Jason Hartman discusses the idea of fiat currency has spread throughout the country’s conscience in the past few years. A few years ago you wouldn’t have heard a peep about it, but with the rise of cryptocurrency, it’s become more and more prevalent. He dives into Orlando’s rental market and how long properties are staying on the market. Later on the show, we go to a clip from the 2018 Meet the Masters of Income Property, where Jason discusses how his prediction of 6 million new renters came more than true.
Investor 0:00
Do your research. There are some providers out there. I mean, this is true not just in real estate, but in general and sales that just wants you to get information from them. Do your research, and you’ll come to see, I think, at least for me that Jason, you, you look out for your clients, you I mean, I with my investment advisor, there were things that I was looking at initially, and there was absolutely no pressure there was okay, yeah, keep asking questions, do that research it. And not only is it better sales, because you have a competent client, but also you become more knowledgeable. So I’d say do the due diligence, constantly investigate, ask questions, and also just look at the big picture. I think about that all the time. You know that they’re going to be hiccups. I’ve already experienced some hiccups, and I haven’t been investing that long. But overall, even with those hiccups, it’s still profitable. Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:35
Welcome to Episode 1303 1303 and I am coming to you today from just outside at sea in the near harbor of Bar Harbor, Maine and it is absolutely gorgeous. We’ve been lucky on this mastermind crews retreat. The weather has been very nice yesterday. We spent Today in Boston, and and we didn’t park the car and Harvard Yard. I know I’m not doing that very well. But anyway, you get the idea, right? And what was funny is we were on the tour yesterday and the awareness of the monetary system and what an epic scam the whole thing is, is just increasing to the common people. So we were driving on the tour bus yesterday. And you know, I’ve been to Boston, of course, many times. It’s not like a tourist attraction for me. But I hadn’t actually never gone on a tour in Boston. My girlfriend hadn’t been there. A couple of the people on the venture Alliance mastermind cruise I don’t think had been to Boston either. Amazingly. And of course, that’s really the third biggest financial center in the United States, New York being number one in Chicago, Chicago investors Listen up. Being number two, Chicago is number two, and I know Illinois is like California and New York, a very mismanaged state and has a pension crisis problem and higher property taxes, no question about it. But hey, if you want high property taxes, have you checked out New Jersey, the highest in the country and, and then Texas, although Texas has so many good things going for it. Property taxes in Texas are high. They are kind of exorbitant. But this stuff passes through, and Chicago, still all things considered, not one of the more landlord friendly markets, high property taxes, but again, the third biggest financial center in the United States, and one of the trophy cities of the entire world, Chicago, so Chicago investors, I know, you’re thinking these property taxes are ridiculous and you are right, you are definitely right about that. But Chicago has some really good stuff going for it. So keep things in balance and balance your view with the good and the bad all together and look at the whole equation, the big picture. Anyway, so we’re on the tour bus yesterday, and we drive by the Federal Reserve Bank of Boston, which by the way, is an absolutely gorgeous over the top building. Many of you have probably seen it. That’s hate the Federal Reserve, that’s where the money is right? And the tour guide, just a common guy says, and on your left, if you want some get this, here’s, here’s what he says, If you want some fiat money, fiat money. Now that’s a term that before the common person would never use fiat money. I remember when I started talking about fiat money and explaining inflation deflation, the scammy monetary system that the entire planet Earth With these central bankers and governments inflating away the value of our stocks, bonds, savings, equity and real estate even inflating it away, inflation is a fief. It’s a pickpocket. And fiat money.
Jason Hartman 5:14
Fiat just mean that word means no, it’s not the car, but fee means by authority or by decree. In other words, the money well really the currency is money, because we said so because the government said so. That is fiat money. In other words, it has no intrinsic value. And I attribute and I noticed it started changing when I was speaking to groups back in 2004, about fiat money about central banking, and about how to use income property, the most historically proven asset class in the entire world to beat the central bankers at their own game and to you Inflation induced debt destruction and all the other techniques that I teach. And of course, you’ve probably been listening for years, and you’ve heard me talk about them to use all those techniques. People looked at me fiat money, what is that? That’s such a strange idea. But now, this knowledge is trickling down through the entire population, everybody gets it. And I think a large part of this understanding of fiat money and all of the other scammy things about central banks and governments and so forth, is largely attributable to Bitcoin. And cryptocurrencies. Because everybody of course, before that it was just the gold bugs that talked about this stuff, right. But now, with the rise of cryptocurrency, which I do not think will be a success, by the way, and again, stating for the record, as I have done many times over the years, I would love nothing more than to be completely wrong about That idea, I would love nothing more than to be wrong. And I would love nothing more than to see crypto currencies succeed in a major, major way. But I think that the entities, the governments, and the central banks are just way too powerful. And they’re going to win. And they’re going to squash cryptocurrencies, when they can when they become too powerful. And I think a lot of people are going to get hurt. But hey, we’ll see. Time will tell. Time will tell, nobody knows yet. But it was just funny to me that the tour guide with a bus of people on it, driving us through Boston yesterday says hey, that’s where they make the fiord money, the Federal Reserve, you would have never heard that 10 years ago, you just would have never heard that 10 1214 years ago. So interesting point there. And I’m glad more and more people are understanding this. And again, as income property investors, we know how to game the system. We know how to align our interests with these most powerful entities. central banks and governments the most powerful entities the human race has ever known. To win the game, we’re gonna win the game just like they do, because their business plan is inflation. In fact, it is their stated goal to have at least 2% inflation. So that’s that, by the way, today, we are doing a pic for our Well, we’re not gonna have a guest on this segment. But our producer Adam, who does a great job, by the way, is going to pick a segment, a live segment. And I think he’s going to be talking about all the new renters coming into the market, or he’s not going to be talking about it. But the live segment will be about that from one of our events. So we’re letting him pick today. And he might actually play one of our blog cast episodes. We’re going to leave that up to him. And we’ll get to that in just a couple of minutes. But in addition to Boston and the beautiful view from the cruise ship here of Bar Harbor, Maine, I did want to tell you a couple of other things. I was looking at an investor PD article yesterday about a another sign that the economy is changing. And there may be an impending recession, if not a recession, at least a slowdown, at least some changes. And the stock market is always a good barometer of this right. It’s a leading indicator most people say because investors, especially the more knowledgeable ones, will price their fear or their optimism into the market in advance of things happening. So this article is entitled stock outflows. In other words, money moving out of stocks, the largest in a decade, show distress with stocks near highs, right. And so since 2009, there hasn’t been as large of an outflow of money, leaving these stocks, that money is repositioning itself into more conservative asset classes, including defensive stocks, that are stocks that tend to do well or at least hold their own hopefully and have less volatility, but lower yields in recessionary times. So we’ll see what happens with that. Hopefully, they’re smart. And they’re investing in the most historically proven asset class in human history, of course, income property, you know what that is? It’s definitely not stocks, because Wall Street is the modern version of organized crime. We all know that. So this is a net outflow By the way, of about 60 billion, that’s billion with a be about $60 billion. And it represents a sharp reversal from the same period in 2018, just a year ago, where a stock funds enjoyed inflows of $20 billion so 20 billion in during this period last year. But this year 60 billion out triple the amount out of the market than last year coming into the market. So that’s a change. Now, a lot of you are going to be seeing me just about a week and a half from now in Orlando, Florida for our profits and paradise event. And of course, Friday By the way, a lot of you going on the property to her on Friday. We we just thought that would be a little sideline, but a lot of you signed up for that. So we’re looking forward to seeing you at the property tour on Friday. That will start we want to say it starts at 1030. It does start at 1030 1030 is when it starts 10:30am but the bus leaves promptly at 11. Okay.
Jason Hartman 11:45
So there you go, but come in network and mingle and hear from our local market specialist at 10:30am on Friday. That’s one week from Friday for the property tour. And then of course Saturday and Sunday, we will have the profits in paradise conference. So looking forward to seeing you all there, we got some great stuff lined up for you. But what I wanted to tell you is I just saw this article in Orlando weekly entitled Orlando being pitched as Florida’s top city for buying rental property. And that’s bad news for renters. So what they’re talking about is the affordability problem. You know, you know, they don’t say the time period here. So this is the problem with the mainstream media, right? They don’t really give you enough details. I don’t know if this is your over your or what it is, but I’m going to read it to you anyway. Okay. Population growth in Orlando. 4.8% employment growth 3.5% increase in home values 10.7% median sales price $254,000 average rent now, by the way, notice how misleading This is right? They show the median sales price But not the median rent, they show the average rent, average and median, of course are different. And so the average rent not the median rent is 1300 and $29. And this is kind of interesting, because this is a website for landlords that keeps rental stats. And it said the average number of leads, in other words tenant leads per property listed on the site is 34. And the average number of days on market 19 days. So in other words, supply is constrained. Things are tight. We’re meeting in Orlando, but we’re looking at one of the outlying areas of Orlando for this. Now, the other thing that’s misleading about this article, I mean, overall, it’s very positive news for landlords, that’s the gist of it. But one of the things here that, you know, people don’t know they talked about the other top markets. Number two is just Jacksonville market. We’re very active in Jacksonville. Of course, many of you listening have purchased through our network in Jacksonville. They also talked about in the top five, one of them being Tampa city, I was just in a city I’m flying back to here after the cruise. Tampa is great. But again, they don’t really ever equate this stuff exactly right. Because what we want to look for as prudent income property investors is a good rent to value ratio. They just look at, well, rents are going up, or rents are high. Well hate. rents are high in Los Angeles and San Francisco too. But I wouldn’t touch those markets with a 10 foot pole. Hey, not even a 25 foot pole. Those markets are so overpriced, and the rent to value ratios are so bad that they make absolutely no sense. So again, whenever you look at this stuff, you sort of see a macro view and that macro view is very important. But you really have to dive in and parse and understand the stats to really get the true meaning. And hey, that’s why you listen to the show. That’s why you have me, right? That’s what I do I help you with that. Okay, so without further ado, let’s get to Today’s surprise segment, our producer is making the call today, he’s quite good at it. So we’re going to go to that and be sure if you want to get a last minute ticket to our profits in paradise event, and or the property tour, go to Jason Hartman live.com. That’s Jason Hartman live.com. And we look forward to seeing you in just about a week and a half the homeownership rate in 1994. That was the prediction in 2011, that we would go back to that homeownership rate and it absolutely came true. actually came true even more than that. So health household growth, about 1% per year in overall households, renters and owners right below the historic rate reduction in homeownership rate to 1994 levels, totally anemic growth in this marketplace. But look at this one, the renter population 39 million, just rounding in 2010 to 46 million in 2016. So how did we do on our prediction?
Jason Hartman 16:30
Okay, homeownership rate down slightly more than it was even then. Now remember, you’ve got to put in. This is not just a question of renting or buying. It’s also a question of population growth. And what I talk about a lot, which is the shadow housing demand, all those millennials we’ve been talking about who live with their parents, you know, blows my mind that we’ve got so many 34 year olds living at home still, absolutely blows my mind. Remember the movie failure to launch their ego? That’s the times in which we live, right? Okay. It’s right on with our model every 1% change this prediction we were slightly off on, we said that every 1% change in the homeownership rate would result in 1 million new renters. It was actually about 1.2 million. Okay. So we understated that that was our prediction. Right? That’s basically how you can look at it when you hear, oh, society’s falling apart. The economy is terrible, which is not right now. But and that’s because Trump’s president, sorry, Elizabeth, Hillary were president, the economy would be falling apart, and taxes would be higher. And you would hear bad things, right. And you’ll hear that in four years, because he’ll lose because he can’t shut his mouth. He’s terrible. That’s another discussion. But when you hear this is like I was on this panel, right. And a couple of you were there. Carrie was there. I know. I spoke on this panel in Phoenix in December. And on the panel with me, was a institutional real estate developer and he said that The decline in homeownership rate is a tragedy for society. Why? Why is that a tragedy? What is the belief system that everybody has to own a home? Where’d that come from George Bush. It’s a silly idea. It just doesn’t make any sense. I say the homeownership rate should be around 55%. Well, I get my way. I don’t know. But all these people need rental housing, and you can provide it for them. I don’t know what will happen, you know, in terms of the homeownership rate going up and down. Nobody knows the future, right. But this is a significant change. So I’ve been working on this theory about ex girlfriends. No, actually, that’s not the theory. I’ve worked on a lot of those theories. I’ve been working on this theory about the investor class. And, you know, there’s a lot of talk about how and one of our venture Alliance members who’s arriving this evening, Jeff, he does these great rants at some of our venture Alliance meetings, you know, usually fueled by a couple of drinks, and they’re awesome. He rants about how Jason is wrong and there’s no inflation. Are you kidding me? Everything’s getting cheaper and he’s kind of right. Okay. But you know where there is totally significant inflation, asset inflation. To play the game of buying real estate is a lot more expensive now than it was in the past to play the game of buying stocks is a lot more expensive now than it was in the past to play the game of buying precious metals, even though they haven’t done much in the last few years. You know, gold is a lot more than $400 an ounce Don’t even get me started on Bitcoin. Okay, you know, or any other cryptocurrency right? You can see that there are these certainly asset bubbles, right, but under the bubble, like if you looked at it like concentric circles right? There would be the outside layer, which would be the bubble, it’s too much right? But then you go in a layer, you know in the core price values in the middle Go in a layer and that would be just inflated value, but the value is really there. So what is the real value of real estate or gold or Bitcoin or you know the s&p 500? Nobody knows exactly, but I think we agree that a lot of it is over inflated. Certainly real estate and cyclical markets is massively overinflated. Real estate and linear markets. I don’t think so at all. How do I know that because when you guys buy properties from us, you’re buying fairly close to construction cost. Now, let me just depress you for a moment. I asked some of you if you were at our meet the Masters in our old office when we used to hold them in our office in Costa Mesa, California. We had a beautiful Class A 5500 square foot office, it had this gorgeous water feature outside of it. All this kind of stuff. Karen work there, Karen, who you heard from already. Back then we were selling properties, not many of them. But some of our clients were buying properties in places like Charlotte, North Carolina. They want Getting these deals in Austin. They weren’t that low in Austin, but they were still cheap. But Charlotte, Indianapolis, and guess how much they were paying per square foot? 30 bucks. Now you’re all saying I missed the boat. I know. It’s always the way you have to think about this stuff, right? 30 to $35 a square foot. We’d sell properties like that all day long Memphis. Same thing in Memphis. Okay, back in 2009 2010. But to buy properties back then you had to have a lot of guts, because everybody thought the world was falling apart. Right? You agree with us? So that’s the thing. So the investor class assets have inflated? There’s no question and nobody can argue that we haven’t had asset inflation. Back when I was in my early to mid 20s. Every ex girlfriend I had had a good corporate job. One was a contract negotiator for FHP healthcare, making 70 grand a year in her mid 20s. Okay, another was a camera. engineer for Dow Chemical. Now there was an architect in Irvine. Back then all of them were buying their first home. Okay, and one of them, I sold her her house probably shouldn’t date your clients. But anyway, she bought this house at 369. Huntington street in Irvine, California. Okay. And I sold that to her. And we dated afterwards. They were all doing that nowadays that’s not happening and they were doing it back then with their own money. Huge difference. You could buy a condo for $130,000 $160,000. Okay. And, you know, they were buying condos in Irvine an expensive market. They were entering the investor class by their mid 20s. Nowadays, how many millennials Do you know that are doing that on their own? Okay, Microsoft employees? Yeah. I mean, certainly there are some okay, but it’s just not happening in a major way. The way it used to, because of the failure to launch All right, failure to launch. So the millennials are a huge impact on the world. There’s 80 million of them slightly bigger than the baby boomers, you know, 75% will be in the workforce by 2025. But of course, they have huge student loan debt. And look at this good old Taylor Swift is here, right? So, you know, there’s some interesting stats on all of this, and the millennials are a different breed. They’re just not that motivated to buy 51% think now this, you know, you got to adjust for what they think they deserve, because they are entitled generation for sure. Right. They think they’re underemployed. Right, but a lot of them are, they really are underemployed. Okay. And then, you know, college major based on passion 69%. A lot of them are getting degrees that are obviously not that useful in the marketplace. You know, look, these liberal arts degrees that just don’t make money. Okay. 92% You know, they want the employer to be socially responsible. They’re very active. realistic, you know, they’re going to take a pay cut to have more engaging work. These are not the 50s worker, okay, that would just take the job because they gotta earn money and support their family. Only 14% want to work for a big company. You know, they want to be entrepreneurs. Okay, homeownership rates still low. I gotta move along here. Oh, now here’s another thing nobody’s talking about though this is really important. A lot of these millennials, as sort of messed up is their generation is they are going to start inheriting money. All right, and they’re going to start inheriting money from who their baby boomer parents. And a lot of those baby boomer parents have done fairly well for themselves. So this will impact the housing market. So what’s the trade of the decade? That’s the thing, the trade of the decade You ready? Here it is rent to millennials now while they’re figuring out their life, right? And then sell to millennials later after they inherit all the money and get capital gains. Okay? That’s the trick. rate of a decade right there. Okay. So what’s going to happen? Well, we think in the next six years, by the way, our prediction was understated. We said six years, 6 million new renters there were really 7 million new renters. Okay. And we think in the next six years, we’re going to get another 7 million new renders part of it from population growth. Part of it from all the stuff we’ve talked about already, but I gotta fast forward and just show you this chart. This chart is going to blow your mind take a picture of this chart. It’s important, hugely important chart. This is from john burns. He’ll be speaking I believe tomorrow. This chart is hugely significant why it is what’s called a mortgage sensitivity chart. And this chart basically shows you how many people get knocked out of the market. How many people get knocked out of the market, based on the interest rate This is major. Now the Fed has stated publicly This is not the same kind of fed we had Federal Reserve under Alan Greenspan that was really opaque and Greenspan talked in code and you know, you have to understand hieroglyphics and Farsi and like Russia and and every other language on earth understand and interpret Alan Greenspan. Okay? This Fed is not like that. All right, this Fed has said that they are going to raise rates at least at least three times this year, maybe four, and then next year in 2019. They’re going to raise rates two more times, because they believe the economy is heating up too much. Okay. Now, the Fed doesn’t directly control mortgage rates, okay, but they definitely influence them. So look what happens here when you have a $200,000 mortgage. Okay, decent number to consider a first time buyer mortgage and these rates go Okay, so if interest rates move higher millions of potential single family home buyers will be unable to qualify for a mortgage loan based on their current income and they will likely rent burns expects rates to hit 4.9%. Now I know a lot of you are thinking, well, that’s not that much higher than I already pay. It is because homeowner rates, owner occupant rates are much lower than investor rates. Okay, as investors, we have to pay a premium for those mortgages. We all know that. So this is the sliding scale of how the homeownership rate just slides down, when interest rates go up. You know, I’ve taught you all about what I call the three dimensions of real estate. And the beautiful thing about real estate is you get to negotiate the deal all along the life of the investment, right, you get to renegotiate it constantly. You buy it, and you buy that deal based on one thing in one scenario, and the way that Performa looks today. But then three years later, if interest rates are higher, you’re reading a No shading the deal? Why are you renegotiating the deal because there’s a lot of upward pressure on rents. And when that upward pressure on rents happens, you get to adjust your strategy. Okay? And maybe that decline in homeownership softens the market, and people can’t afford to buy and so prices soften fine, who cares? We invest for yield, not capital gains. If capital gains come, I can spend it as well as the next guy. It’s great. Okay, but it’s the icing on the cake. It’s not the cake. The cake is the yield. Okay, that’s what produces the return on investment. So either way, you win as long as you understand how to keep score, you know how to do the math of investing. We’ll go into that more this weekend, of course, and we’ve done a lot in the past and on the podcast, and you adjust your strategy. when interest rates are high. Do not be afraid. When you see that homeownership rate declining, do not be afraid. to really put upward pressure on your rents. And one tip that I again shared recently is that, you know, I love animals. I’ve always had this love for free little creatures. They’re great, right? Okay, you know, but I’ve never seen one enhance the value of a property, okay for the owner, the investment property. So another way you can raise your rates is by simply charging pet rent. Okay, you’d maybe you don’t raise the face rental amount, or maybe you do raise that maybe the rents $1,000 a month and you raise it to 1040. But then you add 25 bucks a month pet rent, all of the institutional landlords charge pet rent, why aren’t single family homeowners doing that? Okay, this should be the norm not the exception. It should be the normal thing, okay. People are usually more than happy to pay for their pets. So that’s another thing to think about. You can raise your rates in more than one in more than one way. All right.
Jason Hartman 29:55
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