1242: Jason's Mom Debt Jubilee, Reviewing Leases & Self-Management

When we found you and your podcast, it was like, okay, this is what we should have done the first time. It's like the properties make sense the day you buy them.

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 1242. 1242. Thanks for joining us today. It's a pleasure to welcome my mom back to the show. Today we are going to talk about two major things. Number one, as most of you know, she is a self manager of her rental properties and does a great job of it. She's what I call an extreme self manager. Very engaged and managing properties directly all around the country. Does she doesn't use leasing agents or property managers for anything but does get some free help from realtors out there now. And then she also just finished a book entitled the American Jubilee and we're going to talk about that. So let's go ahead and dive in. Mom, welcome back to the show.

Well, thank you Jason.

The American Jubilee. I think I probably caught this from you. It must be hereditary because I love to learn. I love to read. You're always learning, you're always reading and I think that's a great thing. And you just finished this book. You know, we did a show on my holistic survival show ago about jubilees. A jubilee is when all the debt is forgiven. So just talk to us a little bit about that and about the book if you would.

Well, I just finished reading the American Jubilee and it's really a great book. Some people might think it's a doom and gloom book, but I think it is important to take cognizance of what this book is talking about. As the author whose Porter Stansberry explains, he says that we are at a very serious tipping point in America today. Our nation, he thinks, has become a financial and cultural pressure cooker. We had riots and protests in Charlottesville, in Ferguson and Baltimore football Players refused to stand for the national anthem. There's radical fringe groups like the white supremacists and Black Lives Matter. There's upraisings about race and maybe Donald Trump, police brutality. But according to the author, what they're really about underneath it all is money and a feeling of hopelessness. And he says what's driving so much of this anger and radical politics is the wealth gap that's happening in our country. Some people are doing great. There's never been a better time for wealthy Americans. It seems like the rich are getting richer and everyone else is actually losing ground.

We talk about this when you look at history, though. I mean, think about it. If we were having this conversation in the late 60s, people would have been talking about the Vietnam War, riots in the streets, protests. If we were talking about it in the early 60s, they would have been talking about Selma, Alabama race riots, police brutality. Kind of more institutionalized back then. I mean, there's always problems, right? There are always these things to talk about. Is it really that much different now?

Well, I think this thing happens, this great DennisSatisfaction happens every 50 years or so, at least according to the Jewish tradition. That's when they reset everything, about every 50 years. And it seems like 40 or 50 years is the time. It's kind of the way it happens. Stansberry contends that the middle class, which is great thing about America, is really starting to disappear. He said that the middle class, every year they got a little bit richer and enjoyed life more. They could buy more things in the past.

Yeah, right.

In the past, yeah. But it's not happening anymore. Instead of earning more and being able to purchase more, they cannot do that anymore. The average American is worse off now than they were several decades ago. They're forced to borrow more and more simply to keep up with all of their neighbors. He says that Americans have more than $1 trillion in credit card debt and more than 1 trillion auto loan debt. He says that 73% of Americans now die with debt. The average American dies with a debt of over $60,000. I mean, that seems to be really depressing to me.

Rather than them dying with an estate and money to pass on. Right?

Yeah.

They're dying in debt rather than with assets. Yeah.

He says that this is an incredibly stressful way to live. There are a lot of deaths by drugs and poisoning now. Suicide rates have doubled. There's a feeling of hopelessness and desperation and it's going to lead to violent and radical politics. Americans are calling for the government to do something to fix Our economic inequalities. So what's going to happen? Perhaps the government will simply clean the slate, wipe out everyone's debt and reset the financial system.

Okay, so you certainly see this going on. There's a lot of talk about this with the student loan debt right now that actually might happen. You know, I mean, we've got about one and a half trillion dollars of student loan debt. People have just discovered in recent years, not enough people, but that college is just an overpriced scam. They're selling unusable degrees that don't mean anything in the marketplace, and they're saddling these kids with massive debt. But on the other end of the spectrum, you look at a large portion of the older population or the middle aged population, especially the white males, who have been left behind in a lot of this, this blue collar population has really been left behind. You know, that's almost all male. And the college enrollment for men has declined sharply. This is a problem. I mean, the suicide rates are phenomenal. I mean, they're, they're just. And I'm saying that in a bad way. You know, it's very sad. And then you look at the veteran, suicide rates are just appalling. It's a big problem. So, you know, it's not like you just need to forgive the student loan debt of a bunch of millennials. Is he talking about all debts? I mean, they'd just be, why would the government wipe out all those debts and the repercussions would massive. I mean, we saw this in part during the Great Recession where basically everybody got off the hook. If they had a big mortgage, right? And their house was underwater, millions of people got off the hook. But, you know, all debts or a certain kind of debts or what does he say?

Well, here's the thing. There are three types of debt. The student debt, the car debt, and there's another one that's somewhere in the, in my notes. And I'll come to it in just a few minutes. It's going to be really great news to those who are really underwater.

That's counterintuitive, right? Because normally the conversation would be, be careful of debt. Debt is dangerous. Don't be in debt. But it's going to be.

Yeah, but there's a good kind of debt and a bad kind of debt.

We all know that. I totally get it. But what I'm saying is that if you use debt as a tool, as a strategy, I mean, look at all the real estate investors who just got off the hook during the great Recession, you know, they were able to just walk away from upside down properties and they were in great shape. Now imagine if they purchased those properties for cash or had a whole lot of equity in them. They didn't get any breaks. So the breaks go to the debtors. Isn't that weird? It's counterintuitive.

Well, the masses of the people, they say when rich people get into a problem, it's, you know, just an economic problem, okay? But when the majority of the population gets into huge debt, it becomes a political problem. And then the politicians act. And when they act, usually bad things happen. It's never good when the government starts interfering. So anyway, you know, people like that Zuckerberg, he wants to have everyone have a guaranteed income.

Well, a lot of people do. Elon Musk. Elon Musk is promoting the same thing. The ubi, or Universal Basic Income is a very popular thing among what we might think of as capitalists died in the wool capitalist people. I don't know, maybe because of the automation revolution, putting people out of work, maybe we do need that. I've been really surprised at some of my highly capitalistic right wing friends and associates who actually believe in the idea of UBI Maybe because they're just being fatalistic about it and saying, look, we got to have it no matter what, or.

Let me interrupt you, it's a terrible idea. I don't care who thinks about it. I always had this argument with a friend of mine in Los Angeles. She's always bringing up, well, do you think one of those famous movie producers is stupid? And I said yes in that aspect. And those thoughts, they are stupid.

Well, they're not. It's not just that they're stupid necessarily. They're just promoting their own agenda, right? They're not going to pay for it in any major way if UBI comes into play. You know, they've got so many accountants and strategies and structures, they'll figure out a way to escape the taxes that come as a result of UBI and if inflation inevitably comes from it, then they'll benefit from that because they have tons of real estate debt and it'll work for them. You know, they just got their own agenda. It's like Warren Buffett, he says all these hypocritical things, but he's just feathering his own nest, you know?

Oh yeah, he's so ridiculous. He and his damn secretary.

Anyway, okay, so listeners, what she's referring to, okay, is Warren Buffett made this pretty famous statement saying, my secretary pays more taxes than I do. And as Warren Buffett is saying that, saying that the tax system is unfair because he doesn't pay enough, he is in a lawsuit with the IRS asking for tax relief, and nobody seems to bother him and say to him, you know, you can pay more, Warren. The IRS will take more money if you want to give it to them. But he doesn't contribute more money. He just says everybody else should. Yeah, he's a hypocrite. Yeah, he's a. He's a limousine liberal, Jason.

But what is going to happen here is that millions of Americans with pensions, with 401ks and other types of savings are going to be wiped out. And Washington will pass an act, they'll disguise it, they'll cause it something or other, and they will redistribute hundreds of billions of dollars from those who have invested and saved to those who can no longer pay their debt. What is coming for our country is going to be a lot worse than the tech crash. It's going to be a lot worse than the mortgage crisis. What is interesting is, is that when debts can't be repaid, the government steps in and starts doing things. For example, in 1933, Roosevelt closed the banks for four days.

The bank holiday. The famous bank holiday.

Yeah, that's right. And he made everyone who had gold, which was going for $20 at the time, turn it in and get paper money. And then a few days later, it became $33.

Right. And it wiped out 69% of the savings of Americans, those who followed that. And then the other thing that he did, he wiped out the gold clause. People used to be able to get paid in gold. And when he wiped that out, that really made things terrible. Stock market fell. I mean, it just created chaos. But anyway, it says somewhere that there's a recent poll of Democrats showing that a whopping 66% of them are in favor canceling the student debt. If this happens, stocks will collapse, companies will go bankrupt, and this crisis is going to affect everyone in America.

Let's think about that for a second. Okay, so if the government just says by fiat that $1.5 trillion in student loan debt is just wiped out, it's illegal to try and collect it. If they say that all those loans are bad, tear up the paper they're written on, they're worthless. It's illegal to collect. So if they say that, what will they do? Will they bail out the lenders and give them the 1.3 trillion and print money to do that, or will they just let the lenders Go under and say, too bad, how would it work?

The lenders will go under. And it's not just the student loan debt, but the funny thing is that this student loan debt is held by the millennials, which are now the greater share of the population. The millennials are more of the population than the baby boomers. So when huge amounts of the population that are in one particular situation, the government will do something about it.

Yeah, right. Because they'll vote themselves some sort of relief. That's why you have AOC and Bernie Sanders appealing to this group so much. Yeah.

And it's also the payday loans, you know these places where you can go in total rip off and you don't get a loan. And then it's also the auto loans which are really very bad.

Yeah.

And here's the thing. Just like in the mortgage crisis of 20, all of these loans, all of these liar loans were packaged up and they were sold to all of these firms. Now they're doing the exact same thing with the student loans and rather the car loans. They're calling on them asset backed securities and they're sold to hundreds of mutual funds, insurance companies. This is like JPMorgan Chase, BlackRock, T. Rowe Price, Wells Fargo, Goldman Sachs. I mean these are the people who hold those student loans. And these students, they're poor, you know, they can't get out from under it. So they're not going to pay those things off.

Right, right. Yeah. You know what I think should have to happen is I think the colleges should have to take the hit because they overcharged the students. Right. So they should have to just pay at least a portion of those loans off. I mean if we do the math like this and we say, look, the actual cost of that college education should be 25% of what they charged. It should be an overpricing lawsuit, basically, you know, a class action lawsuit from all students that they've been overcharged, you know, corralled into these ridiculous loans. Yeah, it's a total scam. I mean, unbelievable.

Stansberry thinks that this is all going to hit at once. Okay. The consumer debt problem and everyone will freak out. And one of the bankers that, well this is one of the ways that it may get ironed out. They'll call a month long bank holiday for the 20 largest bank.

That would be scary.

Hold everything in place while the regulators mark down the assets and see how everybody's losses will affect everybody else. That's what they did when you know, Lehman and those companies went bankrupt. Then you wipe out the Stockholders, you wipe out management, some of the unsecured debts. And once everyone has taken their kit, the regulators, the government comes in and recapitalizes everything. And then everything goes on. But through the process, everybody has suffered just hugely. Now how you protect yourself during something like this? My number one thing is you own property. Okay? Now Dan's very.

Thinks he's a gold guy. He says buy gold, I'm sure, right? Or his stock recommendations.

There are some things that are worth more than gold. And he says that these kinds of businesses are worth more than gold. They are the truly elite businesses of the world. And listen to this. They sell habit forming, addiction addictive products. And those products are things that have sugar in them and caffeine. Coca Cola and Pepsi Cola and Starbucks, Hershey Food. Yeah, right, Hershey, yeah, Starbucks, Hershey Foods and Tootsie Rolls. In drug companies, people get used to taking certain drugs. And some of the companies that are very successful in doing this, I'll just mention a few of them are Coca Cola, McDonald's, Walmart, Johnson and Johnson, FedEx, Peps Cola, FedEx.

I'm surprised. FedEx though.

Well, you have to get things across the country and people Are you FedEx?

Well, that's a stretch if you ask me. I don't know about that one, but okay.

Procter and Gamble and Chevron and ExxonMobil, oil companies.

What? What about the. What do you mean the oil companies? Tell me about that.

Jason, our economy, we would not be able to do anything if we didn't have oil.

Okay, of course not. So it's an addictive product. That's. The clay is a little far fetched, but okay.

Yeah, well, you have to drive. You have to.

Of course you do, but come on. I don't know. That one is too out there. That and the FedEx one I don't buy, but.

And Procter and Gamble. Because Procter and Gamble makes the things that you use every day. Okay? So these companies are called the dividend aristocrats. They have increased their dividends for 25 years and they just make products that everyone uses no matter what. But I think the better thing is to have rental properties because if you are not too leveraged, you can survive almost anything. Because everybody needs a place to live.

Yeah, right, right. And here's the thing with the rental properties and folks, you know, we've said this many times before, but the rental properties are not the low hanging fruit. They are hard to get at, they're fragmented, they're difficult. For example, if there is a Doom and gloom crisis like this book predicts. Then think about it. The government by fiat could say, look, we need money, so we're going to nationalize all of the retirement accounts. And if they're in cash money market brokerage accounts in stocks, it's just a computer transaction to make those all nationalized. But if you have a self directed IRA and you've got a bunch of rental properties, that's like really hard for the government to deal with to get to, you know, they don't know what to do with that. What are they going to do? Say deed the property over to us and introduce us to your tenants so we can be the new manager? Come on. That's so clunky and lumpy and that's just impossible. And if you have outside of a retirement account, you know, if the government says like they did in Cyprus a few years ago, we're going to take a chunk out of your bank account. Right? They just literally did that in the little Cypriot banks. Right. If that happened and you know, certainly could happen if you have cash in the bank, it's easy to get to if you have a bunch of properties, you know how they going to get to that? What are they going to do with it? It's just too hard to get to. If you have gold or any precious metals, they could just say like they did in 1933, turn it in. It's illegal to own it unless it's in the form of jewelry, you can't own it. And that's why they have these things they call non confiscation coins, like the Saint Gaudens. You know, there are some that were exempt the last time around. Doesn't mean they will be this time. They could say turning everything, you know, because we got to pay the bills. So I agree with you. The rental properties are the best solution because they're lumpy, they're hard to get to and very interesting. You know, one of our investment counselors a long time ago was telling me about how he lived in and forgive me because I'm probably going to get this backwards, I guess it was Myanmar before it was Burma, or Burma before it was Myanmar. What is it now? It's Myanmar. Right. I think. And when the communists came in and took over the country, they went to his parents business and said, you know, there was like one soldier was with an accountant. Two people came in, a soldier and an accountant and said, you're going to turn over your business to us. We're nationalizing the business. We now own the business. We need to look at the books, you know, and they demonetized the higher currency, which is something they recently did in India too. So, you know, only the lesser bills, which are really clunky and bulky and hard to work with, are still currency. They just said, you know, imagine this in the U.S. imagine if the government just said, okay, the hundred dollar bill and the $50bill are now demonetized. The only bill that anybody is allowed to accept is the $20 and below.

You know, there are people with stacks of these bills in their house. Okay. Or hidden in their backyard or safe deposit, whatever. So, yeah, they can do a lot of stuff, but it's really hard to get to the properties.

And the other thing is your tenants would be as aggravated as you as to what the government was doing and your tenant would. They'll probably continue to pay you until they couldn't do it any longer. So there would be so many ways that you could get around there.

There'd be, there'd be an alignment of interest between you and your tenant. An alignment of interest. So that's a good thing.

Okay. Any other takeaways from the book? I want to talk to you about self management for a couple of minutes.

I think we've done the book, so let's talk about.

Thank you for sharing that with everybody, Mom. Okay, so you are a fantastic self manager of your properties. I mistakenly, because I was mistaken about this, told one of our clients that your long term tenant, I think he's a truck driver, if I'm not mistaken, that's been in one of your properties since 1989, was leaving. But he's not leaving. He's. He's staying. Right. I got that mixed up. I thought it was that tenant you said was finally moving. So he's, he's sticking around, right?

Definitely, yeah.

What are some of your other long tenant stays? You know, turnover is expensive for landlords and you want to minimize it and keep your tenants for the long term. But I do want to say that with a grain of salt, don't keep them for too long because if they're staying too long, you're probably not raising the rent enough. It is a balance. Do you feel you're raising the rent enough from your long term tenants since 1989? Do you give them a rent increase every year?

Jason, I give everyone a rent increase every year and lately I have been giving much, much greater increases because we're just able to do that. Okay.

Yeah.

Because don't forget, sometimes the opposite happens and you have to reduce the Rent a little bit. So while you can make hay, you know, when the sun shines, I say make hay.

Yeah, right, right. Okay, so what percentage.

Do it fairly.

Yeah. What percentage are you usually raising those rents? Are you getting 4% per year? Would you say, or. Or less or more or what?

Yes, I do. Four percent a year.

Okay.

The other thing is, I also look at the tenant, you know, their situation.

Right.

Sometimes I would do a little bit less than that, but I'm raising them 4% a year.

Okay, good. Any other tips on how to get good deals on contractors, materials, minimizing turnover, good management practices? Anything you want to share?

I just read an article in my Landlords association book and that talks about good tenants. And this guy who wrote the article, he and his wife are 71 years old. The article was entitled How We Became Successful Landlords Stay on Track, Jack. And very important is. I'm just reading this almost verbatim. Any prospective tenant that is a lawyer, an accountant, a property manager, or a former police officer.

Now, why not? What's wrong with police officers? I think they're great.

Well, just let me complete it. These people have the knowledge, the skills, and the ability to bend the law, and they will screw you when it comes time for them to do so.

Interesting. Now. Yeah. Okay. And what's that from? Was that from, like the Apartment Owners association or something?

Apartment Owners association, yeah.

Yeah. Well, folks, I think the author of that article in your Apartment Association Owners association magazine was probably okay writing that because none of those groups are protected classes, so. Yeah, interesting.

But every one of them, you know, the ones that I absolutely will not rent to, I will never rent to a lawyer.

Now, that's kind of interesting because I find that lawyers are actually pretty easy clients to deal with in hiring them. They're not always easy to deal with. And I've definitely been burned by a few lawyers. In fact, I just got a nice big fat judgment against one. I was very happy about that. He messed up one of my cases, and so I got a big judgment to collect on. By the way, listeners, if you. Thank you. Thank you. Yeah, that was a good one. If you have any recommendations for collection agencies or collection attorneys, please let us know because we would really appreciate any recommendations and we'll share them with our clients. If any collection attorneys or collection agencies are listening, we'd love to hook up with you. I've got some judgments I want to collect on and really need to get better at this. So let us know if you have any collection referrals or best Practices you want to share or anything like that. But I usually find attorneys to be just kind of too busy to deal with stuff, you know? So anyway, whatever. Okay, so what else other than be aware of difficult tenants? That might be the answer, but other things you might want to share.

Well, people that have the knowledge and the ability to bend the law. Okay. And obviously a police officer has the ability to bend the law. Okay.

Yeah, I don't know. I like cops, but.

Yeah, well, I like them too. But you know something? I don't think I would like to rent to one.

Yeah, I really like military tenants quite well. The only problem is they can break their lease if they get deployed. I know what you're gonna say, I get it.

That's right. And you know, that happened to me. The tenant was in there like six months and he got orders. I just want to stay away from that because the shorter the term, the more money doesn't come to you because you have to probably paint a little bit, you have to clean up. It's just a losing game to have short term tenants. And, you know, the longer the tenant is there, the more they begin to treat it like their own home. They begin to fix things themselves. Right. I have some tenants that I don't even talk to, you know, I just send them out that notice that the rent will be increased a certain amount. I don't discuss it with them. I don't renew their lease. I don't have a new lease signing thing. I think those things just bring problems to you. There's a form that this apartment owners association has. It's very simple. It says your rent will be increased from such and such to such and such. You know, you send it out and if they agree with it, you will receive the new rent 30 days from now.

Yeah, interesting.

That is much simpler than going out and resigning a new lease. I mean, that's when your problems, your questions come up. You have to spend money to do things.

Are you saying you let them go month to month after the first lease is up? Is that what you do?

There's a thing that everything from the old lease applies.

Okay, mom, you're really good at getting good prices for things. I've definitely noticed that. For materials, for contractors. Any tips you want to share with our listeners about that, Jason?

I think there is only one way to do that. You have to have a volume of bids and estimates. It's very simple. You make short phone calls, the people show up, they give you their estimate and you decide. But if you only have one Bid or one estimate, you know you're not going to get the best price, so just get several. You don't have to spend a lot of time on it.

It's amazing to me. And make your. If you have a property manager and you're not self managing, make the manager get multiple bids. Okay. If it's anything over $150, I think you should have two quotes. Okay. And that quote again, I've said this a million times, but people don't listen sometimes. So here it is again. The quote needs to be emailed to you and the quote needs to be on the document from the actual vendor, not some phony document the property manager creates. It needs to be from the vendor. So when they say, well, there's an H Vac, an air conditioning and heating repair, for example, they don't send you an email saying so and so says H Vac needs to be serviced and it's going to be $300. They send you, they send you, they send you an actual attachment with the quote from the actual vendor. So it's going to say ABC Air conditioning repair is what it's going to say on there. It's going to have their address, their phone number, their website, and it's going to be itemized as to what work they're proposing to be done.

Exactly what they're going to do.

I am, I am amazed. I mean, this ought to be illegal. I am amazed at how many property managers, they just send you these emails and they say, maybe not even email. Maybe it's a phone call, you know, something needs to be repaired. This is how much it is. Yes or no, Is it okay to do it? Well, I don't know yet. Because I need an actual quote from the real vendor, not from you. Okay. Not on your letterhead or something or just an email from you. And I need the itemization of what you're doing. Okay. It needs to be itemized. Yeah.

That's the only way to do it. I mean you cannot compare things unless you have all of the information. And if you go along with a manager that won't do this for you, then I think it's time to get.

Another manager or get no manager and self manage. Yeah, absolutely. Yeah, yeah, yeah. Talk to us about insurance a little bit. You're really good at getting good deals on insurance. I've noticed too. Any best practices there that you can share?

Well, I don't know if I would good at it. I started complaining to the insurance company that these rates were going up year after Year, and I was never submitting any claims. The girl got sick of listening to me and she says, you know, I have a friend at this company. Why don't you talk to her? And so I did. And I got this commercial property and I have nine or 10 of my properties in it. And the average cost of insurance is about $350 a year.

Okay, that's really cheap.

They hard to raise my rates at all.

Yeah, and some of your properties are even in hurricane affected areas, so that's really good. That's not that company that we've been telling listeners about that goes under several names. National Real Estate Insurance Group, Affinity Group, REI Guard. We had a lot of complaints about them not paying claims.

No, no, no, no, no, no.

That's a different one.

It's a liberty company. Okay.

Okay, good. So one of the key things that you talk about is setting expectations from the beginning, from the outset. And really the key thing is talking with that tenant about the lease and the terms of the lease. Now, you can do this on the phone, but it's better to do it on Skype or Facetime or some sort of video conferencing app where you can really go over it. Just tell us how you set the tone for that relationship, Mom.

Well, I go over every page of the lease. Look, there's not that many pages. Six, seven, eight, nine pages, but boy, it can make your life a lot easier for several years down the time period, down the road and highlight the things that you think are important.

So you can do this online and they can just initial it right there on their. On their screen or they might have a printed copy and they can show it to you and you can look at it together in front of the camera, right?

Exactly. Exactly.

Yep.

Good.

I think that's very important. And Aunt Joan, your sister, does the same thing. That's a very important thing, is just getting the expectations right up front at the beginning of the relationship. Mom, we got to wrap it up. I know you'll be back on the show, so thanks for joining us today and thanks for sharing some of your insights on the book and on self management. I appreciate it.

Well, thanks for having me, Jason.

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