Jason Hartman covers several issues in this episode including; American vs. international real estate investing, keeping ROI score, maintaining emotional stability, judicial vs non-judicial foreclosures, and much more with investment counselor, Steve. More at: https://www.jasonhartman.com/podcast/
Female Voice: Welcome to Creating Wealth with Jason Hartman. During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness then you ever thought possible. Jason is a genuine, self made multi-millionaire who not only talks the talk but walks the walk.
He’s been a successful investor for twenty years and currently owns properties in eleven states and seventeen cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman: Welcome to the Creating Wealth Show. This is your host, Jason Hartman and this is episode number 305. Number 305, and I’ve got Steve here on the line with me during the intro portion of the show to talk about a few things, and then we will go to today’s guest who is unknown — no, I’m just joking. At the time of this recording, we’re not sure which guest we’re putting with this show. So, we have a guest, we just don’t know who it is yet, but you’ll know in a few minutes after we’re done doing the intro portion. How do you like that folks? This is a real high end production.
Steve: Yeah, the suspense is killing me.
Jason Hartman: Yeah, we just want to keep them in suspense, that’s what we want to do. But anyway hey, I think we’ve got by the way — I think we’ve got Tony Robbins coming on the show, so look forward to that. That’s going to be a big named guest and you know, we had Steve Forbes on recently and I got some good feedback on that mortgage lender panel that we did on the last episode, episode number 304. So, glad to see that all of you are learning a lot from the show, and we thank you so much for listening and for spreading the word about the show and telling your friends.
You know Steve, we need to develop some kind of recruiting program. Every time — it’s kind of like that movie, It’s a Wonderful Life. What a great movie you watch every — every year around the holidays and every time an angel gets its wings, they ring the bell. Maybe that’s what we’ll do on the Creating Wealth Show, huh?
Steve: Yeah, there you go.
Jason Hartman: Yeah, every time someone gets their financial independence wings, we’ll — we’ll — we’ll ring the bell for them.
Steve: That’s what Dave Ramsey does, our favorite guy, Dave Ramsey. People call in an scream that they’re debt free, but —
Jason Hartman: Well, I sort of have a love hate relationship with Dave Ramsey too. You know, I was listening to him the other night and he was making a lot of sense. Some things he’s really good at, but this whole debt free thing, that’s not for people that want to follow in offensive investing strategy. That’s simply for lower end people and I don’t mean that in a negative way. I just mean people lower end financially, that you know, should pay off their credit cards and not spend their money on silly, consumer items.
You know, I always say most people spend their money and their resources on the appearances of wealth, rather than the things that actually create wealth, thus the title of the show, The Creating Wealth Show. And it’s kind of like the guns and butter theory. Don’t — don’t waste your money on stuff that doesn’t produce wealth for you that doesn’t produce a future. And you know, in that way, I think Dave Ramsey’s great because that’s essentially what he’s saying. You just can’t teach people how to invest.
You know, he’s talking about how great mutual funds are. I mean my God, are you kidding? And — and he — he just doesn’t understand the power of inflation induced debt destruction and leverage as it applies to real estate. I invited him on to my Solomon Success Show, and he sent me his number to a man and we did the interview. It’s published, you can find it and listen to it, and Dave, if you want come on the show and kind of debate this with me, I mean I’ll be happy to do it. Largely, I’m a fan of yours, okay. So you know — but I just don’t think you can really teach people how to invest. It’s just more how to pay off your credit cards and that I definitely agree with you.
Steve: Yeah, he does a great job at that in getting people to stop acting completely stupidly, but then after that he hasn’t crawled into the financial bomb shelter —
Jason Hartman: Yeah.
Steve: — and never really do anything.
Jason Hartman: Yeah, it’s just — yeah, if you — it’s like, look if you want to save money, you can buy gold and silver, but that’s not investing. It’s just saving money and hedging inflation which that is part of the strategy. I’m — I’m not saying that’s bad, I’m just saying it’s not investing. Stop saying you’re a gold investor. Stop saying you’re a life insurance investor. Stop saying you invest in silver. Those things in my opinion, aren’t investments. Why, they don’t produce income.
Well, life insurance policies theoretically do, whole life policies, but I think those are basically a scam because they don’t want you to understand inflation and inflation is simply debasing that income. So income property, that’s where it’s at. Nothing works as well.
We’re already off on a tangent, Steve. This isn’t what we were really going to talk about. We weren’t going to talk about Dave Ramsey.
Steve: You’re surprised?
Jason Hartman: Look at what we do here. This is just — this is just how we do it. Okay, let’s get on with it. First we got a few things to cover in the intro portion, folks. We want to talk about the Memphis property tour and Creating Wealth in Today’s Economy Boot Camp. That’s coming up. We want to talk about some clients. We want to talk about compound interest. We want to talk about Albert Einstein. So Steve, I’m going to let you take it away. Let’s talk about some clients first.
Clients, if you’re listening, we’re talking about you behind your back. Well, maybe not. I guess you’re —
Steve: Yeah. Well, we’re not going to use their names. We would — certainly wouldn’t want to do that, but you know, we have clients from all over the — all over the place, right, lots of interesting ones. I’ve got one who’s actually from Singapore. We’re — we’re getting more and more people —
Jason Hartman: I love Singapore except that you don’t want to get caught doing graffiti or smuggling chewing gum into the country.
Jason Hartman: But it is a beautiful place.
Steve: Yeah, the — the penalty in Singapore for smuggling in chewing gum is probably a little bit worse than first degree murder, here in the United States.
Jason Hartman: Well, we’re joking, obviously, but — and no spitting on the sidewalk or anything, but other than the — that strict part of Singapore, it’s a very capitalistic place. Jim Rogers, who we had on the show twice now, he lives there, he moved his whole family there. I think he’s kind of overplaying the downfall of America, but I am a Jim Rogers fan, ultimately.
Steve: Yeah. Well —
Jason Hartman: — greater national clients.
Steve: Yeah, we have one there and more and more international clients are wanting to invest in U.S. real estate because they — they feel like it’s under valued, and I think that’s still is true, you know especially if you’re valuing these properties based on — on the income that they generate. We know that it’s definitely under valued from that — that stand point, but —
Jason Hartman: Well, not just that, the price per square foot or you know —
Jason Hartman: –in other countries they measure per square meter which is approximately ten square feet, but it’s amazing Steve, because I just got back from Belize two days ago and we’ll talk about this more. That was my second trip to Belize. I was speaking at a conference down there, and the conference was all about off shore investing, and kind of this whole concept of escaping America and having some of your assets outside of America, whether it be bank accounts, investments, real estate, whatever and I — I got to tell you, look I could be wrong, but this whole philosophy, and this whole thinking, this doom and gloom thinking — and mind you folks, remember I host a show called the Holistic Survival Show. Okay and that’s another show I have and we’ve got way over one hundred episodes there where we talk about the collapse of America and the end of the world and doom and gloom. And — and then this week — week — weekend, I’m going to Nashville and Steve, you’re going — you’re going to meet me there —
Jason Hartman: — and you’re not going with me because you’re coming from a different airport, but you’re going to meet me there and I — I’m doing two speeches at the national preppers and survivalist expo. So you know, look at — I am fully aware of this thinking. I am immersed in this world. Okay, I know what these people think. I know what they say. I know what it’s all about, but I think it’s being dramatically over exaggerated. And the one thing I will tell you, if America goes down, a lot of other countries are going down too. This is the biggest domino in the bunch and this — this real estate off shore, I just can’t get it to pencil that well.
I — I mean, I have looked. People know, I’ve been to sixty four countries, many of them I’ve been several times and here in Belize I was looking at properties there, I looked at properties there last time, I looked at properties this time and you know, you’re looking at mostly not very good construction, but I — I did meet one builder there and I actually interviewed him, a — a developer, and he’s going to be on the show as well, a great guy. But the price per square foot is — is not cheap. And most of the stuff you look at, it’s condos and I don’t like condos that much, as people know. Uh, I’m not too much of a condo fan at all and the way this developer said is you know, in foreign countries, people kind of prefer the condos a lot of times because they offer some maintenance while — while the person’s away and so forth, but whatever the case, real estate has been subsidized by the government in America since the great depression, and the — the distribution systems here are so much better and so competitive and the infrastructure is so well developed that our builders in this country can just deliver most of the time, a superior product at a lower cost per square foot, including land and you’ve got the fantastic mortgages and the rule of law and the well developed real estate infrastructure here. And what do I mean by that? I mean, the fact that agents here are licensed, property managers, in most states are licensed. The — you have an MLS system, a multiple listing system. And Steve, when you have an MLS system, you don’t get these sort of randomized pricing phenomenon. You can really — you can use comparables and you can find out what a property’s worth and make sure you’re not overpaying for it.
You can find out what a property should rent for. I mean, I don’t know the answer to this question but I’m just going to take a stab at it. I don’t think there are sites like Zillow in other countries. I know that the countries I’ve been to don’t have multiple listing services. That’s a U.S. phenomenon, so far as I know. I mean, you know even in westernized modern countries like Australia, when I went around with real estate brokers in Australia and New Zealand, they — they said they didn’t have an MLS system.
You go to one real estate company and you see their listings. You go to a different one and you see a totally different set of listings, and rarely do they ever come together and cooperate. And those prices aren’t published like they are in the U.S. So folks, you can get yourself into a lot of trouble if you don’t really know what you’re doing and — and all that said, we continue to look at overseas or international investment opportunities, but the jury is out. We haven’t found them ye that makes sense. We — we would be recommending them today, Steve, if we could make it work. And so far, just haven’t been able to do it.
Steve: Yeah, they look really attractive and you — you know, you feel really important, you’re investing off shore, but that lack of the rule of law and cohesive market place, if you don’t believe that’s it’s not there, give it a try.
Jason Hartman: Yeah.
Steve: You know.
Jason Hartman: Yeah.
Steve: You’re going to see how much better the U.S. real estate market functions.
Jason Hartman: Yeah, yeah and — and there’s a certain sexiness and a certain romance to this for like a U.S. buyer, and — and this is a total guess here, by the way, but I would guess that about twenty five percent of our clientele is from outside the U.S. and seventy five percent is inside the U.S. And for a U.S. person, you’ve got to think, oh yeah, I’m going to go buy a property in South America or Central America, and you know that’s like really cool. I’m a big wig, an international person. You know, and it is.
I — I’ll — I’ll be the first to admit, that does sound kind of sexy, but I don’t know. I just — as soon as we can make this deal work, I mean we’ve looked at — we were talking with a — a developer who’s building stuff in Melbourne Australia, Eastern Europe, Southeast Asia, South America, Central America, we’ve looked all over the planet and so far, not yet. We will sell no wine before its time, like Ernest and Julio Gallo.
Steve: That’s right.
Jason Hartman: Yeah.
Steve: Well, and — and then that’s the — the irony here is we have foreign clients that can’t buy enough real estate in the U.S. fast enough, but there’s always still people from the U.S. asking us about the — the foreign real estate and what they need is right here. It’s in the United States. And Wall Street has definitely realized that too, you know they’re making life difficult for a lot of our LMSs in these markets because they’re — they’re paying so much for — for properties. You know they —
Jason Hartman: You know — you know what I say, Steve, no acronyms, LMS means local market specialists. That’s our affiliate. Go ahead.
Steve: There you go, local market specialists are — you know, they can have a tough time in some of these markets because the private equity people will show up at the auctions and — and they’ll pay a lot of money.
Jason Hartman: They overpay. That’s what happens when you invest in — with an institution, when you — when you invest in some fund or something. When it’s — when it’s not their money, they’re much more liberal in overpaying for things.
Steve: Oh yeah, oh yeah. I talked to one of our local markets specialists who — they buy a lot of properties from the auction and a fund out of Boston had just given a couple of other you know, real estate operators a bunch of money to buy properties in this particular area, and they were paying ten thousand, fifteen thousand dollars over the very top of what the local market specialists could pay and — and make any money. And it’s because our listeners, they’re — they’re buying a lot of these properties with leverage and if you’re going to do that the property has to appraise.
So, the local market specialists kind of knows where they have to be to — to buy these properties, but private equity they don’t have to appraise it they go in all cash. They’re looking at this purely on — on the return, you know, and we’ve — I’ve — I’ve been doing business with one and they’re looking at a lot of different markets right now and they’re expanding rapidly and I think they’re going to be doing this another year to 18 months and they’re going to be a little bit of a headache for everybody in the meantime.
I mean, the good news is is yeah, they were paid but not that much, not to the extent of a — a crazy bubble like we saw on 2006.
Jason Hartman: Well –well — yeah —
Steve: Because —
Jason Hartman: — let — let me just comment on that for a moment.
Steve: Yeah, go ahead.
Jason Hartman: One of the dysfunctions of institutional investors and — and you know, any sort of fund whether it be hedge fund or mutual fund, an LLC that you invest in, any sort of pooled money investment, one of the dysfunctions of this type of investment is the same dysfunction that government — now government has a lot more dysfunctions, but they — this is one of them and it’s the concept of, look you better spend your budget or you’re not getting more. That’s the thing with government. If — some bureaucrat runs some government program or department, if they don’t spend all the money they’re allotted, they actually get reduced next year. God forbid, now isn’t that counter to the goal. Isn’t the goal to be more lean and more efficient in cut costs? No, it’s actually not in government, it’s the opposite. The more you spend, the more you get.
Look at the education problem in this country and especially in — in the Socialist Republic of California. You have NEA, the national extortionist association, otherwise known as the national educational association. Forgive me. I know there are great teachers out there. My disclaimer — if I’ve offended anyone. I’m sorry, okay. But these Unions are not doing any good for our kids.
Anyway, enough said. Someone else can —
Steve: Well, they need more money, Jason.
Jason Hartman: Yeah well that’s the problem, we’re too stingy. And I remember in California, I took this program years ago called leadership tomorrow, and with leadership tomorrow, it was like a nine month program and every month we would spend an — a whole day, like a sixteen hour day in one part of the community. And I remember on education day and then the following — the month before and after we would like do homework and study this stuff and then go meet with all the respective leaders in the community and — and stuff like that, and I just remember on education day, sitting there with this administrative staff person with the public school system saying oh, we just don’t have enough money. The — the amount of money we get per student is not enough. I’m like okay that was fifteen years ago. Now you’ve got way more money even adjusted for inflation, and it’s still a disaster.
I mean, it’s — it’s just — it’s just ridiculous. So, that’s one of the functions — dysfunctions of an institution is that they need to get more money — they need to spend all the money they have and in their case, they need to get it fully invested before they can go out and start another fund or another grouping and get it subscribed. That — that’s what happens.
So, they — they just — they’ve got to go get that money invested. That’s like the hot potato. When they get money, they got to deploy it and invest it. They cannot keep it on the sidelines, which I think leads to a lot of malinvestment. That’s my point.
Steve: You — and that’s definitely happening. I mean they’re — many of them are about to get pan caked by the fragmentation train. You know they’re — they’re buying quickly, they’re running faster than they — they really can and they’re just not going to be able to manage all this stuff. And you know, some of them have — have realized that already. They’re — they’re trying to diversify out into these markets and — and use local operators, but at the speed they want to invest that money, it’s — it’s — it’s just not the same. They’re — they’re not going to be able to do it long term and that’s why they’re getting themselves these tight windows to do this within.
Jason Hartman: Yeah, agreed. And I just want to circle back and say one more thing about the international investing. Now look, if someone listening is a person of means and — and they’re — they’re upper middle class or wealthy, I — I certainly think it makes sense to have offshore structures, potentially. Keep in mind that’s a — that can be a trap. You’ve got to be really careful because you must as a U.S. citizen report all worldwide income. You got to be very careful. The government gets real touchy about this type of stuff, and you know you’re likely to be audited I thin — from what I hear.
I’m — I’m no expert on this. The disclaimer again, I’m not a lawyer, I’m not a tax advisor, I’m just talking about my own experience and what I hear on the show here from people and what I read. And — so certainly there are things you want to consider in — in that way, because if the U.S. does fall apart, certainly you want to be a little bit diversified, but for most people just good old U.S. real estate and diversified markets with good insurance policies, I think does the trick most of the time.
And it reminds me of the old story and that is the old story — I think it Russell Herman Conwell that popularized this story and Steve, you might know what I’m about to say here, it’s called Acres of Diamonds. And I originally heard it many years ago from one of my great mentors, Earl Nightingale a founder of Nightingale Conant the audio company and I remember Earl Nightingale, you know he — he would tell me Acres of Diamonds story and in the nutshell, this is it.
It was about a man who had a — a farm, somewhere in the Midwest, I think, and you know he kept hearing and reading about people discovering diamonds over in Africa. So, he finally decided to go chase the end of the rainbow, sell his farm and then go and spend the rest of his life covering — searching the vast continent of Africa, in — in search of diamonds. And what finally happened is he got so frustrated in searching — going through Africa looking for diamonds, that he threw himself into a river and drowned. He committed suicide.
Meanwhile, back at the farm as the saying goes, the — the man who bought his farm was walking across the property one day and he discovered a large interesting stone, okay and you probably know what I’m going to say. He — he picked it up, he took it back, he cleaned it off and it turns out it was at the time, one of the largest found diamonds ever discovered. And it turns out the whole property was covered with them.
So, there is your acres of diamonds story. The first farmer had already had acres of diamonds. If he just bothered to look where he was, there’s like that old saying, bloom where you’re planted and — and the other is saying, there are no small parts, there are only small actors. So, exploit the opportunities right around you. If you’re in the U.S., I’m telling you U.S. offers phenomenal opportunities for real estate investment.
Steve: Yeah — yeah, well —
Jason Hartman: Enough — enough patriotism. I’m going to get a nasty gram like I did before from someone in another country saying, Jason you’ve got to stop talking about how great the U.S. is. I don’t the U.S. is that great. I think it’s a disaster. I’m just an opportunist. And I think — I think there’s a lot of opportunity in terms of gaming the system here. So, I don’t need any more of your emails with that commentary.
Steve: Well, that’s what you get for being a libertarian hack.
Jason Hartman: You know me.
Jason Hartman: Or a conservative hack as Gloria thinks I am. Okay anyway, next subject. So yeah, a lot of people — I guess the point of that whole long discussion — a lot of people buying up U.S. real estate from other countries. If you’re right here in the U.S., maybe you better think the way they do too.
Steve: I — I think so. I think so.
Jason Hartman: We’ll be back in just a minute.
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Steve: We’re looking here now — you know you posted an interesting graphic on Facebook the other day about what happens to a penny —
Jason Hartman: Oh yes.
Steve: — as it compounds over thirty days.
Jason Hartman: Yeah well — well, that’s interesting that you bring that up, because you know Steve, Canada recently decided to do away with the penny. The U.S. should too. It costs much more to make a penny than a penny is worth and the same is true with a nickel and I — I instantly thought my little entrepreneurial mind thought, well if that’s true, I should just go to the bank and get a bunch of pennies and — and take them to a smelting place and have them melted down for the metal value. And one of my friends who’s a — a monetary hack he said, oh not so fast. That’s illegal. You’re not allowed to melt the money or the currency I should say. There are anti-smelting laws and you go to jail if you do that. So —
Jason Hartman: — can’t melt it down for the metal value but it’s just totally illogical. But when you double that penny, you can do some cool stuff, huh?
Steve: Yeah, you know it’s — it’s funny how quickly it makes progress. On day 15, it’s only at one hundred sixty three dollars and eighty four cents, but —
Jason Hartman: Well, hang on a second. Don’t go so fast here because we’ve got to explain, you know and a lot of people have heard this. This whole chart says, watch what happens to this penny over thirty days and it just shows that when you double a penny every day for just thirty days, you get what Albert Einstein called — and — and this is what he said about it, he said compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t pays it. And Einstein was right because — I mean, look at the types of returns we can get with our income property investments, Steve. Returns that are over ten percent pretty easily even on a deal that goes sideways and on a — on a deal that goes well up — upwards of twenty percent overall return on investment.
And so, all of that said — I — I mean, look how fast someone can create wealth over just the matter of a few years — a few to several years, not that many years. So this penny as you said, day one you start out with a penny. Day five — well day two you got two cents, four cents, eight cents, sixteen cents, thirty two, sixty four, etcetera. And so like you said day fifteen you’ve already got from one penny doubled every day, one hundred sixty four dollars basically.
But — but Steve, how long does it take you to get over one million dollars?
Steve: Well, you’re already there and it looks like day twenty eight.
Jason Hartman: Twenty-eight, you’ve got one point three million dollars in change and by day thirty, you’ve got almost five point four million dollars. And if you don’t believe me, just do the math on a calculator. The first time I heard this years ago, I actually did it on a calculator, and — but now you can just Google it and you can find a bunch of charts that show this. So, isn’t that amazing? I mean — wow.
Steve: It is and it shows you what staying power does.
Jason Hartman: Yeah, yeah.
Steve: You know, what if you didn’t stay until day thirty, right?
Jason Hartman: Very good. Thank you for mentioning that. That is really the moral of the story because first of all, it has to do with keeping the score. Most people in the real estate game with the income property game, they’re winning and they just don’t know how to count. They don’t know how to keep score so they get emotional and they think oh gosh, this investment didn’t work and then what usually happens is around March of the following year they go to their tax accountant, and their accountant says, wow you know these rental properties, you’re saving a lot of money on taxes. And they thought, oh well, I didn’t figure that in. That’s actually — that deal was quite a bit better than I thought. And then what happens is, they get the property stabilized, they get a good tenant, the tenant stays for three or four years and that happens more often than not. Well, not more often than not, but it happens a lot.
You know, I’ve had a tenant stay nine years. You heard my mother on the show before taking about one of her tenants that’s been in her — one of her properties since 1989. She hasn’t painted or changed the carpet or done anything. My suspicion is that’s a meth lab. I’m joking.
Steve: Isn’t the EPA going to have to take that carpet out of there?
Jason Hartman: Maybe, maybe.
Steve: That’s nasty.
Jason Hartman: But — yeah that’s — that’s pretty bad. But these properties, if you just have staying power, income property real estate, it’s a game of staying power, and the people that stay in the game unless they were in Detroit, they’re winning the game, generally speaking, they’re almost always going to win the game if they can stay in the game.
So, how do you stay in the game? Well, you follow my ten commandments — well actually, addendum twenty commandments now of successful investing, and — and one of them is thou shall not gamble. You got to make sure the property makes sense from day one and that’s how you stay in the game. And then control your own head. Control your own emotions.
I just did a great interview with a Wall Street guy today and we’ll publish it soon about how important it is that investors — in whatever the asset class is, they control their own thoughts. Viktor Frankl wrote that great book many years ago about the concentration camps in Nazi Germany, and — and it’s entitled Man’s Search for Meaning. And he talks about how the last human freedom is the freedom of how we perceive something. What we think? No one can make us think anything. We are in control of that completely regardless of what is happening outside of us, we control what we think, and of course Napoleon Hill, Earl Nightingale and all of the greats throughout history said essentially, we become what we think about. We become what we think about.
And so, if you want to become rich with income property, get control of your mind. So, enough said on that one, probably.
Steve: Yeah, but that staying power is what does it, when you can stay in the deal and — and ride out any bumps, you’re always going to come out ahead. You know, football teams don’t forfeit the game when the other team gets a first down and say it’s over, the game’s not over. Those bumps will happen but you’re going to win especially everybody loves their income properties a lot more in April, during tax time.
Jason Hartman: Yes, they — they sure do. And you know what, it’s kind of funny that we’re having this conversation now because the market is actually quite good. Properties are renting pretty well in most cases. Prices are going up in almost all cases, and it’s like things have taken a seemingly positive turn. I don’t think this is a — any real economic recovery, but I — I — I mean things seem to be going pretty well overall out there. You know, I think it’s largely because of quantative easing and money printing. I don’t think it’s a legitimate recovery but in eith — in either case, it is one for the people investing in real estate the right way because they out — they over exceed inflation with leverage and inflation induced debt destruction, and packaged commodities investing and all this stuff we talk about. All the — all the principles that really make this — this game work so well.
So, this is kind of like a conversation that we should have had two or three years ago when it was in the — in the dumper and you know everybody needed some encouragement.
Jason Hartman: We don’t even need to be encouraging you folks right now. Things are — things are all in all going pretty darn good out there.
Steve: Yeah, they’re listening to the podcast so they know how to — how to game this thing. I mean, I’ve taken to calling everybody and the government — the Kanzians now. You know, the Kanzians they’re pumping money in the economy. That’s how they believe the — the economy will get better and there’s not much evidence that that’s the case, but it is kind of a short term cortisone shot. It makes the economy prone to more bubbles. So, if you can position yourself for that then you can — you can definitely take advantage of it.
Jason Hartman: Oh yeah. And that’s what happens. The — the — you know the old saying, Steve, the rich get richer and the poor get poorer, well one of the reasons the rich get richer is because number one, they have the resources and the money and usually the will to do things on a contrarian basis. They have the staying power to stay in the game. And by the way, one thing I need to mention about staying power is that the other part of that is you don’t invest every last penny you have. You’ve got to have adequate reserves because if you hit a bump in the road, you need reserves to cover some vacancy. You need reserves to cover some unexpected repair cost. That’s part of the deal. You don’t throw every last penny you have into buying property.
Usually this isn’t a problem, but it is a little bit sometimes but you — you got to have a proper plan. So, that’s kind of like the Dave Ramsey emergency fund idea, which I totally agree with, by the way. You need to have an emergency fund, not only for yourself in your personal life, which many would say is like six months expenses, not six months of income, six months expenses and for your properties a minimum of four percent of the value of the properties.
So in other words, if you have a one million dollar portfolio, you need to have forty thousand dollars at least, on the side in reserve. Now, that gets a little more complicated too because if — if you — if you have that one million dollar portfolio and say you weren’t able to mortgage any of those properties, and they were all free and clear, I hope they’re not. Why do I say, I hope they’re not because leverage can be a very good and powerful tool used properly but if — if you have them highly leveraged you may need more reserves.
So, if you have them not leveraged at all, you know like if you’re a foreign national and you had to pay cash for your properties, maybe you can be a little more skinny on the reserves. So, that’s why we have investment counselors and that’s why they can help you with some guidance there, but you must have some reserves folks.
Steve: You don’t want to be forced to do anything when it comes to your investments. You don’t want to have to accept the rental application on the shady tenant or you don’t want to have to sell. You know, that’s when these dumb decisions start — start being made and you lose the staying power.
Jason Hartman: Yeah, yeah. You don’t want to get the margin call as it were.
Steve: Right, which I love that movie.
Jason Hartman: I know. I talked about it today. That’s such a great movie.
Jason Hartman: But that’s the analogy to the stock market. Okay. Let’s switch gears. We’ve got to wrap up here. What else do we want to talk about?
Steve: This is a quick one on housing wire today. They have announced that in the — I can’t remember, the last six years or so, but the — the lenders have completed just over six point one five million loan modifications. We don’t know how many of those have re-defaulted or defaulted at all, but I think that speaks a lot as to what’s happened to a lot of this shadow inventory that people have been expecting. Much of it has been lost mitigated through, you know, these loan modifications or short sales, and you know, some people have kind of you know fought through it, but much of it still has yet to wash through in the judicial foreclosure states where it just takes so much longer to — to process these foreclosures.
So, that’s — that’s why we haven’t seen that hammer come down like people originally thought was going to happen.
Jason Hartman: Yeah, and you know what’s — what’s kind of interesting about this judicial versus non-judicial foreclosure issue is you kind of look here at how the government once again perverts, subverts. maligns and — and creates not just malinvestment in– in ways, but also malaction I’ll say. I don’t even know if that’s a proper phrase, it probably isn’t, but it causes the market to recover more slowly because one of the things that’s a concept of free market economics is the concept of price discovery and market clearing. Those two concepts, they’re really one in the same. But when — when you have these foreclosures process quickly you get price discovery very quickly and the property is foreclosed, the new buyer buys it. The new buyer either establishes it as their home in their homestead, and that’s fine and dandy, or they turn it into an investment property, or they improve it and flip it and whatever the case is they create a highest invest use hopefully. And the free market is just — it’s got its own wisdom. It’s such a beautiful thing versus Keynesianism with good old John Maynard Keynes and I — I remember as you were mentioning that from my eco — my economics class in college back there at Long Beach City College, my first year, and that professor used to always talk about priming the pump and Keynes. And now that I think back, I think he was a Keynesian, evil. Evil Keynesians —
Steve: I can’t believe you turned out as well as you did.
Jason Hartman: Well, it — it —
Steve: When Keynesian is talking to you.
Jason Hartman: Well, it took — it took a few years but I like the Austrian School of Economics much better, which is more about free market. But — but that’s what happens. It — when the market clears, the recovery happens more quickly. And it’s just better. It’s just better for everybody. Price discovery needs to occur as quickly as possible. Ownership needs to transfer to the party that can do something better and that’s just good for all concerned. It really is.
Steve: Yep, yep that is — that is. So, the government’s been trying to “help with the housing crisis” but I think, you know we can all look back it’s just really prolonged it. Investors are gobbling up properties anyway, which they would have already done.
Jason Hartman: Yeah.
Steve: So, here we are.
Jason Hartman: Here we are. We are here. That’s for sure. And — and — and by the way, I — I want to mention something else before we talk about the Memphis Tour and that is we have had — you may have noticed, some pretty severe website problems. We’ve got almost — one of my companies has almost twenty websites and you know, we’ve just had some problems with like the images not showing up correctly and it’s just been a nightmare the past week, and at the same time as I announced last time, we’ve been changing the podcasting system over to a new — a new service which is quite a bit better but that change has had some problems and I just want to say to everybody, if you ever need to reach us and one of the sites goes down for some odd reason — this only happened once before a few years ago, but we’re here and if you don’t see the podcast on iTunes for whatever reason, look for the website. Go to Jasonhartman.com and you can always of course, contact us (714) 820-4200. (714) 820-4200 and you can reach your investment counselor there.
Steve, I don’t think we’re going to have time for a guest today. Remember at the beginning, we didn’t know who the guest was going to be, but I think we’ve got to wrap this up. We — we’ve talked a lot here, but we do have some great guests coming up including Jim Rodgers and — and a whole bunch of other great guests. So, we’ll — we’ll save that for future shows, but let’s talk about the Memphis tour.
Steve: If you haven’t been to one of our property tours yet, I — I encourage you to come to the Memphis tour. You learn so much. You get so much more confidence in your ability to invest and buy these properties and manage them effectively, when you put your boots on the ground. And — and you get to shake hands with everybody that’s involved. Our local market specialists, their property managers, insurance people, the attorneys, and — and see who ultimately is on the other end of this deal. That you — you get a feel for the neighborhoods, so that — and — and this is important, Jason, because with the inventory moving so quickly, a lot of times you have to be in touch with our local market specialists all the time about what they’re even thinking about buying, because by the time they’ve purchased it, many times it’s already spoken for due to how tight these markets are.
So, one very valuable thing about going to the property tour is that you learn the different neighborhoods and what you’re most comfortable with so you can let the market specialist know, hey you know, when a property becomes available in this neighborhood, count me in. I want first crack at it and that you’re not having to play that — that game of chasing these things down.
Jason Hartman: Yeah, having that human relationship is very valuable and of course, this is — this tour’s at the end of April and we’ll have the Creating Wealth in Today’s Economy Boot Camp. I’ve given that talk to thousands and thousands of investors and you definitely don’t want to miss that.
You know, we used to always say when we had kind of a California centric audience back in the old days, come to the Creating Wealth Boot Camp twice a year. And it’s — it’s just a good refresher, number one and number two, as things change, I’m commenting on current events and so forth and how they apply to us as investors. So, even if you’re not interested in Memphis as a market for some reason, just come for the seminar. Come for the one day, nine hours of educational content on Saturday and — and if you want, you can come of course, to the reception, the dinner we’re having Friday evening and the tour will be on Sunday.
And so, speaking of website problems, we’ve had a problem with that too because for some reason, it’s not showing up in the events section and it’s showing up in the blog section. I don’t know what the problem is, but our — our web developers are working on it. But if you click on blog, and then you click on Memphis property tour, which right now is the first entry there, down at the bottom it says, register now, and you can do that there, okay.
Steve: And I can speak to that really quickly, Jason, what you were saying. I used to work for one of the prominent real estate gurus out there. And by gurus, I mean the guys that are on the — the late night infamercials, and they you know sell their coaching and their books and tapes, and I — I can sit here and I can tell everybody that you will learn more in Jason’s one day Creating Wealth Boot Camp than you would by buying a thirty five thousand dollar coaching program from one of those gurus.
Jason Hartman: I tell you, those — some of those courses are just a complete rip off. They — they really are. You know, I never want to downplay the importance of education, but it’s just — the difference with us is that we’re tied to the — the actual activity of investing unlike these gurus that just sell you a program and send you away. And you know maybe it’s a continuity program where you talk to a coach every month or every week or every two weeks or whatever that is, but when they do that it’s a situation of, they don’t have to actually provide properties, whereas my company provides actual properties to you. Okay. So, what we say in the seminar and on the podcast has to come true in — in a property you can actually buy. And — and that’s — that’s just a huge, huge difference okay, because this is where the rubber meets the road.
I — I — I’ve told this story before, but as I would spend so much time and money over the years reading hundreds of books on real estate investing, going to hundreds of seminars, listening to hundreds of speakers, and it all sounded great, and I’d get all excited. And then I’d go out and try to implement what they said in real life and Steve, it was just too hard to do. You — you can’t — you know in — in reality it’s so hard to find that — that one seller, that needle in the hay stack that’s going to make you this incredible deal, that’s going to give you a great price and great terms, and it’s — it’s just very difficult to do it.
We have actual properties for you, folks. That’s a huge, huge difference. It really is, it’s where the rubber meets the road. So, good — good stuff.
Well hey, let’s wrap this up. Was there anything else? I think we covered it all, right?
Steve: Yeah. We cover it all every time. What are you talking about?
Jason Hartman: Okay. Okay. We cover more than it all. Hey folks, thanks for listening. We’ll be back on the next episode with a great guest for you and I just want to wish you all happy investing. Call us, engage with us and let us know how we can help you. We really don’t charge for any of our services and if it is one of our educational programs or tours, it’s a nominal fee. We want to help you really invest and that’s what we’re here for. So, we’re not selling you a bunch of stuff. We’re actually going to help you — help you have the rubber meets the road and actually build a real estate portfolio.
You know, one more comment on that Steve, I cannot tell you the number of times, and I know since you’ve been with my company you’re starting to hear this too, but the number of times someone has come up to me at a break and said, you know I am so bummed out. I am so disappointed that I — I went to this seminar, this big guru, this big author, and I spent nine thousand dollars, I spend thirty thousand dollars in one. It was unbelievable. They said they spent like sixty one thousand dollars on all of these coaching programs and — and when they learned how we do it they said, I — I could have purchased two or three actual properties.
I — I mean folks, this is like the over priced college education. It goes on in the private market out there and don’t do that. Get yourself some actual properties. We’ll — we’ll give you most of this education for free. Okay. And —
Steve: It’s true.
Jason Hartman: — and dare I say, I think our education’s better than anybody else’s. So —
Steve: It — it is. Those — you know, a lot of those big companies there — it’s a sales funnel, you know. They hook you and they want you to spend a bunch of money at this workshop and they sell you to the next one and — and they’ll take you as far as they can, you know. I’ve even seen some of them, you know, signing clients up for credit cards at the back of the room so that they could buy their products.
Jason Hartman: Yeah, and I — I tell you something. A lot of them, the sales pitch is so good. I remember being on the phone with one of those people for over an hour as they were trying to pitch me on the coaching program, and they start you with like a three hundred dollar weekend seminar and then it’s the eight thousand dollar coaching program and I asked the — the woman who was selling me on this, I said, well — so who — who’s my coach? Tell me about my coach. And she says, well I’ll be your coach. And I said, okay. And I said well tell — tell me about your experience and she completely downplayed experience. And I — I said, you know, have you been a real estate investor for long, and what I come to find out is that she’s never purchased a property.
Jason Hartman: Okay.
Jason Hartman: And — and — and here was her answer. She said, hey is Tiger Woods’ coach as good a golfer as Tiger Woods? You know, I mean they got like every trick in the book.
Folks, I don’t know about you, but I want someone who actually has some experience. I don’t want to rely on some telemarketer in a boiler room following a script, I’ve — I’ve been there and done that. I can tell you, experience does matter.
Steve: Yes it does, yes it does.
Jason Hartman: Enough said. Let’s wrap it up. Thank you Steve for joining me for this intro portion of the show.
Steve: We did it again.
Jason Hartman: We did it again, but we’ll be back with a guest next time and again, thanks for listening folks, and happy investing and we hope to see you in Memphis, Tennessee.
Female Voice: Are you interested in a property outside of our network? Do you need a second opinion? No problem. Let Jason’s experts evaluate the deal. Our deal evaluator is only $50. For more information go to Jasonhartman.com now.
Female Voice: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com or email [email protected] Nothing on this show should be considered to be specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc., exclusively. (Top image: Flickr | jurvetson)
Transcribed by Debra
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