ago their legislature and their executive branch flipped, so they went Right to Work in Michigan, and people have greater freedom and liberty to live the American dream now, and it’s showing up in their economic results. So, there’s hope for California.
JASON HARTMAN: Yeah, well, who knows. I don’t know.
ADAM ANDRZEJEWSKI: What we’ve found though in California is that the trajectory of public pay, and then the pension, is completely out of control. In California, public salaries are golden; the top roughly 14,000 federal, state, and local employees earn $5 billion at taxpayer cost every single year.
JASON HARTMAN: Unbelievable. That’s just—this is just such an abuse of the system. I mean, they’re just stealing from the public treasury, from the taxpayers. It’s unbelievable.
ADAM ANDRZEJEWSKI: The average salary of those 14,647 public employees—the average salary is 231 grand. And you tack on another $92,000 in benefits—I mean, it is completely out of control.
JASON HARTMAN: That just—I can’t believe this. I used to think that if you—if you got a job with the government, sorry, but you’re kind of a mediocre sort of person that just didn’t want to try very hard, and I guess you’re still like that, except you make a lot of money!
ADAM ANDRZEJEWSKI: Well, you know, you’re exactly right. When my father went into teaching history and civics, 38 years ago in the public school system, there was a mental contract, and you made less as you were an active employee, and you did it because you were invested in public service. You were invested in education. You were invested in children. And you would have what was understood at the time to be a gold-plated pension plan for the rest of your life. That was the trade. You were underpaid, and then they took care of you in retirement. And now, because of the unionization—
JASON HARTMAN: You’re overpaid in both.
ADAM ANDRZEJEWSKI: Correct! That’s what we’re showing with our very robust transparency. In California, we’ve actually got 4.643 million records of local, state, and federal salaries and pensions. And we did put the California spending in our mobile apps. You can look it up by zip code, or any zip code in California. Or actually across the country.
JASON HARTMAN: Unbelievable. Wow, this is just incredible. Well, tell us about some of the things that you’ve discovered. I mean, there’s obviously so many stories of waste. We’ve all heard really a long time ago about the Pentagon paying $1500 for a hammer, and $4000 for a toilet seat, and all of this kind of stuff. But tell us about some of the discoveries you’ve made.
ADAM ANDRZEJEWSKI: Well, I encourage your listening audience to download our free app for Apple and Droid. It’s Open The Books, and see the local spending in your zip code. So let’s just talk about here in my hometown of Hinsdale. Now, in Hinsdale, the average home is nearly a million dollars, and the average salary is about $165,000. So it’s a pretty wealthy area. Here’s what I found, taking a look at the spending. When we posted the local salaries, my high school district had over 200 teachers making six figures! When a team took that door-to-door, they won the school board elections, and this year, not only did they freeze the salaries, but they froze the property tax levy for taxpayers! And that’s exactly what needs to be done, Jason. When we posted our school district’s checkbooks across the state of Illinois, in my hometown in Hinsdale, we found $2.3 million was spent on taxicab rides for kids and teachers. And then we found, when we explored it a little further, that it was done on a no-bid basis, and 47 districts in the state had done it for $52 million over the last six years.
JASON HARTMAN: Do you go as far as finding out—I mean, that was a no-bid deal, which reeks of some sort of crony capitalism and kickbacks. I mean, do you go as far as—I can’t imagine you have the resources to do all this. But maybe you do, or maybe you outsource it to somebody who does. But do you go as far as investing who benefited, who’s brother in law owns the taxi company, or whatever is going on there?
ADAM ANDRZEJEWSKI: Well, sometimes we do. On farm subsidies, everybody knows the former Illinois governor, Rod Balojevich, who’s now in jail—he was obviously convicted, but, his Illinois Secretary of Agriculture, while he was in—while Balojevich was in office, the brother of the Ag Secretary in Illinois receive $2 million worth of federal grants, loans, and payments. I’m sure it was all legal. I’m sure it’s all on the up and up. But it goes right to your point about crony capitalism. So yes, we do get pretty granular in the detail that we explore on this spending. Specific to the taxicabs, we left that to NBC 5 out of Chicago. They did an investigative report, and here’s what they found: they found that one out of ten of the taxicab drivers actually had a record, either a sexual offense, an assault record, a gun charge, or drug offenses or other things. So the kids were actually in jeopardy because of these no-bid contracts. Those contracts are now bid according to the state law. They have to follow procurement practices.
JASON HARTMAN: Wow. Talk to us a little bit about the logistics of doing this. I mean, you alluded to that before; you said the federal government was actually quite good at posting the data. But what do you do? They post it. But do they post it in downloadable form, like in a CSV file, and then you bring it into your site? How does this happen? How do you do this?
ADAM ANDRZEJEWSKI: Sure. So, they—if you remember back in 2006, the Illinois US Senator at time with great promise—his name was Barack Obama, and he circled up with the republican senator in Oklahoma, Tom Coburn. And they put together—and it was really good legislation, actually: the Google Your Government Act in 2006, and what that act did is for the first time ever, it opened the books of the federal spending. And they did it the way government tends to do things; they displayed it in hieroglyphic text files, which are not searchable. So we downloaded those text files, we reorganized them and uploaded them to OpenTheBooks.com in a fashion that allows regular people to see the spending in their home town using our mobile app in their zip code, or in any locale across the country for the first time. Now, when we did that, Jason, I obviously again, using the local example right here in my hometown, I took a look at the spending. And here’s what I found. I actually wrote about this in my editorial that was published in the Wall Street Journal last May. And I found that our local Rolex jeweler took 3.64 million. Our Lamborghini auto dealer got a million five. Where my daughters take ballet and dance class at the local community house nonprofit, they got a million dollar grant to enhance the educational programming of the Hinsdale children on millionaire row. This is wrong. And my neighbors need to hear it, Jason, that this is spreading wealth to the wealthy, and it must stop.
JASON HARTMAN: That’s what always happens. You know, most people, even on the left—on the democrat side of the aisle—will agree, the government is inefficient, and it’s corrupt, and it’s wasteful, right? I mean, some of them won’t. Some of them actually trust government, which is a mind-boggling thing to me. What a snow job that is to me. But whatever. But you know, a lot of them on both sides of the aisle, you can find agreement on those things—that government is inefficient, it’s wasteful, and it’s corrupt. My answer to it is, look. We’re never going to stop all of that inefficiency and corruption. However, if we just make government smaller in its total size, we will naturally reduce, proportionally, the size of the waste, corruption, and inefficiency! And so, it’s just unbelievable that the government should be in all these other businesses of picking winners and losers. I’ve never had a government grant. Granted, I haven’t applied for one either, but….
ADAM ANDRZEJEWSKI: You’re like the only person in the country, Jason, not on the gravy train!
JASON HARTMAN: This is unbelievable! I mean, this is just ridiculous, that the government should be financing this kind of stuff.
ADAM ANDRZEJEWSKI: I completely agree with you. I mean, previous to doing this, I was in the private sector. So back in 1997, my brother and I, from our apartment, we founded a Yellow Page publishing company that produced hometown telephone directories. And, so I had a simple theory on government. If you can find it in the Yellow Pages, government should exit the business.
JASON HARTMAN: Hmm, yeah. That’s a good—that’s a good—expand a little bit more on that. That’s a good example.
ADAM ANDRZEJEWSKI: Well, you know, I’m one of those guys that believes that government does have a purpose, right? Beyond just securing the borders and beyond the military and the police force. I believe, actually, that government has a true purpose, when and where people cannot help themselves. Government has a true purpose to help people who have real needs. Now, that doesn’t mean to give a bloated contract to your cronies. That doesn’t mean to be in all these sideline businesses that you see government in, right? So I think you could be true to my Yellow Page analogy, and be true—still have an efficient and targeted government that helps people who do have real needs. I think we’re wealthy enough in this country to do that.
JASON HARTMAN: Or at least we pretend to be wealthy enough. That’s a whole nother discussion, you know.
ADAM ANDRZEJEWSKI: Sure. Well, that’s true too.
JASON HARTMAN: We have a smoke and mirrors house of cards economy. But, you know, this game of monopoly money—I mean, we certainly appear to be wealthy now. So, go ahead.
ADAM ANDRZEJEWSKI: Yeah, and I think the recent farm bill is a great example of what you just talked about. It’s gonna transfer a trillion dollars of wealth, and 80% of it is Food Stamps, but 20% of it’s farm subsidies! And it passes both—it passes the House and the Senate on a bipartisan basis, and it takes the farm subsidies portion of that bill, and increases it by 47%! So, we actually issued a report. It’s called the Federal Transfer Report, Farm Subsidies & The Big Dogs, and we call out all the waste in the previous bill. There was no reform, and everything we called out gets to increase by 47%!
JASON HARTMAN: It’s just—it’s just incredible. What kind of funding—I mean, you started this as a 501(c)(3) charity, right?
ADAM ANDRZEJEWSKI: We are a public charity, American Transparency, and so, we believe that transparency is only good if it brings accountability. I mean, what’s the purpose of displaying a billion lines of the government’s money if nothing happens? So, we not only open the books, but we also screw down on our data, we study it, and we issue reports like this Federal Transfer Report. That’s our brand, people can come to our website at OpenTheBooks.com, they can review that Federal Transfer Report, and what they’ll find is that we studied major American cities and urban areas—New York, New York City, Washington, D.C., and Chicago, and we found 4,000 entities received $30 million worth of farm subsidy where there aren’t any farms!
JASON HARTMAN: [LAUGHTER]. You couldn’t write fiction like this. You just couldn’t write fiction like this.
ADAM ANDRZEJEWSKI: It actually gets worse. You can click on that report, and you can actually look at—we put all the subsidies on red tens with the spending information. And Google Maps, you can actually look at the downtown Chicago high-rise where there’s seven charitable trusts that serve ducks, that got nearly $1 million worth of subsidies in the last 40 years. These are very expensive ducks. You can look at Hyde Park, and you can see that the Nation of Islam, their leader, Louis Farrakhan, he has two charities. He’s received over $300,000 worth of farm subsidies and commodities loans over the course of the last—since 1995. And the checks are mailed to his home address in Hyde Park, Chicago!
JASON HARTMAN: Well, you know, I mean you can run a business for a charity out of your home. I mean, I’m not gonna defend Farrakhan in any way, but that doesn’t necessarily mean corruption, does it? Or does it?
ADAM ANDRZEJEWSKI: Well, I think you’re right. All of it’s legal, probably. Farrakhan’s charities are out of compliance probably with the IRS, certainly with the Illinois Attorney General, and the Secretary of State, which has him not in good standing. But nevertheless, I think that the Federal Farm Subsidy Government Program has grown to such an extent that wealthy individuals and entities are simply making it part of their investment portfolio, where they hire a farm manager to do the farming, and they collect the taxpayer subsidy as a return on their investment.
JASON HARTMAN: Well, what’s next for you guys? You’re about a year out from having every piece of government spending online. Right?
ADAM ANDRZEJEWSKI: Correct. I think that one of the next phases for us is to upgrade all of our technologies. So if you do download that free app, Open The Books, in about 30 days you are going to get a new version of that. Even though this app won the best political app in the country last year, by the Web Marking Association in a prestigious contest. We’re upgrading the technologies. It’s going to be super hot, super fast, with a great user experience, and so I encourage everybody to download that app. The next phase after that, is to circle back on those entities that gave us problems. And they’re very Orwellian problems, Jason. For instance, the Obama administration—the Office of Openness, Transparency, and Accountability, rejected our request for the federal pensions. They called that private information! So, you know—they’re not gonna hand those over to us. We’re probably gonna have to engage in litigation to force those open. Also, it might be, the New York State Comptroller, he produced the New York State checkbook, and redacted the vendor names, okay? Again, very Orwellian. So, it’s certain things like this, we’re gonna have to very judiciously and carefully, for maximum impact, choose our court cases. But we must vigorously, morally and legally, defend our right to have open records in this country.
JASON HARTMAN: Unbelievable. I mean, I’m looking at the app now. I have the app on my phone already before I even knew who you were. I remember someone told me about it quite a while back. And I’m just looking at these salaries. I mean, it is amazing what you can see here. You know, in terms of these salaries, the checkbook, the spending, you can sort it all sorts of different ways; if you want to know what the government employees right around you, based on your geo location, are making, you can search that. I mean, it’s just incredible! What a great app. Phenomenal. So that’s available for iPhone and Android, as well?
ADAM ANDRZEJEWSKI: Yes. We’ve got it available for both. And most likely, a little bit later this year we’ll come out with the same app for Windows-based phones as well.
JASON HARTMAN: Yeah, talk about a great cause. And so, anyone who donates to you—their deduction—their donation is tax-deductible, is that correct?
ADAM ANDRZEJEWSKI: This is true. If you go to OpenTheBooks.com, we’re a public charity, so it’s a completely—to the fullest extent of the law, a tax-deductible donation. And thanks for mentioning that, Jason. We are funded in large part by individuals from across the country who believe that quite possibly this is the most robust way to save liberty and freedom in this country. We know what the NSA’s doing; they’re opening all of us up in the private sector. [Unintelligible] hold government accountable to the open records laws.
JASON HARTMAN: Yeah, yeah. Most definitely. Well, keep up the good work, Adam. Thank you so much for joining us. I hope everybody will download the Open The Books app for their smart phone, and visit your website as well, and what a great cause. Folks, I’m gonna make a donation, so I can tell you, this is one of the better causes out there, I think. And plus, it’s tax-deductible, so it’s a lot better than giving it to the darn IRS, who will use it in reverse to do the stuff that you will hopefully prevent them from doing.
ADAM ANDRZEJEWSKI: That’s a good argument. I would have to remember that one, Jason. And thank you so much for your interest in our mission. I really appreciate you. I want to keep you updates, and your listeners, and I want to come back on your as more things develop here, as they certainly will.
JASON HARTMAN: Fantastic. Well, keep up the good work, and we’ll talk to you soon.
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JASON HARTMAN: I’m here with Caeli Ridge, and one of the things, Caeli, that investors are constantly disappointed with, is that they’re quoted a rate in one place, or they look online and they see a rate for a mortgage, and then they’re switched, and it’s kind of a bait and switch. And they find out they have to pay a higher rate. What’s going on with that?
CAELI RIDGE: I get this question almost every day. They’re looking at the difference between owner-occupied type rates and non-owner-occupied type rates, and the one is always going to be less than the other.
JASON HARTMAN: Investor mortgages are just a little bit more expensive, folks. But remember, as an investor, you don’t pay your own mortgage, your tenant does. So it’s a pretty great thing. Caeli, where can they find you?
CAELI RIDGE: www.ridgelendinggroup.com.
JASON HARTMAN: Fantastic. And if you forget that, you can contact your investment counselor, at www.JasonHartman.com.
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ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected]. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Empowered Investor, LLC. exclusively.
Transcribed by David
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