To start the episode, Jason Hartman shares that real estate is doing great despite the economic hardship we’re facing. He also talks a bit about the pricing shift in building supplies and cryptocurrencies. Afterward, Jason plays an interview recorded several years ago where he’s the interviewee. He shares how he got started in real estate and also his ten commandments of investing. Jason and Mike talk about being ‘area agnostic’ and diversifying your investment portfolio into several markets.
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 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1627. We’ve got a big time coming up. Have you made your New Year’s resolutions? Are you ready for a big year? It is absolutely amazing that we are in times of economic hardship. Supposedly, we are in a recession, supposedly, yet. The real estate market is absolutely booming. Wall Street Journal article today. I talked about it on our live stream this morning. And it’s entitled housing boom brings a shortage of land to build new homes. builders are looking to expand to meet surging demand, but are constrained by the number of lots ready for construction. And according to the the new home lot supply index, okay. And this is from Zonda that was developed by my good friend, Jeff Meyers, who was actually a client of mine starting Guess how long ago 31 years ago, he was my client, I sold five of his properties in Orange County, California. And Jeff was on the show. He owns software called Zonda, and also Myers research. It’s been just amazing to see him grow, he became a really good friend. And we did lots of stuff together, went on lots of trips together, and now he’s a bigwig, he owns this giant real estate market research firm, possibly the biggest in the country? Probably, I can’t say for sure. But I know it’s really big. They’ve got like 900 employees, I think. So amazing stuff. He’s done. Amazing, amazing stuff. Anyway, the new home lot supply index, according to his company, was at 100, in 2015. And now it has steadily, well, you know, with a minor bump up in 2017, it has been declining, declining, declining, little bump up in 2019 into like the 70 range, but always much lower than 100 supply of lots, buildable lots has been declining. And now it is at the lowest point in five years. Okay, right now, the new home lat supply index sits at approximately, you know, I’m reading it off a chart. So I’ve got to sort of interpret the chart, I’m going to say that is that number is 62 versus 105 years ago, and verses 770. That’s got to be 70. Right on the nose just a year and a half ago. So supply, declining, constrained massively, single family home starts. And you know how you look at these charts and these graphs, and they’ve got the recessionary times in gray. And it’s so interesting to see this. Here’s why. Because the two charts that I am trying to express to you orally Are you know, I’m looking at them visually, right, so you’ve got the chart, you’ve got time on the bottom axis, and the value on the on the vertical. And you’ve got the gray areas for recession times. And we’re in a thick gray area right now, right now, as I record this, but both charts show absolute, huge, very significant improvement, if you will, meaning that the lot supply is lower, meaning that there’s huge demand for lots. So that would be considered improvement during recessionary times.
Mostly, you would see this go the opposite way. Let me tell you about the next chart I’m looking at and this one is from the Commerce Department, seasonally adjusted annual rate, commerce department chart and this is single family housing starts. Okay. So we go back to 2015. You know, we see the index kind of go up and down. But, you know, overall it’s within a band where these housing starts are going up, up, up, up, up. And then now this chart doesn’t have the years at the bottom. So I have been interpret that I’m going to say that’s about middle of 2018. You see a little bit of decline, but then it bumps right back up, then you see a little bit of a decline and then it bumps right back up even higher. And then you see the time the lockdown hit, which would have been a great time to be buying up lots. Because, you know, he would have really scored and then the housing starts during, I’m gonna say that’s the second quarter of this year just skyrocket, they just skyrocket to the highest point on the chart by a longshot. The article Wall Street Journal article says the scarcity of developed land means that builders could be unable to meet booming demand. It also means that builders would be able to keep raising home prices, analysts say new home sales rose 19.1% by volume in the first 11 months of 2020 compared with the same period last year, so that’s essentially a 20% increase over last year in terms of sales volume. Builders rush to buy land underscores their confidence in the markets continued strength, a measure of us homebuilder confidence rose in November, to a high going back. So November last month, in other words, was the high in builder confidence going back to get this 1985 35 year high? Wow. And that’s according to the National Association of homebuilders index that tracks the availability of finished lots fell by 9% in the third quarter, from a year earlier to a low going back to 2015. That’s the Zonda chart I just shared with you I’m reading the narrative now. Prices for finished plots Rose 11% in the third quarter, from a year earlier. So your builder Okay, if you go for example, to Jason hartman.com, slash sweet home and or Jason hartman.com slash Charlotte. By the way, I should tell you something about Charlotte, our builder there was building steel framed homes, but had to convert back to lumber because steel prices went way up now. I mean, this is how, how crazy things are. They originally went to steel, because lumber prices were too high. And lumber prices are still way up. By the way, I have an interesting article from our client, Bruce, who’s in the lumber business. You heard him on the show recently talking about that. And he sent me another newsletter, Bruce, thank you for that. appreciate you sharing that. And I will share that with you on a future episode. But lumber prices are skyrocketing. Steel prices are too high. Lot prices are too high builders are having to pay 11% more for those finished lots from just a year ago.
So I mean, if you buy any of the properties through our network, which by the way, are an extremely short supply, you’ll see that you are getting very solid buying opportunities, very solid deals, because these builders their cost is going up. And part of the reason you’re benefiting from that I’m going to go out on a little bit of a limb here and speculate because I I don’t know their business in that much detail. I can’t say that this lot versus the walk down the street or the lot next door what they paid. But I will just speculate for a moment, that the reason the deals are so good for you that you’ll see on the webinars that Jason hartman.com slash Charlotte or Jason hartman.com slash sweet home for Alabama properties. And you know, we’ve got other inventory. But those are the only two webinars we have that really would be what you’d want to look at now is because they bought those supplies before price increases and they bought those lots for price increases. So you are benefiting from that as the buyer take advantage of it because all indicators point to that not lasting. There really is real scarcity here. This is not you know, this is not fake news. It’s not fake scarcity. We all know what’s going on out there. And it is absolutely amazing. I’ve just never seen it like this. And, folks, I’ve been doing this a very long time. In fact, I would argue that I am the most experienced person in this space, who has seen more market cycles than anybody You know, it’s doing what we do. And there are a few others nowadays, but there didn’t used to be, you know, back in the day when we had no competition. I always look back and think I should have appreciated that for I should have made more out of that time. But I didn’t. And as an investor, I feel the same way. Because I, I kind of think, why did I buy more homes? back then? Why didn’t I buy more homes even last year, or earlier this year? Or in 2015? Or in 2012? Or in 1989? You know, we all have the coulda, shoulda, woulda, right? We have the, we have that. And we have the someday all going for us, don’t we? So that’s just part of human nature. And it’s difficult. Okay, I want to mention a word on cryptocurrencies because, as you know, probably I hosts, I host another podcast called the crypto cast. And I’ve gotten a little more interested recently, I’ve been, you know, not that interested. But I got a little more interested, because I saw some of the institutional players jumping into that market a little bit. And this is very speculative stuff, this does not go with my core philosophy of value investing. This is gambling, folks. Remember, to qualify as an investment. The Jason Hartman definition is to qualify as an investment, the asset has to produce what income to qualify as an investment, it has to produce income. Otherwise, it’s just a speculation or a gamble. But if you have some money, if you’ve got a few bucks, it’s okay to speculate with, you know, 1234 or five, maybe 5% of your portfolio. Not much, just a little bit.
But I want to mention, you may have heard in the news, this story about the Securities and Exchange Commission, suing XRP, which is on the ripple network. Now, this is all cryptocurrency talk, you may not know, you know what I’m talking about. But you may have heard that on the news, and the one of the big exchanges Coinbase, delisted that cryptocurrency from their exchange yesterday, I believe, and it instantly dropped 37% it’s probably dropped much more by now. Because I bet you other exchanges are following suit. And they are D listing it as well. And this is the kind of incredibly risky, regulatory, you know, environment you have with stuff like this. You know, the safe money is on real estate, because number one, it’s an asset everybody needs. It’s an asset that everybody is behind. So many people own it. It’s got a huge lobby, it’s got a huge support network. It’s got the largest trade organization in the world, the National Association of Realtors, plus many others, the NA HB home builders, the Mortgage Bankers Association, there’s just a million trade groups, millions of figure of speech, there aren’t really that many, you get what I’m saying. Make a disclaimer all the time don’t. But I’m careful. There’s so much support for the asset, right? And all you want to do is take advantage of that infrastructure, and all of that support that you have out there. And that’s that’s what makes income property. The most historically proven asset class in the entire world, and the most tax favored asset in America are none. It’s a great thing. Okay, now, today, we’ve got an oldie but a goodie, we’re going to take you back in time to an interview I did. And this was about, I want to say six years ago, maybe five, probably six years ago, maybe five, five or six years ago, something like that. You know, it’s just good to kind of hear what I was saying back then. And this is an interview I did. I was on someone else’s show. And I was being interviewed and you know, you can you can learn some good stuff from this. And one of the great things about income property and real estate is that the rules just don’t change very much stuff that I recorded 1215 years ago. That’s why we do flashback Friday. You can listen to it today. And it all still applies today. Yeah, prices change markets change, you know, we might be interested in this market or that market. You can find those at Jason hartman.com slash properties of course. But that varies, but the principles really do not change they are they are timeless principles.
One more thing before we get to that interview. Be sure many of you have done this, but I have forgotten shame on me. I forgot. I forgot. I forgot to announce I had a senior moment, the last couple of days, I forgot to mention the contest that we’re running, which I just have to tell you, you have fantastic odds of winning this. Non many people enter these little contests that we have once a while, we haven’t done one in about a year and a half. But I thought I would provide a stimulus check to the winners, and two people win 500 bucks apiece, so we’re giving away $1,000 and go to Jason hartman.com, slash contest and enter your odds of winning 500 bucks are very good. They are very good. Trust me, I looked at how many people have entered the contest. It’s not that many, you could easily win to have you will win. So go go and Enter. And Jason hartman.com slash contest and dumon do not miss out on this, ladies and gentlemen, do not miss out on this. Because we will send you 500 bucks cash. And we’re going to do that for two of you, dear listeners and followers. Because we appreciate you listening. You know, the government can’t decide if they should give you $600 or $2,000. Trump is behind the $2,000 number, by the way, he’s really pushing for it. But we’re gonna give you 500 bucks to two winners. So take advantage of that. Don’t miss out Jason hartman.com slash contest. Now let’s go to the interview.
Mike 16:29
Today, I’m joined by my friend Jason Hartman. He’s the CEO of Empowered Investor investor network, the Hartman media company where Jason operates an entire Podcast Network, and several other ventures, I really am not sure how he does it all. But Jason is involved in quite a few things, not the least of which is helping assist investors in acquiring turnkey rental properties nationwide and building long term wealth. Today, we’re going to discuss, buy and hold investing. There’s a lot of opportunities right now to accumulate rental properties all across the country. And Jason’s going to tell us all about it. Hey, Jason, welcome to the show.
Jason Hartman 17:02
Hey, Mike, how you doing?
Mike 17:04
Good, good. I get to have an interview with the interviewer.
Jason Hartman 17:09
Well, I’m not always the interviewer. I’ve been interviewed many, many times, hundreds of them. Actually. It’s funny.
Mike 17:14
I’ll tell you folks, when when when I first we first connected earlier, you said are you interviewing me? Or am I interviewing you?
Jason Hartman 17:21
That is what I said, because I did not know. Yeah, well, hey,
Mike 17:25
I’m glad you’re here.
Jason Hartman 17:26
Well, thanks.
Mike 17:26
I’m glad to be here. Yeah, yeah. So we look forward to learning more about you and sharing some of your knowledge for sure. Before we get started, though, why don’t you take a couple minutes and tell us about your background. It’s an exciting one.
Jason Hartman 17:37
Sure. I got started in real estate at the ripe old age of 19. I was actually in my first year of college and got my real estate license two weeks before my 20th birthday, I became interested in in the real estate business, because when I was 16 years old, so just backtracking a little bit here. I saw an infomercial and grew up without many resources at all. We were fairly poor growing up, and I didn’t like that too much. And so I went out and got the Guru’s book, read three chapters, put it down. My mom picked up the book, though, and read the whole thing started going to all these real estate seminars. And then, when I was in 12th grade, I was getting ready to graduate from high school and she says, you know, Jason, you got me interested in this real estate stuff. There’s a big seminar in Anaheim this weekend, Anaheim, California by Disneyland. Yeah. Why don’t you go. And so I rounded up nine of my friends from high school, got him to go to the seminar with me, because at that age, you never want to do anything by yourself, right? I just decided I’d get my real estate license to like, learn the basics. Yeah, after going to that seminar, who was who was the seminar? Can you say? Well, the seminar was like one of those pitch fests where you could have a whole bunch of gurus and they’re selling info products. The first speaker, though, was a guy named Hal Morris. And he was talking about points, and I thought, points, what are points? And so one of my mentors at the time, was Earl Nightingale. And I remember Earl Nightingale saying, you know, most people won’t learn the basics of anything. They just want to become a star. And he said, You know, he used the example Actually, he said, if you want to get rich in real estate, learn the business first. Yeah. And so I just thought I’d get my real estate license to kind of learn the business. Yeah. And I did and I’ve done very well in the business of real estate, and also in real estate investing for my personal portfolio. Sure. Both. Both have been as the old Saturday Night Live skit guy used to say, Betty Betty good to me. He used to say I don’t know if anybody remembers that from Saturday Night Live years ago. He’s a baseball bat and Betty Betty good to me. So it will stay it’s been very
Mike 19:46
So tell us how you evolved to basically start helping other people.
Jason Hartman 19:50
Well, how did I get started helping other people? Well, I was in the traditional real estate business for many years. I purchased a failing real estate company turned it around, sold it to call banker and I knew I would have a non compete with Coldwell Banker. And so I went back to my first love, which is real estate investing, not the traditional real estate business. And I started working on opening a company that was like a financial services firm for real estate investors. And I looked around and I thought, you know, in the Wall Street world, you’ve got all these companies like Merrill Lynch and Ameriprise and, and all of the others. And they sell a very mediocre, really I’ll say it crappy product, in my opinion, but they have an excellent sales force and an excellent sales system. And so I thought, you know, why can’t there be a financial services firm for real estate investors? And I looked around out there and I didn’t see one, I couldn’t find one that did this. And so I created one. And that’s what I do. What are the business I’ve been in for many years? And you know, it’s still today,
Mike 21:02
though, still today, though. I mean, there are other turnkey providers, turnkey providers out there and more solutions, but but there’s still if you consider it as a percentage of the market, it’s it’s nothing, right? Still,
Jason Hartman 21:13
it is nothing. And it’s really nobody offers like an area agnostic approach to real estate investing. So most people, if they think, you know, well, let’s invest in real estate, they’re gonna pick up the postcards that they keep getting from the person who does what they call farming, farming their neighborhood, that’s a real estate term farming, and they’re going to pick up a postcard from them. And they’re going to call them up and say, Hey, you know, I want to invest in real estate, can you show me around, they’re going to get in the car, they’re going to look at properties in their specific market in in their specific neighborhood, and it may not be the right place to invest, Mike. And so. So, you know, you’ve got to take an approach that’s area agnostic. I mean, what if you went to a financial services firm, and they only had one product to sell you maybe they only had one mutual fund, what we do is we help people build a nationwide portfolio, investing in properties in many, many markets. And, and and really develop an investment plan, use financial planning techniques, but apply them to the most historically proven asset class income property, right. Not stocks, bonds, and mutual something tangible. I
Mike 22:25
mean, that you can see and feel I mean, oh, yeah. You know, it’s funny because I, I was a finance undergrad, I, my wife was an investment banker on Wall Street. I worked for a company that did portfolio management that had literally at the time, I remember when we hit a trillion dollars under management as custodian for a very large bank, and I just got dismayed with it. It’s like, well, everybody’s trying to all the fund managers are trying to beat the s&p 500. And you start to like, Well, why don’t you why doesn’t everybody just invest in the s&p 500?
Jason Hartman 22:54
You could just buy you could just buy a Vanguard fund.
Mike 22:56
Yeah, it’s just so it’s just, like you said, a lot of it’s driven by sales people that are selling subpar products, you know,
Jason Hartman 23:03
yeah. Oh, subpar is like an understatement. Yeah, I mean, you know, one of my teachings, I have something I call the 10 commandments of successful investing. And one of them commandment number three, one of my favorite is, thou shalt maintain control. And so what I mean here is, you know, stop investing in someone else’s deal, stop putting your financial future in the hands of some advisor, and some CEO of some company. Because when you don’t, when you don’t maintain control, you know, look, in real estate, we’re almost always direct investors, we buy a property and we own it, we control it, we decide what to buy, where to buy, when to buy, you know, how to finance the property, who to rent it to how much to rent it for all of these relatively easy decisions, okay, driven by market forces, and with good resources to help you do all these things are available to investors, where we can be direct investors, we can be in control of our investments. And I like to say, Mike, that three things happen when you relinquish control to somebody else, when you don’t follow my 10 commandments. And they are number one, you might be investing with a crook. Number two, you might be investing with an idiot. And number three, assuming they’re honest and competent. The next problem is they take a huge management fee off the top for managing the deal, right? And so be a direct investor, maintain control, follow commandment number three, and I have many more commandments, but sure better. So Wall Street is not the place. You know, it’s amazing to me in all the years I’ve been in this business and all the people I’ve met, and you can probably agree coming from that wall street background. Where are all the examples of all the people who got rich, investing in stocks, bonds and mutual funds. Crickets, there’s a big long silence. Nobody
Mike 25:00
Right, nobody who’s not in the insider. Okay. And of course, insiders are a completely different class. You know, Warren Buffett is an insider, the people who started a company and took it public their Insider, right. Okay. So that that does not apply. I’m talking about the passive investor, right? Well, clearly more and more people have caught on to real estate as an asset as an actual asset class because of some of the work you’re doing. And because people are becoming more and more agnostic to where they invest, where historically they want to be in their own backyard. And so where do you see things going from here in terms of buy, the opportunity to buy and hold? Let’s kind of break these apart the opportunity to buy and hold? Because that’s an interesting question. I would say my own question is interesting here. I don’t know if I can say that or not.
Jason Hartman 25:46
But yes, you can. You can laugh. I am this.
Mike 25:48
I am the best looking guy at this end of the camera right now.
Jason Hartman 25:52
I know you’re the only one that
Mike 25:55
don’t say that. So no, obviously there’s a different opportunity now for buy and hold when you become market agnostic, because now you go in and out of markets as the opportunity presents themselves. But once you talk about that a little bit, but just the general opportunity for buy and hold investing, moving forward here into 2015, as a lot of markets are feeling a lot of heat right now, because the markets have gone up so much.
Jason Hartman 26:17
Well, there certainly are overvalued markets in the country of question we like to divide. When we talk about different cities around the country and around the world. Of course, you know, I have traveled to 74 countries now. And I still think the good old US of A I look at real estate deals, almost every place I go, the good old US of A definitely holds the best real estate investment opportunities. And one of the reasons for that, by the way, and I know I’m not answering your question, so I’ll circle back to it is that since the Great Depression, real estate has really been subsidized in the US by the federal government through Fannie Mae and Freddie Mac, the US has such good infrastructure, in terms of supply lines for parts and improvements. And the MLS system is so mature here for comparable data, you know, it’s got a good rule of law, except for wall street and the government, they don’t, everything else has to end up. Not that I have an opinion about this. You know, they’re they’re just some great features about us real estate that just do not are not available in other countries. So that’s one of the reasons I really like it. But when you look at markets around the US, one of the things that we’re seeing now, Mike, is that this industry is really at the beginning stages. It’s not there yet it’s far from it, but it really is starting to show signs of, of real maturity. And what I mean by that is that you know, we look at traditional real estate over here we’ve got REMAX Coldwell Banker, Keller, Williams, Prudential, all those companies, okay, that’s not our business, those are not our competitors, you know, nobody from century 21 is going to take my customer, okay, in any legitimate way if the customer’s got any brains, right. And so, then there’s the real estate investment industry over here. And, and that industry is starting to mature where you, you and I both know, a lot of players in the business who are becoming very, very good at this business, and very businesslike and very, you know, well funded, and they have big teams and big resources and employees and systems and software. And that’s a great thing. It’s great for the consumer. And it’s also great for us ultimately, because competition is what what will inspire, you know, greatness ultimately, and make everybody better at their game. Right. So that’s, that’s really interesting. So when you look around the country, you asked me about different markets. And we like to divide different real estate markets into into three categories. Number one is the linear market. And that’s the market that just sort of chugs along, you know, it will average probably somewhere between five and 6% appreciation over decades, okay, maybe even 7% depends what time period and who you’re talking to, you know, and how they calculate those numbers or some fudge factor there. And then you look at the cyclical markets, and one that I spent most of my life in pretty much every city in the state is this and that’s California, okay, where you’ve got these big ups, and then you’ve got these ugly downs, and then you’ve got an up cycle again, and then it goes down and you just repeat that pattern. Overall trajectory is up, okay. Yep. And then you’ve got what I call a hybrid market. And that is where I live now, and I moved here three years ago, and that’s Phoenix, Arizona would be considered a hybrid market, where you’ve got a little bit of this craziness, on up swings, and a little bit more on the downswing. But it’s kind of mixed with a linear feel as well, where it’s not. It’s not crazy. It’s not New York City. It’s not Boston, Massachusetts. It’s not Miami, and it’s not you know, virtually every Sitting in California, right. Okay.
Mike 30:01
Right. And so, in terms of strategies to kind of select what markets you go after for buy and hold? Well, I guess talk a little bit about the philosophy that that you guys that you use at your company to target, I guess, opportunities to kind of areas. Yeah,
Jason Hartman 30:17
yeah. So, um, you know, look, the older I get, the more conservative I get. I just don’t like gambling. Okay. You know, I go to Las Vegas now, and then I don’t even touch gambling, I just have no interest in that. Okay. It’s just not my thing. I probably saved a lot of money being sharp, I think, Okay. And the same is true with investing in real estate look at appreciation is not very reliable. It’s not very predictable, and neither is depreciation, okay. But cash flow is pretty darn reliable. And so I like to invest for cash flow. And I like linear markets. And, you know, I’ve got to find this old PowerPoint slide I used to use many years ago, in my, in my seminars in my presentations, and what it showed Mike, is it compared to markets? I used to live in Newport Beach, California, for example. Okay. And that’s a high flying market, Orange County, California, you know, the OSI there are, there are television shows about the OSI okay. And this is a cyclical market that goes up and down. And Kansas City, Missouri would be a linear market that just sort of chugs along. And this interesting chart that I’ve got to find and start presenting again, because it’s really timely now. Is it compared over the course of I believe, 18 years, it took Orange County, California and Kansas City. Okay, the high flying Orange County market, where it’s very expensive to live. It’s always in the news. You know, it’s a renowned place Kansas City, not expensive to live there. Not in the news too much. Most people would consider a kind of a boring real estate market. Alright. And over the course of of that long timeframe, guess which market appreciated better? based I you only have a 5050 chance,
Mike 32:08
I’ll go ahead and I’ll say Kansas City,
Jason Hartman 32:11
You know what, and you are right, that was kind of a trick question, because most people would pick Orange County, the high flying bar, right. Okay. actually did
Mike 32:19
a little appreciation. So that wasn’t like, well, if you would have bought in the valley and sold at the top of it,
Jason Hartman 32:25
you know, anyone can be accused of picking favorable time, right. But this is over the course of 18 years. I mean, the time it takes from you know, a newborn to become a legal adult, okay. It’s, it’s a decent, decent sample. Okay. And so Kansas City, 5.7%, Orange County, California, the high flying cyclical market only 5.3%. And the reason is, is look, you know, any, any stock investor will tell you this, because stocks are so volatile, mostly, is that when you lose, if you have $100 stock, and it goes to 50, you’ve got to get back 100% to get back to even, okay, so in a market like orange county that does this, or, or, you know, New York or, you know, Connecticut, any of the high flying Connecticut markets, Boston, you know, whatever. Okay, those Miami, those kinds of markets, you you give back so much on the down cycle, that it’s so hard to recover from that. And plus in any of those markets, Mike, your cash flow is terrible, right? Absolutely. I mean, you just can’t get any decent cash flow in these markets. And so I much prefer linear conservative markets with good cash flow. Yeah, those those are my favorite places.
Mike 33:42
So talk about from an economic standpoint, where you see things going here, because I know you’ve got your ear to the ground and a lot of these things. And going into, again, going into 2015. Here, it feels like the markets have gone up in a lot of, you know, major markets for sure. Some of the opportunities. I know, for a fact, even in my market in the Dallas market where, you know, I’ve found myself buying a couple rental properties this year that I know I bought other properties in that market in the last five years for half half of that price. Yeah. There’s just a lot of that going on. So where do you think things are going from here?
Jason Hartman 34:14
Well, predictions are difficult. That’s my first disclaimer. Okay. And, you know, they’re they’re really not that difficult from an economic standpoint, Mike, but you know, what makes them difficult is government interference and government, you know, pseudo government, mental entity, the Federal Reserve, our central bank, makes it very difficult to predict a lot of this stuff. And so, with that in mind, assuming the government doesn’t interfere too much, I think that we’re going to see some of the high flying markets really softened a bit, okay, because I don’t think that we are in a legitimate economic recovery. Okay. There are lots of statistics and a lot of them are manipulated. To show that things are going great, so that the people who hold public office can, you know, maintain their position. But overall, I think we’ve definitely got some real problems economically now. You know, the central bank can make interest rates artificially low, and, you know, have quantitative easing, which just means creating money out of thin air, not a prudent strategy overall. And they can, you know, juice the market, and they can give it caffeine and give it steroids and make things look better than they really are, underneath all of that. But, you know, I think the linear markets, the good pruney, markets are going to be solid, and they’re going to continue to do well, and we’re going to continue to see rent increases, and they’re just going to be good solid investments. I mean, you know, we’ve got clients making upwards of 2030 40% annually on their investments in boring markets. Yeah,
Mike 36:00
those are probably some of the best markets to invest in, right, are the ones that eight, no, you don’t really care about appreciation much, because it’s all about the cash flow. You know,
Jason Hartman 36:08
the the non sexy markets that are just kind of these boring linear markets, those are the good places, those the markets I like, yeah,
Mike 36:16
and the great thing is, as people become more and more agnostic to where they invest, then you just move in and out of those markets as the opportunities present themselves. Right.
Jason Hartman 36:24
Right. And by you know, I should say, we’re not much for moving Okay, in and out of markets, we’re more interested in buying and holding, going into market. So you can shift gears and say, Hey, we’re gonna stop. Right now we’re gonna move into the Moines, Iowa, because Absolutely, absolutely. And a great example of that is Charlotte, North Carolina, okay, a market that we’ve been in and out of over the years, okay. And that market, you know, if you had to enter that market as a new landlord and find a tenant, and you had what what we call a non stabilized property, there have been times where that could be really difficult. Well, you’d want to avoid it, okay. But if you already have tenants, and they’re going, Well, just keep your tenants happy. Don’t try and raise the rent too much. If, if there’s too much supply coming on the market, then, you know, just just hold hold course, and then keep your study.
Mike 37:18
So if anybody’s listening to this right now, you know, what else is interesting I want to cover is, this is something that I’ve thought a lot about over the past year, in my market where I primarily invest in the Dallas Fort Worth market, things have gotten great city I like Dallas has gotten kind of tight here. And I’m very thankful that I’ve built a portfolio of rental properties. Now, because we have those other streams of income. There’s a lot of real estate investors that you and I know that are, they may be huge wholesalers. But if they’re unless they’re building up some other revenue streams, some passive income streams or more passive income streams, then they can never stop buying, you know, the market gets hot in there. If they stopped buying, they die.
Jason Hartman 37:52
They’re given a lot of tax dollars to the government, you know, income property, when you use the buy and hold income property strategy. It is the most historically proven asset class in America. It is the most tax favored asset class in America. And oddly, it is the most debt favorite asset class in America. And when I say that, I mean debt in a good way. I mean, where else can you get this incredibly cheap, three decade long fixed rate debt, it’s it’s just an unbelievable opportunity to use 80% of somebody else’s money to control assets that produce positive cash flow. And you don’t even have to pay your own debts, you outsource them to your tenants. And that’s that’s my kind of outsource. Right?
Mike 38:38
Okay. And Jason, tell us a little bit about Empowered Investor and what you guys do there?
Jason Hartman 38:43
Yep. So basically, what we do is three major things, okay. We basically teach people how to invest. And we have live seminars and conferences and stuff like that. We’ve got one coming up here on January 10, in Irvine, California. And that’s called our meet the masters of income property event. And we do that once a year. And we do our podcast, and that’s really popular. It’s called the creating wealth show. It’s all free. It’s available on iTunes, or Stitcher Radio, or SoundCloud. And so that’s, that’s a great thing, lots of lots of followers and listeners to that over the years. And we basically teach people how to invest. And then we set up referral agreements with what we call local market specialists or LMS. Not to be confused with MLS, okay. LMS. And these providers provide turnkey properties to our clients in markets that we vet, we research and we like, Okay, and so I’ll give you an example. We have contracts with probably 40 different local market specialists in different cities around the US. But if you look at our website, if you go to Jason hartman.com, and click on the properties section, you’ll only find seven target markets, because these are the markets we happen to like right now. So we’re area agnostic. And we move in and out of these markets as they make sense, right. And if they don’t make sense, we stop recommending them. It doesn’t mean, like we talked about earlier, our clients that already own properties there should sell them and leave, right? It just means they’re stabilized, we’re just not going to re enter that market. Right? They may have a lower cost basis where they paid on average $80,000 for a single family home, and maybe they bought five of them in that market. But now you have to pay 100 or 110,000. And it doesn’t make as much sense to enter the market today.
Mike 40:39
Yeah, by definition, if your market if your investment does well, you should be prepared to go somewhere else. And, you know, with with future dollars, right, I mean, yeah, hope, hopefully,
Jason Hartman 40:49
we want to see investors be diversified into three to five markets, okay. So don’t have all your eggs in one basket. Even if you live in the greatest market in which to invest. It doesn’t mean you should put all your eggs in that basket, because you’re not diversified. What we want to have you do is take the most historically proven asset class and 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 really true.
Mike 41:19
Yeah. Well, Jason, thanks so much for your time to do any kind of final thoughts or words you want to give to folks?
Jason Hartman 41:23
Well, you know, just the idea of just being patient. Okay, and investing for the long haul. That is the surest way to wealth in this business, and probably in any business, okay? All the people that have the deal of the month, and then thing they’re doing now and the thing they’re doing tomorrow, and they keep changing course and changing their mind. They never seem to get anywhere in life. And all you got to do is live a little bit to know that that’s true. So there’s a great quote, and I’m probably gonna butcher it a bit here, but it goes something like this, and I can’t remember who said it. Successful people make decisions quickly, as soon as all the facts are available, and change them very slowly. If ever unsuccessful people on the other hand, make decisions very slowly, and change them often.
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