On today’s Creating Wealth show, Jason talks a little bit about mastermind groups and touches on an article that was released by USA Today on the subject of investments. Jason brings up some very interesting points on the minimum wage discussion as well as talks about conflict of interests in financial advisers. As always, Jason shares some timeless wisdom about the US dollar, commandments to live by, and more on the Creating Wealth show.
Key Takeaways:
1:30 – Jason talks about his mastermind group, Venture Alliance.
5:45 – Minimum wage increases always causes inflation.
11:00 – Give yourself small rewards along the way.
13:40 Jason talks about commandment number nine.
17:20 – The American workspace is getting smaller as more people work from home.
23: 15 – Jason talks about the gold bugs and other forms of currency.
27:45 – The US dollar will still be the reserve currency
30:10 – Jason does a deep dive into his personal commandments.
37:40 – There is no such thing as passive income.
41:00 – Jason’s company looks for landlord friendly markets.
Tweetables:
“If people want to take advantage of someone, they’re going to figure out a way to do it.”
“People need three basic things: food, clothing, and shelter.”
“Whatever happens, I bet the US dollar will still be the reserve currency.”
Mentioned In This Episode:
http://www.newser.com/story/203101/youre-losing-your-office-space.html
http://www.businessinsider.com/us-dollar-most-crowded-trade-2015-2
Transcript
Jason Hartman:
Welcome to the Creating Wealth show. This is your host Jason Hartman. This is episode 482. Thank you so much for joining me, episode 482 today and gosh, there’s so much going on it is amazing. I’m traveling, I’m at my mastermind group here in Tampa Florida and just been learning so much the past couple of days. It’s amazing, truly amazing. The power that happens when you put a bunch of bright people, myself excluded, I’m being humble for once; a brunch of bright people in a room together and let them brain storm on things. For example and this is what I’m really excited about with Venture Alliance.
By the way, thank you all for your interest in Venture Alliance, which if you’re a new listener, the Venture Alliance is the new mastermind group I’m launching and the tag line is: Your Financial Friends and I wanna solve, really one of the biggest problems that relates to commandment three about why you should maintain control, why you should be a direct investor and solve that problem by putting bright people in rooms together who have resources including financial resources and connection resources and knowledge resources and getting them together so they can do things together, they can evaluate deals together and do big deals.
So, yesterday I met my real estate mastermind group. I proposed the idea, here I am with a bunch of people in the room that are all in the real estate business, they’re in the trade. Not consumers, I guess, that’s probably the way to refer to you our listeners as the consumers who are investing and these people are also investing of course, but they’re also in the businesses of providing inventory to investors. So, this would be a business to business meeting, if you will, versus when I talk to you it’s mostly, and I know not completely, it’s a B to C, a business to consumer type of decision.
So, I’m in this meeting yesterday and I suddenly think, gosh, look at all the resources in this room, look at how much real estate all of these people, about 30 of in the room, are responsible for and I did the math and just taking some educated guesses and I came up with the 30 people or not the 30 people in the room, but all of the different people, which adds up to 80 in the entire group, not all of them were there, and from my calculations, it looks like we are all responsible for over $700 million dollars per year in real estate moving around and being transacted, maybe a lot more than that, probably.
That’s probably actually a conservative estimate, but it’s somewhere near the one billion dollar market and I’m thinking, you know, I’ve been thinking about starting a crowd funding company and I always go back to my commandment number three and think that’s not really what I wanna do, but if you can put some controls on it and make it more workable for the investor, it has some possibilities. I much rather be looking at something like that from people I know, like, and trust, okay, then sending my money to some Wall Street criminal. Criminal is used in the loose sense, what they’re doing is mostly, but not always legal, but it’s still a crime in my eyes because the investor just gets so ripped offed. Just wanted to clarify that definition and it’s amazing what you can do when you just put the resources of people together.
Anyway, that’s where I am and I guess that was already the first tangent of the show, because what I was going to talk about is how when I walked out of my hotel room of course there’s either always a copy in the hotel of USA Today or the Wall Street journal, well this morning it was the USA today and the front page article says, “Bad Advise Costs Billions” and then it says, “Obama calls for new rules for financial advisers.” Now, here’s the problem, okay. Whenever there is a new rule, it always seems to back fire and hurt the people it tends to help.
One of the examples that I’ve cited many times and most people, you know, they can’t see the big picture, most people are always just looking at the micro picture. The people that are getting something from government who have the entitlement mentality are saying, “Well, you know, government should do this for us or it should do that for us or it should give us free health care or it should raise the minimum wage.” Well, on the micro picture, for a short time, that usually works out very well and it’s a good deal for the receipt, but on the macro picture, in the long run, it always works out poorly. So, minimum wage, that’s maybe a good example.
All of the minimum wage increase pressure, which by the way, you know, I’m all for people earning lots of money, but people really decide what they’re worth in society. They decide whether they want to sacrifice a little bit of security for a little bit of opportunity and they’re always weighing that balance or they will improve their skills and get better jobs. So, all of this is always a play, but you can see it, as soon as that $15 minimum wage thing happened in Seattle, all the talk was, you know, McDonalds is experimenting with more robotics to make burgers, you know, the robot never gets sick and it never sues you for unlawful termination and all of these things and it always hurts and then on the other end of it the minimum wage increase always cause inflation, they always create inflationary pressure.
So, you’ve got all these things at play. So, here we go with Obama calling for new rules on financial advisers. You know I think the financial services industry is basically corrupt, okay, and he in the article, they did quote Obama a few times, point out some good things here and I’ll just share a little bit of it with you. It says, “WASHINGTON — President Obama called Monday for new rules requiring financial advisers to put their client’s interests above their own.” Now, think about that. How can you make a rule about that? What kind of rule could you possibly quantify, delineate, and enforce that would do that? I mean, this is human nature!
If people want to take advantage of someone, they’re going to figure out a way to do it, okay, but it says, “Especially when it comes to retirement savings plans. “There are a lot of very fine financial advisers out there, but there are also financial advisers who receive backdoor payments or hidden fees for steering people into bad retirement investments that have high fees and low returns,” Obama said. In a speech to supporters at AARP headquarters.” Now, AARP, you know, they lend to the left, so you should know that, okay.
“AARP headquarters in Washington, Obama said that “conflicts of interest in retirement advice results in annual losses of 1 percentage point for affected persons … It can cut your savings by more than a quarter over the course of 35 years.”” Now, that is amazing, because that shows the compounding effect of investments and the compounding can be positive or negative and it really is when you play it out over time, very very significant, so when you’re looking at investing in income property and you’re thinking, “Gosh, I gotta make some sacrifices so I can buy a few more property. Do I want to do that or do I want to go on a nice vacation or do I wanna buy a new car that will depreciate or do I wanna make some sacrifices today for the longer term delayed gratification, greater good for the future?’”
I say, it’s appropriate to live a somewhat lifestyle so that you can do something bigger. Capital formation has got to occur that is how all wealth is created through capital formation, okay, and it’s either your capital formation or it’s somebody else’s capital formation and how does capital formation occur? Well, almost always, but there are a few exceptions, through savings, through delaying gratification. That’s where capital formation comes from.
So, we gotta have capital formation. I’ve given maybe the metaphor of the telescope before and everybody’s looked through a telescope and maybe you’re looking at the moon and if you just accidentally hit the telescope and knock it off the moon, well you’re zillions of light years into interstellar space, right? That’s the same thing that happens, because of that lever, the same things Archimedes talked about when he said, “Give me a lever long enough and I will move the entire world.” It’s the concept of leverage, so that’s what happens when you form capital, when you delay gratification, you increase leverage. Don’t be a spendthrifts, because spendthrifts never get anywhere.
However, I want you to balance that with this concept and that is the balance concept of rewarding yourself with small reasonable rewards along the way of your journey. Make things a celebration. So, if you’ve acquired one more property? Have a small celebration. If you want to buy yourself a swanky pair of new shows, then buy yourself a swanky pair of new shows. You want a new suit, get a new suit. Whatever it is. You know, the small reasonable rewards along the way so that you setup your psychology to interpret things the way you want it.
We need to trick our mind a little bit sometimes, don’t we? So, we need to reward ourselves so we will keep doing the behavior that we want to encourage and we know that delaying gratification is important to long term goals. So, just a thought there on current events there. Obama is seeing that people are getting ripped off because of bad advise and that’s one of the problems, you know, with the Wall Street investments, there’s so many layers and levels and you gotta peal back the onion and look at it in all these different facets.
So, it’s not just the financial advisers, that’s just the front door, okay. Once you go into the house or go into the building, when you’re past the financial adviser at the front door and if they haven’t ripped you off, well then you’ve got all of these middle people. You got to get past the high frequency traders, you gotta get past the investments banks that underwrote the stock, you’ve got to get past the board of directors that is always trying to reward themselves above the share holders and get past all those conflicts of interest.
You’ve got to get past the conflict of interest of the executives after you get past the board of directors, right, because they all want to pay themselves huge bonus and they all want to spend money on corporate jets and all of that stuff just whittles away the investors profits. You’ve got to get past Steve Jobs! The late Steve Jobs, right. I mean, everybody thinks Steve Jobs was this great guy and I do too. I mean, I love Apple products. You know, he’s obviously a visionary, but the expects talk all about his options backdating schemes and all of this stuff he did that wasn’t kosher. There’s just too many conflicts of interest. Be a direct investor, you know the drill, right?
Okay, another thing I’ve predicted and I’ve been talking about this for many years and it goes back, it all goes back to commandment nine. I know I’m always talking about commandment number three, Thou Shalt Maintain Control. Be a direct investor, don’t have the three major problems, you might be investing with a crook, you might be investing with an idiot, assuming they’re honest and competent, they take a huge management fee off the top, but what’s the other one? Commandment number nine. That’s another one.
Well, there are ten of them obviously, actually there’s 20, but of the first ten, commandment nine, Thou Shalt Only Invest Where There Is Universal Need. Thou Shalt Only Invest Where There Is Universal Need and where is there universal need? Remember Maslow’s hierarchy of needs? Remember the old saying that people need three basic things? What are they? They’re food, clothing, and shelter. So, I say, let them buy or rent, because we’re really long term buy and hold investors. Let them rent that shelter from you.
I’ve talked many times about how office space is less needed, because it can be outsourced overseas. I know lots of people that are engaged in the Filipino outsourcing movement where there are outsourcing to workers in the Philippines and just as a side note, I have not had any success with that, I have tried it many times and the offshoring thing has not worked for me, okay. I do know people that do it, they say it works, I’m not totally convinced, but whatever. We know that a lot of office jobs have been outsource and offshored to India and the Philippines, right, no question about that, but we also know that a lot of this office space demand has been outsourced to people’s homes as people have home-based businesses.
I mean, I remember I was at a national, I used to be a member of the National Speakers Association otherwise known as the NSA, which is located in Tempe, Arizona. I was a member of NSA for ten years. I remember I was at one of their meetings or their conferences and one of the speakers was asking a question of the speaker who was up on the podium, up on stage, and they were saying, “Well, when I’m running my speaking business, I just don’t know what to do. I’m sort of ashamed of saying I work out of the house.”
It’s funny how things change, isn’t it? Because that was probably 15 maybe 18 years ago that I remember someone asking that question of the speaker, thinking like what do I do, do I go to a.. I think back then it was Mail Boxes Etc or something, not the UPS store. Do I get that PO box or do I just not print my address on my letterhead like anybody even uses letterheads anymore. See how things have changed? She was really concerned about her image, about how this might be perceived by potential clients and now, like, half the population probably works out of their house.
You know, it’s amazing. I mean, I work out of the house, you know. Three and a half, four years ago, I gave up our last office and made my company virtual and everybody likes it and it works great and there’s lots of technology to support that type of thing. It’s changed so much, but there’s an article here on the Newser app and Newser website and it says, “You’re losing your office space.” So, this is another factor and this just plays into the market of office space investing.
So, we didn’t even talk about industrial properties or retail properties and those are under a huge pressure too, but it says, “The American workspace is getting smaller. In 2010, there was an average of 225 square feet of office space per office employee in North America; in 2012, the figure was down to 176 square feet, the New York Times reports based on data from a real estate association. The group expects the number to drop to 151 square feet by 2017, Time reports. And in New York City, things look even tighter.” Now, there you’ve got very expensive real estate obviously.
“A survey of 10 new office spaces cited by the Times found that the average amount of room per worker was 120 square feet, with the maximum at 178 and the minimum at 93.” So this might not seem like a big deal to you, but think of the percentages. Remember how I talked about how everything should be quantified in relevance, in a relative matter, in percentages. So, if the average size, just 5 years, this is only 5 years, was 225 square feet per employee and now it’s 176 square feet, That’s a huge difference from a percentage basis.
So, if you were an investor in office space properties, you would see how employes are just not tolerating big office expenses anymore. I mean, that’s what it says to me. The trend is moving away from office space. It’s moving toward the mobile virtual worker. Listen, I understand this is not exactly news, I get it, but when it’s quantified in these types of numbers, it’s really interesting. I mean, 93 square feet per employee, wow. That’s a big difference. So, invest where there’s universal need. Invest in housing. That’s where a lot of this office space need has been outsourced, beside being outsourced to India and the Philippine and other offshoring locations and other less expensive real estate locations around the US.
So, very, very significant. Don’t forget, when it comes to retail property, the other type of investment and I love talking to these commercial real estate people. You know, oohh, I’m very sophisticated, so I’m going to buy some shopping centers or some high raise sky-scraper office buildings, you know? And right in front of you, you have the most historically proven asset class, the good old humble, but lucrative single family home, right? Housing, housing, housing, I love housing. Of course, people make money in all sorts of real estate. I understand that completely. Apartments being my second favorite. Mobile home packs being my third favorite and after that it gets kind of murky.
So, let’s talk about the humble US dollar, the one that, I’m going to pick on them again, Peter Schiff and all the doom sayers predicted would just die and all the people I interview on my Holistic Survival show, they just predict that the dollar, the end of the dollar,, the dollar crash, the complete dollar debasement and all the gold bugs and all the Bitcoin people, they all say the dollar is doomed. Really? Hmm, well, according to Business Insider article just a couple of days ago it says, “The US dollar is the most crowded trade in the world.” Hear that again, “The US dollar is the most crowded trade in the world.” It says, “Going long the US dollar is the most crowded trade in the world. And over the last several months, this has been among the best trades in the world.”
So here’s a quote in that article. It’s by someone named David Rosenberg and it says, “There are certainly plenty of reasons why the greenback should be the world’s currency darling, but at some point all the news is in the price.” In other words, it’s priced in to the asset, whether it be the dollar, whether it be real estate, whether it be a stock, whatever, that concept of being priced in, the news is already priced into it, whether it be up or down. “We may well be there in terms of the US dollar story, which looks long in the tooth even if not totally over.”
So, now, it’s interesting, right. This guy is saying that, you know, long in the tooth means it’s old, right, it’s old news and he’s saying that doesn’t looked good, okay, and it’s just too far, it’s a bubble. Maybe it is. Maybe it is, but still, the dollar, I mean, just think about it. The dollar is backed by the most powerful military the human race has ever known and if people who are gold bugs and Bitcoin believers and Bitcoin bugs and cryptocurrency and alternative currency and cyber currency, you know, call it by whatever name you wish, think that the US government, the US military, and the central banking cartel, which is lend by the US central banking, you know, the crooked cartel. We have the federal reserve, right? If anybody is silly enough to think that these most powerful entities on earth will stand idly by while people destroy or allow their currency to be destroyed, they are out of their mind.
I love how the Bitcoin people and the gold bugs talk about this. They say, “Oh, you know, they can’t control it. The government doesn’t know how much gold anybody has. It’s stashed away in safe deposit boxes or under the mattress or buried in the backyard using and using the midnight gardener thing that Howard Ruff when he was on my show talked about. These gold bugs have been basically wrong for decades and I totally see their arguments. I completely get it. I’ve entertained their arguments for years now and they say, “Well, the government control cryptocurrencies, it can’t control Bitcoin.” Are you kidding? It can just make it illegal. “Oh, well, Bitcoin has got such unique characteristic, it has this cool technology call the block chain.” So what? The block chain is open source. The government can make a new cyber dollar tomorrow.
It can put a block chain in it and it can all have the characteristics that make Bitcoin so great, theoretically, and they can stamp the label on it, you know, call it Bitdollar or Cyberdollar or whatever they want or just call it the Newdollar and boom, there it goes. Now, why is this important? Why does this matter to us as investors? Because while the dollar maybe strong now, the ultimate business plan of governments and central banks has to be inflationary and I know they’re defying gravity at the moment and they really weren’t defying gravity until about one year ago. About one year ago they started to go off the reservation and the spending hasn’t really seem to have affect the dollar and maybe it’s because of technology, maybe it’s because everything Jim Norman talked about on the show recently in terms of oil, in terms of the future’s market and that being the reason oil is control as a weapon of war.
I mean, look what’s going on in Venezuela right now. It’s a disaster. I mean, Venezuela’s new leader or relatively new leader, I guess, has basically come out and said that he would not tolerate decadent. Okay, freaking dictator, see how long that lasts. These dictators used to be able to do this for decades and decades and decades, but they never even last. I mean the Soviet Union never lasted. China, you know, the cultural revolution…don’t you love the labels people give this stuff? The People’s Republic, the Cultural Revolution, the Democratic Republic of North Korea. That’s just hilarious. Talk about a total misnomer, right?
They never last, but in a connected world and, you know, Venezuela’s connected, Iran’s connected; North Korea, not so much, Cuba, not so much, but ultimately these whole things will just fall apart and basically look at what’s happening. I mean, Venezuela is falling apart because of the oil prices. Now, granted, it was falling apart before, but it’s falling apart now.
So, as Jim Norman talked about, maybe deflating oil temporarily is the way to just kill the regime and to ruin it. I mean, Hugo Chavez is gone, I guess he was Obama’s friend who gives Obama his books, remember that? I don’t know, maybe that’s over played in the media, in the conservative media. I’m not sure, but the ultimate plan is that the dollar will probably remain the reserve currency of the world for many, many years, if not decades to come, and the dollar will be slowly inflated away unless and the only thing I think that can really stop that ultimate inflation is an incredible, exponential, technological revolution that is evenly distributed to all classes in the United States and really all classes of people around the world and this may happen.
This maybe the thing that saves up from the inflationary pressure that is totally baked in already for the real inflation to happen, the government does not need to continue its poor management and its poor spending for the next 30 years. It’s already baked in, it’s there, and the only thing that can legitimately stop it for the long term is technology. So, we shall see how much impact that technology has. It’s impossible, impossible to estimate. I don’t know the answer, you don’t know the answer, no body knows the answer, but whatever happens, I bet the dollar is still going to be the reserve currency, that’s where I place my bet an apparently a lot of other people think so too, because it’s the most crowded trade in the world.
Okay, what else, gosh. Let’s just review a couple of these commandments for just a moment. I want to go back to that. So, before I go today, let’s just talk about these other commandments, because I’ve been thinking about them a lot lately here. I gave the speech to my mastermind group yesterday and talked about just a couple of them. You know, we talk about commandment number three, let’s review number five. Well, actually, number four for a moment – Thou Shalt Use Prudent Financial Planning Techniques. You know, I haven’t talked about these in a long time, maybe, did we do a flashback Friday episode recently on the ten commandments? I don’t think so. I think someone asked for it, but we didn’t get to that one yet. So, that’ll come up, we’ll get to it soon.
I mean, look, this ten commandment stuff. I wrote this ten years ago. This is ten year old stuff and it’s amazing how it’s written in a way the constitution was meant to be written with something called abstract flexibility so that it could apply 200 years later or 235 years later or whatever the exact number is our country is. It’s got applicability in all market cycles and so number four Thou Shalt Use Prudent Financial Planning Techniques. So, in commandment number three I talk about the evils of Wall Street. I talk about how Wall Street is the modern version of organized crime, but in number four, I talk about something that Wall Street brings to us that is actually valid and good and that is financial planning, the concept of financial planning.
So, rather than the financial planning be diversify, have that pretty little pie chart of modern portfolio theory and by the way, two little notes on diversification. Generally speaking, diversification perpetuates wealth that someone already has and concentration or focus, not being diversified, betting the farm, if you will; that is what creates wealth. So, diversification is largely considered to be a prudent conservative strategy and concentration is largely considered to be a risky strategy, but I remember you of Dale Carnegie quote and I think it’s a very good one and I remember when I read How To Win Friends and Influence People.
I think I was 17 years old when I read that book. My mom gave it to me and it’s classic, obviously. It’s a great book. They probably need to update one and write it for the modern world, because no body has that much time to win friends and influence people anymore and to be that courteous. It’s just not the way the world works now. There’s still some very, very good principles obviously and that’s a perennial best selling book. So, Dale Carnegie said, “Put all your eggs in one basket and watch that basket.” Put all your eggs in one basket and watch that basket. Well, I submit to you that you can do both.
You can have the best of both worlds when it comes to income property, because with income property, all real estate is local, so you can diversify geographically yet have all your eggs or most of them in the asset class. So, you can own in Memphis, Atlanta, Indianapolis, and you can be diversified into three good markets and it doesn’t have to be those three. Could be three different markets. Could be Little Rock and Dallas, doesn’t matter, whatever markets, but you can diversify geographically in the most historical proven asset class, so that’s something to think about, but when it comes to financial planning, we all need to consider our investment goals. Are they appreciation? Are they income? Are they tax benefits? What is the investment goal? What is the time frame for that goal or the time horizon and then what is your risk tolerance as an investor?
So, we have lots of investors come to our firm and they will say that they’re not sure what they are. They are not sure what their risk tolerance is. So, we never put people into highly risky markets like California, New York, Miami. Those are too crazy, too risky, but what we do is we put them into, we take this sort of middle ground and within that middle ground there are some markets and some properties that are likely, we think at least and we could be wrong, but we think from vast experience in doing this and doing business in 48 cities nation wide and doing this for more years than I want to even admit; doing this for so long, there are some markets that we think will have better capital appreciation potential and other markets that we know right now today have better cash flow potential and so we’ll take the more risk tolerant investor and we will help them design a portfolio of properties that is in this more capital appreciation market where if we have a bump in the market where we have loose money supply and inflation, they are really going to benefit.
If they’re really conservative, we will put them all in the cash flow oriented markets. If they’re some where in the middle of that scale, we’ll put them into a blend and we also take into account, what I didn’t mention here as part of financial planning, but it should be apart of it, is the psychology of investing and the personality of the investor. So, probably most of you or maybe even all of you listening have studied the Myers Briggs temperament sorter or the DISC profile or the Kolbe and I think that’s K-O-L-B-E. A lot of people in my mastermind group talk about the Kolbe, I don’t know what it’s called, but it’s called personality assessment test or really character assessment. So, you’ve taken one of these tests or maybe you just read about your horoscope. Something there is probably pretty accurate, right. It’s interesting.
So, are you the investor who likes to roll up your sleeves and doesn’t mind getting your hands dirty and wants to do a little bit of this themselves. Now, when I say that, I don’t mean swinging a hammer and fixing up a house, because our clients never do that stuff. I mean, all our clients are professionals, they’re entrepreneurs, they’re too busy with their own stuff or they’re retired or they just want to build a big investment portfolio and have a bunch of income properties.
So, it’s not doing it yourself in that term, but it’s doing it yourself being maybe more engaged in the process. More emails, more phone calls, more decisions, or is the personality of that investor the other way? Where they don’t want to deal with anything. They just want the done for you program and so we will, we will try and pick and you may not even know we’re doing this, but we are, okay, we’re going to try and assess your personality type as the client and guide you to the markets that we think you will be best suited in and it doesn’t always go right, because there can always be an outlier property or outlier situation even in the market that is the easy market with the really good easy provider and maybe that provider is super great and they make the job of investing easy and, by the way, one of the speakers today in my mastermind group, he said, “There is no such thing as passive income.” I cheered. I couldn’t agree more. It doesn’t exist. It doesn’t even exist in the bank. It does not exist. A truly passive investment is a unicorn. It doesn’t exist, okay, but you can get pretty close with income property. It’s the most passive great investment out there and you can be as engaged or as unengaged as you want to be and if you want to be really unengaged that means you gotta have people do it for you, okay.
So, we’re going to assess the personality of that investor and try be a match maker and match them with the right local market specialties and the right market at the same time. Doing both of those things. Commandment number five, Thou Shalt Not Gamble. The property must make sense the day you buy it or you don’t buy it. Period. Thou Shalt Not Gamble. If you’re the kind of person listening who is looking to throw the dice and to gamble on big appreciation and have, you know, massive negative cash flow today, then you go buy in Orange County California where I used to live and good luck to you. That’s just not our thing, we just don’t do it. It’s just our thing. So, we really focus on the conservative cash flow oriented investor, but there is a spectrum within that, just like I was saying with the financial planning.
Number six, Thou Shalt Diversify and we talked about that. All your eggs in one basket, watch that basket, diversify geographically, all real estate is local, and when you look around the country up until this last downturn, the historic great recession, the worst economy in 7 decades, do you know there was never actually a national down turn in housing prices since the great depression 7 decades earlier? That’s pretty amazing. There were lots of little down turns, but there was never a national one, at least from the stats I have. Pretty amazing investment, isn’t it? That you could actually say that.
Number seven, Thou Shalt Be Area Agnostic. Don’t get attached to anyone area, be willing to shift, and just enclosing here, because I do have to go and I got to tape to the editor, I want to just review the lucky 13. The lucky 13 fundamentals of investing and how these all play into market selection, property selection, and as a bonus, provider or local market specialist selection, okay. Cost of living, transportation, employment, and job growth, education, regulatory climate, and that means growth, rent control, taxes, etc, and what I mean by that one, we’re just going to take a moment on that, landlord friendly markets. We look for landlord friendly markets and if it’s not a very landlord friendly market, then there’s gotta be something big to offset that landlord unfriendliness.
So, for example, Illinois, we just started doing business several months ago in the Chicago land area. That’s not very landlord friendly, you compare that to Little Rock, Arkansas and you’re going to have a much friendly landlord climate in Little Rock, Arkansas, because Arkansas is the most landlord friendly state in the union by none. I mean, it’s far and away the most landlord friendly state. There’s got to be an offsetting factor, so what is it in the Chicago land area? Well, I’d say it’d be an appreciation potential and very, very good rent to value ratios. So, you got to weigh all of these things in the equation.
Alright, number six, weather, crime, culture and arts, health and health care, fun and recreation, overall quality of life, population density, and real estate market trends and part of the real estate market trends issue and the growth issue, which we kind of touched on in two ways, number three and number 13 is something called the path of progress. Progress is largely consider to be growth and population, which there’s an argument as to whether that’s actually progress, okay, but let’s just use this standard definition.
You know, growth in the economy, growth consumption, growth in population, none of this stuff is usually very good for the environment, at least in the short term, but the environmentalists don’t realize is that those people become resources and they solve the problems they create, that’s a good thing. They basically recycle in this sense there, because they solve problems they create in many ways, so it’s not that old Malthusian idea of, you know, we’re going to run out of resources and pollute the world to death, because people are a resource, okay, and that’s where most of the innovation comes from. I mean, people can think of amazing things and create amazing solutions and you know they always do it for profit, for their own personal gain, and it just shows you the incredible power of capitalism.
So, the path of progress. This is why areas that are really, really, really deeply blighted just aren’t really on our radar screen and many of people have asked and I always make jokes and tease about Detroit, for example, right. Well, you know, there are some signs of life in Detroit. There are some green shoots. I mean, I’m going to be there soon, so I’m going to check it out of course every where I go, I’m looking at stuff. I’ll let you know, so far I’m unconvinced, but all of my theories for them to work, you’ve got to have stable or increasing population. That’s what I really submit to you. When you have a declining population, you know, this stuff is, it all comes up for grabs. It all comes up for question, okay.
Well, that’s it for today. Go to JasonHartman.com. We’ve got some phenomenal properties up there in the property section at JasonHartman.com. Take advantage of those last few Meet the Masters home study courses. They’re almost gone as I’ve said, they’re deeply discounted, it’s a physical product. I will ship it out to you and you can have that in just a short time here. So, order those last of the Meet the Masters home study courses and JasonHartman.com in the store section and I will look forward to talking to you on the next episode. We’ve got flashback Friday coming up on Friday and then on Monday we’ll be with a regular episode. So, happy investing and thanks for listening.
