COVID-19 Recession, HELOC v. Cash-Out Refi

In this episode, Jason Hartman continues his discussion with Adam regarding the housing bubble and how to be a real estate permabull. Adam explains the US median price and shares statistics on housing prices from 2008 to 2011. They also discuss how to build a real estate portfolio and shares insights on HELOC and cash out refinancing.

Announcer 0:01
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Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
Thank you for joining me today. And I’ve got some news for you. No, it is not about the big news. The suspense continues on that. And you know what, you might have found it strange that as many complaints as I share with you, and few conspiracy theories here and there, I am not given to complaining that much or being that critical, typically, of the election process in the voting process. However, I gotta say, this one does seem to have some real validity to it. There’s a lot of shenanigans going on folks, shenanigans going on. I’m telling you, there are definitely shenanigans going on here. Yes, it is wrong, what is happening. Wrong, wrong wrong. So we’ll see, you know, the courts get involved. And hopefully, justice will be served, hopefully. But I do have some other news for you. There’s no news there. We’re all waiting. But I got some other news for you. And that and by the way, we may not have an event tomorrow night, or we may for a live stream. But we’ll certainly have one Sunday morning. Either way, maybe just Sunday morning. I don’t know. You know, when there’s just not much to say there’s kind of like it’s a bunch of speculation. So it’s better to have some, some real news. And there are certainly some other news to talk about, because a lot of stuff is known to us. And we got to talk about that. We kind of talk about some of these propositions that went mostly pretty well. So that was good.

But in other news about real estate, there is some bad news going on. For some folks in some sectors of the real estate world, the investment real estate world. I’m looking at a report here. It says multifamily national report rents late vacancies up stress mounts, the COVID recession continues to heavily impact multifamily housing, meaning big apartment complexes. You know, I always found it funny. When someone says to me, Well, I’m thinking about multifamily investing. And then I get into this whole conversation with them and I find out they’re thinking about buying a duplex folks, that is not considered multifamily. I know that technically it is multifamily. But no one considers a Plex duplex triplex four Plex to be multifamily in any real way. What we’re talking about here are apartment complexes with 100 units, 300 units, 400 units, real apartment complexes. Okay, that’s what most people consider to be multifamily. Now there would also be another category of what they call small multifamily, which, you know, might be 30 units, right? 30, a 30, unit apartment complex, something like that. Anyway, anyway, so they’re complaining that the rents are coming in late, the vacancies are up. And you know, who else is complaining? All of those folks that you’re glad you’re not one of all of those folks owning retail properties, you know, they got that little strip center with the dry cleaner and the coffee shop and the quiznos sub place and, you know, couple little, little random stores like that, right? They’re complaining because their rents aren’t coming in or they’re coming in lower, they’re not coming in on time or whatever. And then those folks that have another type of retail property with a couple of restaurants they’re complaining to, and then those folks that have all those office spaces, they’re complaining as well, because guess what, those office offices, they’ve got that office building with several office suites in it, maybe, maybe a few office suites, maybe a whole bunch of them could be big, small, whatever. And you could roll bowling balls down the hallways in those offices, and they’re complaining, but you know, who’s not complaining?

It’s you folks. It’s you people following our plan. Here. We’re raking in the dough right now. Because why? Because as Hartman has said, he said, home is the center of the universe. So I’ll look at a little article here from Ion housing.org. Evan posted this in the content group. Thank you, Rabbi Evan, it says, lack of inventory, higher prices, push housing affordability near two year low, which by the way, that ain’t bad. But when housing affordability gets really, really low, then you start to notice that’s the time the market may well turn. So the housing folks are not complaining. They’re doing great. They’re doing great. So there you go. Yeah, a lot of stuff going on in the market. But hey, we’ve got part two of Adam and I talking about just a whole bunch of things coming up here. So we’ll jump into that. But you know, we’ve got some data we want to share with you coming up, maybe Sunday’s live stream or next week, we got a bunch of great episodes next week. I just recorded one today. That was was a fascinating interview I did with a real estate tech company, who has tons of data, pre mover data, yes, data that is about 60 to 90 days earlier than most of the other what’s considered early data you hear now? Well, they’ve got even earlier data. It’s like they’re reading people’s minds about where they’re thinking of moving to. And then they are sharing it with us, which is what they did. Yeah, I interviewed the Vice President of public relations for this companies today. We thought this would be like a half hour interview. And it was about an hour and 10 minutes, but it was really fascinating. tons of great data. So we will have that coming up for you as well. Yeah, just got a lot of good stuff. Lots of good stuff to keep all of you super, super informed. So you can make a lot of money and profit. And just do really well with your with your investment portfolios. Yeah, here pepper, right. That’s right. That’s right. Okay. Without further ado, let’s get to part two of the interview with Adam. We got a bunch of stuff to talk about. So let’s get there right now.

Adam 7:38
So this, I will grant you This is from the Case Shiller index, because it’s just the US as a whole, very hard to find us data package together. That’s not involving Case Shiller in some way. So this was I looked at what would happen if you were investing in real estate over the long haul, in terms of just everything. Because if you look at since the Great Recession, real estate, for the most part has been on an upward trend, for the most part. So I looked at what was the peak before the Great Recession, the valley. And where are we now? Am I now I mean, relatively recently, because some of the numbers can be hard to find everywhere. So I looked at 2008. And I said, Where was the absolute, and the peak was median home prices. And this is inflation adjusted, were $252,036.85. So that’s all you need to know about this chart is in 2008, the peak of median home values is around $252,000. Now, a lot of people though, would say that the peak was 2006. Just so you know, there is disagreement on that. But it’s fine. I just want to throw that out there. Let’s see, I can go to Oh, six if you want. But it’ll change the calculations, but oh six, so eight before the crash, this is before the crash, you look in. So now, if you want to go to the next one. Now we have the 2011 I would look for when prices kind of bottomed out, and it was 2011, the median home price in the United States was $195,477, a 22.5%. price drop nationwide, from 2008 to 2011. And that’s you’re taking the inflation adjusted, yes, inflation adjusted for both of those, right?

Jason Hartman 9:27
Yes, your apples to apples comparison. Okay. And of course, you know, let’s throw the disclaimer out there that the inflation index is highly manipulated and wrong, but it’s the official number. So just to keep things consistent, you know, at least it’s still apples to apples. And again, Adams put the URL in here for you to go check out properties on our website, Jason hartman.com slash property and now

Adam 9:53
we go to 2017. It was the last year that I can find data across the board without going into like four hours of work. Though I found this, so the 2017 Peak was a median home value of $243,309, which was a 24. and a half percent increase since 2011. But a three and a half percent drop since 2008. So even if you bought and held in a cyclical market since 2008, you’re down home value wise, over that time. So that’s if you’re just going with the, let’s just throw a darkness throw darts at a board and see what market I’m buying in, you were likely going to hit something that wasn’t great.

Jason Hartman 10:35
And and again, we’re talking about 75% of this index being cyclical markets that we would never recommend. Okay, so just understand that I wish there was a linear market index, we’ve thought of creating one ourselves. But you know, we just don’t have the manpower or the staff to do it. Okay. So, you know, it’s, it’s a lot of work to do that stuff and keep it up.

Adam 11:00
All right. So then I thought, all right, well, let’s look at one of our linear markets. And I think, Indiana, because we’ve been in Indiana for the longest, the longest, and I knew we’d been there in 2008. I knew we were there in 2017. And no, we’re still there. So I looked, and I said, Okay, well, from 2008 to 2011, there was actually not a 22 and a half percent drop, there was a 2% increase from 2011 to 2017. There was a 15% increase. Now, if you’ll remember, the other chart, said, oh, there was a much bigger increase from 2011 to 2017. Across the country, median value wise, you’re starting from the crash. So you’re actually performing better in that. And I think I covered that in the next slide. If you want to go to that. No, no, just kidding.

Jason Hartman 11:48
So big quote, quoting himself now.

Adam 11:53
You all know it’s from Pete du Pont, who’s a lawyer, he’s made this quote that, you know, in love, that’s the way it is with entrepreneurial people, you try one thing, it doesn’t work, you try another. So I related that to real estate. And I said, when one market stops working, you move to another. And that is how you can be a perma bowl. In real estate, you invest in one market, let’s say you’ve diversified into three, four or five markets like we recommend, and you keep building your portfolio in those markets. While it makes sense. And then maybe one day, that market doesn’t make sense. And you make your choice I do I sell these properties. Do I hold these properties and buying a different market? You just adjust your market, adjust your strategy, and you can actually be a real estate permeable and have it make sense.

Jason Hartman 12:38
Yeah. And I personally have done that many times. I have ridden the wave in a certain market. And you know, I’ve done this in several markets and several several times over the years and have chronicled those on my podcast on the creating wealth show, where I’ll do a two for one, like the one I can just remember offhand, is I’ll take a Charlotte, North Carolina bought a property there. And then I wrote it up. It was worth about, I think I sold it for about 225,000 bought it for about 150. Don’t quote me on these numbers there on the podcast, but this is my, you know, rough, roughly numbers. And I sold that property did attend 31 tax deferred exchange, which by the way, Joe Biden wants to eliminate. Let’s hope he loses,

Adam 13:27
even if he wins, he’s not gonna be able to do it. Well, I’m gonna push that through a Republican Senate.

Jason Hartman 13:32
Yeah, but wait, in two years, we’ll see what happens. You know, things could change. You know, maybe you’re Indian. And you know, but what Biden wouldn’t be able to be president a second term, because I don’t think he can make it through his first term, with his mental clarity being lost

Adam 13:49
with it. Man, I don’t think he’ll even win the nomination again in four years.

Jason Hartman 13:53
Yeah, that would be interesting. You know, like if he won an incumbent. When’s the last time an incumbent did not get the nomination from their party? I mean, I know LBJ said he wouldn’t accept it. That was way back when?

Adam 14:04
Well, actually, I take that back. The Democratic Party would probably give him the nomination. He may not get the votes for it. But the democratic party would probably give him the nomination or he might not take it. But yeah,

Jason Hartman 14:15
yeah, if Joe Biden wins, basically expect Kamala Harris to be president. Okay. Which is scary. At least for me, do you like Kamala better than you’d like Biden, Adam, because I know you said you didn’t like Biden very much, even though I’m sure he probably voted for him.

Adam 14:31
So Camilla has a weird. So her time in California when she was the district attorney.

Jason Hartman 14:37
It was you mean putting African Americans Yeah,

Adam 14:40
it was terrible. But then she went into the into politics, and has one of the most liberal voting records there. So on the whole I’m not, I’m not a fan. But it leasts more of a fan now than if she were doing this when she was still mean a lawyer in California. That’s my take on her. I don’t know. Better Biden probably because I think Biden’s a worthless political candidate. He’s a conservative, he’s a fiscal conservative.

Jason Hartman 15:09
But okay, all right. Okay. So

Adam 15:11
I think that the three and a half percent drop since 2008. Even if you think that the rise from 11 to 17 was so great, you’re still down on the hole. For the last, you know, nine years, you’ve been holding real estate, that the client and in value and probably getting a total rental value, when you could have put it in a linear market that’s gone up.

Jason Hartman 15:33
And so here is make sure you understand the point I think Adams trying to make is that we’re looking at an index that is 75%, weighted to cyclical markets that we don’t like we don’t recommend, we’ve never recommended them, we wouldn’t touch them with a 10 foot pole, they won’t make sense. And they have terrible cash flow, and their landlord unfriendly almost in every case, and they’re democrat controlled in almost every case to so that’s all interesting that those parallels apply to all of them. Okay, so let me show you a few things, folks. Now, this is just I just took a little a couple of slides from this upcoming webinar we’re going to do on this, okay, this is the median sales price of houses in the US, okay. And this is where we are now of last quarter $313,000, median price as of July 24. There may be a new number out for this now, by the way, but it’s close enough for government work, as they say. Now, let’s look at the interest rate 2.87% as of September 17. And by the way, on these charts, the gray areas are recessions with two or more quarters of flat or declining GDP. That’s the definition of a recession. Let me go back and show you the price one again. So you can see where the recessions are, you can see, you know, Great Recession here down a little bit. And up since then, right and a little bit of ups and downs in there. So then we look at interest rates that have dropped dramatically. Now, here is the thing we’ve got to consider, we’ve got to adjust for price of the home, we’ve got to adjust for the interest rate on the mortgage, and we’ve got to adjust for what else Adam do, we have to adjust for inflation, inflation, because inflation is the insidious hidden tax, that destroys the value of our savings, our stocks, our bonds, even our equity in real estate, because as the dollar goes down in value, and buys less as the purchasing power declines, through inflation, it has all sorts of interesting effects on everything. And people very seldom really, truly understand it. And interestingly, the IRS doesn’t understand it, or doesn’t want to understand it, because the way inflation is regarded on your tax return can either hurt you dramatically, or it can benefit you dramatically, depending on how you play. And I will just say this as a blanket statement, the best asset class, far and away in an inflationary environment is income producing real estate, income property, the kind of stuff that we help people buy and build portfolios with, at Jason Hartman, calm, shame, shameless self promotion. Okay, but it’s true, you got to know this stuff. So we’re going to adjust for house price, inflation and interest rates. Now what we are not including in this analysis, by the way, which we should include, but we didn’t, and it doesn’t make that big a difference. It’s a little bit of a difference, though, but it even makes it better than what I’m going to show you. But once we adjust for this stuff, most people think we’re in a bubble. They think prices have gone up too much. Housing prices now are higher than they were back at the last peak. And look what happened then there was a great recession, and everybody loves money and it was terrible. But when we truly look at the real numbers, not the fake numbers, we see this. Here’s what we see. We see that the $313,000 home at 2.99% which by the way is a little even lower now. Now these are owner occupied numbers, okay, because those are the ones quoted there’s no good charts for investor or non owner occupied mortgages. Okay, so you’re gonna pay a little more for non owner occupied. Your payment is 1300 19 bucks a month 1319. We run around off but if you consider 2006 The peak, okay, and Adam and I were debating that most people say 2006, from what I hear your payment back then was 15 $132. And you adjust for inflation. Remember, since then, according to the official stats, you’ve had 28.9% cumulative inflation, okay? You’re actually saving money on that house today, that house in 14 years, in terms of a mortgage payment principal and interest mortgage payment got cheaper by $657.42, the house is less expensive than it was then, on a payment basis, just understand almost nobody, almost nobody buys a house based on the price of the house. Almost everybody buys it based on the payment based on the monthly cost of that house. And the monthly cost in the last 14 years has declined by $657.42. This is what few people understand, because they don’t know how to do the math. They don’t know how to calculate inflation. And they’re not thinking of the interest rates. So you’ll hear these people in the media, they’ll be on TV, they’ll be in magazine articles, newspapers, whatever, you know, they’re writing newsletters, and they’re just giving you this like stupid amateur analysis of things. where they are. They’re just saying house prices are higher now than they were 14 years ago. And we’re a degree recession. Oh my god, there’s a bubble. And they don’t know what they’re talking about. Houses are cheaper now than they were then. Adam, thoughts.

Adam 21:51
I agree wholeheartedly. I mean, I look back and see all the deals I could have gotten at the prices. I could have gotten them at the payments, I could have gotten them and kicked myself. I wish I wish I’d met you before them.

Jason Hartman 22:05
Yeah. Well, I wish we met soon as sooner to Adam, that would have been very romantical. Hey, so how many properties Do you and your wife own now?

Adam 22:15
We are going to be closing on seven through nine at the beginning of next year.

Jason Hartman 22:20
Congratulations plus your own home. Yes. And you’re in Austin. liberal Austin? Yes. liberal Austin. Yeah, good stuff. Good stuff. Okay. So we’ll wrap it up. We got a few more questions and comments we’ll take but also another website, we’ve got a free little mini book at pandemic investing calm, go there, get your free little mini book report. And it’ll you know, tell you about some of the commandments that we’ve modified for the environment in which we live. Just go to pandemic investing calm, once you realize how amazing it is that we actually got that domain name. And you can check that out totally free. And that’s available to you. Okay, Adam, let’s

Adam 23:02
grab a couple more questions and comments. As you read those, I will change the slide to a better slide. So go for it. So sunshine girl was talking about when she said the rates were down 2.1 somebody asked while you’re getting the rate 4.1%. And she said no. But you don’t pay more than two plus percent in in the Land of Oz. And we have mortgage holidays Commonwealth Bank pledge no for sales until September 21 or September 2021. Minimum and sensible lending rules scrapped from March 70,000 government or government grants to her Aussie dollars, I assume,

Jason Hartman 23:38
Grant, we’ve got a reply from Michael.

Adam 23:41
And Michael said I’m sure different rules apply for foreigners and seeing tight restrictions on what foreigners can buy. And some believe she responded with Yes.

Jason Hartman 23:50
And tinfoil hat says stolen bull. I don’t know exactly what that means, but rather the bull market overall.

Adam 23:57
And then sunshine girl responded with I wouldn’t be buying in AWS if I were a foreigner much better value elsewhere. There are restrictions on what kind of real estate you can buy. You need FIA IRB approval, but that’s easy. Ultimate bargains finds my temple he made me laugh a couple times a day, my tinfoil hat. So adjusting to a tenant that doesn’t pay market. That is something that I’ve talked about with Jason before and on the podcast. It’s actually really interesting. If you look at all the times when they get bad when tenants stop paying. The downside to real estate is that when your value goes down, it hurts. Now, if you’re holding in stocks and all of those things, it still goes down. You’re still losing money, you’re just not selling yet. But let’s say for example, you have your property your tenant completely stops paying, you’re still putting principal into the property that you can refinance out later. You’re still you are losing money on those payments on a month by month basis. But if you look at the amount that you’re losing On a cash on cash basis, from what you’ve put in, it’s usually still better than what’s happening in the stock market. And that’s what I like. That’s what I think a lot of people forget about is if your tenants are in a situation where they can’t pay rent, and you can’t evict them and find another tenant, there are other things going on the economy that are decimating it as well, for the most part, for example, during the pandemic, when our renters were having the most trouble paying their rents, even though that didn’t really happen in the linear markets. That was when the stock market was crashing. 30 40% So you were losing maybe 3% a month, cash on cash wise for your tenant not paying, but like I said, it hurts now, and that’s the downside to real estate.

Jason Hartman 25:44
But the thing is, you don’t really have to notice that if a property goes down in value, just keep renting it. You’re saying if the tenant stops paying, right, but but tenant stops paying is a fixable problem, Okay, anyway, you know, evict them if there’s an and I know you’re gonna say, oh, there’s an eviction moratorium? I’ve heard it a million times. First of all, this is like largely a non issue, folks. Okay? If there is then just go into forbearance and don’t pay the mortgage. It’s Trickle Up economics, as I’ve talked about many times, okay. And also

Adam 26:18
another way to hedge that is to own more than one rental property. You have that way even if your cash flow decreases your other properties are still paying the mortgage for your property that’s not cash flowing. Yeah,

Jason Hartman 26:31
yeah. Okay.

Adam 26:32
So the cold caller interesting comment on the van life on these people the van life people are becoming useless. They single people sole income, no life skills, nothing to offer others. Yeah. I mean, it’s literally just, this is us doing this fun thing. Don’t you wish you were here?

Jason Hartman 26:49
Yeah. Instagram influencer is not a skill set, folks. Like,

Adam 26:53
oh, I’m doing yoga on the beach this morning at 8am. Alright, great. Big deal. The gold healer says please, really Adam and Tifa and all the subgroups payments made by George

Jason Hartman 27:05
Soros had a problem. He doesn’t believe any of that because he’s got his head in the sand. But okay. And Tifa is an idea. Well, it’s actually a pretty organized idea, too. Okay,

Adam 27:18
for my wife, the van life nice van, she offered me a divorce. My tinfoil hat.

Jason Hartman 27:25
Gosh, okay. Question from Fran.

Adam 27:28
Fran, you asked what does it take for first time investor to buy and manage remotely would like to invest in us real estate but confused about a number of properties investment size mentality? So when it comes to buying and managing today’s inventory with what we have, you’re looking at probably needing around 35 to $40,000 to get in,

Jason Hartman 27:51
you can get an inexpensive property for you can get it for 25,000

Adam 27:57
you’re gonna have to wait and find that property at the moment. If you just it’s hard to find this. Yeah. Well, that’s what I’m saying with the inventory we have right now, most of the properties are in the 150 to low two hundreds range. So you can get in anywhere from I mean, our lowest, our lowest price, new new construction property, you can get in for about 30 to 33,000. managing it remotely, you can either do it yourself doing the hybrid self management that Jason has talked about a ton on the podcast, or you can just go straight property management companies, we have management companies in every city that we can recommend

Jason Hartman 28:35
you look at, but I recommend self management, not a brand new person. But you know, if once you get a little experienced as an investor, if you don’t have it already, you know, we can we can really help you with that.

Adam 28:45
Yeah, in terms of number of properties, you can get up to, um, you can get an infinite number if you can qualify for it. But in terms of the government backed securities, you can get 10 loans. And what he means is the Fannie Mae, Freddie Mac, what’s called agency loans, your best rates are going to be they’re there for your first 10 loans, that includes your primary residence if you own one. And if you’re married, and your spouse has income and can qualify, they can get 10 as well. So 20 on the agency loans and the mentality is you just have to get out of the mindset of meeting. I can’t see my property. That’s the mentality

Jason Hartman 29:20
you need to get out of which Guess what, you can’t see your stocks either. Well, I

Adam 29:25
mean, you also think about it how if you own for example, if if I live in Austin, and I own a property in far north Austin, how often Am I gonna go driving by that property? Yeah, maybe once or twice a year at most, I can pay a property manager to send somebody out for 70 7075 bucks, which isn’t that much more than paying for the mileage on the car according to the federal government. And you know, they go out there and take pictures and look at it and send them back to me. So otherwise Are you going to go up to your let’s say you buy one, you know, even four blocks down? even go and look at the outside Are you gonna go knock on their door every couple months and say, let me inside, let me look at your house. It’s just a silly, this is an old fashioned idea that you need to be near your properties. You’ve got all the technology and all the infrastructure and resources nowadays, where you don’t look at, this is what I’ve been doing for the past 1617 years now. Okay, we’ve been helping people invest nationwide. So that’s what we do, we can help you with that bottom line. Okay, we, we can’t talk about all the stuff we do right here or solve all the questions on that. But that’s what we do as a business. We’ve helped 1000s of people do it, so we can help you too. Okay, so start at one unit, the journey of 1000 miles begins with a single step. I started with one unit when I was 19 years old, 20 years old.

Jason Hartman 30:39
I got into real estate when I was 19. But my first rental property at age 20. Your journey to a rental property portfolio is one door, one door at a time.

Adam 30:49
Ramona Griffin thinks they will invoke the 25th amendment to say he is unfit for President.

Jason Hartman 30:55
That’s tried.

Adam 30:56
I don’t agree with that. If they thought he was unfit, if they wanted to kick him out, they would have just had coordinated everybody falling out of the race and endorsing somebody else. I mean, remember it is progress. You know, his his dementia is gonna get worse as time goes on. Right. But if they if they didn’t want Joe Biden to be president, they wouldn’t have orchestrated the whole Hey, everybody drop out right now and endorse Joe Biden, so he can beat Bernie Sanders like they didn’t primaries, beyond kryptos. As I just Bs, I just saw the stats about a week ago, median home value is at about 317,000. Now, there’s a pump period, these guys are very worried. It’s time for these prices to drop cash flow rentals are not. So there’s a reason I didn’t take the most recent median home value of 317,000. I couldn’t find any stats for India, for 2017 to 2020. I didn’t spend five hours making this presentation. I want to my

Jason Hartman 31:48
my my thing said the median home price was 330. Right? He was talking about mine when

Adam 31:53
I was comparing Indiana to the US. Okay, I couldn’t find a good chart for Indiana properties went up to 2020. I could find a good one that went up to 2017. So I just use 2017 numbers. Yeah, that’ll make we need to cover this on the podcast. Okay. Oh, well, maybe

Jason Hartman 32:09
we shouldn’t even talk about this. Folks, you’re adults here. Come on, make your comments adult. Robert Hernandez says after listening to a couple of YouTube business owners, I can tell some people even though they’re successful in a particular business, when it comes to real estate, they have no clue how to use leverage. You know what I am so glad you said that. That is you’re absolutely right. You know, folks too many times in life, we allow people to influence us by the slight transference of expertise. Okay, I have hired you know, there’s this old saying, and I just saw it on my Facebook memories. I was at Ken McElroy, his Halloween party a couple of years ago. Ken McElroy is one of the rich dad authors with Kiyosaki. And you know, he’s an apartment syndicator has like 1000s of units can in his garage, he had a Ferrari and his Ferrari license plate. I posted this on Facebook because I thought it was such a funny license plate. He said, you know, a students work for C students, and then just came up on my memories because we just had a Halloween a couple days ago, you know, I have hired and I’m speaking for myself, I was not like a great student. Unless I was interested in the topic then I was an awesome student. But most topics I wasn’t that interested in in school, you know, I was interested in money and finance stuff, mostly, you know, we trust these people. Like I hire a lot of these a students now, right? lawyers, accountants, management consultants, I hire them in my business. And you know, I’m thinking like, these people are way smarter than me academically. But when it comes to things like money investing, they can be completely clueless and doctors are a great example. They’re kind of in you know, it’s not always a fair, fair thing to say, but it’s a sort of a generalization. They’re notoriously poor business people but they’re good they’re scientist right so different minds are good at different things so yeah, don’t allow this transference of authority or knowledge on things there are certain people are good at certain things and bad and others so absolutely true. Okay, Adam

Adam 34:14
sunshine girl says friend I think Jays team may be able to help you I’m considering it to come on down a lot of forum you can talk to us no harm no foul if you don’t like it. Yeah, there’s our services are free. Okay, so you can talk to investment counselors. You know, we make money when people either buy educational products, we make a little bit of money off that but mostly off of people building their portfolios. Okay. Dan says inflation is pointless. It’s counted wrong. Everyone is getting savvy to this property taxes are going to kill real estate at this point. dm I question to you is where do you think the property taxes go? The property taxes go into the rent. So as property if property taxes increase, rents are going to increase because you’re not going to get a hold? City a landlord saying, Yeah, I guess we’ll start losing money, you know, they’re gonna start increasing rents and tenants are gonna have to pay it, because everybody’s gonna be doing it.

Jason Hartman 35:10
Every Corporation, every business every and that’s what real estate is, it’s a business, they’re all pass through entities raise the minimum wage, and you raise the expenses on the employers, then they’ll just raise the prices to the consumers raise the property taxes, and the landlords will raise the rent prices. And remember, that’s done really pretty much in unison, because property taxes go up in an entire city or state at a time, right. And you know, this, by the way, is on the California ballot, it looks like it’s going to fail, fortunately, at least now, this big property tax increase, but your rental properties are passed through entities who pass that cost through to the tenant.

Adam 35:54
Okay. And you’re also even if the taxes go up, and you lose money for a little bit, and not lose money, necessarily, but your cash flow gets lower for a little bit. I mean, made up for when the rents reset to the market. market value. Yeah. So yeah, your your income might get hit a little bit now, but it’ll get made up for and you’re still getting your depreciation, you’re still getting your your own tax benefit, you know, your equity, you’re still writing off all the wonderful interest that you’re paying, although at this point, you’re not paying that much interest anymore,

Jason Hartman 36:27
while you’re still getting inflation induced debt destroyed. Yeah, for sure which more on the podcast on that. Okay, a couple more questions, and we’ll wrap it up.

Adam 36:35
So Michael is wondering after we close on our third property today, excited for you, Michael, happy to help you find that property, or tomorrow we’ll be running into,

Jason Hartman 36:45
I want to say congratulations.

Adam 36:48
That we will be running into debt to income issues on upcoming purchases, any recommendations for discussion, one of the biggest things is talking to the lender about using the parties to qualify themselves is a one thing you can use

Jason Hartman 37:02
it and then what and what he means by that is that the rental income from the properties add to your income Michael, so they help you qualify. Now, they’re not going to take the rental income at 100%. They usually take it at 75%. So for every $1,000 you receive in rent, your income is increasing $750. It grows, of course, then you take out expenses, just like you take out debt when that’s why you get what’s called the dti, the debt to income ratio that is considered when you qualify for a mortgage.

Adam 37:34
And you can also if you want, like we were talking about the asset protection, it’s possible that your CPA can do something or Bob, in this case, the lawyer might be able to help you hide some things or moving things around to make it look better.

Jason Hartman 37:49
Oh, there’s just good tax treatment use entities properly. So again, the link is below. Check out that free webinar Jason hartman.com. Slash protect Jason hartman.com slash protect, you’ll learn a lot from that. So good question. Thanks, Michael. And congratulations. So centric says what are your thoughts about the great reset that the IMA keep spewing on articles about people owning nothing by 2030? how happy they are, feels like the communist agenda is starting. There is certainly a push for this and an agenda. And it’s a huge topic. I have not had time to cover that a lot on the podcast. I’ve done a little bit on the YouTube channel about that. And thank you for the reminder, because I’ve been wanting to cover this issue. But you know, we’ve had all this stuff going on election pandemic. Just there’s only so much programming time available. Okay, so we will get to that topic. It’s a very good question. There are definite concerns and strategies

Adam 38:48
Kevin says Adam, don’t forget to research and discuss HELOC strategy to pay off mortgage and or he locked to invest property. Thanks, guys. I did have a question about using the HELOC to pay off the mortgage asked me and I wasn’t 100% sure what your thoughts were on that. Jason? Well,

Jason Hartman 39:04
using a HELOC on maybe your own personal residence, a home equity line of credit. Yeah, buy property free and clear.

Adam 39:14
Is that what you’re asking? I believe so. But to me, it seems like you would just do a cash out refi in this environment.

Jason Hartman 39:19
Yes. Well, the cash out refi is probably the better deal because it’s a three decade long fixed rate loan at historically low rates. But you know, everything is worth looking at. Right. I don’t know, you know what he locked terms you’re being offered. But by and large Adam is absolutely right. That usually the cash out refi is going to be the better strategy. Most of the time. Yeah,

Adam 39:46
I agree. dn says thank you miss my point. They’re not increasing wages anywhere near the cost of property tax. They’re using inflation example 2500 in tax went to 6004 years 2% Don’t wage increase won’t help.

Jason Hartman 40:02
Yeah, well, dm, that is not the case. And here’s why. Let me tell you why. I’ve heard this type of thinking and on its face, it makes sense. And I see why you’re asking the question. So I appreciate the while the comment, not question. Okay. But here’s the flaw in this in this kind of argument, okay? People tend to think of this as like this fixed thing. Okay. If my, you know, take, take my sound effect machine, right, this is a house, your tenant rents this house, and they rent this house, and it’s 15 $100 a month and say the property taxes go up, you know, before you had $200 a month positive cash flow on this house. But now the property taxes went up. So you have zero positive cash flow on the house, it’s only a breakeven and you’re thinking like, this deal isn’t so great. Yes, there are other ways you earn your return. But the thing you’re thinking is that this tenant renting this house is this fixed thing. And it’s not, what happens is this tenant has to either take on a roommate to defray their expenses, or not buy a new car to defray their expenses, or they have to move down to a lesser house, and then you get another tenant moving down the socio economic ladder into your house, okay, at the new higher price, where you’ve increased the rent to offset your expenses. So it’s like two ladders, okay. You know, you’ve got tenants moving up and down the socio economic ladder, you’ve got properties that are on certain places on the socio economic ladder, and they will reposition in times of economic change. So it’s not like you have this fixed tenant in this fixed house. And that tenant doesn’t have fixed expenses. If right now they’re living in your house and they’re paying you 15 $100 a month and their wages don’t increase well, then maybe they have to give up that nice car or give up private school for the kids are give up some vacations or shop it cheaper grocery store instead of shopping at Whole Foods whole paycheck, okay, you know, these things are all adjustable, they’re not a fixed thing. Or maybe they just have to say, look, I can’t afford the house anymore. I’m gonna move and you got to get another tenant who can’t afford it. Okay. It’s how many thoughts on that? Now,

Adam 42:28
it’s like it says, in real estate that you can negotiate the deal at anytime. And that includes with tenants. Yeah, bro. Yeah, good stuff. And cannon says, Thank you guys, as always, lots of great information. Have a great day. All.

Jason Hartman 42:41
Okay. Well, with that, we will wrap it up. Thank you all for joining us. Go to Jason hartman.com. Check out more go to pandemic investing calm to get that free mini book. And of course, check out the estate planning, tax reducing and asset protecting webinar at Jason hartman.com slash protect. Adam, thank you so much. And folks, I just want to say I am not sure we are going to do an election livestream this evening. Stay tuned, we’ll see how the day goes. We’ll decide this afternoon. If we don’t do it today, we’ll probably kick it to tomorrow or even Friday. These are horrible lawsuits. And who knows? Yeah, we got we got to let the lawsuits get filed. And see what happens here. We just want to have something more complete to talk about so so that’s our only goal. So make sure on YouTube, you turn on that bell notification. So you get notified when we go live on an impromptu basis. And a lot of you I know have done that because instantly when we’re going live your you know, you’re all joining us. Thanks for doing that. And the rest of you turn on the notification bell as well as subscribe and we love your likes to and your comments. So keep those coming. Alright everybody, happy investing. Let’s see what happens with the election. And thanks again folks. And sunshine girl got one more comment. And thank you for joining us. And we will see you next time everybody. Bye. Bye. Bye.

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