1645: Elon's $1.5 Billion Move, Green New Deal Impact on Investors, Client Case Study Chad Hewitt

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 1645. 1645 today, our main part of the show. Well, you judge what the main part of the show is today because I have some important things to share with you. We have a client case study, another. Another new client case study that I think you will really enjoy. But first, I must comment, are you amazed? I'm amazed. We are seeing some seemingly terrible things occur in the world. But at the same time, as the Chinese say, crisis is an opportunity riding the dangerous wind. I've been sharing that with you for many, many years and it is an opportunity riding the dangerous wind. We have seen massive question marks about our last. Well, can I say it? E, L, E, C, T, I, O, N. You can't say it anymore because you might be censored. They installed. That's the right word, by the way. Installed. They, meaning the powers that be installed a new administration. Now, nobody trusts the system. And then we have seen this massive money creation. In fact, so much money was created out of thin air. Currency, I should say. Of course, of course. You know, you can correct me, listeners, currency is the proper word, not money. Money has intrinsic value. Currency does not. But admittedly, the two things are kind of used interchangeably and hopefully everybody gets the difference. Hopefully they do. We saw so much currency creation last year and we're about to see so much more this year that it absolutely boggles the mind. Now today. Well, maybe it wasn't today, but it's.

In the news today.

Our friend Elon Musk, possibly one of the most famous people on planet Earth, good old Elon.

Purchased one and a half billion dollars worth of bitcoin cryptocurrency. Why does that matter? It does not matter because you want to become a cryptocurrency speculator. I hope you don't. That is a very volatile risky asset. Class, but I own some and I'm doing a few bets here and there. I think it's okay to speculate with a small portion of your net worth, but you better be prepared to lose it.

Be prepared.

Be prepared to lose it.

But on the other hand, it's a.

Gamble and it could be a big win.

Nobody knows.

Nobody knows. But what does that say about the systems? What does it say about the institutions? Well, according to yours truly, what it says is that we are literally witnessing right now at this time in history. Aren't you glad to be here for it? You have a front row seat, ladies and gentlemen. Just like the cardboard cutouts at the super bowl yesterday.

They had a front row seat too. Well, I don't know, maybe they don't.

Give the cardboard cutouts the front seat. You know, I was talking with Ashley last night about the massive amount of environmental damage the plandemic has caused. I mean, think about it. Do they really need to waste all that cardboard to make it look like these venues are full of fake people? I mean, this is like another example of desperate crumbling institutions. The idea that they would first of all cut down a whole bunch of trees, damage the environment, create a whole bunch of pollution by making those cardboard cutouts, by shipping them there, by setting it up. Absolutely absurd, right? If they want to social distance, why.

Don'T they just have every other or.

Every other two seats empty? Big deal. We all get it. We all know that there's a pandemic going on and they've got to make it look like. Like our goody two shoes moron president, always wearing his mask. He's sitting there at the Oval Office. There's nobody even in the Oval Office yet he's got his mask on. Oh, I'm a goody two shoes.

I'm setting the example. Yeah, right, whatever.

This is the last desperate gasp of so many big institutions and it is a slap in the face to them. Nobody trusts the media anymore. Nobody in their right mind, right or left, on the political spectrum does not matter. We all know it's fake. We all know big tech is a scam. We all know social media companies are disgusting, pathetic and awful and evil. No matter what side we're on. Even those on the left who benefited from it cannot be stupid enough to see that what is going on is wrong. Right? It's wrong. Right?

Yeah, that's kind of how you got to look at it.

So the institutions are not trusted and now you've got all these multiple. It's like eating away at the Banking system at the central banking cartel, at the treasuries and governments and you've got this whole population that is not tied to any geography. Think about it, think about how it used to be in the old days, right? In the old days if you had a certain skill and you were a factory worker, you might keep that factory job for your entire career. Back in the day when the US used to actually manufacture things, now we just outsource them to coal burning China, the biggest polluter on earth. Because somehow all of the folks who are running the world seem to have forgotten what famous democrat John F. Kennedy said years ago. What did he say? We all breathe the same air. That's what he said, we all breathe the same air. But somehow it's okay to pollute China because the wind won't blow that pollution around the world. I guess, whatever, absolutely. This stuff is so stupid you can't even make it up. But as we notice the institutions crumble, we are witnessing a time when people can just vote with their feet so easily. Now granted, it's not as easy as it was before the cerveza sickness began, but it's easy enough and people are taking advantage of it. They are geo arbitraging in the US on a state level and a city level and then around the world some people are still even now even doing it with other countries. If you had a certain skill, you were an auto worker in Detroit, you couldn't just move anywhere. Yes, when you move you take the skill with you for sure, but it wasn't the mainstream thinking back then that you would just move. But even then you could only go to a place that manufactured the thing that you had a skill in.

Pretty much you weren't just going to.

Get out of the automotive industry and go into another industry. And if you were a company or a business, most of the time you had a physical plant of some sort, you had equipment, you couldn't just shut your laptop screen and move. Now you can. We're seeing the institutions of socialistic poorly run disaster areas like my home for most of my life, the Socialist Republic of California and the Socialist Republic of New York and many others both in the country and around the world, we're seeing them crumble. People can talk all they want, in fact they can vote all they want. But at the end of the day, everybody knows that the most important vote is where people choose to locate and how they choose to spend their money and whether they're spending their money on consumer goods or housing or taxes. Right? That is the most important vote. It's not the vote that they're making for the politicians. So that is a very important thing to see. Make sure you notice this week, today, tomorrow, every day, the whole month, the whole year, forever. Just notice how the credibility of institutions is just getting just decimated. The university debt enslavement complex. College tuition rip offs just decimated. Disastrous. Public schools decimated. The credibility of the pharmaceutical industry decimated. Just scam after scam after scam. We all now know that the cat is out of the bag. Pandora is out of the box. We know that we cannot trust anybody, resume notwithstanding. We know that Wall street is a complete scam. We know that the new administration has been basically sold off to blackrock. It's like a corporate takeover. That's basically what the new administration is. It's a corporate takeover of America. And nobody can trust the corporatocracy. So notice the crumbling institutions. But what does that mean to us as real estate investors? Oh, it means a lot because people are voting with their feet. And guess what? They're moving to the areas that we've been recommending that you invest in for many, many years now. And those of you who have listened have benefited greatly. So congratulations. Congratulations.

Now let's talk about the central banks and the government printing press. Not just the U.S. it's central banks.

All around the world.

The ECB, the European Central bank is in trouble. The Federal Reserve is a Ponzi scheme.

Okay?

I mean, look folks, you can't hide this stuff anymore. It's so ridiculous that we all know it doesn't work. And now Elon Musk has basically slapped that system in the face and said, you know what? I don't really trust keeping all of my corporate treasury in dollars or even in stocks or other assets of whatever kind. I want to slap that system in the face and I want to put $1.5 billion with a B billion dollars into a decentralized, uncontrolled, trustless asset.

That's a pretty big statement against the institutions. So just keep watching them crumble, crumble, crumble.

Crumble, crumble, crumble. Yep, that's what they're doing. Okay, before we get to our case study, and by the way, if I didn't make that connection well enough, maybe let me just make one more part of that connection. Elon's move is a move saying he is very worried about. Guess what? What word do you think I'm about to say?

I'll give you a hint.

It starts with an I.

Not like I Like I am saying.

It, the word starts with I. The word is, of course, inflation.

That's the word. He is worried about. Inflation. And we as income property investors have aligned our interests with the forces who create inflation.

By the way, in all my rant.

About the institutions, I didn't even mention the whole Robinhood scam, the Gamestop issues and that whole thing from last week and Google deleting over 100,000 negative reviews. Google decided they were going to censor the negative reviews against Robinhood because God forbid Google doesn't want the truth out there. I mean, folks, we are witnessing a massive shift in history right now. And it's ugly, but it's also positive in many, many ways. Okay, I have been meaning to play a whole bunch of messages that I have been saving for you for so, so long and I just haven't had the chance to.

So let me get a couple of these out of the way now.

They're random, they're on a variety of different topics, but I think you'll want to hear them.

And we got to get through more.

Of these, maybe on Wednesday's episode. And then we will get to our guests today. But let's get through a few of these messages.

Jason, hi, good morning, It's Johnny from Arlington, Virginia. Hope that the weather and the day is as beautiful there as it is here. It's looking at 75 degrees.

By the way, this is an old message.

So the weather report, time to be.

Alive doesn't, doesn't follow two things for you.

I was watching, or I was, I was listening to a show on Thursday and I, I gotta tell you, Jason, I. When it comes to bitcoin, I was listening to the guy that he had on.

I still, I've tried to learn about bitcoin for two years. I've tried to understand like how it works, the value proposition of it, of investing in it. And I guess I just still don't get it. I don't get how this can be treated as money or an alternative form of money. I love the idea and the concept and like you, the decentralized quality of it. But like, even if, even if someone does go on, what was it, like Coinbase or something like that and buy bitcoin, you still hear about these cases where people spend millions on bitcoin and then they get hacked, Someone takes it and then it's gone, or it's on some laptop and some 20 year old throws it away, doesn't realize that all of his bitcoin's on his laptop. And Then it's in some landfill somewhere and they hear about stories like that. And I just don't see how it's any different than investing in some other speculative investment. And to your point, I know that your guest was talking about, oh, don't worry as much about the Federal Reserve shutting it down, but the Federal Reserve is a powerful force and if they don't want bitcoin in the United States, they will make sure that bitcoin is not in the United States. If the US Government can physically compensate gold.

By force of law, certainly they can turn off the lights for bitcoin.

So.

So that's just my impression. I just don't get it. I'd rather invest in physical things like real estate. Where there's title, there's a building, there's at least a plot of land that you own. The one thing that I do worry about in the long run is if people like AOC come into office more and more or whatever like minded politician that there would be. If there's lots of AOCs in the government, what's the to prevent them from increasing property taxes to confiscatory levels 3, 4, 5% and saying, hey, you guys can hold onto this property, but you gotta keep paying taxes? Well, if we can't afford to pay those taxes, then they start seizing houses and boom. The federal government has this nationalized housing stock and landowners or property owners are just marginalized and made into peasants. That's not unlikely, but lots of things are unlikely that have happened. So I don't know. That's just the one thing that I get concerned about. Would love to know your thoughts on that Warner Flag. Also, yesterday's show, the Flashback Friday was awesome. I really got a lot out of listening to that, out of hearing something that you had published from 2008. I need to go back and listen to more older episodes. It's because it kind of crystallizes the thought from that period that maybe we forget about things that we had to think through as investors from 2008, that 2017, when the economy's hot, we kind of forget that we had to think in those ways. It really was a good exercise. So just wanted to tell you I got a lot out of both episodes, but if anything, Thursday's episode where the guy was talking about bitcoin, it made me all the more thankful that.

I'm investing in real estate.

Thanks. Okay, so that was a big message with a lot of stuff and I don't really have time to dive down that rabbit hole today, but I will Say, since we are kind of talking about the cryptocurrencies and Elon Musk big move, I think there are problems and opportunities with it. And I just for my main thing, I think the income property is far and away the best asset class, the most historically proven asset class in the entire world because it's multidimensional and for so many other reasons. It has such a big lobby behind it. But I just would love to be wrong about the crypto thing. And Elon's big move was pretty amazing. And it's just a slap in the face to the institutions. So I think we all have to think about that. Just remember, the main product of any government and of course, central bank is the currency they create. And like any business, look, you're in business, you create a product.

You know, even if you don't have your own business, you work for a.

Business and they create a product. And nobody loves competition, okay, for their product. So just always remember that motivation, you know, bet conservatively if you're going to.

Bet on this kind of stuff.

All right, so tonight, by the way, I must say we are revving up. I'm so proud of our team. Lately, we've been just doing great stuff to Property Tracker. It has this beautiful knowledge base component that we've just been expanding and expanding for many, many months now. And it offers so, so much.

So be sure you check out PropertyTracker.

If you are not using Property Tracker, you're really missing out, especially all of the educational components that we've added to it. And if you are not part of our empowered investor inner circle, you are also missing out because we're having another one of our monthly meetings tonight and we're talking about another technology tool. I run those Zoom meetings myself. Everybody just says such great things about them. And also we have created a whole library that's included in that membership of just fantastic video content. And we are really just expanding that all the time. Lot of content that we create that we do not use on the podcast that you don't hear on the podcast. So be sure you're taking advantage of some of our other stuff, like the Empowered Investor Network, Empowered Investor Inner Circle, I should say, and the property tracker software as well. All right, without further ado, let's get to our guest and let's talk about another client case study.

Hey, it's my pleasure to welcome another client to the show and everybody always loves these client case studies. This is Chad Hewitt and he lives in the Seattle area, actually, I think Everett, Washington, I believe Outside of Seattle. And Chad, it's great to have you on. Thanks for joining us.

Yeah, it's great to be on. Thanks for having me.

Good stuff. So you own a construction scaffolding company, right?

Correct. Yep. We put scaffold up, take it down and kind of like having little rental, short term rental properties because while the project's being built, we charge rental for the equipment. So it's kind of like having, you know, little apartment buildings that were renting all over Seattle. But I'm just almost.

That's cool. That's interesting way to look at it. I, I like the way you look at that. Just like a real estate investor would. So that's, that's awesome. That's awesome. Well, you and your wife were interested in triple net leases on commercial property. And you know, I guess you were looking at like a common one is a drugstore, a Walgreens and you looking at that deal. And just for people who don't know, a lot of times investors will buy these triple net properties and triple net simply means that all the expenses pass through to the tenant. So these are liked by some people because they're sort of considered the most sort of hands off form of real estate investing where you just make everything the tenant's responsibility. You own the property, of course, but the yields are pretty low on most of these. You know that people, people trade simplicity for low yield. And what I would think is that on the Walgreens CVS type model, because all those are triple net lease type deals is. And I didn't say this to you before when we were talking off air, Chad, but I think they're overbuilt and I think Amazon is just gonna pillage that business with their. They purchased a prescription company recently and now I think that the next wave is Amazonization. I don't know, I didn't say it right. And I think that's really going to hurt these, these drug stores and I think they're already pretty overbuilt. I mean, you know, you go down any city in America and it's like you go a couple of main streets and you got a Walgreens on one corner, diagonally across there's a cvs. Like do we need this many drugstores? I don't think so. But tell us what got you interested in that and your, your story about getting in real estate. You read Rich Dad, Poor dad and.

I guess that insp.

Right. So I'll let you talk.

Yeah, so yeah, I was inspired from Rich Dad, Poor dad, read that book When I was in my early 20s and the light bulb went on about using leverage and other people's money and the type of gains that you can, the minimum gains you can expect versus what you can expect on Wall street, it just didn't make any sense to me to start pursuing a 401k or anything like that. So as it began to be build my scaffolding company, the goal was as a cash flow vehicle to have money to buy real estate. So my wife and I had acquired a number of small properties locally. But then what I found is my wife is very hands on, she's very frugal. She likes to go and do the move ins, the move outs, the cleans. If the toilet's broken, she wants to go fix the toilet. So that was fun in the beginning, but that gets kind of old fast. Your Saturdays spent, you know, changing up washers and dryers and unplugging toilets. It's really a bit of a downer, right?

Yeah.

Then I started looking at a different vehicle that would be the most hands off form of real estate from the rich dad, poor dad angle. They don't really have a big, you know, they're not really big fans of single family homes. They're more seem to be directed for multifamily. So for a lot of years I was looking at potentially how to get into a big apartment building, but that seemed kind of daunting because I wanted it out of our area. So basically that it would be, would be forced to be a hands off investment like I intended real estate to be. And then the idea of having move ins and moves out on 50 different units, that became a little bit daunting. So that then led me to the triple net arena where the thought of just buying a big box and being able to get good financing on it. The downside being that typically the average down payment on a triple net from what I was looking at was about 30 to 35%. So a considerable amount of money. And then they will only guarantee that loan or you can only lock that loan in for five, seven, maximum 10 years. So then when I started to think about it and weigh the risk, the rewards, what you're talking about, are there a lot of, are they overbuilt at the end of that lease period? I'm then negotiating with a large company that I am just a fly on the wall to. They'll squash me like a bug if they want or squeeze me or break me down. And that just didn't seem like the safety factor wasn't There and then I told you that I heard you on the George Gammon podcast and you're kind of expounding on the single family investment. And I started to relook at that in a completely different light. And I realized that was the best, safest place to park money of any place in real estate. And the idea that I used to have this thing that if you have a single family house, someone moves out, you're 100% vacant. But if you own 100 of them, it's so different than owning 100 unit apartment building. Someone lives in an apartment building, they're always waiting for the next step to be able to get that house. And because I think America's becoming.

A nation of renters, they're gonna be moving towards a rental house and there's no more time tested asset. You said again and again in real estate. And yeah, so I ended up purchasing, talked to the wife about dipping my feet in the pool and we would just buy one property with you. And I started talking to Evan, my investment counselor. And one turned into five, turned into six, which turned into 11, which turned into 15. So I love it.

I'm doing sound effects for that.

So you were just going to buy one of our single family homes through our network and you decided to buy 11. That's great.

Well, yeah, because. Because I told my wife, I said one is not going to move the needle for it. Because another big thing was when I realized that you could also do cost segregations on these properties. I looked at my tax situation and realized that in order to basically offset income, I needed to buy a certain amount of properties, certain amount of value. And that's where we ended up at the number that we ended up at.

Right, yeah. No, I agree. That's great. And I'm really glad you didn't pursue the triple net stuff and you went with the single family homes instead because, you know, it's very hard to disrupt the housing market first off, as you know, being involved with the construction industry. And we're going to talk about something you said to me before we started about the cost and the regulations and so forth. But, you know, it's very hard to make new cheap product which would disrupt the investment.

Right.

And it's, it's very hard to build. That's a disruptor. You know, nobody is outsourcing housing, they're outsourcing retail, they're outsourcing office space, they're outsourcing manufacturing. But you can't outsource housing.

It needs to be where it is.

And there's a, there's a huge shortage of it. So I, I think you made a very, very good decision and I'm, I'm glad you made that decision to do the simple, proven, humble, but very profitable single family homes. And that is the best thing going if you ask me.

And another thing I was going to point out, by the time that I identified these properties and I'm buying all new construction properties, just as a side note, this is the direction I want to go in. I'd like the least amount of problems possible. So I figured that buying brand new, you can't go wrong with that. Also, it helps on the cost segregation end of things, I think, to buy a newer property. But the market is so strong and so crazy. I mean, those properties all approved by the time that I had bought them at say 218,000 to the time that I got loans on them, they were all worth 240,000. So it's just, you're seeing all this money printing show up in hard assets, right?

Yeah, I know. It's absolutely amazing. And.

It'S a good time to be long on hard assets, especially income property. It's interesting through all of this, Chad Gold, I mean, everybody's talking about, about it, but it just hasn't been like anything that impressive and you can't leverage it, you can't rent it out, it doesn't produce income, it has terrible tax treatment. It's just, you know, it's. And now it's got a big competitor which is cryptocurrencies. And you know, those are so speculative and volatile. Yes, there have been some, some big moves and some people have made money. But remember the other side of all those people that made money are people that lost money. So you know, there, there's a counterparty in every one of those upswings. Okay, Definitely.

I'm a gold investor too. I keep a small part of my portfolio in gold and that was just from the preachings of Robert Kiyosaki. But it hasn't really reacted the way that other hard assets have. And I'm not too sure if that's manipulation or that could be a conversation for a completely different show. But I've been disappointed with Gold. I thought it was going to break through 2000 and go to the moon and that never happened.

You know, there are those very logical arguments for it, but they just never seem to really happen. You know, the only time that really ever happened was in the 70s. I mean, it had a run in the last decade, but again it frankly Wasn't that significant compared to what happened in the 70s. And the fact that you can't leverage it, doesn't have the good tax treatment, can't rent it out, doesn't produce income, etc. It's just, you know, and it is manipulated. You know, I would encourage anybody listening who wants to know about gold manipulation and other precious metals price manipulation to check out gata, the Gold Antitrust Action Committee. And, you know, they, they are the ones pursuing this, but they're not going to stop it. You know, it's just, yeah, it's, it's too big for any of us to do, but the one thing we can do is income.

Property.

Yeah, absolutely. And that's, that's another thing that I like about it is it's so scalable based on whatever situation you find yourself in. And I mean, your properties that I was looking at in Memphis, although they're not new properties, you know, they're decent, they've got a roof over their head. They cash flow, they're $80,000. And you get into one of those for 20% down $16,000. I mean, anybody that has a decent paying job can save $16,000. It's not the barrier to entry. Isn't like you need a million five to get into a Walgreens or something. So it's available for anybody no matter where you're at. I feel like in your investing career.

I agree. Or you can ramp it up. Like, we've got one client who closed on a big portfolio last week and he wants to have 500 units. So, you know, he's on his way. He's, he's doing big stuff and it's, it's really fun to see, see these people grow. What kind of goals do you have with it? I mean, you're, you're up to the 11 properties now, plus you probably have your own home. Anything else?

Well, I mean, I have an overall portfolio right now that's worth about $12 million. My complete portfolio. I've got some different properties, got to be a commercial property. I've got a VRBO property in Hawaii that I literally think I just sold before we got on the air here that I got rid of just because I was listening to you. I'm thinking this thing's worth about as much as it's going to be worth. And the VRBO market has dropped off. Everyone's cutting each other's throats to get those things rented now. And I've got equity tied up that could go somewhere else. So my goals are always changing too. Right. If you want to get to 10, that was my first goal to get to a $10 million portfolio. I got there and, and then the next goal for me is a $20 million portfolio and I think I can get there with just continuing to add single family homes to what I already have.

Yeah, good for you. Good for you. That's awesome. So you wanted to talk about cost segregation, I think a little bit. Oh, but before we do that, actually, Chad, which markets are you in? Which markets did you buy in?

So I'm in Memphis, I'm in Huntsville, Alabama. Good choice. Yeah, I'm in three different places in Florida. I'm in Ocala north Port and in Port Charlotte.

Okay, good, good stuff. So you got the Florida market covered. Got Alabama. So you got the commercialization of space working for you and Memphis, which is just great cash cow logistics. So you've got a nice variety there. Now don't over diversify, okay?

No, no, I think I'm pretty good with those markets. I picked Memphis just because the cash on cash return was higher. The appreciation isn't really there. I'm still, I feel like it's a little bit of both and I think Florida overall probably has the. Over the long haul is probably the highest potential to appreciate. That's just my own personal opinion, just based on supply and demand. But either which way, I bought them not for appreciation. I bought them for cash flow. They're all rented and as soon as they're built, within a week or 10 days, they will have tenants.

Yeah, excellent. Good stuff, Good stuff. So I would encourage you to kind of double down in those markets for those, the new ones that you buy for your next round and just getting more in those same markets for ease of management because you've got some decent diversification already. So cost segregation, what questions or thoughts did you have about that?

Well, I know for me, I bought these properties in part because of the cost segregation with the Trump tax cuts, which I think are sunsetting, if I'm not mistaken, on the bonus depreciation. So I took that as an opportunity to buy things I was already going to buy and get, you know, tax incentives to do so. But I'm curious on your thoughts on why someone wouldn't do a cost segregation on property. I know why I would. I'm just curious if you have a counter to that.

Yeah. So first off, just for those who don't know, income property is the most tax favored asset in America because you can depreciate it and depreciation is A good thing. This is in a good way, meaning you get to take a non cash deduction or a phantom deduction, as I sometimes refer to it, where you're not paying for the deduction, you're not writing a check to take a tax deduction, like if you donated to charity or spent money on your business. So it's a really fantastic tax benefit depreciation. And you can depreciate a residential property over 27.5 years and a commercial property over 39 years. So that's another advantage, by the way, of residential. You get faster depreciation, meaning more tax benefits. But what you can do is you can take some of the components of these properties and you can itemize them specifically because they have accelerated depreciation.

For example, appliances in the house or.

The H VAC unit or other certain components of the house. You know, the air conditioner is the H Vac or the furnace. You know, those depreciate at a faster rate. And so you can itemize these units, these items, and you can depreciate them over, say, five years or seven years. Right. And you get a CPA usually to do your cost segregation analysis, or it's also called cost seg for short.

Okay.

And so they'll charge you a little bit of money. And on a single family home, you.

Can get this done.

Now more and more. It used to be cost prohibitive on a single family home, but nowadays you can get this done for usually between 500 and $1,000 per property. And it will usually save you a lot more than it costs you because you can depreciate these things faster, take faster deductions. So that's a long explanation, but the reason you wouldn't want to do it is I can't really think of too many reasons not to do it. I guess, Chad, you know the expense, you're going to have to pay a little bit of money for the cost seg report, okay. So that you can do it. And that's going to cost you 500 to $1,000 per house. And then also, all you're really doing with the cost seg is you're just bringing the future closer to you. And so you are getting the advantage of the time value of money, because I'd rather have a tax deduction today than later.

Right.

So that's good, but you're not changing the tax deal overall, you're just accelerating it. Okay. So, you know, I guess from that component, it's not like a grand slam home run, but I think it is a good deal and I think it's.

Good to do it.

I can't think of too many reasons not to do it. You know, it takes a little bit of work, a little bit of time. But, you know, also keep in mind with everything that you do, there's not just the economic component. You do learn something from doing it.

Right.

So just by doing these cost seg analysis and reading the report after you get it back from the cpa, you're going to learn something about it. And that'll be, you know, in education.

Right.

But you only need to do a couple of them to learn something. Right. You don't need to do. If you have 30 houses in your portfolio, you don't need to do 30 of them.

Right.

But you might want to economically. So, yeah, that would be my answer.

Yeah, yeah.

Like I said, it makes all sense for me to do them. But some people, I guess, and then you have to, if you sell the property, you have to recapture the game. So it is kicking the can down the road a little bit.

Right, right.

But if you do a 1031 exchange, you bury that recapture into the exchange. So you don't recap.

That was something I always worried about, is you sold it and in 1031, you don't have to do the recapture.

No, no. Because the recapture is buried into the exchange calculation. And so it just keeps going over to the next property and the next property. And you can do that your whole life. And then when you die, under current law, the basis steps up to market value for your heirs. Now, again, we always need to make the disclaimer. We're not lawyers, we're not tax experts. Consult the appropriate professional disclaimer. Okay, yeah, so there you go.

Biden is going to eliminate the 1031 exchange. What kind of rules do you think are going to affect real estate for the new tax?

Yeah, good question. You know, we have talked about that on the show. You probably heard us talk about that on the podcast. And it's a possibility. There is some talk of it. But, you know, housing and real estate are just kind of this like sacred cow. And it's very hard to get away with doing anything to hurt real estate because first off, it affects like, everybody. You know, it's not this, this fringe element that's not going to screw up your, your political career.

Right.

It's just like everybody's in real estate in one way or another.

Right.

And so it has such, like, wide ranging effects and there's so many people lobbying against any of this that I don't know. Even if he wants to, he'd probably be hard pressed to make it happen. Go ahead if you had something on the tip of your tongue. But I want to ask you about construction costs because you said something.

What I was going to get into next was just we were talking before we got on a recording here about. You asked me about how Seattle's market was and I noticed a spike of new apartment projects coming in to get bids on. And I kind of asked around to a developer friend of mine and I said, is there you know what's going on? And he said, apparently there's a new energy code coming in, green new deal stuff where the cost to develop your average apartment building is going to go up something astronomical. So everyone was just racing to try and get their permits in so that they can build before they have to comply with the new energy code permit. So that's just going to make, they try to make more affordable housing and anything that the government tries to do they just end up screwing up because no one afford to build these things or buy them or live in them or whatever the case may be. So that's basically the big thing I see going on in my market is just an influx of people trying to get permits before they have to acquiesce to this new energy code.

Yeah, the government, they have created the homelessness problem not only by shipping the jobs overseas and not helping the veterans enough and, and all of this, but by all of these regulations on housing, they've just made it so expensive to comply with the, the requirements. And especially in places like Seattle and California. You know, I'm talking about Seattle like it's a state, it's obviously just a city, but you know, it's run like its own little fiefdom. And so it's just, you know, they're just making it so hard. They can't look for low cost housing anymore. You just can't do it.

No.

One interesting thing about low cost housing is it's always built by the government. And if you actually look when you go to apply to do that job, we're a non union company, right? So when we go to do one of these low cost housing projects, we have to pay prevailing wage. So everyone gets paid a set amount of money. It's the highest wage bar that they have. So when you look at the cost to build what they call, quote unquote affordable housing in the government run sector, the private sector could have built it for about half as much if they were actually, you know, if they. If they let it to the free market. So, you know, I'm a free market guy, and I just don't understand anybody that anything the government touches, they just. Absolutely. They just destroy. And I don't know how many more times need to prove that.

Yeah, no, it's. It's definitely true. I mean, the government, we need a government to do a few things, but let's just keep it to a minimum.

Minimum.

Because, you know, it's. It's like Reagan said, you know, the most dangerous words are, I'm, I'm from the government. I'm here to help.

Run for the hills. Yeah, yeah, absolutely. It's. It's just. So. It's just the nature of the beast. It really is. But what you were saying, just. I don't know if that point was totally clear, Chad, is that you're seeing this boom in construction because all of.

These developers are rushing to build before.

They have to comply with these new requirements coming down the pike. That'll make their cost of construction like 30% higher. So see how that's distorting the market. It's causing overbuilding right now in these apartments.

Right.

And then later it will cause a shortage of supply because no one will want to build.

Exactly.

Yeah.

These people are just all racing to get their permits. They're not even going to break down yet. They just have to get their permit, and then I think they've got 18 months from permit to actually start digging a hole in the ground, whatever the case may be. But there's definitely things coming down that are going to distort the market.

Yeah, it just. It doesn't make any sense. It's crazy. But, hey, I appreciate you sharing your story and is there anything else we should talk about? You know, questions, thoughts, goals, ideas, anything you want to run by the audience?

No, I think I just wanted to share my experience that, you know, it's from someone that's looked at all different angles of real estate, totally bypassing single family, coming right back around to that being the best place to park your money and you guys being probably the best company to deal with, you know, in order to make that happen. So I just want to share my story and thank you for the service that you're putting out there for people and the education that you have on your website and your podcasts. And just a thank you for me.

Hey, well, thank you for your business.

We really appreciate it and it's, you know, it's an honor to serve you and other clients like you, and we just wish you super, super success, Chad and and happy investing and thanks for coming on the show. Really appreciate it.

Thank you.

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