It is possible to illustrate complex financial concepts and Jason Hartman interviews author/artist, Carl Richards, who developed a way to do this and led to his book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. Carl creates simple sketches that help people understand financial concepts, which he refers to as Visualizing Finance. People are primarily visual
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 20 years and currently owns properties in 11 States and 17 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 303. Thanks for all the nice feedback on the show and thank you for supporting the show and spreading the word about it. I am happy to report that I just found out last week, we’re number 49 on iTunes, and that’s in terms of all the business podcast out there on iTunes, not just real estate, not just personal finance, not just investing, not just economics, all of the business category. Our show, the Creating Wealth Show is number 49. So, thank you so much for making it a big success, and of course, that’s a moving target, that algorithm and that ranking changes constantly, so please keep spreading the word and do the good work in helping us reform this economy in the absolute madness that we have going on out there in the world today. But anyway, if I sound a little bit tired it’s because I am. I drove all the way from Newport Beach yesterday to Phoenix, my new home as of about a year and a half ago. I — I live — now live in Phoenix and I emptied the — I just kind of had to do this myself. You know I’ve been putting it off for a year and a half since I moved, and I emptied the last storage unit there and a whole bunch of our records storage. And you know, if you’re a business owner, especially in a regulated business — well, all business is regulated but I mean a business that is licensed or professional services type of business.
I know you have empathy for what I’m about to say because most people they just don’t understand. I sold part of one of my companies to Coldwell Banker way back in 2005. By the way, everybody says I timed that perfectly well. That was one of my predictions that the residential real estate market would really start experiencing some difficulties in the end of 2005, and by golly, it did. I — I — the sale completed November of 2005. Now, that doesn’t mean for them they couldn’t make a lot of money because there’s — there’s what they call a buyer’s market, a seller’s market, which most people consider a seller’s market to be a good market. I don’t know why, you know it’s just sort of the way people look at it, and then there’s what I call a broker’s market. There’s a buyer’s market, a seller’s market and a broker’s market, so you know sometimes in a seller’s market the commonly considered good market, that’s a very difficult market sometimes for brokers to make money because inventory is tight and you know, there’s just a whole host of problems.
So, you can always adapt and figure out a way to make your business a lucrative business, but unless I get on a tangent which I know I do sometimes. But what I meant to say to you, if you’re in a licensed business or professional services business, you have to keep records right, and you’ll understand if you’re — if you’re in one of these businesses and you’re a listener and I — I had a couple of very small minority share holders in that business when the deal closed back in 2005, and one of the things I did before I bought them back out and bought the company back myself by — by paying them off, and most of them wanted to be out of the deal by then because they weren’t actively involved in — in the company’s new affairs, and they — they wondered, you know, and I remember one of them sort of questioned why I was withholding some money from the valuation and the stock and — and buying them out, and I said, well, because I have the burden or the company has the burden of storing all of these records for several years. And yesterday, I went to the record storage company in Orange County, California and I sorted through — listen to this, 299 bankers boxes. I already did this exercise a few years ago once, and I did it again and sorted through the remaining boxes and sent a bunch of them that were within the proper time frames away for destruction, and put the rest of them in a truck that I rented and — and emptied another storage unit we have there and had the movers help me do that.
I — I know — look at I’ve had moving companies for some of this major move which was — consisted of four — well really, five storage units. The record storage company, my personal residence, one of our California office locations, and I had a lot of professional movers help me, but for this one, it just didn’t make sense so I did it myself.
Anyway suffice to say, I was driving this rented truck home. I flew into San Jose, did an event there, did a speaking engagement there up in San Jose, then flew down to Orange County, spent the week there, had several appointments, saw some old friends, had doctor’s appointment, didn’t get myself a flight back because I knew I was finally going to rent a truck and come back. And I did that and I got home at about 3:30 in the morning and you know, I live in kind of a young college area here in Arizona, and you know oddly enough a lot of these kids were still up partying, I’m sure, but I was exhausted. So, I hit the sack and then today the helpers came — you know, there’s these great websites you can use like Hireahelper.com where you can just you know, hire a couple of movers to just help you with the small moving jobs.
And so, they helped me today and we moved the stuff out of the truck into — into the other storage unit here in Arizona. So, there you go. Anyway, it’s a lot of work, but that’s why I’m kind of tired. If I sound tired, that is the reason.
Before we get to our guest today who is Carl Richards, who has made quite a name for himself, he’s a Wall Street guy, and he’s made quite a name for himself teaching people and illustrating people — illustrating investment concepts for people on little napkin style sketches. So, I think you’ll really enjoy that interview and we’ll have that here in just a moment, but two things I want to talk to you about real quickly. One is a listener letter and you know, I really appreciate the call ins to the shows mostly. Those I like the best because those we can have a discussion and of course, you can always call into the show (480) 788-7823. I’ll put you on the air, you’ll get your 15 minutes of fame, it may only be a couple of minutes, maybe 15 minutes, who knows, but this was an email and — and that was from David. Thank you so much for sending this, David. This is an article about Michael Bloomberg questioning basically why does the government need taxation when they can print money. And you know, it’s a great question and there is a famous article or book about this, and forgive me, I cannot remember the name but it was written way back, I think in the 30s, and I’ve mentioned it on the show before and I don’t know who the author is, but it said — it had this exact same sentiment.
It basically said, look, if the government is in control of the printing press — if the government can print fake fiat money, if the government can create money out of thin air, there is simply no reason for taxation. I mean, inflation as — as it’s sometimes referred to, is the insidious hidden tax that robs our purchasing power that destroys the value of the money in your wallet, the money in your bank, the value of your stock portfolio, the value of your bonds and thankfully, the value of your debt, which is — hey, you see I perked right up because I get so excited about this. I’m no longer tired. I love this subject and that’s a big part of our investment philosophy, destroy the value of our — your debt and use that debt that out sources tenants to buy packaged commodities that hedge against inflation beautifully. It’s a — the ultimate investing equation.
But you know, it’s a great point. The government should have only one of two options. It either taxes its citizens to get its revenue and the government of course needs some revenue, so it either taxes or it prints fake money out of thin air and destroys the value of the currency its citizens hold. It’s one or the other.
Our government though, it does both. It does both at the same time and — and that’s the thing and this article is a very good article and it’s entitled Mayor Bloomberg, don’t panic about this sequester and it just says basically why does the government need to tax you if it could just print fake money? It’s a great question, I couldn’t agree more. So, thank you for sending that into me. Great point, David.
One other thing I think I wanted to talk to you about is — well, two other things real quickly. One is that we are becoming a little bit disappointed again. It’s certainly not the first time, in one of our local market specialists and we may put yet you’ll see it again. We will announce it when we do it. Another area or another local market specialist on pause, we hit the pause button — sometimes we hit the stop button and the you’re fired button occasionally that’s where, but it does happen sometimes, but this one I think the pause button is coming up because they’re just not delivering quickly enough and not delivering well enough.
So, we’ll let you know about that when the time comes, it’s probably going to come pretty soon but we’ll kind of give them a chance to get their act together if they don’t, we’ll just have to hit the pause button for a while on — on one of our markets. But, It’s amazing. Spending the week in Orange County in California, in general last week, I’m looking here at a commercial real estate deal and this is in Costa Mesa, California, and that’s an area in Orange County, and this — you know, it’s just interesting how amazing institutional investors will accept such crumby returns on their investment.
This cap rate is a — it’s a bank building, it’s a Chase Bank and you think, oh gosh, a secured tenant, the banks are basically underwritten by the government. They’re too big to fail, etc. And this is a Chase Bank. The cap rate if all of the expense projections and income projections come true, which you know, they’re likely to with a tenant like this, or at east close. But the cap rate 4.44 percent — 4.4 — I mean now, that — that just stinks, it’s a lousy deal and the appreciation rates on these types of properties, they’re generally not very good.
So, I say to you listeners, even if — if you purchase an investment property that we recommend or at least the style of property we recommend and use the plan we recommend, and even if you buy it through somebody else, of course you’d have to have your head examined to do that, but maybe you need your head examined. But if you do that, even if it doesn’t go as well as projected, even if it only goes half as well as projected, you’re going to beat the institutional investors most of the time just because we have the fragmentation benefit and you need to erase the fragmentation and all those little hassles and all those little pet peeves that income property has where you feel the bumps in the road, that’s one thing, and then of course the other issue is because it’s a multidimensional asset class. And it is more dimensional than a lot of these institutional investments.
So, keep that in mind. Keep perspective. If you don’t keep perspective, I guarantee you, you are on the road to making big mistakes as an investor.
Okay, enough said. Let’s get to our guest. We’ll be back with Carl Richards in just less than 60 seconds.
Jason Hartman: Be sure to call into the Creating Wealth Show and get your real estate, investing and economics questions answered by me, personally. We’d love to have you call in, share your experiences, ask your questions and a lot of other people listening have those very same questions. So, be a participant in the show at (480) 788-7823. That’s (480) 788-7823 or anywhere in the world via Skype, Jason Hartman ROI. That’s Jason Hartman ROI for return on investment. Be sure to call into the show and we are going to enter all of the callers in a drawing for some nice prizes, as well. So, be sure to call into the show and I look forward to talking with you soon.
Jason Hartman: It’s my pleasure to welcome Carl Richards to the show. He’s the author of the Behavior Gap and I think you’re going to really, really love this interview because we’re going to talk about some simple ways to stop doing dumb things with money. He — he — he contributes sketches to the New York Times on a regular basis and he’s — he’s got a — a way of illustrating complex financial concepts in fantastically simple and easy to comprehend ways and he’s coming to us today from Park City, Utah. Carl welcome, how are you?
Carl Richards: I’m fantastic, Jason. Thanks for having me.
Jason Hartman: Well, the pleasure is all mine. Tell us a little bit about your background, if you would.
Carl Richards: Yeah, about 15 years ago, I — I went to apply as a — as a — as an undeclared major at — at the University of Utah. I went to apply for a job that I thought was a security job, you know, like a bouncer or a call a cop, and halfway through the interview I thought it was a securities job, not a security job.
Jason Hartman: A slight difference, huh?
Carl Richards: That’s how I got in the industry. I ended up getting that job and working for another [inaudible] investments for a couple of years and then went on to the brokerage world, and became a certified financial planner, and through that sort of experience of trying to explain complex, or at least issues that people feel like are really complex, I started doing everything I could to explain it visually. So just — you know, I — I have no [inaudible] background but I would just try and draw them on the white boarder on the yellow pad, and uh, from there I — I got asked — after a little while of doing that and putting up my own little website, called The Behavior Gap, I got asked by New York Times and started doing them for — for them once a week. And then the book came out in February of this year with portfolio penguin and that’s where we are today.
Jason Hartman: Fantastic. Well, I mean there is obviously an old saying, we’ve all heard a picture says 1000 words, and it really does. It’s amazing how, when something is illustrated, it can become so much easier to understand than when it’s just in — in text form or audio form, you know reading it or hearing it, my — I wonder why that is? Our mind just — just works very visually, don’t they?
Carl Richards: Yeah, I know. I’ve been — I’ve been blown away um, and — and you know, there’s all sorts of statistics floating around about how many of us are visual learners and the number’s pretty high. I mean, it seems like it’s 80 percent of us or 90 percent of us learn better visually, but very few of us — then again, I’m — I’d be butchering the stats to even make it up, but very few of us are comfortable communicating visually. So, I think that’s sort of where this disconnect is we’re — we’re just starting — starting to see things like that – you know like you know, the UPS commercials and all these animated white board sections you see online now.
So I think it’s very fascinating. I found that I would get in touch with somebody, trying to explain the concept and as soon as I stood up and tried – do an attempt to make it visual on the white board, the — the discussion changed, and I don’t know – I — I don’t know why all of that’s — I don’t know why it works, I just know in the end, I found it made it a lot easier to communicate these subjects once I started trying to make them visual.
Jason Hartman: Well, can you kind of illustrate in quotes for us on this interview, any of these concepts and help — help people understand any — any – any a — the recent things in the news or current events? I mean, we’ve all — since the financial crisis, learned so many new acronyms and — and words and phrases and things we never heard of before. We call this Wall Street Innovations.
Carl Richards: Right, right. You know I — one of the sketches that’s really popular and it seems to resignate with a lot of people, in fact, it’s on the cover of the book. If you just imagine sort of a — a wave, right, like a single line that goes up and then comes back down and then goes back up. And you know, we’ve all seen that line. It looks a little bit like a stock market chart, right like it — it goes up and down and — well, seeing that line — what I found is that we have this natural tendency — if you go back to ’97. ’98, ’99 or 2004, 2005, 2006 with — and 2000 — part of 2007 with — with real estate, right, people get excited and unfortunately they get excited like after the line’s already gone up. So, it’s sort of at the top of this line, if you wrote greed/by right, people get all excited at the top of markets because they’ve heard of that. It’s what’s in the news. It’s what — it’s what their neighbors are doing and they buy, right. And then if you fast forward a couple of years, until 2002 or 2008 and ’09, suddenly the market’s gone down and everybody’s selling. You know, everybody’s nervous and we — out of — if you wrote at the bottom of that curb, you wrote fear sell, and then over at the right hand side of the piece of paper you wrote, repeat until broke, you know, this is supposed to be kind of a tongue and cheat.
You know, it’s the only – sort of investment, so the only thing Americans buy when they’re marked down and sell when they’re on sale.
Jason Hartman: It’s kind of like the little guy always seems to enter the game too late. Like they do it — they’d be — you know, after they’ve heard a year or two of hype about something, they’re finally convinced. They’re — they’re convinced too late. Would that be a fair statement and then they — and then they’re convinced to sell too late, also when it’s already in the troth, right?
Carl Richards: Yeah, I mean it’s a fair statement but then maybe we can have a — we can discuss what the little guy means, because it’s —
Jason Hartman: Sure.
Carl Richards: — fascinating to see massive institutions making the same mistake. I mean, money poured into real estate in ’07. Money was pouring into stocks in ‘0 — ’06, ’07. Money was pouring in at the top of the market in ’98, sorry. ’99. So, I think we all do it. Um, we just have this natural human tendency. It’s – it’s genetic almost that we want more of those things that are giving us security or pleasure, and we want to get away from those things that are causing us pain, as fast as possible.
Jason Hartman: Very interesting. Well — so — so that’s kind of the market cycle, if you will or the investors’ cycle and how psychology plays on it. Any other of your sort of big major illustrations that you’ve done? I mean, these are just — by the way folks, these are napkin sketches. I mean but they’re –they’re brilliant little napkin sketches. You know, these aren’t complicated, info graphics with a zillion little points on them. They’re little — just for the listeners, they’re napkin sketches, right? Is that a fair statement?
Carl Richards: Oh yeah, for sure. I have no — certainly no art skill involved here. I mean, there’s a skill it’s taking a complex thing and making it simple, but yeah — so — I mean the other one that people talk a lot about is — now, it’s interesting because this may look like a venn diagram to some people, but I — I — you know, you can argue about — like appar — apparently, they’re getting venn diagram and police who want — like to argue about whether some things that are technically a venn diagram or not. So, don’t worry about that. I call it a circle sketch.
Jason Hartman: Okay.
Carl Richards: So, in one circle you can image if — if — if there was a circle and — and in it it had the words written um, things that matter. And in that circle, I would put you know, whatever — if we were talking about investing, we’d you know — family and the — the amount of money you save. You know those things that actually make — matter or make a difference. In the other circle, and they’re slightly overlapping. Let’s say the other circle says, things that you can control, and where the overlap is, it’s labeled.
So, things that will matter and that you have some control over, the overlap is labeled — where — where — what you should be focused on, and — and what I was trying to get across to you was just that so often we spend so much time worrying about like the national economy or even worse, the European debt crisis. That’s totally out of our control and in fact, specifically in real estate, right, so much about real estate is local. You can argue whether the national economy, you know the national real estate market even matter.
Jason Hartman: Great point. Thank you for making it because I’ve been saying that for a long time. I think — I think the listeners hearing it from somebody else will have more impact, maybe.
Carl Richards: Okay, so two things. Number one, you don’t control the national economy. Number two, it probably doesn’t even matter to your local. So I – and — and when it comes to investing, it’s just things like you know you’re an exposure to risk. Those are the things that you have control over and it matters. Like, how much you have in the stock market? How much do you have in bonds, cash, real estate? Those things you have control over that and they matter.
We should be focused on that and not the latest news on CNBC, because when we’re more worried about what the financial pornography network is saying and what is going on in Europe. We have no control over it. It does us no good to worry about it. So, I’d much rather focus on things we can control and things that matter.
Jason Hartman: Yeah. I — I couldn’t agree more and I love the financial pornography network. It’s great. But yeah — yeah, I find that that’s a — a symptom of sort of the news junkie personality, and certainly I’ve been in that news junkie kind of mentality from time to time, and – and — and also that sort of a macro thinker mentality is that some people spend so much time agonizing and analyzing and discussing these big macro trends, while there are other people out there just doing deals and making money by taking action. They’ll be like — sort of an excuse to become paralyzed almost. Have — have you seen that with your investors?
Carl Richards: Oh, for sure. It’s just — it is just — and I mean you just get so focused on these things and they see — everything feels so much out of your control and you just immediately we — we don’t like that.
Jason Hartman: Right, right. Well, one of the things I’ve started saying in the past few years is that I used to be an optimist. Now, I’m just an opportunist. I think there’s enough to be pessimistic about, and I think it’s — I think the pessimism is legitimate, frankly, you know in a lot of ways, but you know as an investor all I can do is control my own actions and I just want to exploit the heck out of it, you know. Whatever’s going on, that’s — that’s all I can do. I can’t control the Fed. I can’t control government spending, I think it’s ridiculous. I — I hate it, but the — the fact is, it is what it is and all we can do as investors is just — just focus on and control our own actions and decisions. You know, very good point.
Well, it seems like a lot of your work here, and I — I’m just looking like — I went to your website on Behaviorgap.com and I clicked on best selling, you know in terms of the digital sketches and the best selling ones, and I guess, by the way, a lot to do — a lot of investment firms and so forth, buy these and hang them on the wall?
Carl Richards: Yeah, it’s been crazy. Um, a lot of — a lot of investment firms, we’ve had at a real estate firm, a lot of attorneys, CPAs — you now, they’re looking for something “art” if you will to hang on the wall, it’s not complex and Forbes says what they’ve been saying all along, so a client, right walks in the lobby or the foyer or down the conference hall — hallway and — and sees things that are like, huh — and they — they end up being — I like their — I mean, they end up being conversation starters. And — and so yeah, they — we — it’s been — it’s been actually — I don’t know how much — how much interest you got in — in buying these.
Jason Hartman: Yeah, yeah. That’s great. What I — what I noticed though is that it seems like you really focus a lot on the psychology of investing, and I know that is part of investing, but I mean — I mean, do you want to kind of ferret that a little bit, like the psychology of investing versus maybe the — the technical side of investing, you know, the — the sort of the chart — the chartist mentality maybe or anything like that, or some of the different philosophies of in — of investing?
Carl Richards: Yeah, I know. I mean, I think the — my whole point is there’s plenty of information and books and knowledge and wisdom out there about how to invest, like the technical piece of it. You know, whether you should buy index lenses with your 401K or whether you should buy active funds. Like there’s plenty of that information.
The dilemma of course, is you could get all of that perfect and with one behavioral mistake — one emotional, I’ve got to get out of the market now, mistake. It doesn’t matter. The investment process that you choose speaking of like marketable securities like maybe your 401K or retirement accounts, specifically. The investment process that you choose only matters to the degree, but it influences behavior correctly.
So, let me give you an example. Let’s just say that you’ve got a bunch of money in your 401K and — and you sat down and you figured out that, investing in a diversified set of index funds is the right way to go, and it’s — it’s — it’s the right way to go, you’ve — you’ve picked a diversified set that matches sort of your ability, willingness and need to take risk for the next 20 years in your retirement account. And you’ve done everything right and then you wake up one day and your — your portfolio is down 25 percent which would be normal, right. I mean it’s — it — those things happen. Your portfolio’s down 25 percent in ‘0 — ’08 and you wake up and say, I can’t take this any more and you sell. The skill, the knowledge, the wisdom that went in to picking that, it doesn’t matter at all if you can’t behave correctly.
So, that’s sort of — I — yes, we need to have a — a certain level of knowledge to invest correctly, but you could own — and the — the data shows this clearly, you can own an average mutual fund and if you behaved correctly and you just bought it and held onto it for a long, long time, even the last 10 years, like all these people that say investing hasn’t worked the last 12 years, that’s completely wrong. Investors haven’t worked the last 12 years. There’s plenty of investments, broad based index funds that have done fine. It’s just that none of us have the — the sort of emotional ability to stick with it.
So, buy and holding still absolutely works if you buy and hold, right. It’s just that you’re going to have to live through periods of time where it’s incredibly painful.
Jason Hartman: And you’ve got to overcome yourself. Isn’t that a big part of it, overcoming one’s self?
Carl Richards: The biggest enemy is — is you.
Jason Hartman: Yeah. All right. Sure is, it sure is. Do you want to just talk maybe more generally for a just a quick moment here about your outlook on things and what is going on with the economy and investing?
Carl Richards: Yeah, you know, I mean — I think all of those things are really interesting to talk about, but the — the dilemma of course is I have realized over the last 16 years that I don’t — I don’t know. So my view of all this, while it may be fun to talk about and an interesting debates talk about whether the economy is going to grow or not grow or jobless — this jobless rate is a permanent thing or what’s going to happen in Europe? What’s going to happen with debt.
Those things may all be interesting to talk about, but the reality is — is since I don’t know what’s going to happen and I would submit to you that no one does. I would rather not be making decisions on that. I would rather make decisions on my own personal plans. So, if — if I’ve got unique opportunities to in — in — investment real estate, private real estate, you know, I should be looking at those things that are in my control. And sure, I’ve got to make a decision, like okay, if I buy this apartment building, what’s going to happen vacancy rates over the next 12 — 30 — you know, 24 — 36, you know — 10 years, I’m going to have to make some assumptions. And if that assump — if that — if that range of outcomes is so — potential range of outcomes is so wide, and it — it makes me uncomfortable, then maybe I shouldn’t buy that apartment building.
And if I’m relatively certain about the vacancy rates, even when I built in a healthy slice of uh — of uncertainty, right, so to make sure I’m not being over confident, so that’s sort of my view on things is, I would rather focus — there’s enough opportunity out there in any market for me just to focus on the things that I can control. And let’s say I have no interest in real estate, and I don’t know how to do it, and I — somebody who knows how, and let’s say hypothetically I can’t find anybody, well then those things I can control are my long term exposure to stocks.
If I decide I can’t live with any disclosure to stocks, well then I need to have all my money in CDs. That’s fine too. I just need to make a little and save a little bit more.
Jason Hartman: And — and that’s — that’s just exactly what we were talking about, about not worrying about what’s going on in Europe, and you can’t influence that stuff. So, I — I hear you, exactly, but it’s so interesting to talk about. Some people like to just — just chomp on that and talk about it.
Carl Richards: Well, like we’ve all been trained. It became sort of an America’s spectator sport.
Jason Hartman: Um hmm, yeah. That’s a good way to put it. That’s a good way to put it.
Carl Richards: I don’t — I don’t think it does us any — it’s much more entertaining and far cheaper to go to the movies.
Jason Hartman: Uh huh, or — or maybe even to gamble in Las Vegas, and that’s expensive. But yeah, good stuff. Well hey, any closing thought that you’d like to give us and please tell people — uh, give out your website and tell them where they can get the book.
Carl Richards: Sure. Yeah, I mean the website is www.behaviorgap — behaviorgap.com and the book is available anywhere books are sold. Airports, Barnes and Noble, everywhere. Um, but of course, you can always get it from Amazon and you can buy it from — if you want an autographed copy, just send me an email. We can sell it to you right from my website.
Justin Hartman: Fantastic. Well, thank you so much, Carl Richards. We appreciate it and — you — you have any plans for another book? Maybe more illustrations?
Carl Richards: Yeah. Yeah, we’re working on — we’re working on something for about a year from now.
Jason Hartman: Uh huh. Good, good stuff. Well, phone us up when you do so we can have you back on to talk about it.
Carl Richards: Thank you very much, Jason.
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Jason Hartman: One of the great things about the Creating Wealth Show is that we love it when you call into the show and you can do that at (480) 788-7823 and let’s go to a caller now and answer some questions and discuss some issues.
Hey, we have C.J. on the line calling from New York City. C.J., how are you?
C.J.: I’m doing great, Jason. I’m good.
Jason Hartman: Good, good. Thanks for calling into the show. How can I help you?
C.J.: Well, I have one question. Before I ask the question, I — I love your show. I just got to point that out to you. This is a real score.
Jason Hartman: Thank you, thank you so much. I’m glad you find it valuable and I’ll keep doing that as long as people tell me they find it’s valuable. So, we’ll keep it up.
C.J.: Thank you, and my question is just to make it quick is that — well, my concern is that what if I buy investment properties but all of a sudden the way the government is going, they just turn around and take everything that I’ve worked to build and that’s my concern.
Jason Hartman: Yeah well, that’s — that’s a valid concern. I mean look, the reality is, I wish I had some great answers but the government can always do anything they want to — I shouldn’t say they can do anything they want, they can do anything that the people allow them to get away with. We’ll put it that way, maybe. And you know, that — that’s the reality of the situation. You know of course we have a body of laws. We have rule of law in this country, theoretically, have a great constitution, but more and more we see the government watering the constitution down and over stepping their limits and over stepping their rights. And you know, in my opinion and the opinions of many other people. So, this is certainly a concern.
C.J.: And I have another question because I also listen to Robert. Like I read his book Robert Kiyosaki and in his books are such on how the tax laws are an incentive that determines whatever the government wants to see get done.
Jason Hartman: Right.
C.J.: They gear the tax laws towards that. So I mean, when it comes to housing in that respect I guess, are we safe? Like if I’m providing housing for people — but you know something, my question is like gov — the tax law for nothing more than an incentive —
Jason Hartman: Right.
C.J.: — which would be half of the government. So, for example, what you two, which is what I want to do, invest in properties, provide an alignment to what the government wants to see get done.
Jason Hartman: Yes, that is what the government wants to see get done and here’s the thing, you know, have you ever heard, C.J. the old saying there’s safety in numbers’? Have you heard that saying?
C.J.: I’ve heard it, yes.
Jason Hartman: Yeah. Yeah well, that’s one of the things I really like about being a real estate investor, being an income property investor, because there is some safety in numbers. The government is more likely, as anybody, to — to take advantage of a small, weak group than a large powerful group. And so many people own real estate and then of that group, it’s a huge group, so many people of them own income properties and the National Association of Realtors is a huge trade lobbying organization with over one million members.
And so, these laws and these customs are very codified into the American legal system and the American psyche. So, that makes me feel very good about real estate, about income property, you know as the quality of its investment, the quality of its tax benefits and the quality of its legal protections. Because like I said before, if you think society’s going to fall apart, everything falls apart. I mean, what will there be? Will the money in your wallet be worth anything? Will — will you be able to access the money in your savings account? Will you be allowed to trade gold and silver? Probably the answer to all those questions is no.
The government can ultimately do whatever they want because they — they have the monopoly on force. But barring society falling apart in these really sort of outlandish theories like that, that I guess could happen, but they’re very unlikely, I feel very good with income property as an investment.
C.J.: Okay. And um, last question is how do you feel about investment in other countries like Brazil, because I hear their economy’s booming in Brazil, because they’re trying to make it more um, urban, I guess, like the big companies are coming over so the economy’s actually booming because I thought about not only focused on the U.S., but also doing it in Brazil.
Jason Hartman: Yeah. Well, I — by the way, where is your accent from?
C.J.: I’m from the Dominican Republic.
Jason Hartman: Okay. I’ve been to the D.R. I’ve got to tell you about a quick, funny story about the D.R., the Dominican Republic. I did a speech there once and it was funny, it was the only time I ever did a speech where it was translated into another language. And I’m — I’m — I’m wearing a microphone and an ear piece, as well, so I can hear audience reaction. And it’s funny, very time I would say something or tell a joke, the audience would only get it like a minute later. It was — it was really funny doing that. I’ll never forget that.
But yeah, so what I — what I would say is that you know, again it goes back to that rule of law thing. I am very reluctant about investing in other countries. As you’ve heard me say on the show probably, I’ve traveled extensively. I’ve been to 64 countries so far and some of those countries I’ve been to many times and Brazil is growing. They’ve got great resources, there’s no question about it, but still you have, I believe, a lot more corruption and a much less stable infrastructure of property management, of real estate laws, of — of all sorts of things.
I — I — and — and you certainly don’t have the financing and mortgage infrastructure that you have in the United States. I looked at property in Argentina extensively, because I thought that was a great place to invest. I read all about it. I looked at property in Panama. I’ve never been to Brazil, mind you, but you know, I’ve certainly read a lot about Brazil. I’ve talked to many developers down there in Fortaleza, in Sao Paulo and some of these other areas that I can’t even remember right now. But you know what, for me I — I think good old U.S. real estate is far in a way, far in a way, the best because you don’t have the opportunity to get those 30 year mortgages in other countries like you do here. It’s just a — we just have a whole different system here.
And you know, our real estate prices, believe it or not, are actually relatively low. Now, you could look at a country like Brazil. You can look at China. You can look at some of these countries like the brick countries and they’re growing fast, but growing from where? They have to grow from a long way down. Yes, the U.S. and other highly developed industrialized countries, they may — they may have slower growth rates, but they don’t have very far to grow. The population here comparatively is already so prosperous compared to these other countries. They’re already way ahead of the U.S.
C.J.: Okay.
Jason Hartman: That’s — that’s my — my take on it.
C.J.: You got — my Dad actually said this like every other places that is struggling but the U.S. is still like the best, because I’m getting to that age. Like I’m 32 and most of my friends are having kids and — and I’m realizing wow, like I want to feel some sense of stability before I can bring a child into this world.
Jason Hartman: Sure, of course you do. Yeah.
C.J.: And I’m — all I’m trying to do is educate myself as much as I can, because I love your podcast. If there’s any books, like that would be fantastic. I’m always looking for material to read and sometimes I hear you talk about a book and I’m like, what are some of the books? So, if you could put a section in just books that you recommend that would be fantastic because I will definitely make sure that I read those books.
Jason Hartman: Yeah. Well you know, we just talked about some of those books on the last show and any of the guests that I interview, the vast majority of them are authors. So you know, I would say that’s a great start. I love the Robert Kiyosaki books and I — I think just a — just a guest on my show, all the books that I like, I try to interview those guests. Now, I haven’t interviewed every guest that I have read or — or you know, enjoyed their books, but certainly try to and eventually I usually get them on the show.
So, I’ll keep talking about those, though, and try to provide as many resources as possible.
C.J.: Thank you so much, Jason. Thank you for your time and to me you are a light on this earth. So, keep doing what you’re doing. Like, I don’t call as much, but I told them to go home and listen to the podcast and you’re doing great work. I really appreciate it.
Jason Hartman: Well thank you so much, C.J., and keep on listening and we’ll keep on trying to provide value for you and I’m glad you are a life long learner because that will get you very far in the world. So, thanks for calling.
C.J.: Thank you. Bye bye.
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 | twm1340)
Transcribed by Debra Bozeth
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