Jason Hartman and investment counselor Adam talk about an article from the Drudge Report about the big cities losing workers by the hundreds. They also talk about a Business Insider article about Millennial Millionaires and where they’re located around the country. They talk about these trends and there impact on the real estate market.
Investor 0:00
My goals is maybe get into real estate also help my friends do what I’ve been able to do love her asking me about it and spend more time with my family and hopefully grandkids. My daughter’s married three years now. So maybe in the near future we’ll have grandkids a ticker.
Adam 0:15
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. On now. Here’s your host Jay. Hartman with the complete solution for real estate investors.
Jason Hartman 1:05
Welcome to Episode 1309 1309. We’re glad you could join us today and who is us? It’s plural because Adam is here with me. And as I mentioned on yesterday’s episode, I found a couple of articles. And I said to Adam, you know, we got to talk about these on the show. They’re great. But you see the flaws here, and he picked up on it right away. He was kind enough to actually do the math, which took a few minutes to kind of scribble this out on the back of the napkin, if you will, but it’s going to show you how misleading any media can be if you don’t really parse it if you don’t analyze it, and really evaluate it with some critical thinking skills. So we’re going to talk about these two articles, okay. And they’re the city’s losing workers every day. And contrast that with the top 10 states where American wealthiest millennial live and do the comparison. We’re gonna adjust things for cost of living and such and population. So we’ll do that. And we got a couple properties to talk to you about one of them. I think you’ll really like if you can get it. Okay, Adam, you’re ready to roll. Let’s roll with rock band or roll. Let’s rock and roll. Okay, just a couple days till profits in paradise. I’ve been stressing out here, Adam, a lot to do a lot to do. But it’s going to be a great weekend. And with that, let’s talk about these articles. The city’s losing people. Now this is no surprise. This is the Drudge Report article that we mentioned. The usual suspects, but there are some surprising cities losing people, right?
Adam 2:48
Yeah. I was actually surprised not just in terms of what cities are losing people. But how many people obviously the big cities get your New York Seattle, Los Angeles, San Francisco. Bay Area and Boston. But New York is losing 277 people every day.
Jason Hartman 3:07
Are you really saying that people don’t like super high cost of living, crowded environment, lots of rats, not anymore. No greenery and massively high taxes and loads of government intervention to go with it. They don’t like that.
Adam 3:23
Apparently they’re rebelling against it now they didn’t before but they’re rebelling against it now. And you know, they’re losing 277 people a day. La is losing 201 in a day. Chicago is losing 161 a day. I mean, there’s a their big numbers, but I don’t think I personally don’t think it’s going to be as bad as this. Drudge Report article makes it out to be but I guess it’s always possible.
Jason Hartman 3:49
Tell us why you say that.
Adam 3:50
So they interviewed 1500 Bay Area people and 44% said they’re likely to move out of the area in the next few years and 6% said they have definite plans to leave within the next year.
Jason Hartman 4:03
Of course, when we say bay area we mean San Francisco. Great. San Francisco. Yeah. Got it.
Adam 4:08
It’s easy to say you want to leave. It’s a lot harder to actually leave. Well,
Jason Hartman 4:13
that’s a good point. You know, I was like that in Orange County for years, my friends started thinking I was a talker and not a Dewar after a while, because I kept saying I was going to move leave Orange County, and, you know, get out of California. It took me a while.
Adam 4:28
A while, yeah. And there was a Gallup poll that found that 80% of Americans live in urban areas, but only 12% said they want to live there. And when they were asked where they would live, if they had their choice, the top response was a rural area. And let me tell you, as somebody who lives near and has family in rural areas, living in a rural area sounds great until you live in a rural area. Especially if you’re from a big city.
Jason Hartman 4:54
Yeah, yeah. It really is kind of overrated. Now, one thing I want to say about that this interesting You know, when we talk about city or urban, and we talked about rural, you know, there are many degrees there are well 50 Shades of Grey right. As to all of those to use a cliche. City. I mean, does that include You know, when someone says that to me, I picture high rise office towers and apartment towers, and I picture New York City or downtown LA. That’s kind of what comes to my mind. Downtown San Francisco could be another one. That’s the city city, but I don’t know is irvine california city? Well, I mean, the city in that respect, of course, it is an incorporated city. You know, it’s it’s suburbia, most people would say but Heck, it’s not very berbice and a lot of ways either. There are various degrees to that,
Adam 5:49
right. But when you hear rural, you usually think, you know,
Jason Hartman 5:53
cows.
Adam 5:55
And it’s just, you look at the cities they’re coming from and I don’t Don’t think a lot of these people when they’re responding, we’re thinking about what you have to give up. When you move to rural areas like you’re giving up, your restaurants aren’t going to be nearly as good or anywhere near you. You’re not going to have as much entertainment. Your Internet’s usually not as good your cell phone services usually spotty at best.
Jason Hartman 6:16
So So you mean people aren’t going to settle for McDonald’s Applebee’s and Wendy’s? Yep.
Adam 6:22
Right. Actually, sometimes even though Wendy’s is a little too fancy for Jesus.
Jason Hartman 6:28
Well, but but they always have an Applebee’s or something like that. And I got to tell you, that food is just so boring.
Adam 6:36
And it’s going to also require more companies to get on board. The if they don’t want to leave the job market that they’re in. It’s going to require more companies to fully embrace remote working, which is happening a little bit. But some companies are willing to let you work outside the office, but not necessarily outside the office hundreds of miles away where you’re never going to come in and that still needs to be embraced. More before, I think a big shift can even possibly happen.
Jason Hartman 7:04
And then trading was famously reversed several years ago, when former Yahoo CEO, Marissa Meyer came aboard and said, Look, I want people to come into the office, we got to turn this company around. Now, she didn’t accomplish the goal at all. She came in saying a lot of things and left not having done a lot of those things. Well, you know, hey, it’s there’s a lot of circumstances that are not necessarily within our control. I don’t I don’t know about her tenure that much. But she kind of wanted to reverse that remote working trend. And you know, I could see her point. However, what to kind of interesting, as I had mentioned on a prior episode, about john Nesbitt, and he is the author of all those mega trends books, and I really love futurist books. And you know, faith popcorn john has been Alvin Toffler. And there are there’s, of course, you know, and we’ve had many on the show over the years, john is but talked about that big technology. Remember, I told you it was just maybe we could go Federal Express FedEx that would allow him to live and tell you ride a mountain resort town. Well, all of his co workers or competitors had to, you know, live in New York City and slug it out there. And there was a much better life that he had because of technology. And now of course, the technology is electronic and digital and much better. But the interesting thing he pointed out, is he said that the trend the commute trend might reverse. See what you think about this. He said that people would live in the more rural environment where they wanted to live. And they would actually commute to the cities on the weekend, and go and take advantage of the restaurants, the arts, the attractions of the city, he envisioned this reversal. Whereas always throughout history, it’s been people go into the city to work and then they leave and stay out in the more rural area. at their home for the weekend, he predicted a reversal of that. I’m not sure it’s happened. But it’s interesting to think of what you know, this guy said some 3035 years ago.
Adam 9:11
And I think with the outflow of people from these, you know, highly cyclical markets, I think it’s going to be better served for real estate and hybrid markets, I don’t think you’re going to see as many of them, you’ll see some of them but not as many of them flowing into our linear markets. But I think for those of you who are able to invest in like your Austin’s, or your, you know, Atlanta’s or some of the markets that have become hybrid, I think it could be really good for those markets, just because a lot of people are willing to go from the attractions of New York and LA and come down to, you know, the hybrid levels, you know, not the huge, massive professional shows, but you know, just here, regional shows, maybe but they’re not willing to ditch everything and you’re way more rural areas.
Jason Hartman 10:00
Yeah, so you’ve got kind of an in between there. Well, you know, speaking of that, why don’t we shift gears for a moment before we get to your stats. And before we talk about this second article of where these wealthy millennials live, and let’s talk about a couple of properties real quick. How’s that sound? Great. How about if I talk about mine first? I really think the listeners are gonna like this one. But why don’t we flip that and let me start real quick because I have a house in Memphis that is pretty good. It’s pretty good.
Adam 10:31
Right now. There’s a three bed one bath in Memphis. available, it’s $85,000. So if you put 25% down, that’s just a little over $20,000. Looking at 21 to 50. We have an interest rate of 4.75% figured in but right now who knows you could get better if you have some good credit and possibly pay a point. The rent is just under 1%. Not quite getting 1% all the time. So we’re looking at $825 dollars for rent a cash flow of $179 a month. And that is factoring in a vacancy rate of 8%. management fee of 8%. Maintenance of 8%. And you’re getting a cash on cash return that’s average or slightly above average of 8% and a total return of 32%. So Jason, can you beat that property?
Jason Hartman 11:23
Well, you know, here’s the thing. The performance is a little different, but I think I can beat it. I think I can beat it. Do you know what you’re that one was built?
Adam 11:32
It was built in 1959 1959.
Jason Hartman 11:36
Leave it to Beaver era. Okay. So this house and I, by the way, I have to tell you, I posted this on Facebook. And so far I’ve only received five likes and five comments, but I did receive property did get two shares. And here’s the deal. This is an Indianapolis. It’s an reo real estate owned by a bank. paid. It was built in 2002. It’s a four bedroom, two and a half bath. It’s 20 424 square feet 2424. And it is priced. You ready, folks? it’s priced at $78,000. Remember, this is a 2002 house. It’s pretty new, and it’s over 2400 square feet. Now, the performance here is a little different than yours, because it’s based on 25% down.
Adam 12:28
Yeah, so that does ours. Excuse me. 24
Jason Hartman 12:30
Okay, all right. Okay. I was gonna say I thought yours was based on 20 and it’s going to skew the numbers slightly. So this $78,000 house in Indianapolis built in 2002, just over 2400 square feet. Price is seven 8000. The projected rent is 1195. The price per square foot is only $32. I think the phones are ringing off the hook. Now, at one 800 Hartman can call one 800 Hartman That’s our main number. And you can I think, press two for an investment counselor get ahold of any of our investment counselors, or just go to Jason Hartman calm. So 32 bucks a square foot. And I know some of you are thinking, What’s wrong with this deal? Right? I get it. Hang on. We’re not done yet. projected cash flow is $443 per month for 43. The debt coverage ratio, which is that ratio, we don’t talk about much, but that’s really how likely is it that you would ever get into trouble with this property ratio? That’s what I call it. Okay. It’s 2.5 2.5. Meaning that you’re going to make two and a half dollars for every dollar of debt basically. So you’re very unlikely to ever run a problem with this. This property, the cap rate is 11.4%. On the performer, the cash on cash return is projected it 14% Mind. Yeah. And everything else is, you know, probably got the same assumptions as yours. Actually, those assumptions are driven actually by a more conservative appreciation rate of only 4% vacancy rate of typical 8% one month per year management fee of 8%. And a maintenance percentage of 4%, which is probably quite a bit higher than it really will be. on my Facebook post. I wrote in the comments I just said, You can’t beat my company’s deals with a Caveman’s club. Yeah, I’m very good copywriter and I look at these projections 11.4% cap rate 14% cash on cash 24% ROI now the ROI is lower than yours because of the high maintenance and the more conservative appreciation rate. So Adam, you want to know what’s wrong with my deal?
Adam 14:53
Yeah, there’s something wrong with your deal.
Jason Hartman 14:54
Yeah, you smell a rat know you well, the rap on the deal with I did say I posted it on Facebook. But I posted it back on October 23 of 2012. So there’s
Adam 15:07
no rub the rub is it’s unavailable.
Jason Hartman 15:09
Yeah. So it came up on my Facebook memories today, memories from seven years ago. So I almost didn’t want to talk about this today because I you know, thought for Surely it’s going to discourage some people. But sometimes that discouragement should be a kick in the pants. Because the old saying don’t wait to buy real estate, buy real estate and then wait. only seven short years have passed. Sadly, I have lost quite a bit of hair since then. But you know, mostly I’m feeling pretty much the same. And so are you. Hopefully you haven’t lost any hair? I know I have. But you know, seven years goes by in the blink of an eye. Okay. And one of our clients bought this property. I don’t know which one we should we should figure that out and asked him to come on the show. Because, you know, in seven years from today, you’re going to be thinking, gosh, I wish I would have purchased some of those properties in 2019 I just bet you you’ll be saying that don’t be at meet the masters and listening to Jason’s closing reluctant investors limit and thinking that was me seven years ago. Right exactly, exactly because that was written by Donald wheel in 1977. When he thought everything was so price, income properties and amazing asset class, just stock up on it and wait deal with the the trials and tribulations you’re definitely going to have some. That’s life in any endeavor, like I talked about yesterday. But you know, you’ll be amazed how quickly seven years goes by, and how, how much that has enhanced your wealth. Imagine if you bought 10 of these properties seven years ago. It’s so interesting, Adam, that I only got few comments and a few likes on that. Whatever I said that I think it was six six comments. And finally Enough, not nearly enough today if I posted that property in fact, I should do that. Boy, if it were April Fool’s Day I would. I should post it like it’s a current deal. And I bet I’ll get 78 likes tons of comments and tons of interest. Oh yeah. wanting to buy that property. So don’t be the shoulda, coulda woulda person. Okay.
Adam 17:20
Yeah. And we’ve talked to us. We’ve talked internally recently about trying to get the investment counselors to tell us when a brand new investor purchases their first property, and we’re kind of getting in the process of getting that ball rolling. But I want to throw a hearty congratulations on getting started on the investment journey out to one of my clients that is romera. She recently closed on her very first deal. So she’s not waiting any longer. Awesome. So you know, if you haven’t reached out to us, get an investment counselor, buy your first and you’ll hear your name on the podcast.
Jason Hartman 17:55
Yeah. Congratulations Romero. That’s awesome. Thank you for your business and We are here to offer you life time support. As long as we’re around, we are happy to support you with your property. You know if you need something, three years from now, five years from now, seven years from now, whatever, just always reach out to us. Which reminds me of another thing that I didn’t directly say on yesterday’s episode when I was ranting about, you know how you got to be a little fierce sometimes right? And you know, fight the battles fight the good fight as the words from that triumph song, go. Don’t just pay for things because someone presents you an invoice. You know, that came up because I was talking with Sarah, about one of our clients. And she says, you know, this client called and they were discouraged about their property. And as she started talking to them about it, you know, they just paid a $2,000 invoice for something. And she says, You know, I just wish you would have called me first I would have told you not to pay that. would have cut that invoice way down. And that’s the thing. You know, just because someone places an invoice or a quote, for some service repair whatever in front of you, doesn’t mean you have to agree to it. Okay? shop around for everything always. Okay, that’s life. All right, Adam, you want to get back in? We’ve got to look at the the adjusted numbers on the study. Now, in the interest of time, we looked at the numbers you did the analysis relates to the next article, right?
Adam 19:32
Yes, yes, that’s all the millennials.
Jason Hartman 19:34
So this is a Business Insider article about the top 10 states where the wealthiest millennials live. Keep in mind that the prior article was about cities, not states, but you get the idea, okay. These things are broad strokes, okay, so, so relax, okay, don’t agonize over too much detail. They’re just broad, a broad look at things and what’s interesting about this This is that several of our markets are in here were wealthy millennials live. Number 10 is Maryland. Okay, number nine is Illinois. And we’ve got properties in those markets. There are some others in here from Texas, of course we have. And we’ll skip things like Massachusetts, and some of the others, but we do have Florida on the list. So talk to us about the math that you did. Right. So first off, we need to start with the overall number. And that’s total number of millennial millionaires. And right now, they are estimating that’s about 618,000.
Adam 20:33
Okay, so there’s a lot of millennial millionaires, 618,000. Who are depending on how you look at the demographic cohort between the ages of like, I don’t know 23 and 40. Now right about there somewhere in that range. Yeah, that sounds about right. So we got the top 10 states and they are just to list them off and this is from fewest percentage to highest percentage. You got Maryland, Illinois. Virginia, New Jersey, Washington, the state not DC, Texas, Massachusetts, Florida, New York and California. So they have the percentages. And we thought, you know, that isn’t quite fair.
Jason Hartman 21:17
No, it’s ridiculous. So,
Adam 21:19
California has a few more people than say Illinois.
Jason Hartman 21:23
Abs Absolutely. waiting. Okay, so so let’s just explain what they did. So they took these different states, and they looked at what percentage of all the millennial millionaires, the 618,000 live in each of the states. They didn’t take the percentage as a per capita of the state’s population. So the Jason Hartman question is, compared to what, right, and they’re comparing it to absolutely arbitrary thing. Okay, so if your whole sample is just the 618,000 millennial millionaires, then you want I don’t know where most of them live, okay, fine. But that doesn’t tell you anything. You got to compare it to the 40 million people that live in California, versus the much lower population of say, Maryland, or whatever. So that’s, that’s what I asked you to do. And you just jumped in and did it. And so now we’ve got a correct analysis,
Adam 22:22
don’t we? Yes. So the state that has the highest percentage of millennial millionaires is Massachusetts. They have point four 5% of the state’s population are millennial millionaires. And the state in the top 10, that has the least is Texas, because out of the 29.2 million people in the state, only point one 1% are millennial millionaires.
Jason Hartman 22:45
Okay. So if you just read this article on the face of it, you’re going to think what all the millennial millionaires are in California, right?
Adam 22:53
Well, they are. The number was number was their percentage was
Jason Hartman 22:57
what it was number. Yeah, it’s like, Who cares? of the percentage of millennial millionaires, you have to compare it to the population of the state as a whole. That’s the meaningful number. And the article didn’t address that at all.
Adam 23:09
No, they didn’t. And then I looked at I said, Okay, well, that’s the percentage of millennial millionaires in each state. So but then I thought, you know, what, even that doesn’t really make doesn’t tell you what, what is a million dollars. Right. So I went in and found state, it’s like a cost of living adjustment website, and they don’t list specific cities. So all I did is I went into each state, and I looked at the cost of living adjustment to New York, right from New York was my basis. So in New York, a million dollars is a million dollars. And then I found the largest city in each state and just adjusted it based on that.
Jason Hartman 23:45
Okay, so basically, what you did is you applied inflation induced cost of living destruction, okay. to that number, which is the accurate thing to do, because he does anybody Remember, the famous Craigslist gold digger. We did a blog post about this at Jason Hartman calm when it came out years ago because it was so funny. This was all over the news media. And basically it was this beautiful self described woman in New York City that said she wanted to meet a guy that made at least $500,000 a year. And she rightly said, because, hey, $500,000 a year in New York, isn’t that much. Yeah, she was right. Okay. And so if you’re a millennial millionaire, in Texas, versus New York, that’s a huge difference in what it means. I mean, you really shouldn’t even be considered a millionaire in New York, or you should be considered a deca millionaire in Texas, maybe right. deca meaning 10. It’s probably not that much, but it’s not. It’s not It’s not that significant. But what you did in this adjustment is really enlightening.
Adam 24:59
It’s So if you’re in New York millionaire, and you want to move to a city that has a lot of other millionaires, you can move to NB rich, you can move to Baltimore, Maryland, and have 2.125 million in adjusted money. Yeah.
Jason Hartman 25:13
So basically you double your money by moving from New York to Baltimore.
Adam 25:17
Yeah. And then you take Jacksonville, Florida, and you have 1.9 million and we actually have properties. And yes, it’ll Florida. Again, yeah. And then Houston is still 1.9 million. Houston, Texas, and Virginia Beach is one point round 1.8 million. Chicago is right around 1.75. New Jersey is one and a half million. La you’re at one and a third. Boston, you’re at 1.15 million. And Seattle. You’re right around 1.1 million and then New York, you’re at 1 million. So there’s a massive discrepancy.
Jason Hartman 25:51
You know what’s actually surprising to me on here to Seattle.
Adam 25:56
I was a little surprised that too, but you know, they said it was you know every now 92 cents in Seattle was $1 in New York, which was
Jason Hartman 26:02
that’s actually really quite shocking. I would think la would be right after New York on the expensive. La is number four.
Adam 26:09
Yeah, Southern between them.
Jason Hartman 26:11
Yeah, yeah. That’s quite surprising maybe that massive minimum wage increase several years ago in Seattle, just cause the cost of living to go up and created a lot of inflation. So, you know, imagine that, but theory interesting. So, again, the article tells you the percentage of millennial millionaires compared to the overall number of millennial millionaires. Adams analysis told you the percentage of millennial millionaires compared to the population of the state. And then after that, he did the analysis to adjust. Are you really a millionaire there? What does being a millionaire mean? Again, it’s the difference between nominal meaning in name only, and real meaning What does it really do for you? It’s just a big difference. Yeah, and Baltimore and Maryland especially, that’s number 10. On the list that only has, you know, as they say, 2%. Now, as I mentioned before, it has a really higher rate of point 2% of the total population, but it’s the least percentage according to their list. But it’s if you have a million dollars, you have over $2 million
Adam 27:23
compared to New York,
Jason Hartman 27:24
right? I mean, it’s these things, you know, if you look at what number they are, in terms of how much money you really have, versus the list, it’s all over the place. I mean, it’s bouncing around left and right. It is it is and you know, it’s interesting, because with technology, you can move and vote with your feet much more easily. The place I would choose to live out of everything on that list is I would either choose to live in Jacksonville, Florida, because you have no state income taxes, or Houston, Texas all also no state income taxes, and invest in all the right places, right. So I would argue that your quality of life in Jacksonville would be substantially better than your quality of life in New York, Seattle, Boston, Los Angeles, my hometown, Newark, Chicago, Virginia Beach, and Baltimore. beats all of those if you ask.
Adam 28:20
And if you look at where the millionaires, you know, we talked about workers leaving. And so if you look at, you know, if they’re leaving New York and leaving LA, like we discussed earlier in the show, where are they going to go? Well, if you think millionaires like to be around millionaires, let’s say, you know, you end up dealing with people who are in roughly your same social wealth strata. And you look at this top 10 list as Hey, where are they likely to go? You can kind of Judge based on that if, if there are, you know, 30,000 millennials in Florida, would they move there? Well, if there’s 30,000 millennials in Florida and you want to go hang out with them, and then you realize when you move there, your million dollars is turned into almost $2 million Yeah, they’re gonna they’re gonna want to move there. But you know, if you’re in New York, are they going to be moving to Seattle? Probably not. Because it’ll still be there million dollars. So I mean, you can kind of look at it based on that as well as, you know, where are they? And how likely are they to continue moving there?
Jason Hartman 29:15
Yeah, really, really good points. good points. very enlightening. I’m glad you did that analysis. Adam. I guess we shouldn’t. Yeah, the math. Math was very enlightening. It certainly was. And I guess we should wrap it up for today. If you want to grab a last minute ticket to profits in Paradise, we have a couple people grab them yesterday. We’d love to see you come and join us. Okay, we have room to knock out the back meeting tables in the room and and add some, some more seating. So let us know go to Jason Hartman live.com and grab that last minute ticket Jason Hartman live.com This event is only once a year. We will see you in Orlando this weekend. We’ve got a property tour before that as well. And that’ll be great. We’re looking forward to it and we’ll talk to you tomorrow. Tomorrow. We got a 10th show, right Adam?
Adam 30:06
Yes, we did with Lauren Susskind.
Jason Hartman 30:08
Alright and so 10th episode show tomorrow and then flashback Friday, and then we will be back with our regular programming on Monday. Until tomorrow. Happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it efficient. And subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.