1158: Big, Boring, Profitable Idea: Day 2

My wife and I were drawn to you because we liked the idea of putting money down, qualifying, making sure we can cover the mortgage, you know, and have reserves like you were talking a language that was very appealing based on what we had gone through before.

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 multimillionaire 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. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to episode 1158. 1158. This is your host, Jason Hartman. Thank you so much for joining me today. You may hear just a little bit of background noise in this very short intro because I am still in Newport beach where we just finished our Meet the Masters two day conference and then a one day Venture alliance mastermind where we invited the elite ticket holders as a guest. And we just wrapped that up and I am looking at this absolutely gorgeous view from our hotel room here at the venue where we held both events. We're overlooking a beautiful golf course, the Newport Beach Country Club, I believe that's what it's called. Yeah, I think so. And then the Newport harbor and then the ocean beyond that. This view. Boy, I've seen some pretty good views in my life, but I don't think you can beat this one. It's absolutely gorgeous. And it was such an exciting weekend.

It really was.

And just wrapping it up with the Venture Alliance Day was just the perfect icing on the cake. We masterminded this morning and we had one of our members just did a great presentation on the four investment quadrants. That was a really nice overview of how investors can invest in different things and, and just kind of another way they can diversify and eliminate risk when investing in various pooled money assets. Well, you can never eliminate risk. I should say reduce risk or mitigate risk. That's the more proper word. And that was great. And then we went to a beautiful lunch at a super swanky restaurant. Everybody just loved it. There were, I think 15 of us here for the Venture alliance day again. That's always a small group, mastermind group format. And then we had almost 200 people this weekend for the entire weekend and everybody just loved it. And you know, at the end of Meet the Masters, it always happens this way. On Sunday afternoon, people are outside of the room visiting our exhibitors in the trade show area and doing deals and buying properties and talking with financing providers and self directed IRA providers and the different banking people that are out there and just all our different service providers. Our home inspector that we had here did a phenomenal presentation. One of our clients, Drew, who you've heard on the podcast, did a great presentation about self management and it got a little spicy, I must say. There were some fireworks during that presentation which were interesting. And you know, that's what we want. We want to encourage this, we want to encourage different viewpoints and really, you know, see things from every angle. Because my view is when you have that kind of openness and transparency, you really get the best answer for any problem. And so that was great. And we also really want to reach out and say thank you so much to our livestream audience. We had 97 viewers on there at one point and of course the live stream audience does get a replay for a while. 57% of those viewers were on a mobile device, 36% on a desktop, and get this, 4.9% on a connected TV. They were watching the live stream right on a television set. But interestingly, only 0.7% of you watched on a tablet device. So that was interesting, but was even more interesting than that is when looking at the live stream audience, looking at where in the world they were from. Wow, that was really interesting. We had viewers on the live stream. Well, we had a live visitor actually, and what a treat for him to fly out 22 hours to fly from Australia, from Perth, Australia to come to Meet the Masters. And you know, over the years we've had people come from all over the world to our different events, but, but that was, I, I just want to say super special appreciation for coming that far to attend Meet the Masters, a 22 hour flight. That's really phenomenal. So we very much appreciate your faith in us and coming out so far for something like that. But just give you some information about where in the world all of our livestream viewers. We had people in El Salvador, Iraq, Philippines, Nigeria. Now last year at Meet the Masters we had a gentleman fly from Nigeria and he attended in person. Of course, we had people in the UK, Romania, 82% of the livestream audience was in the US 2.8% was in Australia, another 2.8% in Indonesia, 2.1% in Argentina. We had people in Portugal, South Africa, Brazil, Canada, the Czech Republic, Chile. Wow. What an honor. Thank you so much for buying the livestream ticket and tuning in and watching us from around the world. And we really appreciate that. So that was just fun.

Phenomenal.

But an absolutely great weekend. And we are going to play some highlights for you from the weekend. And you know, I've been working pretty.

Hard for this event.

My team has been working very hard. So a big thank you to all of them. You know, my girlfriend and I are gonna go out and just kind of enjoy Newport Beach. So she doesn't know where I'm taking her, but I'm gonna take her over to Balboa island and where going to walk around there, maybe take the Balboa island ferry, maybe go down to Laguna beach and and just chill out a little bit.

So that's what I need to do.

Here for a few hours. Here are some highlights from Meet the Masters. And this again I want to say is content. You're going to hear some content here. This is not just a commercial of us patting ourselves on the back about the event. So here's some free content for you as a a little sampler of what we did this weekend at Meet the Masters. And then also I do want to say though that we did announce a few upcoming events at Meet the Masters. We announced two cruise ship events. One is our Cuba and Grand Cayman event. That is a, a cruise, a week long Cruise departing from Fort Lauderdale, Florida on November 6th. That'll be several months away. November 6th, Cuba and Grand Cayman, the Cayman Islands. Then we also announced Meet the Masters at Sea, a Mexican Riviera cruise next March. And you can go to jasonhartman.com Cruise jasonhartman.com Cruise to check out our cruise events.

You know, if we don't get enough.

Registration for Meet the Masters at sea and then we'll just do it on land again and we'll be a bunch of land lubbers like we've always been and have our 22nd anniversary meet the Masters.

But I'd love to do it at sea.

So if we get enough signups for that here we will go ahead and finalize that. So that would be a lot of fun to do that at sea. And then we also announced an event coming up sooner than that. And that is a Venture alliance retreat, a weekend retreat in Savannah, Georgia. And here is the focus of that. One of my very good friends has been teaching me lately. She has been doing a great job teaching me all about tax liens and tax deeds and investing in them. And that will be the focus of our upcoming Venture alliance weekend in Savannah, Georgia. And of course, if you are not a member of the Venture alliance, you can buy a guest ticket for that event if you'd really like to learn about that. And then just mastermind with us for the weekend that will be in May. You can go to venturealliancemastermind.com to see more information about that or jasonhartman.com for the other events. And you know, of course jasonhartman.com cruise for a direct link to the cruise events. But we'll get that up on the front page so you can find those.

All easily just from the main page.

That's it for me now. But hey, let's hear some highlights from the weekend. Here we go.

I rented this gorgeous brand new penthouse one block from ASU in Arizona in Tempe, Arizona. And I paid only $3,600 a month for this gorgeous new 3,600 square foot house. A dollar a square foot. It was, it was a pretty amazing deal. And I thought I must have died and gone to heaven. This is such a better deal than my 1,800 square foot house here locally for 11 grand a month. And that's when I thought, you know, renting a high end house is a very good deal. And why is that? Well, most of you know that follow my work is that it's the rent.

To value ratio, the RV ratio.

And that's really the best, very simple rule of thumb. See the thumb for investing, right? The rent to value ratio. And so that place in Arizona that I rented and I lived there for about, I don't know, four years, five years, four years maybe. You know, my rent to value ratio there was like three, it was probably worth about a million five. And you know, but you can always rent a high end home for a very good deal because the rent to.

Value ratio is in favor of the.

Tenant and you want to own a lot of less expensive bread and butter.

Places that you rent to other people.

Because the rent to value ratios vary in favor of the landlord. So essentially, you know the word I use a lot, right? The word is arbitrage, okay? And arbitrage, my dumbed down simple definition of the word arbitrage is exploiting the differences in things.

Exploiting the differences in things. That's what arbitrage is to me. I mean you can look on Wikipedia and it'll be More complex to definition.

All right, let's talk about investor inspection. So does everybody get inspections when you buy? Everybody does.

All right.

That's a super smart idea if you're not getting the inspection. That's what I really want to talk to you guys about today is that the inspection is super important because you go into that house and you have some things that you're looking for. Maybe you have some great experience and you know what you're looking for cosmetically, you know what you want to do. You might want to knock down this wall. You, maybe even you bring your contractor in. Like my old investor, Robert brought me to the jobs, and I would maybe poke my head in the attic, or I would poke my head underneath the sub area and just take a quick look. And I might look at the roof from down on the ground and give them my opinion as a contractor. That's what I'm doing. I'm thinking about, how am I going to fix this? What are we going to do next on the project for remodeling? But what you want really is someone to give you an unbiased opinion. You want someone to dig in a little bit deeper, someone who doesn't have any skin in the game. You're paying them a small fee, maybe 300, $400 to spend three hours at that house, photograph everything, and report the defects to you. So that's what the purpose of the home inspector is for. He's here to help you mitigate risk, not eliminate risk, but reduce it. So no home inspector is perfect. We're going to go places. Your contractor's not going to go. Every one of my home inspectors, if they can't crawl completely under the sub area or completely through the attic, they're going to let you know. They're going to take all the photos, they're going to bring them out. They'll send that crawl bot underneath there if they need to. But your contractor's not looking that way. He'll poke his head under, go, hey, you have galvanized plumbing. That's cool. We'll fix that later. But he didn't see the seven foundation cracks that may affect your home down the road. And we also know what the. I know you guys are all buy and hold investors, but sometime you may end up selling. So we also know what the next inspector is going to look for. So if you happen to be in that particular deal where you may buy it and hold onto it for a little bit, and then you're going to sell it. Well, again, having a home inspector opinion to look at it is going to give you some sort of idea of what the next guy is going to look for.

My view is that wealth is essentially knowledge.

And knowledge is the growth of information.

And thus.

Knowledge reflects the creativity of people like you out there making major commitments in the economy. And you may think you are in real estate and real estate should convey real physical things, physics and chemistry, but that is not the business you're in. You're really in a knowledge business. Real estate of the earth hasn't changed since the Stone Age.

What has changed is the knowledge about it.

So here's my definition of a self directed retirement account. It it's an IRS approved vehicle that allows you and I to get complete control over the money in our account, invest in anything that we choose, so long as it's allowed by the government, and make money tax protected. So our money grows exponentially faster and larger and in many cases spend every dollar we make 100% tax free. Okay? So it's a vehicle that allows us to build wealth, make money and eliminate taxes. That's what a self directed retirement account is. Okay, In a nutshell. So the one challenge that sometimes we run into though, when we start to go down this path is that you're going to hear things and there's a lot of misinformation on this subject. But one of the things that I hear people say once in a while is that you can't do that inside of an ira, right? You're not allowed to buy real estate inside of a retirement account. Have you guys ever heard that before? Anybody ever hear that?

You've heard it?

One person. Okay, so who do you typically hear that from? Tax advisors. Friends, neighbors, right? People like that is who you'll hear this from. But let me ask you something. Do tax advisors make the rules when it comes to retirement accounts?

No. No. Who makes the rules? All right, very good. The irs. So if we want to know what we can and cannot do, we have to go to the source, right? We have to go to the people who enforce the rules. And, and so this is off the IRS website right here. I'm not going to spend much time on it, but basically, here's what it says. It says IRA trustees. Anybody know what an IRA trustee is? IRA trustee is the financial firm or institution that holds your retirement account. Okay? So what this says is that IRA trustees are permitted to impose additional restrictions on investments. For example, because of administrative burdens, many IRA trustees do not permit IRA owners to invest IRA funds in real estate. So in other Words. What they're saying right there is the company that holds your retirement account. Just because the government allows us to do something doesn't mean that a company that offers these services have to allow us to do it. Make sense? So what it's saying is, is that the company can restrict the things that they're willing to let you do. Now, they can't go beyond the rules because what's that called? Breaking the law? Right. So we can't break the law. So we can't go beyond the rules, but they can restrict the rules. But look at this last sentence here. And this is the one that I want you to focus in on. It says, IRA law does not prohibit investing in real estate, but trustees are not required to offer real estate as an option. So here's the reality of it all. You might hear that you can't do this kind of stuff with your retirement account. Okay? It's just not true. And the IRS spells it out front and center on their website for us. So we just have to go back to the rule book.

The next paradox of learning in some ways is speed. I know a lot of you guys have asked me this question over the last couple of days as to, can you read faster? Can you listen to books faster? And one of the things, a really simple hack that I was talking about is the idea that if you like listening to audiobooks, go, try, listen to them at a faster pace. Instead of listening at 1x, they do.

That to my podcast.

I do that to everybody.

How fast do you guys listen to my podcast? 1.5 or faster.

2.

You can't do that. You're not getting anything, man.

See, I disagree with you here, Jason.

I can't go faster than 1.75 of anything, you know?

Yeah, okay, so what happens? I disagree with you.

Really?

You go, how fast do you go three times or something?

Depending on the book, I could go 3x. But the key there is to. What happens with the paradox here is that when you don't have, like, when you are. When the information is coming at you really fast, your brain is forced to focus. It's forced to focus. It's almost like you cannot. You don't have any bandwidth remaining for doing anything else. The brain cannot think about anything else. Because a lot of times, how many. How many of you have had that experience where you're listening to a book and it's 20 minutes later and you're like, oh, what happened? 20 minutes just went by.

You're in a car, you're driving 20 minutes just went by, you're like, oh no, I lost it. That's because your brain has excess capacity. It's able to do other things. But when you are putting information in through a fire hose, now it's forced to focus. Now it has to be completely in the moment, completely present. So you, not only are you learning faster, not only is the information coming faster, you're learning better, you're learning more because of the speed.

So part of the benefits of self management is step one, finding a leasing agent. Finding someone in your market that knows what they're doing, what's renting currently, and how to successfully find a good tenant.

Okay, so let's, let's talk about a.

Leasing agent for a moment. What do you mean when you say that?

Do you mean a realtor, a regular realtor who will do leases now?

Yes.

A lot of realtors in a lot of markets do leases, some don't.

Yeah.

And so this is not a property manager offering an unbundled or a la carte service. Right. Of just, and let me just define this. So you know, the property management thing has usually been throwing in multiple activities together. One, you know, marketing and, you know, handling the lease, writing up the lease, screening the tenants and then putting the tenants in the property, managing any repairs or fix up and then collecting rent each month. So what you're doing is you're saying hire a real estate agent and they do the lease up. How much do you pay them?

Well, that's the next thing. Part of my reservation about going with a leasing agent, a realtor, to do the lease up is it was versus a property manager was it was more expensive. It was about one month's rent, not half rent's worth of rent. But the reason for that is the property manager gets all this back end money that you don't really think about. And so, yeah, you got a great deal on a cheap haircut, but then you look in the mirror and realize you're an idiot. You know, and so part of the problem here is I'm negotiating up front, someone to sell, you know, take a good amount of time to take quality photos, market the property, go there and meet with, you know, plumbers to deal with little issues. And they're on the hook for getting me to the finish line to find a good tenant. And then also you kind of have some say about what type of tenant you're going to get in terms of, hey, do you want this tenant over here that has five kids and works on cars in the driveway or do you want this family that has, you know, I mean, and I. So I'll just kind of briefly look over and kind of come to conclusion of what she thinks and we'll figure out what makes the most sense for the property. The next thing is.

Whoops.

Is building a network. And so I'm. I think that building that network of support in the local area is what helps me ultimately find good vendors.

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