Jason Hartman starts this 317th episode along with Steve as they discuss real estate market conditions and economic factors creating investor urgency. Then it’s a discussion of “Crowd Funding” – a potentially hot new opportunity that came out of the ‘Jumpstart Our Business Startups Act’ or JOBS Act, a law intended to encourage funding of United States small businesses by easing various securities regulations. It passed with bipartisan support, and was signed into law by President Barack Obama on April 5, 2012. To help with the discussion client, Chase Insogna, CPA outlines some of the issues. Chase is Managing Partner & Co-Owner of Insogna & Stewart, CPAs, PC, a licensed CPA firm focusing on delivering paperless & cloud-based technologies to provide professional accounting and tax services for small & medium-size businesses, including entertainment (film & music) and through crowd funding platforms.
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: Hey, welcome to the Creating Wealth Show. This is your host Jason Hartman. This is episode number 317. Thanks for joining us today, as we are going to finally talk about — finally, finally I’ve been wanting to do a show on this. We’re going to finally talk about the concept of crowd funding. Yes, you may have heard about this. You’ve heard about websites certainly like Kick Starter and Indiegogo and then you’ve also heard about sites like Keva and these sites are really changing the world in many, many ways whether it be micro-lending or crowd funding, but there’s also a crowd funding aspect where you can crowd fund a real estate deal. And just so you know I don’t think this day has arrived yet in any real practical way, but being on the cutting edge of things, as we are here at the Creating Wealth Show, we wanted to talk about it. I’ve been very interested in it for a long time — I just — I don’t think we’re quite ready for prime time on this, but it’s something to keep in the back of your minds and we will be talking about it and exploring it more as it develops and as the laws mature. I do think that out of a lot of these things, there’s going to be a lot of litigation so watch out. They always have a new thing coming to play and then the lawyers follow and the litigation follows as — as fraud appears, and people get burnt on deals and stuff happens. But generally speaking, this stuff kind of sorts itself out.
You may know that in the early days of franchising, and there’s still a lot of litigation that comes out of the world of franchising of course, but you know now days after decades and decades of franchising, the legal system has matured, the parties in that business have matured and everybody’s just gotten better at understanding what it’s all about and — and the regulators have — have gotten better at understanding what it’s about, and you know I think that’s the way it will go with crowd funding too.
So, I’m not saying we’re ready to do this yet, but I’m saying it’s an interesting thing that as real estate investors, we want to keep — keep our eye on for the future. And so, we’ve got a couple of guest experts who are going to talk about that here as part of our guest segment today, but before we do that Steve and I have some very important things to talk to you about, and one of them is some massive change in the housing market and what you should be doing with that. And we’re going to talk about an article from a prior guest that I had on not too long ago and that was Dr. Steve Sjuggerud, and you can go back and find that episode, of course. It wasn’t too long ago, maybe twenty or thirty episodes ago, but we want to talk about one of his articles that appear today and Steve, how are you doing?
Steve: I’m doing well. I’m just thinking about a couple of really important things which is what prize are we going to give the person who can spell Sjuggerud, successfully?
Jason Hartman: Well yeah, that’s a — that’s a good question because you know, I’m always recommending that our listeners go to Jasonhartman.com or if they listen to our other shows, any of our websites, and we always have this very handy dandy Google search bar that we actually pay for, so it’s not full of advertising and it’s in the upper right of the page and they can type in Steve Sjuggerud and find that episode if they can spell it. But you know what, I’m going to circumvent that contest and I’m just going to spell it here for them. It’s S-j-u-g-g-e-r-u-d. That’s a — that’s a tough one.
But Steve’s a great guy and really, really smart, really insightful and you can find that — that episode that I recorded with him, a couple dozen episodes ago. It — it was a good one.
But Steve, talk to us about this article.
Steve: Well, it’s an interesting article. We were kind of going over it together and I think one of the things that stands out the most to me is that Dr. Sjuggerud here has a graft that shows home prices since 1973 and kind of where the median home prices have been in the United States, and what is really a mind — you know, I’ll just read it. It’s only three or four sentences.
Jason Hartman: Okay. Before you — before you do that, I’ve got to just site the source. This is a Bloomberg graft. It’s from Bloomberg so it’s a credible source and folks, if this doesn’t convince you to beg, borrow and steal to be buying high quality properties with long term fixed rate investment grade debt, following my exact plan, you’re out of your freaking mind. I just got to say this so strongly, and I — I really don’t talk like that but I mean folks, this is going to blow your mind, this graft and what it tells you, because the opportunity is nothing short of phenomenal. I mean Steve, it’s hard to overplay this because it’s just so true. It’s — it’s just the facts of what’s going on right now.
Steve: It is — it is so true and we really ought to link the article on the blog or something because he — he nails your philosophy here.
Jason Hartman: Oh, he — he nails it, yeah.
Steve: Yeah, we’re — we’re not alone anymore.
Jason Hartman: We are definitely not alone.
Steve: Yeah, he — he just hits it out of the park because I’ll — I’ll read what he says here. House prices today are at about the same levels they were in 1979 and 1980, adjusted but —
Jason Hartman: Adjusted for inflation.
Steve: — adjusted for inflation.
Jason Hartman: Yeah, yeah. And — and so you know folks, if you felt that you were — that you missed the boat, that you — you wish you could turn back the hands of time, don’t we all have those regrets at times in our lives? Every time I look in the mirror and then I hear on the news there’s not a recession, but my forehead seems to be getting bigger.
Steve: Ha, ha, ha.
Jason Hartman: I’ve got the recession in my hairline and — and you — you just — in so many ways, we want to turn back the hands of time. We want to take a mulligan, if you’re a golfer, you want to take a do over and start again. This is the chance. I mean look at this, this is the chance. I mean, do I sound too giddy? I — I — I — it’s just phenomenal. Steve, what did you say? You said, house prices today are back at the same levels as they were in 1979 and 1980, adjusted for inflation. And — and the amazing thing about that sentence is those are adjusted, I’m sure because whenever anybody says that, they’re never adjusting for real inflation, they’re adjusting for the official or the quoted inflation rate. So, when — when you think of this, it’s actually better than what he’s pointing out because of that.
Steve: Yeah. We don’t know if he’s purposely being concerned there, but – okay, so be —
Jason Hartman: Well you know, because — because to adjust for real inflation, you’d have to decide what the real inflation rate is, okay, and everybody whenever they do that, some liability or potential manage to their —
Jason Hartman: — credibility is going to come. I say real inflation now is nine or ten percent. Most people in the know agree with me on that, but if you just go with government statistics, no one will criticize you too badly for that.
Steve: Just go with those knowing it’s actually higher than that, right?
Jason Hartman: Yeah.
Steve: So, back then and — and I’m quoting again here, back then mortgage rates were fifteen percent. At that rate you’d pay six hundred twenty thousand dollars in interest over the life of that loan, and that’s — that’s taking you know what the median home price was back then. And then he says, “by comparison at today’s mortgage rates of three and a half percent, you’d only pay one hundred six thousand dollars over the life of the loan”. So, what — what if you could go back in time, and now I’m not quoting anymore, to 1979 and buy houses in three point five percent?
Jason Hartman: It’s better than it was then. I mean, think about the significance of this folks. Now, one — one note, it’s not quite as good as it seems in this sense because an investor probably isn’t going to get a three point six percent mortgage rate.
Steve: Yeah, it’s not going to happen.
Jason Hartman: The investor rates are higher. Maybe you’ll get four and a half percent, just as an example. And you know that fluxgates a little bit depending on the size of the loan, your credit score, the points you pay, the location in which you buy. So, that’s a slight moving target.
Steve: That’s okay it’s still ten percent lower.
Jason Hartman: It’s — it’s —
Jason Hartman: — it’s phenomenal okay, it’s phenomenal either way okay, but it’s not quite this good. But in this example of buying one’s own home as an owner/occupant, you’re paying one sixth — almost one sixth of the interest in a time when we have this massive, un-payable — un-repayable debt that — that is a sign of significant, if not hyper inflation coming your way, that is going to totally enrich you and wipe this debt out. Those people didn’t have this.
In 1979, we were coming off of the big inflation problem as — as Reagan got things back — back in — in decent stead. I’m not saying he was perfect by any means, he was just better than everybody else. Reagan had his downfalls too but when he got things back under control, that was good for the overall economy and it was more sensible, and it was really — you know, I can’t even credit Reagan. You’ve got to credit Paul Volcker. He was the only Fed chairman who was — who had guts to do the right thing and break the back of inflation with those high interest rates.
But I know many people who are in the — in the real estate business in 1980 and in the ‘70s and still are in the business now or recently retired from it and this is true. I mean this is an accurate portrayal of things.
So, you’ve got basically the same median home price, nationwide median home price, and you’ve got interest rates that have you the equivalent of paying a – a — a — not quite as good but almost one sixth of the interest over the life of the loan. And you’ve got massive inflation knocking on the door here. I mean —
Steve: I know. I know, we have those — we have that opportunity and — and — and it really has cut a fine line, Jason, because we have that opportunity because the money is cheap what the Fed has done, what the government has done. If you don’t take advantage of it, you’re going to get clobbered by it.
Jason Hartman: I’ve got to almost make a strong statement here because I just get so frustrated. Look folks, when I sold my last company I could have just retired. This is like my mission. I love this stuff. I want to really see the middle class and the upper middle class live on in this country and they are totally under attack.
But if you’ve been listening to this show and you have the wherewithal, and I understand, some of our listeners don’t. They — they’ve been listening because they’ve been wanting to get educated and they — they’re not ready, and they don’t have the capital to make the move to do this, okay, and they’re accumulating it. But if you have the wherewithal and you don’t take advantage of this time, you’re just — I — you’re just wasting your time. I mean, I don’t know why you’re listening to the show. You know I’ve got to say, because the opportunity is so phenomenal right now. It’s just sad to see people miss the opportunity.
Steve: It really is and — and I’ll kind of, if you don’t mind Jason, segway a little bit here because there’s something I want to read from the story, and we can circle back if we need to, but you and I were talking about the quote from Wayne Gretzky, the famous hockey player —
Jason Hartman: Yeah, that’s a great quote.
Steve: — yeah you miss one hundred percents of the shots, you don’t take, and I actually — I don’t even think you know this, but I played hockey for four years in high school. So that hits home with me. It — it’s a very much a gamal opportunity and a lot of times, hockey coaches will measure success by how many shots on goal does the team have? If you didn’t have a lot of them, your odds of winning go down and that’s how this is. And I have you know, a few clients and I know lots of people do who are – and it just stuck in paralysis by analysis right now. They’re — they’re chasing returns from six months ago or they’re looking for reasons to not make a decision, and they’re — they’re getting left behind, but even if you’re new to this and you’re just jumping in now, it’s still a fantastic opportunity that leads me to what I want to read you from the story and we can comment on this if you want to hang on one second here.
But Dr. Sjuggerud says, what most people don’t realize is that market price today is still a fantastic deal. Most people don’t understand compound interest and fair value, so most people today will back down. They won’t pay “full price” or more because they don’t really understand where we are now in housing. And I’ll put — “historically” there at the end of that, because what he’s talking about with where we are. We’re at adjusted for inflation. We’re back in 1980 right now.
And back to his — his quote, he says “In the grand scheme of things, full price today is still cheap. It takes a long time for house prices to reach fair value. They can’t jump overnight like stock prices. Housing is still incredibly affordable, thanks to low mortgage rates and coupled with no supply and tons of demand, we have a recipe for much higher housing prices in the next couple of years, yet it’s much — much harder to get good property dramatically below asking price. But buying at market price is still a bargain today. I am confident that you will look back on today’s prices in two years and wonder why the heck you didn’t act”?
Jason Hartman: Yeah, yeah. The Beginning of the Reluctant Investor’s Lament, written back in 1977, he says I hesitate to make a list of all the countless deals I’ve missed, bonanza’s that we’re in my grip, I watch them through my fingers slip”. And it goes on and on and I — I just want to read the whole thing but I don’t want to bore the listeners. I’ve — I’ve done it before, I might do it again. I just have to warn you that this is the time. And folks, if you’re out there and you have half of the capital necessary to do a deal, I will partner with you personally, you know. I’ll put my own money into the other half of the deal. I — I can’t imagine I would turn down any deal offered through our network. So, if you want to buy something and you’ve got half the cash, and you need me to put in the other half of the cash, talk to your investment counselor in my company. If you’re — if you’re not engaged with investment counselor, just go to Jasonhartman.com and click the contact section of the website and contact us through there and say, I’m interested in partnering with Jason. How does it work? And they’ll help explain it to you and you know we’ll see if we could do a deal. I’ve partnered with many of our investors and I’ve got capital and one of my biggest problems is trying to deploy the capital because the inventory is so scarce, and if you need a partner and you want the guy on the show here to put his money where his mouth is, you just let me know and I’ll put up some of the cash in your deal for you, okay.
And we will split the equity, we’ll split the tax benefits, we’ll split the cash flow and go from there. Those are pretty easy partnerships to do. I’ve done many, many of them over the years.
Steve: Challenge issued.
Jason Hartman: Yeah, yeah. Challenge issued, there’s your deal okay.
Steve: Well yeah, I think you and I are going to do one here, but I — I want to say something here because some — some people are stuck in this mentality of — of 2009 and 2010. If — if you were doing real estate deals in 2009 and 2010, most people would have said that you’re absolutely insane.
Jason Hartman: And — and you know what else, you had a lot of guts to be doing them back then.
Steve: You certainly did.
Jason Hartman: We — we had clients — I mean I’ll — I’ll just tell you. In my businesses and my financial life, 2009 was not a good year. I mean there was — the financing just dried up, but we still had clients that had the guts to do it and they were contrarian thinkers. Buy when everybody’s selling, sell when everybody’s buying. Right now, it may seem frothy to you but we’re early in the froth folks. It’s going to get a lot frothier than this and still on — on net overall the mentality out there is for mainstream, is that things are still tough. I don’t know if I should do anything? You hear a different thing on our show of course, but you look at the mainstream world and there’s a lot of people with paralysis for analysis out there that are still scared to make the leap.
And when we’re — when we’re talking about this, by the way Steve, I have to qualify it because most people that contact us are willing to do things. It’s not like they’re not buying. I guess what I’m saying is they’re not buying enough.
Jason Hartman: Because I — I know that they have a lot more wherewithal and a lot more capital, and you know, they’re buying five, six properties, ten properties, but when you look at their entire portfolio because you know they come to us and tell us about many times their whole entire financial life. What I’ve got in my IRA, what I’ve got in my 401K, what I’ve got in the bank, what I’ve got in equity in other properties, and all that stuff, and I qualify this with saying, as long as you’re in the right deals, in the right markets and you’re structuring them correctly, this is the time to go in kind of heavy. Okay. I don’t want to say go all in. I don’t want to say that because that’s just too much liability for me to say that. Okay.
But this is the time to really, really push yourself to be doing a lot of stuff and when you only put twenty percent or one fifth of the money in the deal, you’re risk is relatively low, folks. The bank is taking the biggest risk.
Steve: It — it really is. And it — it’s not that time anymore. You don’t — some people want to buy — you — you talked about this on the last podcast, I believe. They want “instant equity” and that can happen but that can be somewhat relative. But like Dr. Sjuggerud was talking about, when you’re looking at this historically and understanding what’s really happening in the broader market, market price is a good deal today. It — it’s not what –like in 2009 when you could go buy land or something from a builder who was losing his shirt, or from a bank who was going to get shut down by the FDIC tomorrow.
Jason Hartman: Yeah, if they didn’t unload some of their REO real estate ownership.
Steve: Exactly, it’s — or — like we like to say when there was blood in the streets and when only the crazy people were doing real estate. Well that — that ship has sailed. The crazy people, they did it. They’re going to make the highest return because they took the biggest risk during that time, and we’re in a good equilibrium right now where it’s pretty apparent that this is a historical market but you don’t have to be one of the crazy people with all the risk. You’re taking less now but you’ve still got that window to get a very good return historically, the herd has not arrived yet. We don’t have ninja loans yet. We don’t have these low down, no doc loans.
Jason Hartman: Yeah but we’ll probably get them. It looks like they’re coming. And that will [voice over] —
Scott: They’ll be here.
Jason Hartman: — and that will really —
Steve: And that will sell.
Jason Hartman: — that — that — and that’ll really make the market frothy —
Jason Hartman: — and that — that’s when things will get really crazy when that happens and you’ll — you’ll think that this time was no big deal. Yeah — yeah folks, just do not miss the opportunity and —
Steve: Financing is holding it back, that’s why it’s so great right now because when financing comes back you bought when it made sense, the deal made sense today. So, you want to hold them forever, you can. You want to liquidate it, you can because you did the right thing, you made the right decision and you’ve got staying power.
Jason Hartman: Yeah, right, right. And — and that’s commandment number five, thou shall not gamble. Only invest in properties that make sense the day you buy them and don’t expect anything great to happen, although from the looks of it, something great probably will happen. But maybe it won’t. Diversify geographically, follow my ten commandments and that’s — that’s going to be your insurance policy, and it’s going to offer you a lot of protection in different areas.
You’re — you’re going to be buying sensible properties, you’re going to have control of your investments, you’re — you’re educated, you’re diversified, you’re area agnostic, you’ve got the most tax favorite asset in America, you’re using as much leverage as possible, it’s fixed rate, prudent, conservative leverage. You’re not buying in markets where you’re buying high land values. You’re following my risk evaluator formula to lessen your risk and almost eliminate it. And those are all the — the principles under which a prudent investor does business.
And I — I just — I tell you, if you’re not going in heavy right now, you’re just going to miss the boat and I — I — I hate to talk like this because I feel like a cheesy salesman saying it.
Steve: Yeah, I know what you mean.
Jason Hartman: But — but — but sometimes it’s actually accurate, okay. You know. And that’s the thing. So anyway, okay. Well hey, let’s look at an actual property, Steve.
Steve: Yeah, I’m looking at one here in Lehigh Acres, Florida down in southwest Florida, a lot of building happened back there during the boom.
Jason Hartman: Oh yeah, that was one of the blood — bloodshed areas. I mean it was just —
Jason Hartman: — was just — what happened in some of these areas of Florida was just ridiculous. I mean where pe — promoters would basically, they would get — they would sell people a lot, a piece of land and then they’d say hey, get this contractor to build the house for you, and these ram shackle houses were going up, very little zoning restrictions at all and they were just building things everywhere. They didn’t have proper planning or there wasn’t any shopping nearby and there was like no employment base whatsoever in some of these areas, and you know it was just ridiculous. They just totally overbuilt these areas, but what happened was even worse than that — than those things is the builders, they’d start your project and start building your house, and they would quit in the middle of the job because they got another job that paid them more. That’s how crazy markets — can you imagine buying a lot and having a half finished house that you can’t get anyone to finish for you because there were just no workers. They would just leave a job in the middle of the job and then go build another house because it would pay them so much more. Wow!
Steve: Those were the crazy times.
Jason Hartman: Those — I mean there were some bad things going on. So —
Steve: Yeah, yeah.
Jason Hartman: — this — there are many overbuilt areas in Florida, but — but now the pendulum is swinging back because almost nothing has been built in the past few years, and demand has increased and it’s not all investor driven and it’s not all sub-prime borrower driven, the silly demand. The demand is much more sturdy and realistic now.
Steve: Yep, it’s realistic, organic demand. People like to jokingly refer to Lehigh Acres as ground zero —
Jason Hartman: Yeah.
Steve: — yeah.
Jason Hartman: And — and it’s close to ground — that’s one of the ground zeros.
Jason Hartman: There are several of them but that’s one of them.
Steve: It’s — it’s one of them but you know you can buy — you know we’re looking at this property that was built in 1987 and it’s almost thirteen hundred square feet. You’re buying it for forty nine dollars a — a square foot.
Jason Hartman: So this — this — okay, it’s funny because you look at the age. So it’s built in 1987, so this property has lived through a couple of cycles.
Steve: Yes, it has.
Jason Hartman: Absolutely, okay —
Steve: And — and that is, well below the cost of construction —
Jason Hartman: Oh yeah.
Steve: — in Florida.
Jason Hartman: Forty-nine bucks a foot, yeah.
Steve: Oh yeah, and — and so that — for Florida, that’s great. So what’s even better too, the cash-on-cash return on this is twelve percent and your total return is — is forty one. This isn’t a growth market where you’re buying well below the cost of construction. I like this deal.
Jason Hartman: Yeah, and I — I — I got to say, these are all performer returns. This is part of the projections but our projections, we feel are pretty darn conservative. We’ve got the vacancy rate in there. We’ve got the management fees in there. We’ve got the maintenance percentage in there. This is not the pie and not the sky stuff that some of our “competitors” do.
Steve: It’s — it’s very conservative, you know. I — part of my responsibility at the company here is to — is to verify data and I’ve checked with a couple of property managers just to verify, hey you know or how are we looking on our rents, you know in Lehigh Acres and Cape Coral? And this particular property, we have it on the performer at seven hundred a month. Both the property managers that I talked to came in higher than that.
Jason Hartman: Yeah, and Steve I got to ask before we totally finish with this property, what are some of the other markets that you like right now? If someone’s listening to this and they say hey, I’m just not a big Florida fan or I already own four — five properties in Florida and I want to be diversified, what are some of your favorites right now that we’re doing business in?
Steve: Well, I can answer that quickly. It does depend on what your goal is, you know. If you want to go minimal cash out of pocket, if you’re the person that likes really cheap properties, maybe you like Section 8 and the guaranteed income that that brings I don’t think you can beat Birmingham, Alabama right now. The — what they get for rent there is very high. I think it’s probably our highest rent to value ratios.
If you — if you want new construction and you just like the stability that that brings, I am crazy about Houston right now. The growth of this happening in the Houston Metro area — I was talking to our local market specialist actually the other day, and the manager there, he’s actually got some calls from some of the big oil companies who want to sign executive leases on these new built properties. I mean which — that’s a great tenant to have, okay. And it’s fantastic. So I love Houston. I — I love southwest Florida and you know from your bread and butter steady cash flow, boring but steady, I always like, Indy.
Jason Hartman: Um hmm. Yeah, good old Indianapolis, you used to live there and that’s where I actually met you. So, well I didn’t meet you there, I met you in Phoenix but the first time we went and looked at properties together was in Indianapolis.
Steve: Yes, we were in Indy, yep, yep.
Jason Hartman: Yeah, yeah, that’s good, yeah. Good. Well yeah, we have lots of different markets for you to choose from, but just getting back to this property, so we got a projection of cash-on-cash return of twelve percent annually, so if the property goes to zero in value aft — the day after you buy it, just maintain your income and expenses, you’ll get twelve percent annually and overall return on investment. Then you factor everything in is at — projected at forty one percent annually. Wow!
Steve: I know.
Jason Hartman: So, again, as I always say, if it only goes half as well, you’re going to make twenty point five percent annually, if it only goes half as well as expected. So, there you go.
Steve: That’s — that’s a — that’s a pretty good way to look at it and as a conservative performer, we’ve got the taxes, insurance, vacancy, maintenance, leasing fees — this is all built into the performer. Make sure you pay attention to tat stuff if you’re looking at property in other places, because that’s usually not included. People want to dial up the numbers. This is a realistic figure. These are — these are real costs of what it takes to operate an income property and even after all of them, you’re getting the numbers that Jason just said.
Jason Hartman: Good, good stuff. Well Steve, any other closing thoughts that you want to mention before we get to our guest?
Steve: Well, I want to hear the guest. I’m curious to see how the SEC’s going to throw cold water on this crowd funding thing.
Jason Hartman: And they — they probably are and there’s going to be a lot of litigation, and we’re early talking about this folks, okay but we just wanted to bring it to you and share some of the ideas, and Chase is on the — he’s one of the guests, is a client of ours, and — and he bought — I recorded this a couple of weeks ago, but he bought — I believe he’s purchased nine properties from our group, so far and right on the call I think I asked him, when we were talking, I think I said well how’s it going? And I did not talk to him before. I don’t know what he was going to say. I just took the risk and — and you know, what’s he going to say? And I think he said, eight of them are going great and one of them is a problem.
So hey, and — and — and you’ll eventually right the problem. You know maybe — I can’t remember why it was a problem. I think he’s got a bad tenant in one of them, both look — but look at the odds of that. I mean you’ve got eight properties that are performing well, and I would assume that those properties are probably paying him somewhere in the mid twenty percent annual rate of return, so like twenty five percent, something like that and one of them is going poorly and he’s probably breaking even on it, with zero return. So, that’s not bad at all, huh? You’ve got eight properties paying you maybe twenty five percent annually and one paying you zero percent annually and eventually within the next probably couple of months, that one is going to be — that ship will be righted and it will start paying well again. So, this stuff is great. I love real estate. Actually, I don’t love real estate, I love income property —
Steve: Income property.
Jason Hartman: Let’s be more specific about that. If you want to know what I mean by that, listen to some of the past shows, folks. I’ve explained it before.
Anyway Steve, thanks for joining us today. We will be back to talk about the early advanced pioneer stages of crowd funding here in just less than sixty seconds and I leave you with one thought, because it relates to this. Steve, I don’t know if you know the answer to this little riddle, but how can you recognize who the pioneers are?
Steve: Um –
Jason Hartman: I’ll tell you.
Steve: If you don’t — if you don’t see any of them around you then you’re it, right?
Jason Hartman: No, no, no, no. They’re the ones with the arrows in their back.
Steve: Oh. There you go.
Jason Hartman: So — so don’t be too early, but this is something to keep aware of. I really — I really am — been looking at this crowd funding thing and — and we’ll see, you know as it develops how it turns out. So, we’ll be back to talk about that in just a moment. Thanks Steve.
Steve: Talk to you later.
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Jason Hartman: Okay, I’d like to talk to you about something that I have been following for a while now and that is the concept of crowd funding. I’ve mentioned it before on the show and Obama signed a — a bill about this — I’m remembering about a year, year and a half ago, but my guest will — will confirm the dates and — and get me all the proper information here in just a moment for you. And this is a really interesting thing that has changed some of the SEC rules and allows small investors to raise funds in different ways and we’ll talk about that today. So, I have on the line with me, coming — both guests are coming from Texas. One of them is our client, Chase. Chase, how are you?
Chase: Good, thank you.
Jason Hartman: Good. Now, you are a CPA and you became one of our clients — what, a few years ago, right?
Chase: That’s correct. You know, I got to think, it was on the first one.
Jason Hartman: Okay fantastic, and you own nine properties that you purchased through our network?
Chase: That’s right. I’ve got four in Georgia, four in Missouri and — and one in Texas.
Jason Hartman: Uh, huh and as you said to me before we started recording for the show, eight of them are great and one’s a problem, right?
Chase: Yeah, and like you said, it’s pretty good odds, so doing well.
Jason Hartman: It — it is pretty good odds and we like to — we like to make this a realistic thing. It’s not perfect by any means but I — I just say it’s — it’s kind of like that story of the bear chasing the camp — the hikers. It doesn’t have to be perfect it just has to be better than everything else. So, it’s a — and — and you know the — the moral of that little story, if you haven’t heard listeners is one of the hikers as they see the bear coming, stops to put on his tennis shoes and the other hiker says, hey man forget about your tennis shoes, you can’t outrun a bear. And he says, I don’t have to I just have to outrun you. And that’s really all you have to do with your investments is just outrun everything else. So — and Nathan is with us. Nathan works with Chase and — in — in the crowd funding arena and he is a — a lawyer who has come to specialize in this field a little bit and is also building an interest in portal for crowd funding, as well. Nathan, how are you?
Nathan: Very good, thanks.
Jason Hartman: Good, good. Give us a little background on what you’re doing, because I — I don’t think you’re introduction for me was very complete.
Nathan: Well, thanks for the opportunity. I am a former real estate attorney and I’m now focused on area practice, which can be easily described as start-up law which are all those things that small companies and business encounter on their life cycle in the beginning part of their life. And one of the major issues behind that is — is funding.
There’s been a lot of interesting ways with funding companies in the past and I think now we’re at a point where with the passage of the JOBS Act and some of the changes to crowd funding, that only gets more interesting. We’re also a partner in a company that’s building a crowd funding [inaudible], which is an online portal under that JOBS Act, that lets people engage in crowd funding of their ventures online. It’s called Green House and we just help build companies. It’s at Fundgreenhouse.com and you — and you can check that out and we’ll have a lot more information on the — the JOBS Act in crowd funding, as we go along available through there.
Jason Hartman: So as part of the JOBS Act — now, when was that? Was that about a year and a half ago? Am I remembering that correctly?
Nathan: Yeah, yeah. It was proposed to congress in September of 2011, and then it was passed in April of 2012.
Jason Hartman: Okay so it — it was a year ago then, almost exactly. Yeah, but proposed about a year and a half ago so I guess I was kind of right on both, maybe. So, what — what is that? I mean, the JOBS Act of course contained a bunch of things but as it relates to our subject matter today, crowd funding, what happened there? What changed there, and Nathan, that’s probably a question for you I guess, or I don’t know.
Nathan: But sure, I’ll — I’ll take a stab at it and I’m sure Chase can jump in here, as well. In the past for most companies and for various different reasons, if you wanted to get investment dollars, it usually had to come from credited investors and the definition of the credited investor has traditionally been someone who has more than a million dollars in assets, excluding their primary residence or two hundred thousand dollars a year for the past couple of years and a reasonable expectation that that income will continue, or someone that runs essentially a professional investment company or investment fund.
Because of the SEC regulations on security, as security’s offerings, companies needed to go to accredited investors and they had a lot of hoops to jump through, through the various SEC exemptions, if they wanted to offer to anyone other than accredited investors. And unfortunately, some of those — those hoops to jump through wound up being prohibited to the extent that people really couldn’t raise money from retail investors.
Jason Hartman: Well just to give you my — my take on that, this is one of those things where most people think the government was protecting them, right? But in a way — it’s kind of counter intuitive to look at it this way but in a way but in a way what they were really doing potentially, I mean they’re — this is subject to opinion but it’s mine, is that they were really protecting the big Wall Street firms because they were keeping small business from growing by making the regulations so stringent that nobody in the small to medium sized market could play the game and that really eliminated competition for the larger companies and the larger firm — you know, in — investment firms as well on Wall Street where they — they just — if you wanted to raise money for your smaller business, you just — it was very tough to do. But of course that was always under the guides of protecting the small investor, which those results are questionable, as well. But this is a little philosophic. I just wanted to point that out. Your thoughts?
Chase: I — I think that’s accurate you know, for the most part and what Nathan was touching on was two parts of the — two parts came out of the JOBS Act last April 5, 2012 when it passed. One was Title II, which is the accredited investor piece which is what Nathan just touched on, and then what you’re touching on is — is referred to as Title III, which is basically allowing you know all individuals to invest in any type of start up in the U.S., and with certain criteria. I think the government did a good job writing the bill and allowing you know only up to ten percent of your income, up to certain dollar amounts. I think the highest you can go up to — and Nathan can confirm is ten thousand dollars, you’re risking. So from an investment prospective, losing ten grand is not a lot of money in the grand scheme of things versus you know the stock market you can — say — you know, put one hundred thousand dollars in there and who knows what’s happening with it.
So, you’re not — I let Nathan talk to Title III and those specifics and — and what is required for investors to invest in a type of business for a Title III.
Jason Hartman: Right, and what — folks just — before you start thinking, why are we even talking about this, most of our listeners are interested in investing in real estate, is because the supply is to real estate deals where you could crowd fund a real estate deal, potentially, and I — I don’t know that we’re really here yet but it’s getting closer and things are changing. So, that’s what we’re going to dive into today, so please continue to pay attention as we kind of drill down on this.
But, you — you know what’s interesting about that Chase, you know you’re a CPA and it’s a ten thousand dollar maximum investment. Do these companies though, have to have any sort of audited financial statements? I mean, the — the big companies that are on the public markets, of course they have all kinds of audits with questionable reliability, just follow Author Andersen and Enron and — and a zillion others frankly, but they do have “standards”. What about these real estate ventures and — and business — and start up businesses?
Chase: There are some fluid regulations still floating around, nothing really set in stone yet, but I believe it’s over five hundred thousand. It’s going to need a small audit which can be very — possibly, I mean audits normally run at least a minimum of five grand, so you know five percent’s not too bad but you know, from a — from a investment perspective, that’s kind of where we are trying to position ourselves as kind of being the CPA stance, so to speak on a — a business submitting their financial to a portal and saying, look we’re working with a CPA, you should give us your money, you know we’re not just taking it from you and running for the hills, we have professionals behind us and I think those are the businesses that are going to succeed on the portals, the — the small start ups is those who have a professional network working for them that they can show on their business plan that you know these professionals are looking out for their investment monies.
But for start-ups, you know — and how I kind of got into it, I mean most CPAs that I know of never even heard of crowd funding or very little about. Now for me I’ve always been an entrepreneurship and — and I’ve always followed industry and I really believe with the passage of this and — and once the SEC finally passes its rulings and — and it comes to a precision this is going to basically — is that every single business idea that’s ever been created, and I know everybody on the phone you know has some sort of business idea that they’ve thought of the says, man that would be a great idea as long as I can have — get some — a little funding. And what this is going to do in Title III is basically put our business plan up on a website, have people come to it, you know read it and give you money to as an equity investor in your — in your start-up business. So that’s just going to explode the entrepreneurship world because unlike today where you know you normally have a great idea and you just don’t even know where to start or you know you got to know someone that has a lot of money or borrow it from your family or you know, to reach an angel investor or a victric capitalist. When you go to those types of people even on — the people that watch Shark Tank on ABC, they’re always looking for proven businesses, proven sales and this is not something that the small entrepreneurs have.
And so this is going to allow the entrepreneurship world to basically vet their own business and then allow it to grow and then get proven and then the angel investor and the victric capitalist will then step in as “investor number 2” and take that viable business and run with it.
Jason Hartman: Okay so — so — but why do you say though Chase, that it — it’s going to be vetted? I mean, you’re assuming that all of these little investors that invest less than ten thousand dollars will vet it. I mean is that what you’re saying?
Chase: Well I’m saying you know, as far as the business idea and the business concepts, it will allow a person to get a little start-up capital and you know see if the business is viable enough to bring to market or to give additional equity investment to then take it to the next level.
Nathan: Well on thing, I just want to jump in and — and point out is it’s very for us to focus on start-ups and new businesses. I think there’s a lot of energy there and a lot of excitement, but this also applies to traditional businesses through or pre-existing but never need to go out and raise capital for additional equipment or — or to grow their business [voice over] —
Jason Hartman: Good point, good point. Yeah.
Nathan: So, you could — you could certainly use this. If you’ve got a — a construction company and you need to buy some more high end equipment and you know you’re having trouble getting the loan and terms that you want out of — out of your traditional lender’s —
Jason Hartman: Take it to the next level.
Nathan: — this too.
Jason Hartman: Yeah, right. I got it.
Nathan: — exactly.
Jason Hartman: Take – take — take the business to the next level and raise some funding there. I mean the point of this though is, if this really works, this could really stimulate the economy. I mean this might be — as much as I really think Obama is frankly, an awful president, not that the guy before him was much better, but this is a pretty good — I mean this has pretty good potential, I think to do some real good.
Nathan: Well you know some of the example numbers from the Kaplan Foundation on entrepreneurship and some others, small businesses and start-ups in this country create sixty five percent of the net new jobs looking back over the past seventeen years. So, if you are able to get this small business and the start-ups and regional companies and accelerate their growth that makes a huge difference for our national employment picture, as well.
Jason Hartman: Yeah. Chase.
Chase: Yeah, it’s really going to help all — all sizes of businesses, just like Nathan pointed out, very well, because as we all know we — everyone goes to the bank and all my clients you know try to go to a bank for a loan and it’s pretty much impossible. I mean even twenty five thousand dollar equipment loan with a perfect credit score isn’t even guaranteed these days. So you know, as Nathan pointed out you know you can easily put this up on crowd funding sties and you know get the terms you want and easily get twenty five grand and I think it’s going to be — I think the banks are going to find themselves being highly competed against with this crowd funding space when it opens up.
Jason Hartman: So let’s talk about real estate guys. I mean we can circle back to business a little more if we haven’t really covered that very well, but on a real estate deal, I mean how would this look? Someone goes to Jasonhartman.com, which is the only place they should be shopping for real estate and they find an investment property they want to buy, could they crowd fund it?
Chase: It’s very likely that they could. You have a choice as to how you crowd fund it. Right now, if you want to do something right away, you most likely follow under Title II, which is the credited investor category. As part as some of the changes, the solicitation rules have been amended and we expect additional development I think in that arena as well, but it makes it a little easier now for small businesses and — and real estate investors too, to come in and find participation that they couldn’t get before and that’s from that accredited base.
But you could also create something like a limited liability company or a corporation. A lot of people are probably already familiar with using single asset partnerships and things like that to hold the real estate investments. You could create a very similar structure where you create a company to hold a piece of real estate or a series of — of real estate investments and offer equity stake in that under the rules — under the Title III section, if they develop the way that we believe that they will this summer and this fall.
Jason Hartman: More the — I don’t know that we really answered the question about the real estate thing.
Chase: Well, I —
Jason Hartman: You’ve got to draw that a little more, I think.
Chase: — I think it’s — yeah, I think it’s kind of fluid you know with the rules still coming out. We’re just not really sure. I mean I — you know this conversation kind of started — I see an article, I forget the source but over the weekend, relating to a group of investors to pool some money together in a crowd fund way and — and bought some properties, but from — from a tax prospective and — and that’s where I kind of come with for you know for the tax prospective prop with real estate, because I have my own properties, I didn’t really think that was the best option for crowd fund investors to put their money in because there really was not tax benefits from that deal that — that they put together whereas you know you could — I think it would just be better to go put yourself in a read — put that same money on a read on the stock exchange and you get the same benefit.
But I’m — I’m wondering if you know crowd funding will allow you know let’s say I want to buy thirty properties in Dallas, can I throw it up on a crowd fund site and get some equity investors and we all kind of form one LLC and go into it together. It’s still kind of up in the air. Maybe Nathan can touch on it a little bit more in his opinion?
Nathan: Yeah, and it kind of what I was — I think I was maybe not very heart fully saying a moment ago is that you can — we — we think you would be able to fund any kind of company through Title III and — and already voices to Title II, and that company doesn’t have to be an internet start-up. They can be a company that holds real estate. So, that company could purchase real estate and then you could divide up those membership interests if it’s an LLC or divide it up their shares if it’s a corporation and offer those shares and membership interests through crowd funding.
Jason Hartman: So, when you crowd fund, I mean how do you do it? Do you just go to the people you know, or do you go to the web? I mean there are crowd funding platforms out there now. I know you’re developing one, as well, but —
Jason Hartman: — I mean there are some others out there too, already in existence, right?
Nathan: Certainly, and an example of what I think everyone should relate to is the Kick Starter approach to things. They were one of the early —
Jason Hartman: Kick Starter though is — is different though because it’s a donation. Like it’s — the crowd — when we’re talking about crowd funding, we’re talking about making an investment where you get a return on, right?
Jason Hartman: Yeah.
Nathan: Right, but I get through the attributes that make for a successful Kick Starter campaign —
Jason Hartman: Um hmm.
Nathan: — are the same attributes that would make for successful crowd funding campaign. So, one of the things I — I deal often times as you mentioned earlier is, hey I have this great idea. Can I crowd fund this idea? Well, you could take an idea and put it on a crowd funding site, but the chance of your success with that would be pretty limited, and I would say the same would apply to real estate. You could say hey, I want to create a LLC that holds some real estate. Come invest in my LLC through crowd funding. But that alone probably isn’t going to get you a very strong response because people are going to look for the same thing and in crowd funding they would look for in any other investment, they want to know that where they’re putting their money is — is reliable. They want to know that the people behind it have some experience or at least have a plan for how that money’s going to be spent.
The companies that has done really kind of gang busters on — on Kick Starter have put a lot of effort into marketing their campaigns outside of whatever crowd funding platform that they’re using. It’s very much about being able to tap your network and tap the people that believe in you and believe in what you’re doing to be able to make that — that raise effective and to make that campaign successful. The difference is in the past maybe you had to convince a bank or a handful of accredited investors, now you just have to find people in your community and people that you know through your extended network who believed in you and who believe in your success.
Jason Hartman: And your — your site and the other sites that are out there, if you know already, what do they do? Do they just take a percentage of the money raised?
Nathan: That’s something that’s kind of open that we’re not sure how the — the rules are going to sort out on that right now.
Chase: But you can for example, Britain and they got a year ahead of us. They came out with crowd funding a year ago and the way theirs works to produce funding portals take a percentage of the rate and they also charge a transaction fee for legal and things like that. It’s my belief and this is just my personal opinion, no legal opinion or anything else like that, but the way these rules are going to sort out is that you can — you can fund through one of these portals and the portals who offer much like Kick Starter where they take a — a percentage that unlikely there would be a — a significant amount of legal fees or transactional fees outside of that.
Jason Hartman: I would assume that as — as good as all this sounds, there is going to be just a tone of fraud and litigation and problems like this. Now, it’s interesting how the internet has in — in — of course there’s tons of fraud on the internet, no one would deny that. In fact, I just sent like one hundred thousand dollars to someone in Nigeria. They promised me — I — I hope it’s going to work. I’m joking, of course, but — but I mean no one would deny that there’s a tone of fraud and problems with the internet, but — but on — on balance, it is amazingly affective.
Like you look at something like Ebay and you look at how a seller is kept honest with ratings and reviews and of course they’re not all accurate or true, but it’s pretty good, a — amazingly. The problem with the crowd funding though is that no one so — starts a business or funds a business that often, whereas if you’re a seller on Ebay you want to sell stuff many times a day, probably depending on what you’re selling especially if it’s not a high ticket item.
So, that rating really matters to you. So I don’t know if you can keep people who are raising money honest with ratings. How are we going to prevent just the massive possibility of fraud and litigation and wow? I mean there’s enough of it in private placement memorandums and people that go raise money for something and take off to another country, or they just start the business and do it kind of in vain and — and then they siphon all the money off. I mean, this is certainly done on Wall Street too. Just ask Dennis Kozlowski or any — any one of a zillion other sleazy operators. But the thing about the crowd funding that makes it in a way worse is the fact the maximum is ten thousand dollars. It doesn’t make it worth it to go hire a lawyer and sue him and track him down because it’s not enough to offset the cost of litigation.
Chase: It’s a very good question and — and this is what’s being brought up, especially in the media that — you know with fraud. It’s — it’s definitely an issue, but like you said you know fraud happens everywhere. I think, in my personal opinion what’s — what’s going to happen is there’s two parts. One it does businesses like Nathan said that are already established in just seeking additional investment to continue to take it to the next level. Those are the ones that are going to be successful on crowd funding because they can look at their business and you know, they’re already established. But those that are starting up that are new, I think it’s going to come down to the portal itself, and there’s still you know regulations on how people are going to be better at interviewing stuff, but I — I think the ones — the portals that are going to be successful are the ones that heavily interview the — the candidates that are coming onto their site, you know with an application and a background check, financial review, etcetera, etcetera, before they even get their campaign online.
There’s a ton of backend work that — that will happen at the portal level, you know as far as credit checks and things like that to — to hopefully self police their own industry. And when I was in [inaudible] Southwest, the founder of Indiegogo, the co-founder of Stoke for Startup America session a couple of weeks ago, and he said you know we have potential fraud everyday, you just don’t hear about it because it generally never becomes a precision. So on the backend, they’re constantly — and they send I think he said millions or high — tens of millions of dollars around the world every day through Indiegogo and he said, there’s potential fraud all over, however they’re dealing with it on the backend and they’re policing themselves so that issues like you know huge fraud case doesn’t come to precision on the front end with you know the media and things like that.
Nathan: Right Chase, and I think you know each portal is — is likely to tackle that differently and — and how they handle it. Everyone who’s going to be doing work on the backend to identify those — those cases of fraud, but it’s worth distinguishing the difference between fraud and poor return on an investment. You can get poor return on an investment lots of different places.
Jason Hartman: Oh, absolutely.
Chase: How true.
Nathan: And — and so one of the things that is – that I – I will caution people who are looking at crowd funding, looking and going and investing money that way, is to treat this the same way you would treat any other investment, and you want to look at what methods are available. You want to look and see what kind of information you can get about those companies. Some portals will lead the due diligence process to the investor, others will — will be more proactive about and there’s actually companies out there like crowd check that are entirely focused on the due diligence process of these investments. And a lot of the times it’s going to be you’ve [inaudible] knowledge or you’re subject matter expert. He helps you to evaluate. So, there’s definitely a place for real estate in those specific investment advice and ways to determine how you are making a good investment and how you’re not on the start-up side of things. There’s a lot of discussion in the stat-up community about traction and how did this small company that’s getting started demonstrate traction to there investors and show that there actually are you know or they say they’re [inaudible] and there’s incubators and accelerators and things like tech-stars and a program here in San Antonio that sets these companies and runs them through an accelerator process and provides them to a lot of mentoring.
So, these are all kinds of things that you might look at when you’re evaluating these investments. On the far side of things, we really haven’t seen that much in the U.K. We haven’t seen that much through places like Chase said, like Indiegogo and the existing crowd funding platforms. It — it’s also not a particularly efficient way for fraudsters to — to work because they still do have to go through so many different checks and this is something the SEC is going to have very strong leadership on we believe. I — I can figure a loss and have some strong leadership on this in terms of the what in the industry — what kind of criteria do we wish to replace on issues which the — the people offering the equity, and on investors to make sure that that both sides are getting the disclosures that they need to make an accurate decision.
Jason Hartman: Okay, good. Wrap it up. Anything I missed that you want people to know.
Nathan: Well, I think it’s a really interesting — yeah, we — we’ve covered a lot of ground and — and there’s still a lot of ground to cover, but it’s the sort of thing that we’re going to see a lot of developments on this as the year — the calendar year, wares along. I — I think ultimately people can start planning now in — in deciding what do they need to do if they do have a business or a real estate investment for an existing company. Anything that — that might benefit from this funding, how would I go about presenting this to an investor and if you come up with good answers to that question, then those are going to be good answers on a crowd funding platform or on the traditional investment method.
Jason Hartman: Chase.
Chase: Yeah, you know I think for my existing clients so I can speak on behalf of them. I know they’re — you know I’ve been educating them about it and they’re getting super excited because like I mentioned before, the banks are — are just so tight these days with their own lending that it’s really going to help them open up, getting that extra funding to take their business to the next level and use their social network and their customer network to pull again to and say hey, go on this crowd funding site and help us out with our business so we can grow with you.
Jason Hartman: Good. Good stuff. Well Nathan, I think you gave out your website already? Did we — did you already give that out at the beginning I believe?
Nathan: I — I did. It’s — it’s Fundgreenhouse.com and we’ll have quite a bit of information there for investors to consider as crowd funding goes along and I’d encourage you to come back and check out Fundgreenhouse often, because as that information comes down from the SEC and — and from the other regulatory agencies, we’ll definitely be very proactive in trying to help explain that, and to help people understand where we are in the funding process.
Jason Hartman: And Chase, give out your website, if you would.
Chase: Yeah, it’s Iscpapc.com — Iscpapc.com and my specialty is tax — we do accounting and tax only and you know not just crowd funding but real estate investment taxes for those who are on the call out of all my properties through Hartman so I’m kind of familiar with the industry and — and everything that goes along with making sure you catch all your tax deductions.
Jason Hartman: Good. Yeah, that’s great. And Chase, since you mentioned it, just maybe a — just a moment on your investments and — and things like that and what your thoughts are? I mean, what attracted you to real estate? You probably found my podcast, I assume, and started listening and then you got — I know you came to at least one event. Have you been to a couple of our events in California?
Chase: No, I came to one. I think it was maybe spring of ’09?
Jason Hartman: Yeah, at the Marriott.
Chase: It’s been a while.
Jason Hartman: Yeah, right, right. And that — that was a Masters event, I think. Yeah.
Chase: It was and then again — but again, I kind of got started with the podcast. I just started listening to a bunch of podcasts. Found you — you know really liked your message. You didn’t charge any money like some of those other guys out there do and then what I found in Atlanta when I went out there to interview everyone, before I bought my first one out there was that you — you do your own vetting process with those that you’re recommending properties from and which was very encouraging to know that in my future deals that you know you’re looking out for the people that are investing in the properties that you’re recommending.
But my properties, individually, they — like I said, m – it’s any good ones — you know, one pretty nightmare but you know, it’s getting better, so it’s got some tenant issues, nothing major, just you know some cash flow problems. But — but all my properties I’m super happy with. I think I got in at a good time and — and 2008 through ’10 before all the equity money started flooding into the market like it is today. They’re all — they’re making at least fifteen to twenty percent cash rates of a — I’m extremely happy with all the ones that I’ve — I’ve found from your group and — and working with Ari.
Jason Hartman: And — and so that’s fifteen to twenty percent cash-on-cash return?
Chase: That’s correct.
Jason Hartman: That’s phenomenal. I mean except for the problem child, so about — about — I guess that would make it about eleven percent of your portfolio’s been problematic. The one property out of the nine — you know, out of the nine. But boy I tell you, if you lose money on the other one, and make money on the other eight, if — if fifteen to twenty percent cash-on-cash, if you average that I don’t know what the average of your portfolio is, if you even keep track of that, but it’s got to be seventeen percent, I would assume. That’s — that’s phenomenal.
Chase: Yeah it is very phenomenal and you know, being a tax guy I mean the tax benefits are just amazing. It’s the most tax favorite asset class as you’ve always pointed out on your show. And then you know it’s getting in and you know with housing basically, nothing being built and that — during that period, and now we’re getting into you know increased rents, as you’ve been bringing up and habitually appreciation because the — there’s just less inventory out there to choose from.
Jason Hartman: Well, good stuff. Keep up the good work with the crowd funding and investing and Chase and Nathan thank you so much for joining us today and telling us about this. I appreciate it.
Nathan: Thank you.
Chase: Thank you for having us on.
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