1588: COVID-19 Recession, HELOC v. Cash-Out Refi, Housing Price or Payment, Permabulls

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 1588. 1588. Thank you for joining me today. And I've got some news for you. 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 a few conspiracy theories here and there, I am not given to complaining that much or being that critical typically of the election process and 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. Right? 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 got to 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. 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 fourplex 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 a couple of 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 too. And then those folks that have all those office spaces, they're complaining as well, because guess what? Those offices, they've got that office building with several office suites in it. 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. You'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 ionhousing.org Evan posted this in the content group. Thank you, Rabbi Evan. It says lack of inventory, higher prices push housing affordability near 2 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 livestream or next week. We got a bunch of great episodes next week. I just recorded one today that 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 company 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 a lot of good stuff. Lot 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 investment portfolios.

Yeah. Hip hip hooray. 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.

So this, I will grant you, this is from the Case Shiller index because it's just the US As a whole, it's very hard to find US Data packaged 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? And by 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. We're $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.06 if you want and see, but it'll change the calculations. But, oh, six. So eight before the crash. So 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. So it's an apples to apples comparison. Okay. Yes, it is. 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, Adam's put the URL in here for you to go check out properties on our website. Website. Jason hartman.com property all right, and now.

We go to 2017. It was the last year that I could find data across the board without going into like four hours of research. So 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 dart. Let's throw a dart at a board and see what market I'm buying in. You were likely going to hit something that wasn't great.

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.

All right, so then I thought, all right, well, let's look at one of our linear markets and I picked 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. I know 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.

So your big quote, Adam is quoting himself now, which I've been guilty of doing that too.

The quote you all know is from Pete Dupont, who's a lawyer. He's made this quote that you know and 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 permeable in real estate. You invest in one market. Let's say you've diversified into 3, 4, 5 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, say, do I sell these properties? Do I hold these properties and buy in 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.

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 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, they're on the podcast. But this is my, you know, rough, roughly numbers. And I sold that Property, did a 1031 tax deferred exchange, which by the way, Joe Biden wants to eliminate. Let's hope he loses, even if he.

Wins, he's not going to be able to do it. Well, you're not going to push that through a Republican Senate.

Yeah. But in two years, we'll see what happens. You know, things could change, you know, and, you know, while 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 with his plan.

I don't think he'll even win the nomination again in four years.

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.

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. 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 like Biden, Adam? Because I know you said you didn't like Biden very much, even though I'm sure you probably voted for him.

So Kamala is a weird. So her time in California, when she was the district attorney, it was.

You mean putting African Americans in jail? Yeah, it was.

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 at least I'm more of a fan now than if she were doing this when she was still being a lawyer in California. That's my take on her. I don't know. Better than Biden, probably, because I think Biden's a worthless political candidate. Yeah, he's a conservative. He's a fiscal conservative, but.

Okay. All right. Okay.

So I think I right there that the three and a half percent drop since 2008, even if you think that the. 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's declining in value and probably getting a terror into value when you could have put it in a linear market that's gone.

Up.

Here is make sure you understand the point I think Adam's trying to make is, 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 ten foot pole. They don'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 too. So that's all interesting that those parallels apply to, 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 U.S. okay, and this is where we are now, 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 17th. 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 is 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@jason hartman.com 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 lost 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 going to pay a little more for non owner occupied. Your payment is 1318 bucks a month. 1319 if we want to round 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 $32. 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, they're writing newsletters and they're just giving you this 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 had a great 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?

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 kick myself.

Wish I'd met you before then.

Yeah, well, I wish we met sooner too, Adam. That would have been very romantical.

Hey, so how many properties do you and your wife own now?

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

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@pandemicinvesting.com. go there, get your free little mini book report and it'll tell you about some of the commandments that we've modified for the environment in which we live. Just go to pandemicinvesting.com 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 grab a couple more questions and comments. As you read those, I will change the slide to a better slide. So go for it.

Yeah. So Sunshine Girl was talking about when she said that rates were down to 0.1. Somebody asked while you're getting a rate for 0.1% and she said no, but you don't pay more than 2 plus percent in in the land of Oz. And we have mortgage holidays. Commonwealth bank pledge no forced sales until September 21 or September September 2021 minimum. And sensible lending rules scrapped from March 70,000 government grants to or Aussie dollars, I assume. Grants.

We've got a reply from Michael and.

Michael said I'm sure different rules apply for foreigners. I'm seeing tight restrictions on what foreigners can buy and believe. She responded with yes.

And tinfoil hat says stolen bull. I don't know exactly what that means.

Probably the bull market. It's still. And then Sunshine Girl responded with I wouldn't be buying an Oz if I were a foreigner. Much better value elsewhere. There are restrictions on what kind of real estate you can buy. You need firb approval, but that's easy. Ultimate bargains finds my tinfoil he. You made me laugh a couple times today. 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, on the times when, on the things when they get bad, when tenants stop paying. The downside to real estate is that when your value goes down, it hurts now. And 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 in 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.

But the thing is you don't really have to notice that if the property goes down in value, just keep renting it and managing 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 going to 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.

And also another way to hedge that is to own more than one rental property. 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, okay. The gold color. Interesting comment on the Van life, huh?

Yeah. These people, the van Life people are becoming useless. These 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?

Yeah.

Instagram influencer is not a skill set, folks.

Oh, I'm doing yoga on the beach this morning at 8:00am all right, great.

Big deal.

The gold color says please. Really? Adam, Antifa and all the subgroups payments made by George Soros.

Adam probably doesn't believe any of that because he's got his head in the sand, but okay.

Antifa is an idea.

Well, it's actually a pretty organized idea too. Okay.

I offered my wife the van life. Nice van. She offered me a divorce.

Thank you.

My tinfoil hat.

Oh gosh. Okay. Question from Fran.

So Fran, you ask, what does it take for first time investor to buy and manage remotely would like to invest in US real estate but confused about number of properties, investment size mentality. So when it comes to buying and manage in today's inventory, with what we have, you're looking at probably needing around 35 to $40,000 to get in.

Well, you can get a inexpensive property for. You can get in 25 to 30,000.

You're gonna have to wait and find that property at the moment. If you just.

It's hard to find.

That's what I'm saying. With the inventory we have right now, most of the properties are in the 150 to low 2/00 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 you look at.

But I recommend self management not for a brand new person, but you know, if once you get a little experience as an investor, if you don't have it already, you know we can, we can really help you with that.

Yeah. In terms of number of properties you can get up to, I mean 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 there and therefore your first 10 LO 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 total on the agency loans.

And the mentality is you just have to get out of the mindset of needing, I can't see my property. That's the mentality you need to get out of.

Which guess what, you can't see your stocks either.

Well, I mean, you also think about it how if you own, for example, if I live in Austin and I own a property in far north Austin, how often am I going to go driving by that property? Yeah, it's maybe once or twice a year at most. I can pay a property manager to send somebody out for 70, 70, 75 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 you can go and look at the outside. Are you going to go knock on their door every couple months and say, let me inside and let me look at.

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 to where you don't look at. This is what I've been doing for the past 16, 17 years now. Okay. We've been helping people invest nationwide. So that's what we do. We can help you with it. 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 thousands of people do it, so we can help you too. Okay? So start at one unit. The journey of a thousand miles begins with a single step. I started with one unit when I was 19 or no, 20 years old. I got into real estate when I was 19, but my first rental property at age 20.

Yeah. Your journey to a rental property portfolio.

Is one door, one door at a time.

Ramona Griffin thinks they will invoke the 25th Amendment to say he is fit for president.

That's Joe.

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 progressive. You know, his, his dementia is going to 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 did in the primaries. Beyond crypto says. I just bs. I just saw the stats about a week ago. Median home value is at about 317,000 now. This is a pump period. These guys are very worried. It's time for these prices to drop. Cash flow rentals or 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 Indiana for 2017-2020. I didn't spend five hours making this presentation.

Honestly, my, my thing said the median home price was 330.

Right. He was talking about mine when I was comparing Indiana to the U.S. okay. I couldn't find a good chart for Indiana properties. Yeah, that went up to 2020. I could find a good one that went up to 2017. So I just use 2017 numbers. Yeah, I don't think we need to cover this one on the podcast.

Right. Okay. Oh, well, maybe we shouldn't even talk about this. Okay, 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 are 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. You are absolutely right. You know, folks, too many times in life we allow people to influence us by this like, 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's Halloween party a couple of years ago. Ken McElroy is one of the rich dad authors with Kiyosaki. And he's an apartment syndicator. Has like thousands of units. Ken, 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, A students work for C students. And that just came up on my memories because we just had Halloween a couple days ago. I have hired and I'm speaking for myself, I was not 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 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. And 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 scientists. 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 at others, so. Absolutely true. Okay.

Adam, Sunshine girl says, Fran, I think Jason's team may be able to help you. I'm considering it too. Come on down, fill out a form. You can talk to us. No harm, no foul. If you don't like it.

Yep. There's our. 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.

DM 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, my question to you is, where do you think the property taxes go? The property taxes go into the rent. So as prop. If property taxes increase, rents are going to increase because you're not going to get a whole city of landlords saying, I guess we'll start losing money. You know, they're going to start increasing rents and tenants are going to have to pay it because everybody's going to be doing it.

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. You pass that cost through to the tenant. Okay.

And you're also. Even if the taxes go up and you lose money for a little bit, you not lose money necessarily, but your cash flow gets lower for a little bit. Gonna be made up for when the rents reset to the market market value.

Yeah.

So yeah, you're in. 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. Yeah. 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.

Well, you're still getting inflation induced debt destruction for sure. Which More on the podcast on that. Okay, a couple more questions and we'll wrap it up.

Yeah. 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 will be running into debt.

I want to say congratulations.

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 properties to qualify themselves is one thing you.

Can use 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 thousand dollars you receive in rent, your income is increasing. $750 it gross. Of course then you take out expenses just like you take out debt. That's why you get what's called the dti, the debt to income ratio. That is considered when you qualify for a mortgage.

Yeah. And you can also if you want. Like we were talking about the asset protection. It's possible that your CPA could do something or Bob, in this case the lawyer might be able to help you hide some things or move things around to make it look better.

Well, there's just good tax treatment if you use entities properly. So again the link is below. Check out that free webinar Jason hartman.com protect Jason hartman.com 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 IMF keeps spewing and articles about people owning nothing by 2030, how happy they are. Feels like the communist agenda is starting to.

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. It's 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.

Kevin says. Adam, don't forget to research and discuss HELOC strategy to pay off mortgage and or HELOC 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, using a HELOC on maybe your own personal residence, a home equity line of credit.

Yeah.

Free and clear, 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.

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 everything is worth looking at, right? I don't know what HELOC 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, I agree.

DM says thank you. Missed my point. They are not increasing wages anywhere near the cost of property tax. They're using inflation example, 2500 in tax went to 6000 in four years. Two percent wage increase won't help.

Yeah, well, I'm 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. Well, 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 $1,500 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 break even. 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 socioeconomic 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 socioeconomic ladder. You've got properties that are on certain places on the socioeconomic 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 $1,500 a month and their wages don't increase, well, then maybe they have give up that nice car or give up private school for the kids or give up some vacations or shop at a 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 going to move, and you got to get another tenant who can afford it. Okay, Adam, any thoughts on that?

Now, it's like you said in real estate that you can renegotiate the deal at any time, and that includes with tenants.

Yeah. Yeah. Good stuff.

And Cam M. Says, thank you guys, as always. Lots of great information. Have a great day all.

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 pandemicinvesting.com to get that free mini book. And of course, check out the estate planning, tax reducing and asset protecting webinar@jason hartman.com 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 maybe all the lawsuits in. 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, you're, 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. And we love your likes too, and your comments, so keep those coming. All right, everybody, happy investing. Let's see what happens with the election. And thanks again folks. And oh, Sunshine Girl got one more comment and oh, thank you for joining us and we will see you next time, everybody. Bye bye bye.

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