CW 505 – How Declining Home Ownership Rates for Millennials Creates Opportunities For Real Estate Investors with Jason Hartman

Jason starts by talking about the Millennial demographic and its benefits for real estate investors. In relation to this, he reads an article on the renter market and why fewer people are purchasing homes. He also takes the time to answer a couple of listener questions about home-owner risk mitigation and renting versus owning property on today’s show.

Key Takeaways:

2:00 – Millennials have seen their parents get burned by the real estate crash.

7:40 – Millennials are putting off marriage, living with their parents, and have massive student loan debt.

9:35 – It’s hard to get good stats on individual home owners or single family homes.

11:35 – If Fannie Mae and Freddie Mac were to go away, it would free up 25 million new renters.

14:30 – Jason answers a listener question about risk mitigation for properties.

19:20 – Jason answers another question about renting versus owning.

27:05 – Next episode Jason will have Dan Mitchell, Senior Fellow from the Cato Institute, on the show.


When interest rates are low and it’s easy to qualify for loans, you have this market where everybody moves out and they buy.

I think Fannie Mae and Freddie Mac should go away. They cause distortions in the market.

We get to own and control things while we’re alive and it’s come upon us to do the best job that we can with our financial resources.

Mentioned In This Episode:

Affluent Apartment Renters Slow to Buy a Home


Jason Hartman:

Hey, welcome to the Creating Wealth Show. This is episode 505 and this is your host Jason Hartman. Thank you so much for joining me today. So, you know, on many previous episodes I have talked about the amazing, literally amazing demographics coming at the rental market over the next decade plus and potentially, I don’t have any way of empirically knowing this, but potentially they are the best they’ve ever been in US history. It is nothing but amazing. Every part of this, which we have talked about in depth on many prior episodes, it’s amazing.

You look at the millennial generation and they are this huge cohort, the largest demographic cohort in history, slightly larger than the baby boomers and they grew up seeing their parents going through a housing crisis and stock market crisis and employment crisis or, I should say, an unemployment crisis. They saw their parents get burned and they are in an anemic job market. It’s hard to find employment. It’s not going to be the typical thing that used to exist by the way where the typical millennial, well, they weren’t a millennial back then, they were a gen Xer, my generation.

The typical gen Xer, they’d be 26-27 years old and they’re buying their first house, right? Or even younger at many times, but now a days that has just changed, because with an anemic job market they’ve got to have mobility. Mobility is the best thing on a resume as I often say. Here’s another article that just kind of, among so many other reasons the massive amount of student debt, not having faith in the American dream of home ownership and an anemic employment market and needing mobility and the list goes on and on. Family formation starting later, people not really getting married at a big rate anymore, this massive growth in the single population.

The largest voter block in the last three Presidential elections, which most people don’t even consider that a voter block, right, because singles of both genders, they are of all ages, they are of all races, so it’s not considered a voting block, but it really is, single is a voting block and it’s the largest voting block in the last three presidential elections.

So, here’s a Business Insider article a came across that says, “Apartment renters just aren’t crazy about buying a home.” It’s just really interesting. It comes at it from an interesting angle, because it says and I’ll just read a little bit to you, it says, “On an almost-daily basis, we hear the question: When will the millennial / first-time buyer emerge? While predicting the behavior of a cohort still recovering from high levels of unemployment and a record amount of student loan debt can be tricky, the response of some of the largest apartment REIT operators,” And a REIT, of course, is real estate investment trust, these are the big owners of many apartment buildings, right., “is an unhesitating no time soon.

When your apartment lease expires, you have two choices: to renew or move out. Each quarter we track the percentage of residents who move out of an apartment to purchase a home. (Other reasons for moving out can include a job change, eviction, or rent rising too high). By studying publicly traded apartment REITs who manage a combined 520,000 units, we have learned the following:

During the housing boom of the early to mid-2000s, roughly 1 in 5 renters leaving their apartment opted to purchase a home. In fact, the national homeownership rate peaked in 2004—at the same time that the percentage of those moving out to purchase a home was peaking.” Now, may commentary. Remember I’ve talked to you many times in prior episodes about what I call the three dimensions of real estate. There’s really more dimensions, but these three dimensions that I talk about commonly are: people buying, people renting, and interest rates, and, of course, the values of homes acting mostly to interest rates and affordability.

When I do this, I always talk about, you know, I give the example of my friend Nancy who I ran into the car wash sometime circa 2003-2004 in Irvine, California and she worked, at the time, maybe she’s still there, not sure, for the Irvine Company, the largest apartment owner in Orange County, if not all of California, possibly. There are certainty a giant, giant company. You know, I said to Nancy the typical question, I said, “Hey, how’s business?” and she said, “Oh, it’s really kind of tough right now, because everybody is moving out of apartments to buy homes from you.” Now, back in that era I was in traditional real estate. It was before I sold my traditional real estate company to Caldwell Banker and, you know, I thought, well, isn’t that interesting. Interest rates are very low, prices are going up, housing affordability was still reasonably good, it got bad lately in the boom and that, of course, is a sign of a bubble coming and that’s how counter cyclical it is.

So, when interest rates are low and it’s easily to qualify for loans, remember back then you could fog a mirror and get a loan, then you have this kind of market where everybody moves out and they buy and now you kind of have this weird scenario, because interest rates are extremely low, but the lenders are making it pretty difficult to qualify for loans, right. So, that’s kind of an odd situation on it. You also have a time right now where in most markets housing affordability is quite desirable, it’s very good. People can afford to buy, but they can’t necessarily qualify for loans.

Now, you add on to that the additional layer of psychology and it’s what I talked about when I started this segment of the show. I talked about generation Y, the millennial generation and how they don’t really seem to psychologically have that same concept of the American dream. First of all, they’re putting off marriage, they’re putting off household formation. A lot of them are living at home with their parents, a lot of them are renting, they have massive student loan debt, they like mobility, and they like the social life that renting offers. It offers usually a better social life then owning, unless you’re a family and you live on a familish neighborhood and so forth and that can be a different kind of social life.

So, they’re putting off this choice, right, and you layer all this into the equation and the decade of renters coming at us is like this tide wave. It’s like the movie the Perfect Storm and it makes being a landlord being a very desirable thing right now.

The article goes on to say, “Since 2008, the percentage of renters moving out to purchase a home has remained below its historical average of 17%, while the homeownership rate has continued to decline.” Now, when you look at stats like this, this is just me talking, when you look at stats like this, it’s important to make another distinction that’s hard to survey and so you have to accept a lot of anecdotal evidence rather than really, really firm empirical facts, because you can’t really survey individual home-owner signal family home landlords very well. You can only survey big apartments, so here, this article is based on surveying these huge REITs, these huge institutional landlords that manage 520,000 units.

Now, many of you listening own 20-30-40 or even more single family homes, but no body is surveying you, right? So, you don’t get stats very good on single family homes or individual owners, because surely no one has ever called you and surveyed you about what your tenants are doing, right? So, that’s one other thing you always have to consider with this. You always have to look at the apartments. Now, a lot of these people would much rather live in a single family home and I think that’s a big opportunity  for us because by enlarge our clients offer single family home rentals and that can be a great opportunity for them.

So, you know, there’s a graph here that’s included and it is staggering. It’s amazing. You’re looking back in 2004 up to really about 2007 or 2008 and you saw the home ownership rate was high and then it started to plummet, which I actually think is a great thing. I think the home ownership rate is still a little too high, you’ve heard me talk about that on prior episodes. It’s funny you would hear a guy in real estate say that, I know I’m probably the only one, but you know, I think the home ownership rate realistically should be around 50%, maybe 55%.

Now it’s hovering around 64% and it peaked out at nearly 70% and we did that talk at our Meet the Masters event a couple of years ago called 6 years, 6 million renters, and you know, it looks like we’re going to be right and one of the other things we’ve pointed out is if Fanny Mae and Freddie Mac were to stop being subsidized by the government. If they were to be allowed to fail or fail for whatever reason or reign in the horns and become drastically smaller, as they should, another real estate guy saying something you’ll never hear any other real estate people say.

I think Fanny Mae and Freddie Mac should go away. They cause distortions in the market just as Sally Mae with student loans. These are just silly, stupid government agencies that shouldn’t be allowed to exist. If they were to go away, we’d predict that could mean an additional up to about 25 million new renters, wow! What an opportunity. Now, you’d probably see home prices decline, because remember in that three dimensions of real estate, those things go counter cyclical or they’re non correlating indicators, I guess is the way I want to say that.

Interesting stuff to keep in mind. Now, I want to get to a couple of listener questions, but before I do, I want to say something, listeners, you need to listen to the prior episodes and you need to come to our live events. We’ve got our Memphis property tour coming up in just a couple of weeks. You should be there! A lot of the question you’re asking are answered at the Creating Wealth seminar, the live seminar and here you’ve got it with a tour and a private dinner and a semi private tour of Graceland. We may just have an Elvis sighting there too.

So, come to our live events, we don’t have them that often. So, it’ll be in Memphis in a couple of weeks, you’ve got the Creating Wealth seminar, you’ve got the property tour, you’ve got some meals with me. You know, you can sit right next to me and ask me question to your heart’s content and I will answer them, but if you don’t go to the live event, you need to buy something.

You need to go to and you need to purchase the Creating Wealth home study course, okay. Just go buy that, listen to it, what is it, it’s about a nine hour day condensed into about four hours, I think it’s five hours, of audio. You can just download that and listen to it. On the podcast, it’s great for news and current events and current commentary and these interviews with the great guests that we have on our show, but again, it’s piece meal.

The Creating Wealth seminar is a course and it’s, you know, it follows an outline, it follows a really nice overview and gives you all the stuff, a broad knowledge you need to know, okay, so you need both of these things, you know, it’s like saying, you went to school, maybe you went to college, and you got all of your basic academics taken care of there, but you still read the news and listen to the news, right, you know, that’s what the podcast is, it’s the news combined with some tips and good commentary there, but do that, come to our live events, buy that product, go to, click on products, and invest in the Creating Wealth home study course. It’s really cheap, it’s $297 bucks and we’ve had thousands of people have that course now, so take advantage of it, okay? It’s really a great thing. Let’s get to a couple of questions here, this one comes from Matt in Colorado, here we go.


Hi Jason, my question is in relationship to mitigating risk for properties. What if you have, let’s say, 10 properties in three states, do you have an LLC to manage the properties and then another L:C that owes the properties as assets thus mitigating the risk if there’s ever any liability issue where tenant possibly sues and tries to recover an amount greater than what you’re insured for. I’m just trying to understand how you silo risk between your properties so that you’re not exposed should something accidental happen to one of our tenants and they seek to go after for an amount in excess of your insurance. Thanks. This is Matt.


Hey Matt, great question. We have discussed that on prior episodes and, of course, at our live events. The first thing I gotta say is that I am not an attorney. I am also not a tax advisor, but my person experience with this and what I’ve heard from so many clients is what I can share with you, number one, generally speaking, I think the use of LLCs and entities can certain offer some asset protection. I think it is largely over promoted. It does create some complexity when investing in real estate.

If you put your properties into LLCs, single family homes, I’m talking about, the single unit properties or anything up to four units. It can be a little bit difficult to get insurance. Insurance might be a little bit more expensive, there are fewer providers providing it to entity owners, rather than individual owners.

Also, in all of my years of doing this, I can not remember ever hearing a law suit where you had the typical slip and fall, where you have a tenant claim they were injured and sued the land lord and created some sort of liability. Certainty not to say it couldn’t happen, it can happen, but I have never heard of it happening. It hasn’t happened to me and I’ve had hundreds of tenants. I think the risk is kind of overrated. I think it’s pretty easy to insure around this stuff.

Now, there are other types of risk too. You could have an liability from another activity. You might get sued in your business or in another part of your life, say a car accident or something like that, and they might try and attach assets and, you know, there are ways with LLCs to protect those assets from the external threat versus the internal threat, which is the one you’re referring and one strategy if you want to go the entity route, you don’t mind the additional expense and the additional complexity, it can certainty offer some greater protection. If you want to go that route, you can have maybe three LLCs in three states, you mentioned ten properties that you had and I believe you said that they were in three different states.

So, you might do one LLC in each state. You might have that LLC owned by another LLC in another state and you might put that in a desirable state such as Wyoming or Nevada or one of the others that offer some greater protection. For example in Wyoming, they offer charging order protection, so that if an external threat occurs and you are sued and you have a creditor come to you, they may be in a position where they have to wait to collect until you take a distribution and if you don’t take a distribution, they just have to keep waiting possibly forever.

So, there are some reasons to do this. Talk to an attorney. We’ve had many attorneys on the show talking about this stuff before. At our Meet the Masters events we have attorneys come and speak and any of our investment counselors at my office can refer you to an attorney who can help you with this kind of stuff. Again, I can’t practice law, I don’t know enough about it, there are a lot of complexities, but those are some initial thoughts to guide you and maybe bring up some questions when you do talk to an attorney.

Okay, let’s go to our next question from our listener Steven who has called in many times and here’s another question we have definitely covered this one many times on prior episodes and just to say I did not yet move to the socialist republic of California, I’m looking for a place there. I do have a big tax benefit. I have to move back and re-establish residency for. So, I do still live in Arizona at the time of this recording, but I’m looking. So, I’m going to answer this question about renting versus owning. Here we go.


Hey Jason, Dr. Steve G. Jones clinical hypnotherapist here again and I have a question about owning versus renting your primary residence. I notice you rent your primary residence and your reasoning, well, right now you’re in California, I understand that, because…


Not there yet..


There’s a tax thing, you had to move there to get some kind of tax savings. You want to be in La Jolla, so you’re renting in La Jolla, because property prices there..


Not yet.


are too expensive. I understand all of that, but before any of that, you were living in Arizona, renting a place that I think was a condo for about $5,000 a month or you were trying to. That was your goal to rent them $5-6,000 a month, I believe. To me, that doesn’t make any sense, because..


It makes lots of sense!


I don’t know, it’s just very wasteful, sounds like. It’s about $60,000 a year flushed down the toilet.


No, it’s not.


So, I don’t understand in the scheme of things, in the long term planning of things, I don’t understand that. It sounds like a live for today, don’t plan for tomorrow type move and I find that, I don’t know, I’m not able to comprehend that as a person who is interested in building wealth over time. It just sounds extremely wasteful. On the other hand, I understand you being a single guy and wanting to have the freedom to move around, but wouldn’t it be better to have a stable home base, not considering the California thing, that’s a different, that’s different all together.

I’m talking about before you realized that. Wouldn’t it make sense to have a stable base that you owed, that you were paying down the mortgage on, not paying someone else’s mortgage, and from there you could go out and about and I ask that because I am in the same situation where I am considering, I’m the same situation as you, and I’m considering that exact challenge. Rent versus own.

So, I would love to hear your reasoning behind why you choose to rent and how that makes financial sense, because, one more thing, you can own a primary residence and you can travel around the world like you do anyway and like I do and those are all tax deductible, because they are all business related, so please explain, thank you.


Okay, so, that question has been addressed many, many time on prior episodes and it’s a good question. Here’s the deal. If you are going to live in a home or a condo, well, I don’t like going condos at all, so I almost never think of condos as a good deal. There may be an exception there, but almost never, but if you’re going to live in a single family home that’s worth less than about than $150,000, it makes sense to own it, okay, and because if you’re going to rent that property, you’re probably going to pay $1,500 a month to rent it and that’s going to be about 1% of the value.

So, in that case, I’d recommend that you buy that home and you live there, okay, it makes sense, but in La Jolla for $5,000 a month, I can get the use of a 1.2 million dollar or maybe even more home, okay, and that is a phenomenal deal, because I can take and acquire 1.2 million dollars worth of real estate assets in market that make sense. For example, I could buy 12 $100,000 homes with that 1.2 million dollars worth of real estate and I could put those homes in three diverse markets, four in each, and I bet I could get them to generate $1,000 per month, so I would b getting $12,000 per month from my 1.2 million dollars worth of real estate versus getting the use of a 1.2 million dollar gorgeous home for myself, for only $500,000 a month. That makes complete sense. You can not argue with that. It is a great deal to be a renter of a high-end property.

Now, you referred to the property in Arizona, that I was trying to rent and I’m no longer trying to rent, that was quite a while ago, so you obviously listened to an old episode. This property, probably still on the market, is a really high-end penthouse condo and it was listed for 2.4 million dollars last time I check. It was about 5,500 square feet or something like that and it was newer. It’s beautiful. It over looks Tempe Town Lake in Arizona and that I did make them an offer where I went up to $6,000 a month on, but if I’m going to invest 2.4 million dollars in a real estate deal, I want to get $2,400 a month. I want to get 1% per month, okay, anything else, it’s better to rent.

And look, here’s the thing you gotta understand, I remember I was at church years ago and the pastor said, you know, he was talking about materialism and I was at church in Orange County like most materialistic place going, right? So, I was there and he was talking about how that none of us really own anything and I think this is a concept that is worth thinking about in this discussion of rent versus buy, because none of us really do own anything, we’re not taking any of this stuff with us, right?

When we pass on, as the pastor said, we are just trustee from birth to death. We get to own and control things while we are alive and it is incumbent upon us to do the best job we can with our financial resources and to plan for the long term, but also live a little bit today, don’t deny living today, either, and balance that equation of instance gratification versus long term planning. If you live in a house that you own and you pay five grand a month to own it, you could rent that house out to somebody else and charge them whatever the market rent is.

So, when you’re saying I’m just flushing down $60,000 a year down the toilet. You’re just wrong about that. I’m not doing that at all. We’re all renting. If you live in a house in which you own, you have, you have an opportunity cost where you can’t rent that house to somebody else or you can’t use that money tied up in that property or that loan that you got against that property for some other property. It couldn’t produce a return for you. So, this is the deal, okay, we’re all renting, we’re all renters, even if you think you’re an owner, you’re in essence still a renter, because there’s an opportunity cost that goes with it.

So, I hope that answers your question. That’s been debated for many, many years. You know what? I was going to have Dan Mitchell, senior fellow from the Canto Institute on as our guest today, but once again, I went very long, so we’ll have Dan on probably the next episode and be use to go to get your final chance to register for the Memphis property tour. It’s almost full and it’s only a couple of weeks away. We’d love to have you join us. We have a private dinner at Graceland. Elvis Presley’s former home, Graceland, so that’ll be really cool and we’ve got a semi-private tour of Graceland too.

So, not only will we look at some good properties, not only will you get the Creating Wealth into today’s economy seminar and not only will we be able to spend a lot of time together and have informal conversations, but we will also have the Graceland stuff, which I think is kind of cool. I wanted to do it two years ago when we had a tour there and we just never pulled it off, so this time we did. So, join us and I will look forward to talking to you on the next episode and seeing you in Memphis.


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