George H. Walper, Jr. is the President of the Spectrem Group. He discusses the correlation between how investors describe their risk tolerance and how they actually make investment decisions. He also shares whether investors looking to get more aggressive given the market’s run-up. There’s been a lot of debate about the one-percenters… are they helping or hurting the economy and markets? Walper shares the data. Retirement has changed a lot over the past decade. How much do wealthy investors think is in the pot of gold at the end of the rainbow?
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 321, 321. Thank you so much for joining me today. I am coming to you today from Kansas City, Missouri and I am here in the office of our local market specialist from St. Robert. Although they are based in Kansas City, we’ve done business with them for many years in St. Robert, and many of you listening I know are our clients who have purchased in that market and have had some very good experiences and we are going to talk about St. Robert a little bit and the property management scenario there with the person who heads up the St. Robert property management and that is Jessica. And then we are going to talk a little bit about the new project that they are launching here in Kansas City, and we’re pretty excited about that.
A lot of you have heard about that project. I went out to look at it this morning and I think you’ll hear some fantastic things on this. And after the intro portion with Jessica, we will have George Walper with the Spectrem Group on to talk about some economic issues and here we go. Jessica welcome, how are you today?
Jessica: I’m good, how are you?
Jason Hartman: Fantastic. Tell us a little bit about the overview. Just give us a little overview on St. Robert. We haven’t talked about it on the show lately and you do a fantastic job running the property management in St. Robert, and kind of what’s going on there lately and then we’ll talk about Kansas City.
Jessica: Well, St. Robert is located near Fort Leonard Wood with its military installation there, so it’s ninety eight percent military personnel that are staying with us and the other two percent are probably working at the base. So, it’s kind of a nice mix of tenants there.
Jason Hartman: Fantastic. And in — in terms of the property management, I mean we’ve talked before on the shows — we’ve had Zack on to talk about purchasing there in the market and things like that, but I really want to dive into property management with you, which you say is boring and I say property management is critical. Maybe getting a good deal, that’s exciting and so forth, but good old property management, it may be a — a little less exciting but it is critically important to have a dependable good property manager.
And as I’ve said to our clients and listeners so many times, there are several markets around the U.S. that we actually like quite well, but we are not recommending them because we haven’t found a good provider or a good local market specialist there and the team is every bit as important as the market itself. So, give us a little overview on what you’re finding there in terms of how properties are leasing, vacancy issues, any collection issues, you know, is it landlord friendly? And then also you know your fee structure and so forth which is really clean and nice. I — I really like that a lot.
Jessica: Well, exactly. So, property management I think that’s why I kind of shy away sometimes with this subject with people just because I — I feel like other people might think it’s really boring. To me, it’s really interesting and I’ve really dove into this industry. I — I love it. So, thanks for letting me talk about it.
Jason Hartman: Well, you didn’t want to talk about it because you said it was too boring, but it’s super important, so — so go on. I’m glad you’re — I’m glad you like it so much.
Jessica: Okay. So, I — I guess going through and simplifying it, I — I kind of look at property management into three different divisions of importance, especially if I was looking for a property, this is — these are the kind of questions I would be asking a property manager about their company. One is fund management. So exactly how are they structuring their accounting system? You would think that it was really simple about collecting the rent and then disbursing that over to the owner is actually very complicated accounting. So, I would say hey, what kind of accounting software are you using and exactly — you know, what’s your time frame, because as we — as we’ve gone through the processes with different accounting software’s we actually get a strange reaction from sometimes the sales people. They’re like you seriously get your funds out between the 10th and the 15th then really? Yeah. Our — our owners like to see their money and they’re like that’s kind of unheard of. Normally we see it between the 20th and the 30th. I’m like no, we’re — we’re really fast. We’re — we’re really progressive with that. We know everybody wants their money. So, we’re quickly — you know we’re seeing those funds and — and making sure they’re calculated correctly because that’s a huge — huge point of that and making sure that our owner statements are easily readable. So maybe asking a property manager hey, can I see your owner statement just to see what it looks like and making sure that it’s something that you can understand.
Jason Hartman: Absolutely. And having clean and simple statements is one thing, but having clean and simple fee structures is another. I mean, some of these property managers they tack on — they just nickel and dime you to death. So, tell us about your fee structure. I mean you charge a percentage every month and many managers charge lease up fees and many managers mark up repairs and maintenance issues and things like that, but kind of dive into that if you would.
Jessica: Well, I like simplicity so I kind of think everybody does too. So, we do not charge a leasing fee. That’s complicated I think and in some situations it’s not always really fair. So, we just do a flat percentage fee off of the rents that are collected, and that’s you know your base rent plus any pet fees we’ll — we’ll take off the pet rent — we’ll take a percentage from that. Other than that, you’re not going to get any other fees.
Jason Hartman: Okay so, when the property is vacant and you initially lease it up or maybe one tenant stays a year and then you lease it up again, you don’t charge to lease up the property, whereas many managers will charge fifty percent of the first month’s rent, seventy five percent of the first month’s rent, sometimes and entire first month’s rent for the initial lease up. And then I believe you charge eight percent per month, right?
Jessica: Yeah, and that depends on the type of property.
Jason Hartman: Okay so that varies a little bit. And you — you rarely see — I’m a — I’m a — I’m a pet lover. I — I love cats and dogs, especially dogs. I have a dog of my — my own and pretty much I always had dogs and I like them and I’ll rent to them, however I’ve never seen a pet actually improve the value of a property. Maybe they improve the lives of the owner, but do you really see people collecting pet rent?
I — I — I try to get it. I get it on a lot of my properties. I suggest that our clients ask for it and what amounts of pet rent do you see people get?
Jessica: Well what we do is a non-refundable two hundred fifty dollars. So, that goes into your pocket on your very first owner’s statement. After that, every month they actually pay twenty dollars per pet.
Jason Hartman: Fantastic. So pet rent — Fido has to — has to pay twenty bucks a month. Okay and if there’s two Fidos, then it’s forty a month. And eight percent, now tell us how — how repairs and maintenance issues are handled, if you would.
Jessica: That’s something that we have really dove into the past two years and gotten it down to a pretty exact science, because we are developing all of our properties. We do have access to a big labor pool and also materials, and since all of our properties are kind of cookie-cutter, it’s all the same. We’re able to pass on those savings to our owners. So we do have an internal maintenance company which we can then control costs. Obviously, there’s sometimes outside things that we’re unable to repair. We do have to rely on an outside vendor. We always get all of their costs upfront before we do proceed to help control those costs.
Jason Hartman: And what’s going on in the market place in general? Properties leasing quickly, is it an owner’s market or a tenant’s market and what happens in terms of collection issues? With — with military tenants in St. Robert, I know the collection isn’t much of a problem compared to other markets because you’ve got some leverage there and tell us about that.
Jessica: Right. With collections, we’ve only gone through six evictions, which is really crazy because of the [inaudible].
Jason Hartman: Wait, wait, wait, six evictions ever? You — you — you must be kidding. Let’s talk about how many doors you have under management and how long you’ve been in the management business and I am amazed. I didn’t know it was that good.
Jessica: And actually, the — the funny thing with that, I can only really say that it’s just really four because two of those as we got to the courts actually ended up paying us with my owners. So, we were actually still able to receive the funds. Yeah, it’s kind of interesting. We do have about three hundred sixty properties and some of those are storage units and some of them are single family homes in the area that we help either military personal you know that are moving or whatever, we try to rent their homes for them. So, and that’s over four years with just six evictions.
Jason Hartman: Incredible. That is literally incredible the stats. I mean that’s amazing, totally amazing. I got to hand it to you on that one. So that’s the military angle in St. Robert. Now, how fast are properties leasing and how long are people staying? Everybody’s concerned with military tenants. The thing they’re concerned about is base closings, base size reductions, military tenants are allowed to break leases if they’re re-deployed into another location. You know any of those issues you want to talk about and then let’s switch gears to Kansas City.
Jessica: You know, it’s one of things, any type of investment that you go into, you — you have to identify the cons and you have to identify the pros and obviously military personal, I means just with the evictions and our — kind of our track record there, they’re really great tenants. They are really amazing.
Yes, you do have the rest of those that they do get PCSed out.
Jason Hartman: What does PCS mean?
Jessica: That’s when the military personal actually gets re-stationed. So there’s a couple of different things, especially with Missouri and federal state laws, you do have to let your tenant out of their lease if they get military orders, and that’s either re-stationing or they get deployed or if there’s some sort of issue where they need to go back on base. So those orders we take very seriously and we do have to let them out. You get fifteen days notice. Usually though with our tenants, we see between thirty and even up to sixty days notice that they do give us but in some cases, they don’t even know. Sometimes they have to be out immediately. So, we do get fifteen days partial rent there and then we put it back on the hot sheet to get that leased up quickly.
Jason Hartman: And what are the leasing techniques that you’re using there that are — that are working? I mean, things lease pretty quickly. You’ve got a captive audience maybe just speak to that for a moment.
Jessica: What we’ve kind of found there in that area is, there is a lot of training — it’s a huge training insulation, so we’re picking up on that temporary population that’s there and that’s where a lot of our marketing is directed towards, making sure we get those students, especially the career captains courses. Those students are really awesome. So, we — we definitely try to go after them. We get a lot of word of mouth because we are one of the only apartment area or apartment complexes there that offer furnished units and also short term leasing which is really interesting for that area, why no one else has done that. So —
Jason Hartman: Well, it’s been a fantastic investment for me and for many of our clients. I’m a — a partner in an apartment building there, but you have single units, duplexes, four plexus, ten unit buildings, so there is some variety of what people can get and the properties will typically have — you can find them on our website, of course at Jasonhartman.com, in the properties section but the returns are typically projected at somewhere in the mid twenty, even you know a little over thirty percent annually, and so you can see the full performers in the property section there. And let’s switch gears and talk about Kansas City, if we can?
You recently acquired a subdivision that was unfinished by a builder that went under and it’s a subdivision of triplexes where some of them were built and a lot of them were not built. So you have finished lots, roads and I toured it this morning, and tell us a little bit about that, if you would and — and this isn’t officially on the market yet. It’ll probably come on our website at Jasonhartman.com in about two weeks. But give us some background.
Jessica: Well, I’m — I’m super excited. I have a project here in Kansas City and I — I ob — obviously live here, so I am definitely a huge advocate of Kansas City. The project is going to be located in Johnson County, which is like the best county in Kansas City especially if you’re wanting to go Class A. So, it would be a Class A type tenant that will be searching for this project on the property management side.
This will be comprised of triplexes, so there’ll be two and three bedrooms and high end — you know, high end finishing with a stainless steel and granite and hard wood floors and fireplaces.
Jason Hartman: Fantastic. And the ones that are built there now, I mean they looked very nice. You know, you can drop those into some more expensive cities in southern California where — especially the Irving Company. I’m from Orange County so I know all about the Irving Company in dealing with them for so many years, but they’re extremely picky about the elevations of their properties and the — the architecture and so forth. And I — I was really impressed with the looks of them. And so you’ll be building your properties, the new units to the same sort of level and appearance so they’ll match the existing units that are there. And what was interesting is the cost. I mean Kansas City is — it’s not St. Robert. It’s definitely more expensive and the units are quite a bit nicer.
St. Robert is very bread and butter and these are I guess three hundred ninety seven thousand dollars per triplex. So you’ve got three units there and people can get one loan or they can get three loans on them potentially, but one loan is probably going to be the better way to go. But what’s interesting is some of the higher costs in constructing these.
When I was out this morning touring the development, I learned about tornado shelter that needs to be built in each home. That’s a code requirement that adds to about twenty five hundred dollars per unit. So, seventy five hundred dollars per triplex to the cost and in addition to that, the sewer hook-ups and the water hook-ups and so forth, utility hook-ups, about nine thousand two hundred dollars per unit. So there you’re looking at almost twenty eight thousand dollars per triplex. That’s — that’s something you’re not really used to in St. Robert. It’s much more expensive to do business in Kansas City, right?
Jessica: For sure, and especially in Johnson Country and they can ask that because they can. So —
Jason Hartman: Very desirable area. Anything you want to say about the area in terms of what tenants will enjoy in living there, you know employers, shopping, schools, transportation, amenities, anything like that?
Jessica: Definitely, it — definitely Class A, for sure and Johnson County itself is really desirable because of the school district, so there are some new and/or even expanding companies in the other counties where — because of where this is located with just the inner state’s people will be able to jump on — it’s very centrally located to be able to jump on the highways there and get to work within ten minutes. So, that’s why it’s so desirable to live out there and you have shopping and you have basically everything around you. So —
Jason Hartman: Yeah, and I saw all of those amenities and — and about eight minutes away you have a whole bunch of destination type amenities. You have a — a — a race track and just all — all kinds of things. You know, water park, etcetera, so it looks like a pretty neat development and congratulations on it. How — how long have you been in the development business?
Jessica: For about five years.
Jason Hartman: So, you’ve gone through really you got into a — the tail end of a high cycle and most of the time that you guys have been doing it, has been a down market and you know of course it’s coming back now, but — but — but that’s interesting you got your experience in what some would consider the worst time in seven decades.
Jessica: Yeah, somewhat we’ve kind of looked at it as a kind of a saving grace or a blessing because it’s taught us to be very conservative and —and — and watch our — watch our companies very closely.
Jason Hartman: Good, good. Well anything you want to say in closing?
Jessica: Thank you for having me and letting me talk about property management.
Jason Hartman: And — and what she really means is thank you for twisting my arm and making me come on the show. Okay well Jessica, thank you very much for joining us today and we will be back with our guest talking about some economic issues here in just a moment, less than sixty seconds, we’ll be back.
Female Voice: Here’s your chance to catch up on all of those Creating Wealth shows that you’ve missed. There’s a three book set which shows one through sixty, all digital download. You save ninety four dollars by buying this three book set. Go ahead and get these advanced strategies for wealth creation. For more details, go to Jaonhartman.com.
Jason Hartman: It’s my pleasure to welcome George Walper, Jr. He is the president of the Spectrem Group and they do some very interesting research and consulting on the creation of wealth, investing, economics, etcetera, etcetera. I’m sure he will add a lot to that list. But George welcome, how are you?
George Walper: I’m fine Jason. Thank you very much.
Jason Hartman: Good. I always like to give my guest a sense of geography. Where are you located today?
George Walper: We’re located in Chicago.
Jason Hartman: Okay fantastic. Obama land. I don’t even mean to be political right away.
George Walper: Obama land and the — the land of the late — late spring live — living here. We’re tired of cold weather.
Jason Hartman: Yeah, that’s for sure. But tell us a little about the Spectrem Group and what it is you do?
George Walper: Spectrem Group is a market research and consulting firm and the primary focus is we spend our efforts talking to investors throughout the country of all different levels of wealth from mainstream America to millionaires to the very, very wealthy. And we talk a little about their attitudes, about their economy, how they’re investing, how they are worried about the next five years, what they’re thinking about for their children. So, it’s a pretty good pulse on a monthly basis about how Americans are feeling about finances in general.
Jason Hartman: This is almost like a Consumer Confidence Index for investors.
George Walper: It actually is. We actually publish the last Wed — Wednesday of every month the Spectrem Affluent Investor Confidence Index and we’ve been doing that since 2004 and it — it very much parallels a lot of the attitudes you see in some of the consumer confidence index but we do see some significant differences between very wealthy Americans and just gen — and then wealthy America which is only affluent.
Jason Hartman: And what are you seeing now? I mean, what is — what is the mind set of — of investors now days? When we look at the stock market, you see all of the mainstream Wall Street folks and of course the CNBC they’re cheering new Dow highs, but if you adjust those for inflation, the investors are still behind. I mean, they’ve — they’ve got to be — the way I did it is based on official inflation statistics, which you know in my opinion are dramatically understated. But just going with the official — official numbers, the Dow would have to hit fifteen thousand eight hundred to be the same as the last peak. But of course most people don’t notice that.
George Walper: Well, there — there is a lot of excitement because the market is trending upward when we’re all time record highs, as you point out, not accounting for inflation, but what we see with very wealthy Americans and also mainstream Americans, is a pretty significant economy between the feel good about the market being positive. They are equally concerned about continued bottleneck in Washington and this has been an issue for them now for almost three years. It got a little bit better in January after the tax increases were passed towards the end of the year. Not because people were happy with their taxes being increased but because they felt they knew what was going to occur finally.
But now here we are in — in March and we’re kind of right back to confusion about the economics in the country, the budgets, etcetera. So, what we’re really seeing is, it’s been a proxy since 2008 that the stock market’s an important factor for these folks, but what they really feel is critical as a marker about will the economy be better and are things on the road to recovery, is all about the unemployment levels, which they’ve stated back in 2008 and they still say path to drop to about six percent. So, we’re still a long way away from those folks feeling that things are one hundred percent better.
Jason Hartman: Yeah, it seems — seems to be about the case. It’s interesting that you — you say investors are concerned about the gridlock and the bureaucracy in — in D.C. and — and I think certain executives are very concerned about that and that’s effecting — I — I guess I want to say decisions, but really lack of decisions in the corporate world and — and you know, main street small business as well. People just don’t know what to do because they don’t know what’s coming next. They don’t know what — what fiat is — is coming that’s going to affect them, and it’s kind of a crazy time.
George Walper: I think that’s very true. You see it visibly for public companies as you said senior corporate executives, but the road meets the ground in this country with small business owners and they’re the ones that continue to be under enormous stress coming out of the recession.
We just did an interesting research last year with business owners and this was in the summer months of last year, and there was an interesting theme that came out of that research and that was they survived the fall of 2008, the epidemic crisis and the recession subsequently, but they’ve spent everything they could spend in terms of taking — borrowing any money, any reserves and they said they couldn’t handle one more down term. And at the same time, they felt frustrated with Washington getting back to your gridlock, and that is that — that they didn’t feel as if Washington really understood small business owners, the tax end [inaudible] of small business owners. They didn’t really feel as if they understood what S corporations were and what it was all past due to the business owner. And so, we typically don’t see or just over the last ten years, we don’t typically see what’s happening in Washington as a major concern other than during the few months before presidential election, but it’s been a major issue for the last three years, as I said.
Jason Hartman: Yeah, it sure has. What is the investor outlook in terms of — terms of inflation? We have unprecedented levels of debt. We have massively irresponsible government. There’s no end in sight for this spending. This latest fight over the sequester is — is not whether there will be spending cuts, it’ll just be reduction in the growth spending and the amount that they’re arguing over in — in the — in the big picture in the overall scheme of things is a joke. I mean it’s like arguing over pennies. It’s — it’s just nothing.
George Walper: Well, one of the questions we asked recently was — was we didn’t publish the results. It was kind of in formidable, but we asked folks what percentage of the federal budget was impacted by the sequester, and people said, well ten percent and twenty percent. Well when you point it out — and it was — and when you point it out to them it was two to two and a half percent they all looked at it — they looked at it cross eyed because they couldn’t image that that’s all we were talking about.
And I do — I do think that they’re frustrated because they don’t feel as if they’re getting straight information about what needs to be done to fix the country. I mean, these are folks that understand what it takes to run a business and what it takes to run their own family financials. And so they’re wondering the government can cut two and a half percent of the budget easily if they would focus on it.
Jason Hartman: Yep. If people ran their household the way the government runs its books, they would be completely insolvent with no — no ability to print money or have a bailout for anybody. But speaking of bailouts, we’d be remised if we didn’t talk about what’s going on in Cyprus. Right now, this is an amazingly scary situation where you’re just looking at an outright confiscation of wealth. You know, I don’t know what the latest is on — on — maybe a day out of date, but it’s either nationalize the pensions, confiscate six to ten percent of the money on deposit. I guess people that are looking for offshore banking havens really better watch out, but I think even in the U.S., you know we run this risk too.
George Walper: Well, you — you recall a couple of years ago and for the previous twenty or thirty or forty years the insurance for bank deposits was one hundred thousand dollars.
Jason Hartman: Right.
George Walper: And now, it’s two hundred fifty. There’s a lot of folks that had a lot more than two hundred fifty thousand dollars in banks and — and I wonder about the Cyprus scenario if people are now sitting in the U.S. saying wait a second, you know we had more than two hundred fifty thousand dollars in this — in these interest bearing accounts in some of these banks, and they should be scratching their head about — they should be moving money between institutions to take advantage of insurance. But in that — that issue hasn’t really been dealt with much since 2008 and 2009 in this country and they’re very much linked together. It is interesting that the solution in Cyprus south like as you point out that call what you’d like, it’s sort of a reduction in someone’s account balance but it was at the bank that fund the problem.
Jason Hartman: And usually that’s just confiscation of money in banks. It’s just done through inflation, but here it’s just an outright grab. I guess — I guess they can’t — they — they don’t have the ability, obviously, being part of the EEU, but even if there was a consorted effort to inflate, and I’m just — I’m talking conception ally with any government, it would be hard to inflate that quickly and steal the money that quickly.
George Walper: I’m sure and you know the EEU had to solve this problem because it was sort of the backbone of the European Union, if they didn’t solve this from an economic standpoint. And now it has a huge impact on the U.S. markets.
Jason Hartman: And right behind it we’ve got Spain, Italy, Portugal and Japan. It’s — it’s an amazing time in which we live, huh?
George Walper: Well, then — and you think about what the — the country — the U.S. has done so well because of the economy in China and that economy is slowing down. And so you — you do take it back to the U.S. has to fix its own knitting here, mind its own knitting and solve its problems and that’s going to mean that — that where the jobs are changing. I mean there are lots of jobs in different parts of the country that it might mean that people have to move and that’s hard on families. But if you go back over the last couple hundred years of the country, people move to seek where the jobs were and that’s how the sort of the western part of the country got created in the eighteen hundreds. And we’re — we’re a little bit at that way at this point in time and I think people have to evaluate their own scenarios and say gee, there are better jobs in different communities than I live in.
Jason Hartman: That reminds me of a really interesting article about a year and a half ago, I believe, in Time magazine talking about how the high home ownership rates actually hurt employment because they tie people down and it’s all done — I say this because you know I have a real estate background and we deal with investors from all over the world that are buying properties in numerous markets around the U.S. And I say that owning a home is kind of a bad deal in a lot of ways because the best thing you can have on a resume is mobility and own investment properties sure provide that mobility to other people so that they’re not tied down as well, but the United States is — is the most mobile population — or at least the most mobile advanced population. There might be some nomadic tribes still in Africa that you know it doesn’t apply but we’re — we’re a very mobile people and that’s what people have to do. They have to go where the jobs are.
George Walper: Well, and — and you touch on the American dream. The baby boomers were brought up under the concept that you buy your house and you — you know you sell your house and buy the other house and it would be hard pressed to argue a better investment in the ‘80s and ‘90s than your own personal residence.
Jason Hartman: You are absolutely right.
George Walper: But now — now the question is, is it — is it really something you — you purchase with the expectation that you’re really providing a roof over your family, but you’re not expected to make much money in the next five years or so? And that’s a — that’s a whole different outlook and the baby boomers — it’s very difficult right now for baby boomers to determine what to do but selling their house. And you’re right, job mobility becomes tied to how can someone move from a depressed urban area to where the money is out west in some of the — especially the part with all the gas expiration, if they’re sitting there with their biggest asset and a loan exposure with their primary house?
Jason Hartman: And it’s — it’s tying them down. So I say, participate in the real estate market for sure. Own lots of income properties, but when it comes to your own house, especially if you have a — a — if you’re — if you’ve got enough money to have a nice place to live, renting a Hyatt house is a phenomenal deal because there’s just no renting elasticity. The rents just don’t go up that much.
George Walper: Right.
Jason Hartman: And you — and you know, you can — you can rent a — a stunning house for a very low rent to value ratio and then you can buy other properties that you rent to other people that are at the lower end of the spectrum and those rent to value ratios are very in favor of you as the investor. So you really get a double — double arbitrage.
George Walper: But I’m — I’m sure you’ve seen in the last five years that there’s been a significant amount of buying activity by folks who could afford to buy investment real estate because it’s been under priced for the last five years.
Jason Hartman: Absolutely.
George Walper: And it’s —was in our – my business partner Catherine McBreen wrote a book back in 2007 called Get Rich, Stay Rich, Pass It On and it was based on the research we did that showed there were two ways that wealth was created in America the previous fifty years. One is owning a small business and be an entrepreneurial and the second is in having investment real estate. And investment real estate doesn’t mean that you — that you buy the largest office building in your town, and sometimes it means you’re — you’re owning a duplex and you live on one side and rent out the other and you could — you could rent that out now if you have to move across the country for jobs. That — that works, let alone as you point out, commercial income producing real estate or profit buildings.
Jason Hartman: Yep, very true. Well tell us some more about your research and what investors are thinking, what are their concerns and — and — and what are the — what are the opportunities that they’re seeing?
George Walper: Well, one of the things that I think surprises a lot of people is when we ask Americans of all levels of wealth from mainstream America to the very wealthy what are the top three or four concerns in your life? And of course it’s always their own health, their spouse’s health and of course more importantly, the cost of health care in retirement and down the road. But we are starting to see a little bit of a difference now the very wealthy Americans are very concerned about the future of their grandchildren. We haven’t seen that really before, but they’re concerned about their grandchildren meaning in the future of the country and can their grandchildren live the same life that they had?
Again, this American dream theme comes up that folks are concerned that the future of the country is not going to be quite as robust as it was the past forty or fifty years. Anybody who’s close to retirement or in retirement, of course, is worried about income and retirement and will they have enough to live in retirement? And the unknown is the cost of health care. There are some good things about the new legislation around health care and there are some things that will be — have to be changed because it won’t be affordable.
Jason Hartman: Or at least maybe affordable for the lower end of the economic market because if we — government subsidized/provided, but if you want quality health care, you’re going to have to pay through the nose for it.
George Walper: It’s getting expensive. In the last couple of years premiums have really gone up and you know, lots of [inaudible] I’m sure you do who are in the medical industry and medical fields or doctors, they’re on the other side of it saying, they — you’re — they really can’t afford to be in practice any more between the cost of their own liability insurance and what they’re allowed to charge patents for and get reimbursed, is because — it’s been — it’s a business that has its challenge.
Jason Hartman: Yeah. This — this whole — this whole health care thing is just such a disaster. I — I mean it’s not a — it’s not a hundred percent solution what I’m about to say, but I tell you it would solve a lot of the problems. It is the only service that anybody buys where they have no concept of the cost.
You know when I take my dog to the vet, oh we want to do this procedure, that procedure. Okay, how much does that cost? I actually am engaged in the process in making decisions. When I go to the doctor myself, I have no idea what they charge. They don’t even discuss price. It’s the only thing in the world where there’s no — the — the — the consumer has no connection whatsoever to the cost.
George Walper: Well, what’s even — you’re right, but what’s even more bizarre because when you — when you go and ask how much is it, if you — if you even look — get an answer from them —
Jason Hartman: The doctor doesn’t know.
George Walper: — well the problem is the doctor doesn’t know because he or she doesn’t know which type of health insurance you have because they’ll — they’ll charge five hundred dollars but then you only get paid one hundred fifty by one insurance carrier and one hundred twenty five by another. But they don’t even know what you’re being charged.
Jason Hartman: Right.
George Walper: The system — you know yet — yet you can buy a car and they’ll write down to the last lug nut how much it costs to — to make it and build it and buy it. It — it’s — it’s kind of — it’s sort of scary.
Jason Hartman: It is. It really is.
George Walper: But you’re not supposed to ask is what you’re told.
Jason Hartman: Yeah, its — is it — as if it’s like tacky to ask.
George Walper: Right. So what, you’re supposed to leave the emergency room because you want to go down the street and get a better deal?
Jason Hartman: Yeah, exactly. You know even with my dentist at times, I’ll kind of negotiate a little bit because I — I — I — most of the time in my life I haven’t had dental insurance. Okay, we want to put a crown on this tooth, that’s nine hundred dollars. You know, how about you do it for seven fifty? You know, why not?
George Walper: Well, they will too.
Jason Hartman: Yeah I know they will but nobody ever asks. It’s amazing.
George Walper: Right well again, it’s — it’s — you’re — you’re trained in life not to ask about those types of questions and I think that actually hurt — that’s hurt the — the whole supply and demand over the last twenty years and at the same time, you know there’s — there’s quality health care where you wouldn’t mind paying whatever — whatever it costs for you to get quality health care in a major medical problem. So you’re — you know, you’re sort of in a — in — in a quandary there as to what to do.
Jason Hartman: Yeah, it’s a — it’s a real catch 22, no doubt about it. But just share anymore kind of important or interesting parts of your research lately, if you would.
George Walper: Well, one of the — I don’t — I don’t know if — if you find spending time with what folks are doing with social media?
Jason Hartman: Well, we certainly do as a business.
George Walper: Sure. So —
Jason Hartman: Tell us what — what investors are — buying Facebook stock? I don’t know.
George Walper: One of the most interesting things that most — most folks assume that social media is always for younger folks being in a car beyond — under forty or under thirty, but one of the most interest — interesting things we’ve found is that one of the largest group of Americans, sixty five years and older who are worth five million dollars and above. So, pretty wealthy Americans are the — are the largest readers of financial blogers in the country because they’re — they — they want to read from a sophisticated writer because they have a little but more time at that age. What we’re finding is that there’s more and more culprit with things like Facebook to get information about investing, information on a company. Not from one of the Facebook members or even a Facebook page for investment advisor. We find that Twitter is becoming a very — or again information that’s financial investing in nature, that they would like to read more up on Twitter about investing, etcetera. And so anybody who’s in this industry that’s investing money for folks or financial service providers, even though there’s some regulatory concern that they have to follow guidelines, social media is something that’s here that it’s not just about young people and it’s a — it’s really an important way to position a firm from an investment standpoint to be on social media and use those platforms effectively.
Jason Hartman: Yeah, I couldn’t agree more. It — I think Facebook as far as that pure social media, not blogs but actual Facebook, really ushered a lot of that in because it’s just so easy to use and so natural that it — you know, it brought a lot of older Americans into the fray.
George Walper: And the other one that I mentioned was YouTube, which is — is not so much folks go to YouTube, of course, but anybody that’s using a video concept on their site is being hosted by YouTube is a — is now the number three social media platform with wealthy investors because it’s easy to — to glitter about something by watching a video.
We have a website for investors called Millionaires’Quarter.com that is great for consumers who want to learn about what other investors are doing. We publish five or six stories a day. They send us some of this research. We do a couple of videos — two or three videos — or probably five or six videos a week, maybe one a day at minimum, but it’s in response to all of our research because investors like to read about what other investors are doing. So, here’s a great site for them and — and the other part that now is theirs the ability for those investors to search for a financial advisor. And we’re using a video under a financial advisor because the power of a video is really strong.
Jason Hartman: Yeah, it definitely is no question about it. There’s an interesting story on your website and I don’t know if this is just a feed from CNBC though it actually looks like your commentary, but it talks about how there are three hundred thousand new millionaires and — and this wealth effect is really more buy homes than stocks. Three hundred thousand new millionaires, I mean this is an all time high. And once again, I think this is symptomatic of the middle class being very much under attack and the ranks of the poor expanding and the ranks of the wealthy expanding and the middle going away.
George Walper: It — it is actually a little bit about the middle going away which is sort of sad because —
Jason Hartman: It’s very sad.
George Walper: — it’s not a good thing for this country, but —
Jason Hartman: It’s not a good thing or stability.
George Walper: — you know, what we found was the — the population that was — is still the most stressed is sort of this middle America and so to think of the following which are one — one of the largest groups of Mass Apple America, which is one hundred two million net worth. Well you might say, that’s a lot of money, George. Well, a lot of it is two income households but the largest thing is that they are educators, so you’ve got two school teachers or three university professors who worked their entire life as educators and actually have done a good job saving money. They tend to be more conservative investors. They tend to be savers, but that population now who worked for many years is the most stressed relative to their financial situation. They’ve lost a lot of their house, etcetera and so mainstream America, Mass Apple investors are impacted the most yet there’s been new millionaires created. A lot of that is the advantage that they took which is that they could afford to not leave the stock market back in 2008 or ’09 or they could afford to buy a second, or as you call that investment income real estate, but the rest of the folks in America couldn’t afford to do that. They got out of the stock market. You know this is not a good time today to be putting all your money back in the stock market because of the level of that and a lot of people are.
We see a lot of cash on the side lines for the last year or two and now it’s starting to say people are thinking they’re going to take that cash and go back on the market. So, that middle group that’s going to be impacted the most, if they — if they buy high and sell low.
Jason Hartman: Yeah, and I would caution every day investor between Goldman Sachs and the federal reserve, it’s a bubble machine and you can almost argue when you look at history since 1913 that it’s — it’s planned and this — this is why one — you know one of the reasons, not the only one, but one of the reasons I say that the rich get richer and the poor get poorer and that’s because these — these bubbles that take place, they run up basset prices and most people enter late and then they get stuck, they get burned. We saw this in the last cycle circulating with the real estate market and then they ride it down and they have to sell somewhere in there. They do the same thing with stocks because so many people invest you know emotionally when they invest because they don’t have — they invest without having adequate staying power, proper planning and who — who gobbles up all those assets? The powers would be.
George Walper: You know, it — it — it also argues why that mass affluent and sort of you know your early millionaire population really ought to take advantage of a financial planer or a financial advisor but to help them understand this a little bit and put together a really solid financial planner, financial blueprint for their life. And that’s really important because it could be that real estate’s an important part that they should be putting more in. Or it could be that they have a lot of exposed — a major exposure to it already, but — but most folks, especially in that sort of mainstream America, Mass Apple, most folks don’t — don’t even know where to turn to find an advisor.
Jason Hartman: No question about it. Any advice or tips on that?
George Walper: [voice over].
Jason Hartman: You — you can’t just say that and let it go.
George Walper: Well, level one, the advisors would love to do work with them, that’s why our — our Millionaires’ Quarter site is perfect because they can search for an advisor and we’re adding more advisors to that every day. But even becoming educated about what an advisor can do for you, how advisors can pay, makes them far better off and a number of those folks are also in their own companies, they’re employer’s 401K plan. A lot of those provider’s websites have great information that they can turn to that’s pretty foundation organized that can help them.
Jason Hartman: Yeah, and I — and I hate to be such a — a — such a cynic here but I’ll just throw it in. Even if you are very educated and even if you pick the right advisor, the problem is you still have all the graft and corruption of everybody beyond that advisor. The investment bank, the market maker who’s the executives of the corporation in which you’re investing, the board of directors, you know it’s like —
George Walper: It is — there is a food chain of people making money.
Jason Hartman: Yeah, that — that food chain is you know people skimming money off the top even if they’re doing it in a legal way by just giving themselves each bonuses, you know.
George Walper: But they also — those same people though, create a lot of jobs. It’s a very — it’s a very circular problem, you’re right.
Jason Hartman: It is.
George Walper: They’re the ones who are creating jobs in America.
Jason Hartman: Right, right. Yep, that’s true. No question about it, it’s just —
George Walper: You may not like it, but that’s what it is.
Jason Hartman: Right. Yeah, yeah, you’re right. Well good stuff. Well hey, thanks for joining us. I appreciate it and give out your website. Is that Spectrem.com?
George Walper: Spectrem.com is the one that’s probably more interesting to your listeners as Millionaires’Quarter.com.
Jason Hartman: Okay, Millionaires’Quarter.com. Thanks so much and we appreciate you joining us today, George.
George Walper: You’re welcome, Jason.
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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 Empowered Investor, LLC., exclusively.
Transcribed by Debra Bozeth
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 Empowered Investor, LLC., exclusively. (Top image: Flickr | Pam_Broviak)
Transcribed by Debra
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