Jason Hartman discusses the benefits of real estate in our everyday lives. He looks at down payments on residential properties and explains what causes upward pressure on rents. Later, he plays a clip from a housing market webinar. With around 400 different markets nationwide, he delineates between 3 specific types of markets. He ends with a discussion on the impact of technology on inflation.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome to Episode 966 966. This is your host, Jason Hartman. Thank you so much for joining me today. As I speak to you today, I just landed in beautiful San Diego, California. And I am in my hotel room here at the Marriott Marquis and looking out at this gorgeous harbor on a beautiful sunny day, you know, for all the times that I bagged on California and I complain about the high taxes in my home state and the high regulation and all of the problems that this misguided mismanaged state has. I gotta tell you, it is gorgeous. There’s especially on a beautiful day like it is today. So beautiful, beautiful view, beautiful day. Can’t wait to get outside, but I thought I would talk with you for just a moment. Today we’re going to talk about some fundamental things, some fundamentals I recorded a webinar recently about our San Jose event coming up this weekend. hope you’ll join me in Silicon Valley March 3. Jason Hartman University comm Jason Hartman University comm We look forward to seeing you there. gonna be an awesome, awesome event. And by the way, we have upgraded the portfolio builder exercise. We do this event once a year. And, you know, maybe there might be a time someday we’ll do it twice in one year. But so far, it’s just once a year, we have upgraded that game. And so I can’t wait to play the new version of the portfolio builder game at our Jay Chou event this weekend on Saturday, March 3, so join us for that. But hey, Warren Buffett is in the news again. He’s always in the news. What’s new about that? Jason, no big deal. Well, it is. He says he has 116 billion dollars to invest. And everything’s too expensive, nothing to buy. Well, Warren, don’t let that money burn a hole in your pocket. Because you know, that usually leads to bad things. The problem he has is a problem of scale. Now, many times I’ve talked to you about this over the years, and it’s counterintuitive. It’s really Really counterintuitive. The idea that we’re all in our lives we’re used to the concept of a volume discount. A bulk purchase price you know, when you buy more, the thing is usually less expensive. For example, at meet the Masters we ordered these swanky swag bags that arrive late. Yes, they arrived the day after meet the masters. So now we are arguing with the vendor about those. But I remember when we ordered those, of course like whenever we order anything in bulk, if we order 300 bags, it’s one price if we order 500 it’s another price. There always seems to be kind of a sweet spot in this stuff with a bulk prices. So the concept we’re used to that we’re used to thinking of is that when we buy more we get a better deal. But with big real estate deals, many many times the exact opposite is true. You have So many big institutional investors spending other people’s money, okay? That they crowd out the deals, the deals are crowded out. And so actually, oddly and counter intuitively, the larger deals except lower return on investment, lower cap rates. The deals aren’t as good many times as the deals you’re getting. The better deals are the deals the small investor is buying. I know it’s counterintuitive. You think, hey, if I had 100 million dollars, and I could buy a big giant apartment complex, with mixed use retail and a little office building on the site, for 100 million bucks, I would get a much better return on investment than I get on a $100,000 single family home in Indianapolis, Memphis, Atlanta, Jackson, Mississippi, Jacksonville, Florida. Whatever right? Huh, Little Rock, Arkansas. Not true at all. The problem is you have this problem of scale. Now, admittedly to Warren Buffett is experiencing the same thing. Many people in the stock market and in the cyclical real estate markets, and even in the hybrid markets are experiencing the everything bubble, the everything bubble. So, asset prices have been massively massively inflated. I do not. I do not. I do not. In fact, I know it’s not true in the boring linear markets that we recommend. But in these other markets, we’re way past point of fundamental value. And that’s where, you know, institutional investors buy trophy properties. So the cap rates are lousy. You know, you want to buy a property here in downtown San Diego in seaport village or, you know, in in the in La Jolla, where I used to live in these primarily Because, I mean, the returns are terrible. They’re terrible. So I guess it’s the old saying serve the masses dine with the classes, serve the masses dine with the classes, right? So if you provide mass appeal products, like basic rental housing, you get to dine with the classes. Because it’s very lucrative, obviously, right? So something all to keep in mind. I just thought that was interesting. Now, I’ve been doing so many interviews for you. We have got just a lot of great episodes coming up. And one of the common threads that it seems like every economist I’ve been interviewing lately, is just talking about higher interest rates, higher interest rates, higher interest rates. What will that mean? As you see this tightening of the economy and contraction of the credit supply? Well, it means severe risk of volatility and bubble markets and price declines. Maybe some small price declines in linear markets. But I don’t know we’re too close to the cost of construction still, you know, the Hartman, risk evaluator, the Hartman, risk evaluator very, very important concept. To understand and mitigate risk when investing. That’s an important factor. You want to invest in these basic linear markets. Oh, interest rates, three dimensions of real estate. Remember the three dimensions of real estate, we are bound to see significant upward pressure on rents. Now, it takes a long time for that to play out. Remember, this is pretty much a two year cycle before you start to see the results play into the rental market. Remember, the rental prices move much more slowly than the sales prices that as always the case. So keep that in mind. Now, one of the things I’m excited about that This weekend that we are engineering right now for GHQ live Jason Hartman University live is in the portfolio builder game, we’re tying it to refi till you die, see my refi till you die concept, we are going to take the portfolio that we build and fast forward seven years and see how we make decisions. This will be a very good exercise. I can’t wait to do it. I can’t wait to see as many of you as possible on Saturday, March third. So Jason Hartman university.com We look forward to seeing you there. Also, if you’re interested in our Ice Hotel trip in Sweden, the incredible Ice Hotel Jason Hartman Ice Hotel calm. We just greenlight of that trip so we’re very excited about it. I booked my airfare airfare is so reasonable to Europe. It’s unbelievable. So if you’re looking for a once in a lifetime bucket list adventure. We’ll see if we can still get in on the Ice Hotel trip. dog sleds are picking us up at the airport. Yes, dogsleds, literally, it’s going to be an incredible adventure sleeping in a nice room. I can’t wait. It’s gonna be really, really cool. Pardon the pun. Okay, let’s get on with Today, we’re gonna talk about some good fundamental stuff. I think you’ll really enjoy this webinar. I think you’ll get a lot out of it. So let’s listen in.
Laurie 9:33
So welcome everyone. This is Laurie grandma. We’re here with Jason Hartman. And we have been putting out a lot of emails for you regarding his arrival March 1, and then the boot camp on the third and we’re very excited to have Jason with us. One of the things that Jason is all about is creating wealth. And I know that lately, a lot of people have been worried about what’s happening in the stock market. Is it kind of the preceptive So what’s going to happen as far as a recession? Should we get out of the stock market and move our money somewhere else? And if so, where? Where do you money? Because we keep hearing over and over that there’s just no inventory. How do you get cash flowing properties when property values are escalating so quickly? So this is a very timely event that we’re hosting with Jason. And so without much further ado, I’m going to turn the microphone over and welcome Jason Hartman. Thank
Jason Hartman 10:28
you, Laurie. And Greetings, everybody. I hope you’re all having a very Happy Wednesday. And I hope everybody can hear me. Okay. Look forward to talking with you today. And I thank you for spending a little time with me. Just shall I start with a little bit of my background? Maybe Lori? Yes, let’s do that. Great. I have been helping investors build nationwide portfolios for 14 years now. And then before that, I was in the traditional real estate business. I had a traditional real estate company in Southern California in Irvine, and I sold that to Coldwell Banker In 2005, many people say my timing was fantastic. And I guess it was before the Great Recession. For about a year back in 2004. I was negotiating the deal with Coldwell Banker to buy my traditional real estate company. And at that time, I started wondering what I would do next, of course, the typical question any business owner that’s cashing out house, you know, what am I going to do with the rest of my life? And also, what am I going to do with my money? And that money was a fairly big check from from the sale. And I had always invested in real estate I got interested in income property. When I was actually 16 years old. I grew up in Los Angeles, California. I was relatively poor growing up and I didn’t like being poor very much. So I always was rather money conscious and wanted to be successful and learn how to invest and so forth. I went to a real estate seminar when I was eight. 10 years old about two years later that my mom told me about. And then I got my real estate license when I was 19 years old in my first year of college, and I was in traditional real estate for several years, bought a company sold it. And now we’re up to 2004. Again, I went around and I started interviewing all of the typical financial services people at Merrill Lynch, Charles Schwab, Ameriprise, all of the usual companies that we all know about TD Ameritrade, etc. They all have the same plan. And none of them seem to really create any real wealth for themselves with their own plan. And I thought, why am I even talking to these people? I got into real estate because I wanted to be a great investor and I made a lot of money investing in real estate over the years, but having gone through the recession in Southern California in the 90s. I didn’t want to go through another one. By this time, I was older, I was much more conservative. And you know, we all realize at a certain point in our life, that It’s it really takes a lot of effort to earn your money again, you don’t want to lose it. And so being more conservative, I decided, you know, I should do what all the financial planners recommend, diversify. Take the most historically proven asset class, but diversify geographically, because there’s an old saying in real estate that all real estate is local, all real estate is local. And that’s very true. In a country as large and diverse as the United States. There are really 400 local real estate markets. You know, we all hear these talking heads on on television, and we read articles in the mainstream media about the quote unquote, real estate market or the housing market. What is housing doing? What is real estate doing? Well, the answer to that question is almost impossible. Are they talking about Miami, Los Angeles, Seattle, New York, or Memphis or Indianapolis or Chicago or little rock or Atlanta, you You know, where is the housing market in the United States? It’s a giant country. It’s a very diverse country. And so there are really about 400 local markets. So back in 2004, as I was questioning what I’m going to do for my next career, and also what am I going to do with the check of the proceeds from the sale of my real estate company to Coldwell Banker, I started researching different markets around the country. And I got very interested in being a macro investor and investing nationwide, I knew that there was a huge correction coming to Southern California. And I’ll just explain that a little bit. The great recession was not really one thing. It was two things. The first part of the great recession was caused by the mortgage meltdown. And I knew that was coming. I predicted it. I spoke about it very publicly. I was doing seminars and I was I was on the radio. I was talking about this. I was having arguments with realtors all the time. And they were starting to hate me, as I was, you know, being the doom and gloom are saying the market is going to crash. So I knew that would happen. And the reason I knew that would happen is because it was I mean, in hindsight, everybody probably thinks they knew this too. But at the time, it’s kind of hard to tell. You know, I knew the mortgage lending was way too liberal. That was pretty obvious, right? People were getting loans from countrywide and all the rest of the lenders, one day out of bankruptcy, fog, a mirror, have a pulse, get alone, you know, get a loan for much more house than you can ever afford. That was pretty obvious that that was a disaster waiting to happen. And then also, a lot of people right after 911 in the.com bubble in the early 2000s. They took out 231 arms or adjustable rate mortgages that adjust in three years, or fixed for three at a low teaser rate, and then adjust in three years. or five one arms that do the same thing, but in five years rather than three. And you knew you could tell when the big pieces of all those mortgage originations would come through the pipeline, and when they would hit. And, boy, by the end of 2005, there was a giant bunch of those adjustments happening. And so people got what we call payment shock. They had artificially low payments on their mortgages for three year or five years. And then they were going to start to face a real payment after that. So that was obvious. I mean, you know, anybody thinking back then should have seen it coming. I did. I predicted it. I talked about it a lot. I got a lot of hate. But I was right. The part that I did not know about though, was part two that caused the Great Recession. And that was the Wall Street component. I had no idea this was happening. And so it was much deeper and much worse than probably any have us knew if any of you read the book or saw the movie, The Big Short by Michael Lewis, that tells the story of what was going on behind the scenes at the highest levels of our financial system, both on Wall Street and really globally. And how these mortgages, there was all this fraud and, and the same mortgage loan was being sold into pools of mortgages 33 times, and the loan literally wasn’t there. The investors buying that asset, were buying nothing at all. It was the equivalent of swamp land in Florida as the saying goes, right. So that was the second part of the financial crisis. And that’s what really made it much, much worse than just the mortgage meltdown component, which was part one. So I realized back in 2004 2005, that when you talk about real estate markets, number one, there are about 400 markets in the United States, and of course, many more worldwide. I had traveled extensively. I’ve now been to 81 countries, some of those countries I’ve been to several times. And I was born in Europe. So I like to think that I have sort of a big broad macro view of these things. But it’s really quite simple. When you look at real estate markets around the world, not even just around the US. They all can be boiled down into three basic types of markets, linear markets, cyclical markets, and hybrid markets. If you’re in San Jose, or you’re in Silicon Valley or anywhere in California, or anywhere on the west coast, if you you know, if you’re in Portland or Seattle, or anywhere in California, my former home state for most of my life, you are in a cyclical market. Now, the deceiving part of trying to figure out real estate markets is that the markets that are newsworthy that get covered in the media Are all cyclical markets. They’re all of the markets on the west coast in South Florida, and the expensive markets in the northeast New York, Washington, Boston, etc, right? These are all cyclical markets. And as the name would imply, if you look at a graph, it looks like a rollercoaster ride, you know, you have these glorious highs and these really ugly lows, and then it goes up and goes through the cycle again over time. The linear markets, by contrast, are the markets that just sort of chug along. They’ll have minor ups and downs, but they’re not hugely significant. They’re very palatable. And the hybrid markets are in between the two. So needless to say, as I’m older and more conservative, I like linear markets. I like markets where properties make sense the day you buy them, and one of the sayings I always use is that Property must make sense the day you buy it or you don’t buy it. Now, a lot of people, including myself, have made a lot of money in cyclical markets. cyclical markets are like the old myth about the siren song, right? The siren song, these sailors would be sailing and, and they would hear the beautiful voices of these beautiful females, right? And they would have to tie themselves to the mast of the ship. So they wouldn’t sail the ship into the rocks, right? And so it’s very seductive, right? The cyclical markets are very seductive, quick money, instant gratification, but I have never met anybody who can reliably predict appreciation and depreciation cycles. A lot of gurus will be right one or maybe two cycles, but then they will eventually fall on their sword. It happens to all of them. Some are better than others. But the end of the day, it’s pretty hard to predict. If you don’t believe me about this, by the way, and you want to put a lot of stock in predicting cyclical markets, ask yourself, why can’t the people with the most information, predict and control the cycles in the real estate markets? And in the economy in general? Well, those would be the people that run the government and the central banks of the world. I mean, why can’t every Federal Reserve Chair know what the markets gonna do? So they can stop the ugly swings, right? They can’t, they don’t know. And they have a lot more information than any of us have. So that’s kind of a little background, and I hope it helps as we kind of dive into some stuff. And Laurie, please interrupt me anytime with your questions or questions from the viewers as well. Okay, and I hope you can all see my screen. Okay. So I’m just going to move forward here a little bit. I may say some things that lead you to believe that I am a doom and gloom and i’m not i do think we have some very scary things going on. In the economy, and with fiscal and monetary policy, but overall, I think it’s an amazing time to be alive. I really do. We’ve just got to adjust our strategy for these various dangers that we see in the marketplace. You know, one of them, obviously, is this Keynesian type economic philosophy that is very attractive to the government. It’s very attractive to the central bankers, the Federal Reserve. I used to joke about Bernanke, when he was Federal Reserve Chair and say, you know, we can’t be out of money, we still have more paper left, right. So this is the ridiculous philosophy of the people that run the global economy. Their answer to everything is basically print more money, right? That’s all was the answer. So what I say is, instead of trying to argue about the philosophical nature of how wrong this is, right, instead of doing that, we just need to align our strategy with the most powerful forces the human race has ever known. What are the most powerful forces the human race has ever known? They are governments and central banks. And governments and central banks have a common goal. The first common goal they have is to stay in power. Okay, and not have people get too upset about everything in the world and in the economy and what they’re doing right. And so behind that stay in power goal always comes down to a result that leads to inflation in the economy. Okay. Now, there will be short term times and we’ve had that recently where there’s been very little inflation. But overall, I say the long term trend is always always inflation. Certainly, historically, that’s been absolutely true. And I think it will be true More and more so in the future. So my investment strategy is very much aligned with these goals of governments and central banks. Laurie, did you have a question?
Laurie 24:10
Yeah, I was just gonna say do you see inflation happening right now? I mean with the looks like the Saudis have stopped playing Russian roulette with Iran and gas prices are starting to go up. And it seems like it’s trickling food prices starting to go up. So I mean, what are you seeing with that?
Jason Hartman 24:26
certainly see some evidence of it. It’s not hugely significant, at least not yet. But I do think that’s where it’s going. And there may be bouts of deflation or what’s called disinflation, which is arguably what we’ve had for the last few years. And when you talk about inflation and deflation, and, you know, try to predict the future of which way it’s going to go, it sort of comes back to my it’s an amazing time to be alive, quote, right? Because there are two very powerful forces in the world. And these powerful forces and I’m not going to say governments and central banks, this is another concept, or basically a war, okay, for which way the future will go? Okay. One force is the one we’ve talked about. It’s the governments and the central banks. And they’re, I think most people would agree they’re completely ridiculous, terrible, awful fiscal and monetary policy. Yeah, there’ll be a few people that will say, hey, they’re doing a great job managing the economy. I say they’re not, but whatever. So there’s that force over there, right? But then the other force on the positive side, and hey, you’re in Silicon Valley. So a lot of your, you know, we have a lot of clients that work for all the big tech companies in Silicon Valley. And of course, technology is incredible. I mean, it is really an incredible thing. I think of any time in history, we are probably living through right now and witnessing this inflection point in technology where it is just Changing the world so quickly. And in technology is a deflationary force. Okay, so the question is who wins the war? Is it money printing spending, buying votes by giving out goodies to people? And that’s what politicians like to do. Or is it technology now that that’s inflationary over here with a political and banking system type concept. But over here is technology which is deflationary and makes lives better. And it’s really hard to figure out and you know, here’s why it’s hard to figure out Yeah. Okay, so your iPhone is an incredible device, right? It does amazing things and even at $1,000 it’s still cheap. Look at the first cell phone I had weighed 14 pounds and it costs 30 $200. Okay, so is this one better or is that mobilia 14 pound 30 $200 cell phone better. Obviously, the One is better for thousand dollars, right? And so certainly many things like that are better and cheaper, no question about it. But, you know, a typical family with a single income in the late 60s or early 70s could buy a beautiful home in where I used to live in Newport Beach, California, okay. And they could buy that home for somewhere around $40,000. Now, of course, you have to adjust that for inflation. But don’t even worry about adjusting it for inflation. They could just buy it with one income and not struggle. Okay. And that home was on a quarter acre lot. And it was very low density and it was in a very nice neighborhood. Okay, today, even though the square footage of the average home has increased, the density has also massively increased. So yeah, you may live in a condo Where you’ve got neighbors everywhere. And it may have more square footage than your typical baby boomer home, right in the old days, but it doesn’t have as much land. And it’s probably not as in as nice an area either. So, these things are complicated. It’s really hard to figure out if the standard of living is increasing or decreasing. In some ways, it’s doing one thing and in some ways, it’s doing another it’s, it’s complicated. So, so that’s one of the things now we have got a huge generation of people, the millennial generation, otherwise known as Generation Y. Okay, now I’m a Gen Xer. And then before me came the baby boomers, and now Gen Y or millennial generation, right? The millennial generation is much talked about. They are the biggest demographic cohort in American history the baby boomers had about depending on who you talk to about seven 6 million people. Generation wire the millennial generation has 80 million. Okay, now my generation Gen X, very small about 46 million people. So very small little generation in between the two. And these young people have a few things in common. They have even though the economy is booming and that’s kind of arguable. Okay, there’s still a lot of underemployment. Okay, even though the unemployment rate is low in the situation where now there’s still a lot of underemployment, okay. And the things they have in common. They have huge student loan debt. We’ve all heard about this. It’s about 1.2 trillion with a T trillion dollars. So this is a whole generation that basically has an anemic job market of underemployment, okay. Where Yes, they may be employed, but working at Starbucks is not what you You’re supposed to be doing with a college degree. Okay. And they have a lot of college degrees and liberal arts majors that are, frankly kind of useless. Okay, there. There’s just not many people hiring for a lot of these majors that these kids have have majored in and they’ve got a mortgage. They’ve got a mortgage payment, but they didn’t get a house with it. And that’s their student loan. Okay, they got it, they got the mortgage, they just didn’t get the house included. Right. And so that’s the student loan they have. So this generation will be full of renters. The demographics coming at the rental housing market over the next 10 years are nothing short of phenomenal. Laurie, literally when when I say that I am getting goosebumps, okay on my arms, because they are astounding. Literally, I would argue never in history. Has there been a better rental market for landlords than the one we’re in now. And Continuing to come at us over the next decade. It is nothing short of phenomenal. Okay? So that’s another reason to be a long term buy and hold investor. Now there are many real estate people out there teaching different strategies. I have done most everything in the real estate world. I’ve owned lots of single family homes. I’ve had hundreds of tenants over the years, currently own several single family homes, one large apartment complex hundred and 39 units, a small apartment complex and a mobile home park. Okay. That’s what I have. I love housing. And I’ve done my share of flipping properties throughout the years. But I do not like flipping number one, it’s a heck of a lot of work. It’s very risky. And I’ve definitely noticed over my many years in the business, that the people who flip properties, they have spending money, but the people who buy and hold, they have real wealth, and I think anybody listening would rather have real wealth and spending money, I’m just gonna share a couple of my philosophies and strategies here. Just dive into it and feel free to interrupt me anytime. So back in 2004, I thought, you know, I’ve got to develop a sort of philosophy of investing that number one, I can wrap my head around something I want to follow, and practice what I preach. And something that’s easy for other people to wrap their head around and really remember and use as guiding principles. So I came up with something I call the 10 commandments of successful investing. And I’ll just share a couple of those with us here in the interest of time, and I’ll share more when I come up and speak there as well. And then on the Saturday event, also, one of them that seems to really resonate with people, Laurie, is commandment number three, thou shalt maintain control, thou shalt maintain control. And there’s a little funny video I’m not sure it’ll play on the webinar, so I might skip it. Basically, here’s the idea behind that. Look at you can invest in stocks, bonds, mutual funds, real estate syndications, all sorts of pooled money asset classes. But I say that when you do that you leave yourself susceptible to three major problems. Number one problem you might be investing with a crook. Okay? That’s obvious, right? You know, we all know about the scams on Wall Street, whether it’d be Bernie Madoff or Enron or WorldCom, or all the rest, right? There are so many of them. It’s ridiculous. So you might be investing with a crook. Okay? That’s the first problem. Number two problem, you might be investing with an idiot. And you can lose your money either way. I mean, if they’re crooked, they’ll steal your money. If they’re incompetent, they’ll just lose your money because of their stupidity. Right? Neither of those are too good. But assuming you pass those two hurdles, assuming they’re honest and competent. The third problem is they take A huge management fee off the top for managing the deal, right. And so we believe that people should be direct investors, income property. direct investment in income property is literally the most historically proven asset class in the entire world, the most historically proven asset class in the entire world. But you’ve got to be a direct investor. So you don’t leave yourself susceptible to these three major problems. Okay? commandment number eight, just skipping around here a little bit. Thou shalt borrow to maximize leverage, accelerate wealth creation and reduce risk. And so I’m sure everyone in your club understands the power of leverage. It’s a very, very powerful thing. And so, the basic idea, of course, that most people have come to understand is, hey, look, if you invest 20%, and you’ve got the bank that will put up 80% And then you outsource the debt to the tenant, right? That’s a pretty great deal. Because as the property appreciates over time, you basically get a multiplier effect, because you’ve only got 20% in the deal, and the banks got 80% in the deal. So you basically multiply your return times five, right? That’s an awesome deal. Right? The power of leverage. We all understand that. But very few people understand a concept I teach, that I call inflation induced debt destruction, inflation and do step destruction. Say that 10 times fast. It is a tongue twister, no question a rubber buggy baby bumpers, you know, say my right. But inflation induced at destruction is really the hidden wealth creator that has made 10s of millions, if not more, 10s of millions of people very, very wealthy, and many of them became very wealthy because of Inflation induced debt destruction. And they still don’t even know how they made all that money from their investment. Right. It’s pretty awesome. And I’ll go into that today, time permitting. This is a study I saw on the wall street journal about appreciation that was pretty interesting. This is a 1996 article about different asset classes and their performance from 1926 to 1992, the longest study I could find, and here’s what I want to show you. I’m just going to go to the next page here. I’ll just go through this quick because the next page shows it bigger. Look at the comparison here. They showed over this very long survey that small cap stocks did 12 and a half percent over that long timeframe. Real Estate 11% which is pretty darn good. Okay. Now, I assume they’re talking about commercial and residential real estate and obviously, there was a lot of inflation in the 70s etc. Okay. The Dow Jones Industrial Average 10% bonds 5.2 Treasury 3.7 and inflation 3.1% was the return on all these asset classes, but with the real estate if it’s income property, and if you leverage it with 20%, down, and 80% of the bank’s money, you multiply that return from 11 to 55%. Now, if that appreciation rate is only 6%, it’s the same multiplier, it doesn’t matter if it’s 2% doesn’t matter, right? The multiplier is there. And obviously, in the cyclical markets, that are the high flying markets that get all the coverage, obviously, that’s the bay area where you are San Jose, Silicon Valley, very cyclical, high flying market, for sure. Very overvalued market, I would say, if you hit the cycle, right, and you have leverage, I mean, you can just it’s a homerun, you can make a fortune. But the problem is, it’s hard to predict the cycle. And if you’re wrong, you have to buy a property that will never make sense from day One, because none of the properties come anywhere close regardless of the economic cycle, even at the bottom of the cycle, you can’t make them cash flow. So they’re not sustainable investments. And if you predict wrong, you’re going to end up losing a bunch of money or just giving the property back. Okay? So that’s the thing, the power of leverage, very, very powerful. And here’s just another example from one of Robert Kiyosaki books, over 10 years from 92 to 2002. The s&p 500, if you had put 10,000 in, you’d have about 17,000 back at the end of that 10 years, but with a single family home, basically, putting 10% down on that property, you’d have $156,000 or so sell the property, pay off the loan, pay the closing cost, your return on investment roughly is about 800% over the s&p, okay, and this is Why we all know so many people, maybe ourselves that became very, very rich, investing in income property. It’s the most historically proven asset class in the entire world. This will be continued on the next episode. Thank you for listening and happy investing. Hey, I hope you’ll join me in San Jose on March 3, as we host our Jason Hartman University event. Now, this event is for the real practical, hands on interactive education on income property investing, where you will learn how to actually do the math, how to evaluate the deals, we will go in depth into this subject of how to analyze a real estate deal. And once we do that, we’ll talk about how to build a portfolio, how to properly structure a portfolio, how to diversify it, how to sequence your mortgage financing, and it is a fun event. We do some gamification You’ll meet a lot of people because you’ll be working with the people in the class. And it’s a one day event. You can check it out at Jason Hartman University comm Jason Hartman University comm we’ve been doing this event for about three or four years, and people absolutely love it. We’ve done it in San Diego and Salt Lake City. Now we’re doing it in San Jose. We’ve done it other places as well. I just can’t remember where offhand but it’s a great event, and we try to do it about once a year. I asked her we did it in Oklahoma City. This time we will be in San Jose Silicon Valley on March 3. Jason Hartman university.com Jason Hartman university.com Get your tickets today, and we’ll look forward to seeing you in Silicon Valley on March 3. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes, be sure to check out the show’s specific website. And our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.