1752 FBF: Memphis Real Estate Property Tour Preview & Jason Hartman Talks One-On-One with a Creating Wealth Listener

Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now, here's your host, Jason Hartman with the complete solution for real estate investors. Hey, welcome to the Creating wealth show. This is your host, Jason Hartman. This is Episode number 502. Thank you so much for joining me today and I so wish you could join me and be here for the view. I am in Virgin Gorda in the Caribbean today, headed over to Necker island in just less than two hours to hang out with Sir Richard Branson on his private island. It's really cool. That's my second trip there. I went two years ago and you heard me talk about it on a prior episode. I wish you could join me for this video. It is phenomenal. I'm looking at this beautiful blue ocean and the green lush landscape against it. It's just gorgeous. Pardon me. If you hear a little background noise or wind occasionally. Our editors will try and get most of that out in post production, but it kind of gives you a live feel. And I'm gonna stick a picture of where I'm recording from on my Facebook page so you can see it. I just wish you could all be here. But you're here in spirit if you're not looking at a view like this. This is the best view podcast I've ever recorded in the last 501 episodes. So today, what are we going to talk about today? Well, today we are going to take a caller that's a fairly in depth call in just talking about real estate and economic issues and so forth. And I think you'll enjoy that. Get some good information there. And also a listener question that comes from Hannah in San Francisco. And Hannah's actually in the real estate business in San Francisco. Boy, talk about in which we would never invest because we could never make the numbers work, especially with rent control. That even makes it worse. You know, when you look at these high priced markets, beautiful places like San Francisco or you know, any of the coastal properties around the country, pretty much anywhere, or around the world for that matter, of course you can never make rent to value or RV ratios work. But it's really interesting because a lot of these people in these markets and you know, this is a large part of our client base. Having had my start in Southern California many years ago when I was in traditional real estate, of course a lot of my traditional real estate clients have come to my seminars over the years and have listened to my podcast and become involved with us as investors. And it's really a great way to do what I call equity arbitraging. So if you've been in that California market, or if you've been in the New York market, or any of these expensive markets, really, I was thinking over the years that I was a real estate investor when I really honestly wasn't. I was more of a real estate gambler or real estate speculator. But you know, you can take this equity that you may have been lucky enough to develop in those markets, in those expensive markets, either by just owning your own home or actually investing, or I should say speculating. And if you've timed it and you've gotten lucky, or if you've just maybe you haven't gotten lucky, but you've just sort of endured the bad cash flow over the years but supported your properties and developed some equity because you know, if you have one or two up cycles in one of these cyclical markets, of course they can really put you in a pretty nice position to have some good money to do equity arbitraging with where you're taking and you're investing in a more sensible market with that equity in a market that produces good income and good cash flow, that is a very good strategy. Now what you don't hear about, of course, when I talk about things like this is all of the hundreds of thousands or really millions of people in markets like this all over the world that lost money in these markets because they invested a significant chunk of their savings, bought an expensive property markets like California or South Florida or the Northeast or in other markets in Europe or Asia or anywhere in the world for that matter. And you know, they didn't get lucky and they didn't hit the cycle right. And of course the cash flow never made sense. And so they're not able to do this strategy unless they have Income or savings from some other source. So that's what you kind of don't hear about. And I just want to make sure that, you know, the good and the bad of that is conveyed. And what's really interesting when you look at these linear markets, the markets we recommend versus the cyclical markets, the expensive markets, New York, California, the Northeast, South Florida, expensive markets anywhere in the world where typical rent to value ratios are 0.4%. And of course, those are not good because the rent to value or RV ratio that we want to see is somewhere in the neighborhood of 1% per month. So again, and I hate to repeat myself, but I just have to. If. If it's $100,000 property, we want you to get $1,000 per month. If it's a million dollar property, we want you to get $10,000 per month. Typical deal in one of these expensive markets, these cyclical markets, the nonlinear markets, is a point four where you've got $1 million into a real estate, a piece of one piece of real estate, or, you know, maybe a couple pieces of real estate, and it's only generating about $4,000 per month. 0.4%, definitely not good enough. But if you time that right, it can look like you're a good investor. Right? Because if you get lucky and you see a bunch of appreciation, then, heck, you think I'm a genius. And, you know, you're really just lucky, you know, because I have never met anybody over the years that can truly time those markets with any degree of real accuracy. As I've always said, I'd rather be lucky than good any day of the week. I'd definitely rather be lucky than good. But unfortunately, luck is not predictable. So we've got to just be conservative and good if we can't make luck happen. Right? So Hannah's question, just to kind of take the long route to it, of course. And I'm trying to read it here with the sun and the glare on my screen, so pardon me. She says, hi, Jason. I've been listening to your show for five years, and I have to admit that I'm almost an addict at this point. Smiley. And I like your flashback Friday's episodes. For the record, I have a quick question. Don't mind bothering a busy man like you. You may have already addressed it in one of your 500 episodes or so. So forgive me, I'm just wondering if it. If it's always a good time to buy a rental. So that's the fundamental question I want to address here. Okay? It's a silly question, I know, but I recently became curious scared that what if my rental rate ever goes down significantly in the future? Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help.

You today in the present and propel.

You into the future. Enjoy. I see the property values and rental rates went up a lot in Memphis or Dallas where I already own rentals and I am currently trying to buy more. I am buying a property at the current value, assuming that I can get a rental rate of today. But what happens if the rental rate goes down by 100 or $200 per month in the next five to 10 years, which will significantly eat up my cash flow? Do you think it's something I should be prepared for? Or will the rental rate tend to stay stable in markets you recommend? Sorry if it's a silly question, but all of a sudden it just scares me too much to move forward. So I wanted to ask your advice. Thanks again, Jason, for making the best podcast ever. Hannah in San Francisco. And Hannah happens to be in the real estate business in San Francisco, of course. So good question, Hannah. And you know, no, it's not always a good time to buy necessarily. Now some people will say that every real estate promoter says, you know, the typical thing, it's always the best time to buy real estate. Well, is now the best time? No, it's not the best time. You know when the best time was? It was in 2008 or maybe 2009. 2010 was pretty darn good too. But we can never go back in time. We always, as Voltaire said, you know, we cannot choose the cards we're dealt, but we must choose how to play the cards in order to win the game. And the great thing about income property is that it is a multidimensional asset class. And so we can always adjust our strategy to play the game as well as possible. So if we followed commandment number five, and that basically tells us that the property must make sense the day we buy it or we don't buy it, then we know we're going to be in an advantageous position from the start. And so if the property values aren't doing well, we just sit tight and we milk our investment for cash flow. If the property values go up a lot, we may want to consider selling that property on a 1031 tax deferred exchange and equity arbitraging to another area where cash flow is better and prices are lower. Now, rents over time, Hannah, they. They tend to go up. We know this. As long as they're not controlled by the government, as, of course, you have rent control and San Francisco, you always see rents hedge very, very effectively against inflation. But always remember when you looked at linear, cyclical and hybrid markets, as we've talked about in prior episodes, that rents lag prices, especially in the cyclical markets. And that's why we don't like the cyclical expensive markets like the coastal areas, because they just don't work and rents always rise much slower than prices do. So I'm glad that you're investing in Dallas and Memphis and those have been great markets for us over the years. And of course, we've got a Memphis property tour coming up. But I don't think you really have to worry too much about this. The rent to value ratios still make sense. They still work. They are deteriorating. They are getting worse. So there is definitely some urgency because as prices creep up, the rents lag, even in linear markets, even in the markets we like, but they lag a lot more in the cyclical and the hybrid markets. You know, it's still a very good time to buy. I don't know if it always will be, but if you're buying in linear markets, there is almost always a good time to buy because you can adjust strategy. In cyclical markets, you don't have that opportunity. Anyway, I kind of hope that makes sense. I'm a little distracted here by the wind and the environment, of course. And we're going to go to a listener call. So, Hannah, thank you for that question. It is a very good question and it's a common question. So I appreciate you asking it because I'm sure a lot of our listeners have the same question. Be sure to join us for the Memphis property tour. You can register@jasonhartman.com for that. I will look forward to talking to you on the intro of the next episode in just a couple of days here. And I am off to see Sir Richard Branson and I hope for our sake we're going to be able to get him on the show soon. Maybe I'll be able to put the microphone in front of him this afternoon and we'll hear what he has to say about business and real estate. He's obviously quite good at those things. So, anyway, let's get to our caller and discuss some more real estate stuff. Here we go. Hey, it's my pleasure to walk. Welcome, Jurgen, to the show. Jurgen, you have been listening to the podcast for a while and you've got some questions for me about investing and monetary and fiscal issues, I believe.

Yes, Jason, thanks a lot. Yeah, I've listened to many of your podcasts, and I really like the idea of the turnkey property, but I'm concerned about all my other research, which seems to be indicating that the dollar is going to have a collapse soon and all asset classes are going to adjust with it, including real estate, stocks, bonds, and so on.

The immediate thought I have is before investing in a property like this and risking losing 30, 40%, like many people did in the stock market and so on, I'd like to hear your thoughts on what you think the future looks like and how this type of investment might protect us against that a little bit.

Well, you know, as you've heard me talk about on the show, I've just got to believe that inflation is coming. You know, the only legitimate force that can keep us from having a very inflationary future, and I'll define legitimate in a moment, is technology. That. That's really it. Everything else is a game of smoke and mirrors. It's a Ponzi scheme, it's a shell game, whatever way you want to refer to it. And that's all the stuff that the government does and the central banking cartel does, and, you know, basically defying gravity, which is shocking that they've been able to do it this long. I mean, if you'd asked me years ago, Jurgen, would we have lots of inflation by now? I would have said yes. And, you know, we did have a pretty decent bout of it there for a while, but. But about a year and a half ago, it really started mellowing, and it's surprising. And the problem is none of us can tell is the reason, because it's certainly not because we have a responsible government, really. And when I say government, I mean the whole world. I'm not just talking about the U.S. but since the U.S. is such a big player in it, but also because they're just, like, kicking the can down the road with these debt obligations, and it's sort of amazing that they can actually get away with it. It can't last forever. So, you know, is technology improving lives so much and making things so much less expensive, Is that the reason? Or, you know, and that's a legitimate and great reason, or is it just that it's a shell game and it's a game of smoke and mirrors and the, you know, the jig is going to be up at some point? You know, I don't know. None of us really do. It's hard to, hard to tell, you know. So as far as investing strategy, I believe that income property offers the best strategy. Whether we have inflation deflation or stagnation. However, it's a home run. In an inflationary environment, that would be the best scenario for investors, investors who.

Are using leverage, especially because interest, interest rates are likely to go up dramatically and so on.

Well, interested interest rates are a response to inflationary pressures. They're not the leader, they're not necessarily the cause of it. What happens is a couple of things. Number one, you've got the government and central banks want to see inflation be more tame. So in order as a way to do that, they put upward pressure on rates to slow the economy down and cool it off and cool inflationary pressures. But number two, as the dollar is getting debased, or this applies to any currency as it's being debased, like if you look at Greece, that's such a disaster, and so many other countries, they've got to pay higher rates on treasury bills to entice investors to invest because the investors know that the face value, the nominal value of that instrument is being debased as the currency is being debased through inflation. So there's, there's really, there's really two reasons for that response, two primary reasons. If the dollar is debased, of course your debt is debased, the value of your stocks is, is debased and the value of your savings account is destroyed. So these are reasons that income property makes sense. And you know, as you've heard me talk about on the show, it makes sense from two aspects primarily. Well, really three, but two main ones. Right. The first one is that it's a commodity. So commodities, the ingredients for a house or an apartment building, they go up in, in value at least they hedge against inflation because all those commodities get more expensive. So that's good for an investor who owns those commodities. But number two, if you use leverage and you have debt against the asset, if you have a long term fixed rate mortgage, that debt is also devalued because you pay it back in cheaper dollars over time. And the payment, the monthly payment to service that debt is also devalued. And I've used the example many times of my mother in the first house that she purchased and how she thought, you know, a $416 a month mortgage payment for a house in West Los Angeles was insane. But as the years went by and she still happens to own that property, as the years went by, that $416 payment looked like nothing years later. Why did it look like nothing? It wasn't become her because her income rose a whole bunch. It was because inflation made it look meaningless. You know, now $416, you can't even buy a nice car for that, much less a house. Right?

Yeah. It doesn't seem like there are a lot of options because if you leave cash in the bank, there's always the possibility of bail in. If you buy gold, silver, you might get taxed on that. And I can see why these countries are putting a lot of money into hard assets and paying a premium for them because you can't just leave it somewhere. You can't just put it in treasury bills or leave it in cash.

No, you're absolutely right. And when you refer to bail in, I think you're referring to. Referring to the situation that happened a few years ago in Cyprus.

Right, exactly. And I think it's coming here.

Yeah. And when you say coming here, you mean to the us, Right?

Correct.

Yeah. Because we should say to the listeners, you are. Tell us where you're located, by the way. You're in an exotic place.

Yeah, I'm located in Dahran, Saudi Arabia. It's near the eastern side of the country.

What are you doing over there? Are you in the oil business or something?

I am, I am. I've been here almost three years now in the desert.

What the heck is it like? I mean, is it. Is it like, I don't know, maybe you can't speak freely about this, so I'll appreciate that if you can't. But I would just imagine that Saudi Arabia is a very oppressive kind of place. You know, we, the US sort of looks the other way on human rights in countries that it's doing so much business with. Obviously, if it wasn't, you know, it might be a news item, you know.

Yeah, yeah. Well, there's a few things that, that aren't allowed here, like alcohol and a few other things that Western culture enjoys. But for the most part, if you have an open mind and a bit of a liberal bias about how you deal with people and deal with different cultures, it's just fine.

Are women allowed to drive there? Can women drive in Saudi Arabia?

Well, I live in a camp. It's, I think about 11 square miles. And on these camps that the company has, women are allowed to drive, but not outside the camps.

Wow. Unbelievable. Do you care to say what company do you work for? A big oil company like Exxon or something?

Sure, yeah. It's Saudi Aramco. So Saudi Aramco is a nationalized or government owned oil company. It's owned by the Kingdom of Saudi Arabia.

Yeah, very interesting. And what do you actually do? Are you in like the exploration business or what side of it are you in?

Background CPA finance. So I help them with their managerial reporting and analysis and do a lot of performance measurement management and essentially help them be a better company and help them achieve their goals and objectives.

Yeah. Fantastic. That's awesome. That's awesome. I assume you grew up in the States. I mean, you have a very American accent. Where are you from?

A little bit of time in Ohio, some time in Florida, some time in Seattle. But I was born overseas in Germany, so kind of a child of the world.

Yeah, I was born in Germany too, in Stuttgart. Yeah. Oh, good stuff. So I got to ask you a question, and I know we're not. Maybe we're not finished with the questions you have for me, but, you know, I sort of issued, you may have heard me say this on the podcast. I issued kind of what I call a yellow light warning on, on Houston, and I own property in Houston, not selling it. I think Houston's a great market. We've done lots of business there over the years and, you know, probably hundreds of our clients have invested there through our network. You know, I'm kind of concerned with low oil prices that, you know, and there's only been really one sort of decent sized story I've noticed about layoffs and so forth. But, you know, first of all, our oil price is going to stay low. Do you have any thoughts on that? I mean, you know, nobody probably really knows for sure, but. And then any thoughts on maybe the Houston market? I'm going to ask you that question. How do you like that?

No, that's a really great question. What really surprised us here was that none of us, you would think finance people would see it coming. None of us saw the price drop by 50%. And you have to wonder, what's the machine behind that? Because we do the math on a daily basis and we know the output, we know everything, we know the sales, and none of us saw it. So I don't know what's behind it, but it's not, it's not what you might expect. It's not the macroeconomic is all I can tell.

Did you happen to listen to that episode? I did with Jim Norman, who wrote a book called the Oil Card? You would enjoy that episode. It was, you know, a few months ago, maybe three months ago or two months ago, I did that episode. And that was on the Creating wealth show, of course. You know, multiple shows here. So we. I don't know which one you're listening to primarily, but. But Jim Norman's, you know, he's like an oil industry analyst and he's retired now. Wrote a book called the Oil Card. And his thesis is that the oil price is really controlled by the futures market. And the reason it's low now is because. And I may not be, you know, conveying his idea correctly, but the reason it's so low now is because the US Is controlling the futures market as a weapon to hurt Russia and Venezuela. Venezuela. That's sort of his premise, as I understand it.

Yeah, conspiracy theory. Same thing with gold being controlled by shorts and so on.

Well, gold is manipulated. I mean, that organization. I gotta get someone from GADA on my show. The Gold Antitrust Action Committee. They're interesting, but. Yeah. Well, when you say conspiracy theory, are you kind of dismissive then? Is that how you're saying that or is that just a label? I don't know.

No, no, I, I try to listen to anybody that has any kind of credibility and merit and hear their opinion. For example, Harry Dent, I'm sure you're familiar with him. He just came out with a book.

He's been on the show three times.

Yeah, yeah, exactly. In fact, that's where I got his name and got his recent book. But he says oil is going down to $25 to $30. And he actually warns about getting into turnkey properties. If you think that's the future, think twice and look on page 77 and so on. So.

Yeah, yeah, okay, so let's address that because my mom's been talking to me about that a lot lately and I've had Harry Dent on the show three times and I had. I'm a big fan. I've been reading Harry's work since the mid-90s, you know, like a long time ago. And then I also had the president of his company on the show who's also a very. Rodney Johnson, I think was his name, who was really interesting too. It was kind of almost interesting in a way that more. More so to interview Rodney than Harry Potter because it was just sort of a different take on the same work, you know, which I really enjoyed. His latest book, the Demographic Cliff. He talks about real estate. Now the problem with Harry, well, there's a few, but I mean, I think his work is overall really fascinating. But the problem with his real estate thinking is that he, he talks about real estate as if it's One single entity. You know, he doesn't segment it by price. He doesn't, he does a little bit by price, but he doesn't segment it at all by geography much. Okay. Now in some of his books, the roaring investor 2000s, he did a little bit of geographical stuff when he was recommending Ashland, Oregon and you know, some other geographical places. But Harry's main thing about real estate as I understand it, and you know, I'm not saying this because I have an agenda, I think real estate has its share of problems and pitfalls. I just think it happens to be better than anything else. I think everything else has more problems. Okay, so that's my, my take. But you know, Harry's thing is the McMansions will be terribly affected because of course you have all these retiring baby boomers and you know, they may have financial pressures, they may just want a simpler life. And you know, we are moving, you know, in the next 5ish years depending on what segment of it we're moving right into that. And a lot of these baby boomers will be unloading their big expensive houses. And he really said that would start happening in a major way in 2012. And it didn't so much because so far as I can tell, big mansions are still roaring and they're selling for very high prices. But when he talks about real estate, I think that's mostly what he's talking about. That and the expense of real estate markets, not cash flow type properties. Do you disagree with that, by the way? And please tell me if you do, do not let me control the conversation here. I want to hear opposing viewpoints.

Well, I haven't had a chance to read his book yet. I've just ordered it and getting it over here is a bit of an ordeal. But he did mention turnkey property specific in a page number. So I'm really excited to get the book and have a look at it and assess what he, he, what he thinks about it.

See, the thing is with Harry Dent is, and he said it on my show, he said, look, I don't know what else you can do to get yield because okay, so let's say we have deflation. The, the rental properties still produce yield. In a deflationary environment, there's no way to get yield anywhere pretty much right. He says gold's going to go to 750 and then it might go down to 250 after that, after it breaks through. 750 in its, in its plummet. And you know, so far he's been on the right side of gold. It hasn't gone that low as he predicted, but it's gone down. The stock market has got to be a bubble. I mean, that's just, it's getting ridiculously frothy. What else would you do? You know, it's more a question of elimination of investments than it is saying, hey, this is the greatest investment. It's really like a process of elimination.

I'd like to diversify what I'm doing. The one thing I can't do is have cash sitting there idle. So I think for me it makes sense to get involved in that. And as I mentioned in my short missive to, I already have a property that's generating cash flow and.

I don't like having one large property that has a lot of asset buildup because that's putting all my eggs in one basket and I'd rather just sell the place and buy several. And it's the same approach but more diversified. Right. And I think owning hard assets, whatever it is, if it's gold, if it's real estate, you don't have a lot of choices. You're going to have to overpay for it right now. But at least it gives you some peace of mind.

If you believe in inflation, then you'd probably be a gold bug. If you believe in deflation, you've got to just look for yield. There's really not much to choose from in a deflationary environment unless you've got some ideas you want to discuss. But, you know, I mean, deflation just leaves you with like nothing except yield. That's all you get. Right, Right.

Yeah. And I, and I have bought some gold. Unfortunately, most of it's paper and, you know, come to find out a year after I bought it that the.

Organization who backs it could just simply default on it if it reaches a certain price level or change it on cash.

Yeah, no question about it. I, I, if, if you're gonna own precious metals, hold the metal, you've got to actually have the metal in your possession. You know, that's, that's my opinion. Because, because paper gold, whether it be, you know, stock in a miner or some sort of gold derivative or ETF or something like that, that's just fiat money. And I mean, the gold bugs, it's so funny how they contradict themselves because the, one of the whole premises of being a gold bug is that you think, you know, disaster is upon us and you want to hold hard assets. Well, if you don't have the gold in your possession or the silver or the platinum or the palladium. Then what do you have? I mean, these people that want to buy into things where you have gold in a vault somewhere that you don't even know is yours. I mean, there's so many scams in that world, it's just. It's just crazy, huh? I agree. Did you have another question there? I mean, I know you know me, I get on tangents here, so I apologize. But any other things you wanted to discuss?

Yeah. I noticed you've gone through a lot of rules about.

How you evaluate properties, coverage and cash on cash ratio. And 1 plus.

Or 0.1%. What is it, 1% or 0.1? I forget which it is.

You're referring to the RV ratio, the rent to value ratio that I believe should be 1% of the value per month. So $100,000 property, you get $1,000 per month. You know, give or take a little bit.

Okay. Do you have a checklist published somewhere that you use to source your properties?

You know, we have over the years. I can't say we do now. I wouldn't be able to find it if I looked for it, probably. But there isn't a checklist like that that is in existence nowadays. But it's a good idea.

Well, here's the real question. You know, if I went on one of these tours, I think the next one is on the 2nd or 3rd of May, I would have to do it pretty quickly. I wouldn't know the area at all. What is it? Memphis, I think.

Right.

Even if I went over to Little Rock, which I don't know either, it's pretty difficult doing something like this, cold, without having a. Yep. It meets these. It doesn't meet that.

And yeah, I understand what you're saying, you know, unfortunately, that I. I don't know, I'd be sort of worried about going by checklist and that kind of stuff, because real. There are lots of little nuances, you know, and that's why you just sort of need a human guidance. And that's why we're there. You know, I'm there. Investment counselors are there on the property tours to guide you, along with our local market specialists. You know, there are so many factors. The neighborhood, the school district. There's just a zillion little nuances to it, of course. But, yeah, you know, I guess, you know, the. The real checklist is the Performa. So when you go to Jason hartman.com and you click on the properties page and you look at those performas for those neighborhoods, you know, the first mark is rent to value ratio. You know, is it near, at or near or above 1%? And the second big mark that I would be looking for, because you can still do this now, a few years from now, I might say don't even think about this one too much. But right now you can still get a pretty good deal on it. And that is cost per square foot. And that cost per square foot is a real insulator. How long you been listening to the podcast, by the way, or how many episodes have you listened to?

Probably about a year and a half.

Are you listening like to all three episodes a week type thing or just when you can catch it? Okay, so you've been listening for a while. Good. Thank you for listening, first of all. But when you. When you look at the concept of regression to replacement cost, right. That cost per square foot really does offer you some protection. So right now, for example, I'm looking on our site and I'm looking at a property in Little Rock. Okay. Well, we've only got one property for sale. There's very limited inventory. But this property in Little Rock, I mean, you know, it's $53 per square foot. Okay. And granted it's not a new property, but if it burnt to the ground and you had to build a new property on that site, you would have to spend a lot more than $53 per square foot to build it. So I think the rent to value ratio and the cost per square foot. The cost per square foot, if you're really concerned about downside risk, that offers you some good protection and it offers you some good upside potential as you have what I call regression to replacement cost. And if you want me to dive deeper into the regression to replacement cost thing, I'll be happy to.

I think I've heard you talk about at least two or three episodes, and I get the idea you were saying something like the land is free or, you know, something to that effect.

The land is free or cheap, and, you know, the price of that property is ultimately going to regress toward the replacement cost, which to build new in this market is probably about $75 per square foot at the cheapest. Okay. And, you know, probably 85, $90 square foot to build something a little nicer. So that's not really the same as appreciation, in my opinion. And I don't have like an empirical way to sort of prove that with an equation, but it's just a, you know, it's just kind of from experience. I don't think it's the same Thing as appreciation, you know, so even if you don't have, like, a frothy market where you see really significant appreciation, you're ultimately going to have that regression toward replacement cost or regression to replacement cost. Yeah.

And my last question. I don't want to keep you too long. I know you're very busy, but I heard one episode about Fernando talking about his independence plan, or Independence Day plan, he calls it.

Yeah, Financial Independence Day. Yes.

I thought it was funny. He seems like quite a character. Very organized, very methodical and focused in what he's doing.

He's super organized. Yeah. Yeah. Much more so than I am.

Well, the thought was, if I have this one property which is somewhere between 6 and 700,000, and it's paid off, it's in Seattle, and it's generating 2,500amonth, which is a very low with your ratio. And I use that money to hopefully time the market well and cash out and put that into several other properties. I would be very interested in speaking with Fernando about how we would model something like this, because if it's 20% down, that gets a lot of houses, and my credit is stellar.

That's something you can certainly talk to him about. And we might actually do a show. We've kind of done it, but really do a show just on the very, very narrow topic of Financial Independence Day. Because the first time I sat down with him, we were at a. At a bar in Tempe, Arizona, and I didn't know who he was. He just said he wanted to meet me. And, you know, it was a Sunday afternoon, so he pulled out his laptop and showed me the spreadsheets. And, you know, his Financial Independence Day target was two years after he started investing. You know, so he listened to my podcast, met me. You know, I said, heck, I can help you do that. I can help you execute that plan. It took three years, not two, so it really took an extra year because it was a lot slower to acquire the properties than he thought it would be. And especially in one of our markets in St. Louis, they had some problems being slow there in construction and so forth, and. And so, you know, it kind of slowed him down a bit, but it happened, and he retired from Apple, so. Yeah, yeah, yeah, that's a good plan. And you're certainly welcome to talk to him. Absolutely.

How would you recommend I move forward with that?

I can talk with you off air about that and put you in touch with him.

Okay, that's great.

Yeah. Good stuff. So, Jurgen, thank you so much for calling into the show and asking some good questions there and I'd love to even have you back on after you do read Harry Dent's book. Harry Dent is one of the few deflationists out there and you know, would love to see what you think of it as. You really gotta dissect the real estate thing by geography, by price, by, you know, the market segment and you know, a whole bunch of things. The US is just too big to talk about real estate as though it's one, one entity. You know, 400 markets in the US and a lot of differences and you know, segment by price, segment by geography, a bunch of things. Okay, so good questions and thanks for asking them. And when are you moving back from Saudi Arabia? Do you have plans to leave and come back to the States?

That's a really good question. A lot of people come over here middle aged and retire here. It's kind of the last hurrah where you try to work as hard as you can and save as much as you can and plan for the rest of your future. So if all works out well, another 10 years and that'll be it.

Oh wow, you're gonna stay there a while? Yeah. Is it expensive to live there or is it cheap? I mean, you're kind of in your own world probably on this, on this camp. But what's it like?

Well, the housing is subsidized, there's no electric bill, there's no water bill, there's no maintenance. And you know, the car, you just need it for a few miles to the office and back. So you don't spend a lot of money. You can get away with $500 a month, even eating out a few times.

So what if you were outside though, you know, what is it like for regular people that live in Saudi Arabia? Is it expensive? Is there inflation, deflation? What's going on there?

There's a bit of inflation. Housing is pretty expensive, but this particular company helps subsidize a part of that cost and it makes things a bit easier. But the cost of living is much lower here than it is in the US by far. There's no way I'd be able to save as much as I can. And that's why a lot of Americans and other expats are here. And the first 975 of our income is not taxed.

Yeah, right, right, because you're, you're living overseas. So you got $97,500 tax free. And then, you know, the IRS, the only taxing entity on earth that requires tax on all worldwide income you know.

Right. And no social. No Medicare as well. Right.

Very interesting. Yeah, it's a good deal. You can save a lot of money there. Yeah. Good, good stuff. Well, hey, Juergen, thanks for joining us. Appreciate you calling into the show and I'm gonna stop the tape now so we can talk off air. Okay, thank you. Jason.

What'S great about the shows you'll find on jasonhartman.com is that if you want to learn how to finance your next big real estate deal, there's a show for that. If you want to learn more about food storage and the best way to keep those onions from smelling up everything else, there's a show for that. If you honestly want to know more about business ethics, there's a show for that. And if you just want to get away from it all and need to know something about world travel, there's even a show for that. Yep, there's a show for just about anything only from jasonhartman.com or type in Jason Hartman in the iTunes store.

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