Jason Hartman hosts investment counselor Adam to go over real estate news and some charts. Adam explains where median prices are currently at and what markets he is excited about. He explains why the Southeast US housing market is booming and why this will go on for the next few years and beyond. Next, they discuss the impact of low-interest rates and why now is a great time to leverage. While some fear a foreclosure crisis, the two discuss that people tend to look in the rearview mirror with regret when time passes by.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer, and entrepreneur who’s owned properties in 11, states had hundreds of tenants and been involved in thousands of real estate transactions, this program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:54
Thank you for joining us today for part two of the last episode. Adam, this is incredible. Just tell us about this a little bit more, because I want to stay on the slide just for a moment. It’s so significant.
Adam 1:06
Yeah. So I mean, it really just shows that in, you’re gonna, it’s going to cost a little bit more than the 19.8%. Because this is just the housing payment. It doesn’t include your home insurance, your any other property taxes, or anything like that yet, property taxes. It doesn’t include everything. But it really shows it kind of emphasizes the previous graph that I mean, it’s getting so money is getting free at this point in time. And when money becomes free, things get cheaper, and when things get cheaper, the demand for him hikes, and then the prices go up. And we’re gonna we’re starting to see that now. I think I read an article this morning that said median home prices are up 11% from just the previous month or two. I mean, it’s it’s getting crazy out there. And the Federal Reserve has made it very clear that they do not see any danger of inflation until 2023 at the earliest, the absolute earliest. But just because there’s no inflation in the economy, the overall economy does not mean there’s not inflation in certain areas of the economy.
Jason Hartman 2:10
I’m glad you said that, Adam, because
Adam 2:12
free money is going to make housing prices. Yeah,
Jason Hartman 2:15
skyrocket. Okay, so remember something and and that’s very important, what Adam just alluded to, there is a huge the consumer price index, the CPI, the most widely used index of whether there’s inflation or not, and the feds target on that is 2%. Of course, we’ve all talked about that many times. But it does not. It does not account for asset price inflation. What all of these things do whenever there’s this quantitative easing, whenever there’s this money printing, whenever there’s the loose accommodative money policy, right. And the Fed, by the way, just to slightly modify what Adam said, didn’t necessarily say that they did see inflation, I think they were even more cavalier about it. They alluded to the idea that they don’t care. If there’s inflation, they’re just not concerned about it. They think they can rein it back in when it happens. But the reality is, and folks, this is one of the reasons you’ve all heard the old saying, okay, the rich get richer, right? The rich get richer, why do the rich get richer? And why do the poor get poor? It sucks? It’s totally unfair? Well, the reason is, is that the rich are or the upper middle class, or even the middle class that gets in the game of real estate investing, okay, we’re even the lower middle class that gets in the game of real estate investing, you know, there’s lots of social mobility in the United States. And there’s a million rags to riches stories that we all know that, okay, or 10s of millions or hundreds of millions of them, actually, is that they get an asset, okay, they get a property, and then they let that loose money policy, inflate the value of it, and then they get another property, and then they get another one. And they keep doing that. Where is as the poor don’t participate in that game. And they also don’t have good financial discipline, they usually fall into instant gratification, and they buy things that give them pleasure instead of producing wealth. And you’ve always got to delay gratification, to grow in anything in life. It requires delayed gratification, the ability to wait for longer term, larger rewards. So instead of buying a jetski, you buy a rental property, instead of buying that nicer car, or you know, spending all your money on expensive designer clothes or whatever. You buy a property you buy an asset, something that produces income for you, and then you’re in the game, and then you’re on your way and you buy those luxuries later. All right, so also it’s booming in Tucson. Oh please says Sara says hi guys. Hi, Sara. Metal bum says thanks, Adam. Yes, Sam. Good job on this. And then Oh, please says, but no good inventory to buy only overpriced crap on the market. Oh, oh please. I’m glad you brought that up. Let’s get your head on straight here. Okay, the question is compared to what? Compared to what? How do you know there’s only overpriced crap on the market? Seriously, how do you know that? You know that because you’re comparing it to what was for sale a year ago, right? Or what was for sale five years ago. And every deal starts to look good in the rearview mirror. There is almost never a buyer who feels the day they decided to buy the property that they stole it, that they got some incredible I mean, occasionally, you know, but that they got some amazing, incredible deal. The deal became amazing later, okay, it’s, um, you know, it’s like, eating healthy and going to the gym and working out, right? You know, it’s like, okay, you have a certain condition of your body today. But with a certain amount of eating right? And working out and time you create a better body, right? That’s the idea of, you know, physical fitness and health consciousness. Right. And so that’s the same with your properties. But largely, the economy just does it for you. You don’t even have to do anything. Yes, you can. You can improve the property for sure, by fixing it up and so forth. But you know, this idea that everything is overpriced and all the inventory is junk. I will bet you Oh, please. That’s the handle. Oh, please. I will bet you that in a year, you’re going to feel that you can’t even get the deals you can today, a year from now.
Adam 6:59
You’ll hear Jason reading The Reluctant investors lament and be like, Oh, yeah, that’s right.
Jason Hartman 7:04
Yeah, absolutely. Look up The Reluctant investors lament folks, that’s really good stuff. And Carrie says hi, hey, Tony. Okay, so let’s go to the next one, Adam. And I think we’re now the one you loved. Yeah.
Adam 7:16
So for the most part, we’ve talked about how investment properties single family investment properties. You said, Jason, usually, once you get over about 225 250,000, they can’t. It stops, it starts getting really hard to make sense, right? Yeah. So if you look at this chart, when you get up to $200,000 of the new home sales that are available, that bottom line, that’s you’re looking at the red line is under 150. And that orange line is 150 to 200,000. That orange line is only at 10% right now. So one out of every 10 homes on the market is under $200,000. If you’re looking for something under 150 it’s that miniscule thing down there, that’s probably around two years 2% of it. So in other words, 2% of the market is single family homes under 150,000. Yep. 10%, approximately, of the market is single family homes under are between 150 and $200,000 8%. Because the two combined are 10%.
Jason Hartman 8:22
Oh, wow. Okay, so, so 90% of the market is not eligible for investment. Pretty Pretty much. Yeah. Wow. Wow, nice, doesn’t count that.
Adam 8:36
Yeah, this doesn’t count the fact and part of it is because homes under $200,000 just haven’t been built for the last 10 years. And, you know, there’s such a demand. But, you know, at least for the last 10 years, they haven’t built the under $200,000 and this is why our inventory is so low, it’s so tight right now is because they don’t exist. I mean, we’re in most of our markets. So we’re selling properties right now. They’re literally having to build the inventory, to sell our re or renovated markets
Jason Hartman 9:08
very hard to build that inventory at the price and deliver it because all of their component parts you know, I talked about this in the Hartmann risk evaluator that I teach packaged commodities investing all of those component parts those ingredients of a house, the concrete the lumber, the steel, the copper wire, the glass, the petroleum products, all of the prices except petroleum products, admittedly, well even lately they have gone up a lot you know, compared to where they were I mean prices have shot through the roof for petroleum products, but in the grand scheme of things still fairly cheap for energy, but all those component parts have gone up in price so much that they can’t deliver the house that price anymore. So Oh, pleases comment is a good one. I’m so glad you said that even though I beg to differ with you. Oh, please. You know Cuz that’s the way so many people think. And they’re just gonna, they’re just going to talk themselves out of it, they’re just not going to take advantage of the situation we’re in. So Adam, the rest of the chart just shows you the rest of the market. Right? Yeah. And you see that a lot of it is dispersed into the more expensive properties, you know, you’ve got a big, fairly big portion in the 200,000 to 299 price range. And remember, you know, this is nationwide. So, yeah, prices obviously differ greatly in different markets. And then, you know, over 400,000, quite a few properties as well.
Adam 10:34
Yeah, that’s where all the builds been, because that’s where the money’s been.
Jason Hartman 10:37
Right? That’s where builders can afford to build it and deliver it. And so that’s good. Okay. Julian says, look at the deals on the 11 million people who are left unemployed, or look for deals. For the 11 million people left unemployed, once the foreclosure becomes a daily news topic, the market will start devaluing surrounding properties, according to the area. Yeah. I don’t know about that. You know, yesterday, I interviewed Sean O’Toole, the founder of foreclosure radar, and now property radar. And I made a point about that yesterday, but just I’m gonna publish that episode next week, okay. And he’s an expert. He has the raw data. Okay, this is this is like, not an uninformed opinion from him. Okay. And he’s been on the show several times over the years. But he said, if you’re looking for a big foreclosure crisis, this time around, you’re just not going to find it. That’s been my prediction for the last couple months when people talk to me, because I mean, you’ve seen it already. With all the forbearances with all the eviction moratoriums, they’re doing everything they can to keep people in their homes. Yeah. Right. And look at folks, there are several reasons this is their Look, I want to make the disclaimer, the famous last words of any investor are This time, it’s different. Okay, that’s the famous thing. every investor who’s about to fall on their face says, but this time, it’s different. Okay. So, at the risk of sounding that way, I am going to say, this time, it is different. Okay. No, don’t hang me for that yet. Okay. There are some very significant things that are different. I get that unemployment is high. First off, a lot of those unemployed people aren’t homeowners. Yeah, that’s the first thing. They’re people that are in the lower middle level that don’t own homes. They’re renters. Okay, so now I know you’re gonna say, well, then why don’t I get paid my rent? I get it. That’s another. You know, look, it’ll take me 20 minutes to go through this example if I discuss every little thing. So just more on the podcast, okay, just listen to the podcast. But the other thing is, the people the equity position for American property owners is pretty good. During the Great Recession last time around, people had no equity in those properties. When you have no skin in the game, you just take a walk away, you just leave, you know, there’s nothing to lose, you just walk this time they have equity. And guess what else? This time, those loans have been underwritten. conservatively, the liar’s loans, the ninja loans, those haven’t been happening the last 10 to 12 years. And I know there are some examples of them. Okay. But by and large, that, you know, it’s a non issue, okay. And these people are not homeowners, many of the unemployed people are not homeowners. And then of course, you’ve got the political environment of just they want to keep everybody in their home, whether they be a renter or a homeowner. So that’s another thing. Adam comments.
Adam 13:57
Yeah, I was gonna say if you’re a politician, and you want to make people mad, the best thing to do is to tell them to stay home if they lose their job, and then tell them they have to leave their house.
Jason Hartman 14:04
Yeah, I think that’s working. Actually. I think I I think that’s what politicians have been doing. But yes,
Adam 14:12
don’t go to work. But since you can’t go to work, you’re also you can’t live in your house, you know, say later.
Jason Hartman 14:17
So we’ll wrap up in a moment here. But Oh, please is back with another comment that says Jason, prices go up here at $10,000 per month. It’s tulipmania. I get it. I know. It’s It’s crazy. Now, I don’t know where here is because I don’t know where you’re located. But if you’re in a good, normal linear conservative market, like you would find it Jason Hartman, calm in the Properties section. If you’re there in one of those markets, okay. If you’re working with our team members, you can get yourself some properties. And I know it’s discouraging and there are multiple offers. I get it. But remember, one of the things you’re really buying right now is not the property, you know, people are too focused on the property, when they need to look at it as a holistic asset. And a huge part of that holistic x asset is the mortgage, you’re buying the mortgage, not just the property, that mortgage at these incredible rates is a huge asset. Think about it, you get a mortgage today, you don’t have to make the last payment or your tenants because that’s who really makes the payment, we outsource the mortgage obligation to the tenant, they don’t make the last payment until 2050. Think of all the sci fi movies you’ve watched about what life will be like in 2050. Whether they be dystopian or positive, doesn’t matter. The fact is, things will massively change. And the likelihood is there will be massive bouts of inflation between now in 2050. Actually, long before that, I think. So you got to stop agonizing about this. I get it. I know, I know how it feels. You feel that sense of scarcity, that sense of loss that you can’t get a property. And it’s hard. But you just gotta outwork other people, you know,
Adam 16:15
not only that, but if you’re in a market where prices are going up $10,000 per month, that’s likely not going to be a great market for buying investment properties then, right?
Jason Hartman 16:25
It’s likely a cyclical market. Yeah. Where are you? Oh, please, please post please, please, oh, please post where you’re located. Okay, or where you’re looking?
Adam 16:35
So I mean, yeah, whenever you’ve got prices going up that high, you either have really high values to start with, or you’re just going to get priced out of the investment properties really quick at that rate.
Jason Hartman 16:45
Absolutely. Absolutely. Okay, so let’s move on, grab these questions and add them. I think this is the last chart right? Yeah, it is. So these last ones here, let me just grab those. I’ll make this a little smaller, make us a little bigger. Oh, wait, that doesn’t put both of us on the screen. Okay. So hook shot. hook shot is asking. I’m selling an investment property in north Scottsdale. I love North Scottsdale. Scottsdale is such a great place. I miss it, which has appreciated substantially over the past five years. Since it’s in an IRA, I can’t pull cash out. Should I sit on the cash and wait for a correction?
Adam 17:24
Okay. Well, when? When is the correction going to get here? How will you know?
Jason Hartman 17:29
Yeah, that’s the big question. But first, let’s address the actual dynamics you’re talking about. So it sounds like you have this property. And it’s owned by your self directed IRA. You say I can’t pull cash out? Why would argue that that’s not true. You can’t pull cash out into your normal bank account. But you can pull cash out and leave it in the plan in the self directed IRA, and you can use that cash within the IRA to buy another property. I think I don’t know what would be wrong with that. Unless the issue you’re saying and folks, you know, these questions are, since we can’t go back and forth, and they’re not always complete, we have to sort of assume what you might be thinking. Right. And one of the things you might be also saying is that, you know, there’s not a lender that will give you a cash out loan on a self directed IRA property that may well be true. But, you know, look at the stuff that, you know, our former guests and speakers, Garrett Sutton and Tom wheelwright talk about about these self directed plans. You know, they’re really, and I don’t mean self directed plans, I just mean IRAs, in general. They’re not as great as people think when you say compared to what you think of, you know, What can your money just do on the open market, even if you pay tax, and pay a 10% penalty, you know, sometimes it can actually be worth pulling the money. Tom wheelwright is not a fan of these plans, and neither is Garrett Sutton. So check out what they’ve written on it, they’ve been on the show many times I’ve, you know, got pod. By the way, if you want to search them, just go to Jason hartman.com. and type in any keywords on our search engine. And you can find the podcast episodes on all of these topics. And then the correction, Adam, you want to comment on that real quickly,
Adam 19:11
I was just gonna say, based on what you’ve seen here, and based on everything else, I mean, let’s say you think $200,000 is too, too high a price for an investment property that you’re looking at, is 180 going to be good enough, is already you want to go down to 160 or 150. You’re going to Where’s your point, and based on what you’ve seen and what you’re seeing in the market, that’s a you know, anywhere from a 10 to 20 to 40% decline in home prices. I mean, your cash flow, if you look at the interest rates, the change in interest rate from 180,000 to 200,000 is probably what 25 bucks, 2025 bucks a month, I would say so you’re not increasing, okay? You’re not really increasing your return. All that much. I mean, it’s an increase, but you can sit there and wait around for years to make an extra 20 or $25 a month cash flow and hope that the interest rates are going to be as low as they are today.
Jason Hartman 20:08
Yep. in the rearview mirror, every deal looks fantastic. Okay, folks, so you gotta, you got to just consider that. Okay, so last couple comments here. Julian says, Thanks for the insight
Adam 20:21
answered. Down below, if you want to go, the lender will refinance on a non recourse loan within a self directed IRA to pull the equity out. So you’re right, it was the lender. Yeah, might wait that out, honestly,
Jason Hartman 20:32
hookshot I was thinking that but you can sell the property inside the plan. And then the money is in your plan. And you can use the money to invest elsewhere. I mean, look at North Scottsdale is a very expensive market in most cases. And it’s, you know, that’s not going to be a good performing market in terms of rental. I love the area. But you know, again, it’s not a place to invest. So you could sell that property, you don’t need to worry about a 1031 tax deferred exchange that by the way, communist Joe Biden, if he’s awake, wants to take that away. Just so you know, Adam, I know you’re probably are you voting for Biden? I bet Adam is. I’m gonna put you on the spot.
Adam 21:11
Whether I
Jason Hartman 21:12
should put it this way. Are you not voting for Trump?
Adam 21:15
I am, I am going to not vote for Trump. Yes, that would be an accurate statement.
Jason Hartman 21:19
All right. So So there you go. But you can you can buy two, maybe three properties, maybe more. I don’t know how much your property in Scottsdale is worth. But I would do that I would you know, just get rid of that property. By the way. I have to make the disclaimer. You know, we’re not tax experts. We’re not legal experts. So consult the appropriate professional. All right. Dominic says, Oh, wait, Julian says thanks for the insight. Looking forward to your upload next week. Oh, while we’re doing this, like daily, man, I
Adam 21:47
don’t know your upload with the foreclosure guy think?
Jason Hartman 21:51
Oh, okay. Okay. Thank you. Thank you, Adam. Yes. So that’ll be next week with Sean O’Toole. And I think you’ll like that episode. Looking in Charlotte, North Carolina. It’s going up? Where should I go now? Well, you know, go to Jason hartman.com. And check out the properties. Talk with her team members talk with Adam. And they can help direct you Dominic. You know, that’s that’s what we’re here for. Okay, I think we can wrap it up. Adam, final comments and thoughts. Thank you for the info. Thank you for bringing that to us.
Adam 22:18
My final thoughts gonna be there’s no harm in reaching out and talking with us think talking about, you know, what you might be able to do with your money. You know, it doesn’t hurt our feelings. If you come up and talk to us and then decide, you know, oh, I’m going to wait six months. I mean, you may as well start forming a plan. You know, whether that’s invest right now, today, or tomorrow or six months from now. It never hurts to have a plan.
Jason Hartman 22:43
And really, there’s much more than a plan. form relationships, yes. or start assembling your team, even if you’re not ready. So talk to Adam, talk to our other team members, they’ll be happy to help you just go to Jason hartman.com. For that, but also at the bottom of the screen. If you’re if you’re watching this, I don’t know be might just be listening. But be sure to go to pandemic investing calm and get Your FREE Mini book on pandemic investing. What we did is we sort of adjusted some of the strategies we’ve been teaching for a long time, some of the commandments think we added two new commandments to the 10 commandments. They’re in the pandemic investing mini book. And that’s totally free, no strings attached. So go to pandemic investing.com. And get Your FREE Mini book there. And I think you’ll you’ll really enjoy that and get a lot out of it. Adam, thank you so much for bringing this to us. Thank you for joining us. Thank you, everybody. For your great comments, questions and thoughts. Please tell your friends about the podcast about our YouTube channel and so forth. And we look forward to seeing you next time and until then, happy investing everybody. Thanks for joining us. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.