1824 FBF: Insurance for Real Estate Investors, The Housing Bubble Burst in 2017?, & Is Congress Coming for Your 401k?

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. This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new 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 the Creating Wealth show, episode number 821. 821. This is your host, Jason Hartman and thank you so much for joining me today. I hope you enjoyed our Flashback Friday episode number 820. We did something a little different there this that was a 10th episode show and it was also a flashback Friday. Now that happens from time to time. Nothing new on that. But what was different? What was different? We had Tony Alessandra on and he was talking about charisma and some other important things in life that can help us be more successful. And it was originally aired as episode number 165. 165. And why was it played as a tenth show, 8:20 and a flashback Friday? Well, we didn't have tenth episodes show formats back then where we go off topic and talk about something of general interest, not just real estate investing. Yet it always seems to come back to being a more successful person or being a more successful investor. So that was appropriate for a 10th episode show. So that's why we played it as episode 820 just before this one. So it is an amazing time to be alive, as I, I always say. And one of the amazing things that I think is going to affect us as real estate investors. Now look, I'll admit I am connecting a few dots here and maybe I'm taking a little bit of a leap, but technology is changing all of our lives, Big data is changing all of our lives. And there is a new area in the world of big data and fintech financial technology. Fintech, you've probably heard that term and it is affecting every industry in the financial world. And one of the industries is insurance. Insurance is going to be changing a lot over the coming years. Renting our properties is going to be changing a lot over the coming years. And the level of empowerment that we experience and benefit from as income property investors is going to be changing a lot in our favor over the coming years. So let me give you an example. Now you know that we've had Gary Pinkerton, our Venture alliance member and also retired naval captain and our client for many, many years who's been on the show and, and now he's working with Pat Donahoe, who's also a Venture alliance member and who's also been on the show. They both are working in the, the life insurance business and using insurance as a, as a financial product. And I really never much believed in that idea, by the way, until those two moved the needle for me. They were the only ones that could do it. Now, maybe it's because they were presenting a different product to me and they were just better at designing it or explaining it. And I think they were. But regardless of all of that, I just want to tell you something about life insurance that I think is interesting and I think we need to connect the dots isn't investors. And here's the leap I'm making. It's not too much of a leap really. I think you'll see that recently I have told you on recent episodes about how credit scoring is about to get a lot better. A lot better with the help of technology and with the help of big data and data mining instead of just using very simple things like the things that make up one's FICO score. Okay, let's talk about those for just a quick moment. And again, I've talked about these in detail on prior episodes. So check out those past episodes for a lot of in depth, nerdy, wonky detail on this stuff. But basically our FICO score is made up by the amount of available credit we have, the utilization of that credit. In other words, have we gone out on a limb and used every last penny of credit we can get or are we only using a moderate amount of that credit? And then it's also of course, mostly based on what our payment history. Our payment history. And then it's based on the amount of new credit we've taken out. So if someone's taken out a lot of new credit just recently and using it all up, well, you know, frankly, credit issuers get concerned about that. It looks like this person, you know, what do they have, a gambling addict, a spending addiction? Maybe they have an expensive new spouse, which, by the way, I think that's what I need. I need an expensive wife. That would help me spend my money. That would be good. Well, maybe not. Men, more than women, tend to complain about their expensive spouses, but women do it too, you know, rightfully so. There's a lot of guys out there that spend all the money too, in the family anyway, whatever. At the risk of a tangent and a risk of offending people. Yes, there we go. So maybe that's the reason they're gobbling up so much new credit. Are there a lot of inquiries on their report? And so. So these are the types of things that make up our FICO score. Well, the FICO score really, if you look at it, is pretty simplistic. It doesn't really do a very good job, frankly. And understand also, by the way, that there are many types of FICO scores. There's the FICO 4, the FICO 8. There are many different FICO scoring models. And then also, and that's, by the way, fair Isaac. That was invented many years ago. And then also there are three different credit bureaus. So your score at Experian could be different than your score at TransUnion, for example, or different than your Equifax score for a third. So this is complicated. But again, it's also not very good, honestly, at assessing risk for a landlord who wants to rent to a tenant or a issuer of any types of credit, whether it be a mortgage, an auto loan, or whatever. Right. So credit scoring is about to get a lot better, using about 1200 data points. 1200 instead of the meager amount that the FICO model uses. And this is going to make us better investors. It's going to make us more successful landlords because we're going to be able to profile these tenants much better than we have at any time in human history. Yes, it is an amazing time to be alive. So let me take this back to this article I saw about life insurance recently. 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. Now, this is a Newser article and it says, the key to easy life insurance. A selfie question mark, by the way. I love it when my older, not so hip mother uses the Words. Selfie. I just think that's really funny coming from her. You know, it's. It's funny to see someone of my mom's age use the word selfie. It just. It just makes me laugh. But anyway, so here is a picture I'm looking at of older people, an older couple taking a selfie. Right. And why are they taking this selfie? Well, it's to get. Get life insurance. Yes. Okay, so let me read a little bit of this story to you. Just quickly. A selfie reveals more than whether it's just a good hair day. Facial lines and contours, droops and dark spots could indicate how well you're aging and when with paired. Paired with other data could someday help determine whether you qualify for life insurance. The AP Associated Press reports several life insurance companies are testing technology that uses the facial analytics and other data to estimate life expectancy. Says Carl Ricky Jr. I guess that's how you say that. Co founder and chief data scientist at Leptis. No, Laptius Solutions Incorporated. Insurers use life expectancy estimates to make policy approval and pricing decisions. Okay, so they have this product, it's called Kronos, right, Which would enable customer to buy life insurance online in as little as 10 minutes without taking a medical exam. If Kronos is adopted by an insurer, which would need regulatory approval from states to use it in the underwriting process, probably because there's all sorts of discrimination concerns and so forth, you'd upload a selfie to the insurer online, answer health and other questions, and the facial analytics technology would scan hundreds of points of your face, of your face, and extract certain information. Well, what would that information be, you ask? Okay, well, the article says including body mass index, how old you look, and whether you're aging faster or slower than your actual age. Okay, so this is interesting. It is interesting. And it leads to this whole new area in fintech that is going to make us better landlords, it's going to make banks better mortgage lenders. You know, I bought a policy recently from Gary and Pat, and I was just amazed at how sort of obtuse the whole process was. You know, I took a medical exam and this and that and all that stuff's important. But they never really inquired or verified, much less how I eat, how I exercise. They didn't really seem to care too much about all these things that I think matter most. And you know, frankly, if I give myself a pat on the back for all the stuff I've done in the world of real estate, and the predictions I've made that have come true so many times and you've heard those on the show because you've been listening for the last 820 episodes and for the last 12 years and you've heard that a lot of my predictions have come very, very true in the face of maybe a lot of the market that would disagree with me where other people were predicting the opposite of what I predicted or not seeing a nuance that I noticed. Okay, so Jason, enough stroking your ego here, all right? But I think I'm also doing a very good job at aging well. And what is my secret? Well, listen to the longevity and biohacking show with my co host Fernando who's on there. But, but I will tell you just quickly a couple of my little secrets. Number one, a moderate, not a lot. A moderate amount of exercise and just movement. Just get up every day and move for literally four minutes. I kid you not. Yes, I have not always been the best at working out. But number one, with working out, you gotta do it first thing in the morning. Number two, get a dog. If you have a dog, you're gonna walk a dog. Hopefully you're gonna walk a dog. And walking is a really good for you. Number three, I really only drink three things. Okay. There's only really three things I generally drink. Yeah, occasionally I make exception. Number one, I had a girlfriend years ago, Karen, that got me to get rid of coke and soda and that stuff's just frickin poison. There's a new study by the way, that came out last week about diet soda and how incredibly dangerous and poisonous that is to us. So just don't drink coke and soda. And any drink you drink, drink if it's iced tea or anything, look on the label and see how much frickin sugar is in that drink and how. And if there's a bunch of chemicals in that drink, you know, if it's not like one syllable, you really probably shouldn't be drinking it or ingesting it in any form. Including on your skin and your hair. Yeah. Shampoo and lotion and stuff like that. That's the next thing I want to start paying attention to. I really haven't paid much attention to that. So yeah, the three things I drink, coffee, water and vodka. Yes, a little bit of vodka, but I drink a lot of water. I have always liked water. I just, I like the taste of it. It's just very well refreshing. And I'm a big, I'm a big fan of water. And in recent years I have Definitely reduced my alcohol consumption because alcohol is obviously very bad for you. But I do think just a very small, moderate amount is actually kind of good for you. A very, very small amount. So where was I going with that? Oh yeah, underwriting and all that kind of stuff. So anyway, I had one guest on the show recently who talked about the credit scoring models. Another one that's coming up that I'm going to talk a lot more about, credit scoring models as well. Anyway, look forward to more on that. I think it's really interesting. It means a lot to us as real estate investors. Stay tuned for more on that. Now, one of our clients and listeners sent me an email the other day. Let me find it. That's from Michael Schoellenberger. I think I'm pronouncing that right. Thank you so much for sending this. And it was just a Wall Street Journal article that said, grab your PitchForks, America. Your 401k may need defending from Congress. Congress is considering whether to reduce the benefits of contributing to a 401k and similar retirement plans even as representatives and senators bask in the safety of the pension systems that taxpayers fully fund for federal employees. And he, he wrote me a note here. He says, jason, you predicted it. Well, I didn't just predict this. I predicted actually more than this. I think Congress is coming for your retirement plan. And folks, watch out. Remember, the government is always going to go for the low hanging fruit first. The low hanging fruit, the EAS. Easy stuff. What's easy? You have a traditional IRA or 401k and all of your assets there are in some stupid brokerage account. And if they are, that is literally just a decree fiat by authority, a law that is passed by our greedy, broke, bankrupt, insolvent government. Right? And that law could just say that and it'll undoubtedly be in the face of some sort of disaster, there will be a stock market crash, which we know inevitably there will always be another stock market crash. There will be this problem, that problem, some sort of financial fraud that goes on and the government needs to step in to protect us poor little dumb people, right? Yes. That's always the guise under which they do these things, right? Gun control, whatever it is. You know, it's always, always something like that. They always have some, some pitch to sell it to the public. And this is the reason, by the way, I do not have a Roth, okay? I have a retirement plan. In fact, I have two of them. I have a solo K and then I have an IRA type account. I can't remember exactly what type of IRA it is? I do not have a Roth. Why don't I have a Roth? Well, the Roth idea basically says this. It says, look, in the future, taxes are going to be higher, so you should convert your traditional plan to a Roth and pay all the tax today so you don't have to pay it later. Then we'll make you exempt. And if you're not going to retire for 20 years, for example, then you know, when you retire, you won't have to pay tax on it. Just pay the tax now. Well, taxes are probably lower and you won't have to pay again. Well, I don't like that plan. Reason I don't like it and is I think the government is in serious financial trouble. And I'm sure you'll agree with me on that. And the government looking for money in the future, there's just too much risk they might just change that law. And they say, look, you Roth people, sorry you paid all the tax 20 years ago, but, you know, we're broke now and we need some money and we're just going to have to change the law and screw you over. So, yeah, I'm a little too paranoid and pessimistic to have a Roth, so I'm not in favor of the Roth idea. I know a lot of you do it. Maybe I'm gonna be wrong about this, but anyway, look, that's just me. That's my thing. All right, what else should we talk about? I want to recommend a couple of books on the subject of energy and environmentalism real quickly. And these I read. Actually, one of them was an audiobook. They're both on audible, but also, you know, available for reading whichever medium you like the best. Oh, by the way, before I do that, I must tell you, yes, it's an amazing time to be alive. One of the greatest, most awesome, inexpensive, and most useful pieces of technology that I have purchased in many, many years. I think this might far and away be the best product, the best tech product in the last five years. And you should go out and buy some of these. They are the new Apple Wireless AirPods. Whoa, do I love these things. I can listen now to so many more podcasts and so many more audiobooks. I mean, my brain is exploding with new knowledge now that I got those AirPods. I think they're 159 bucks. They are phenomenal. My only concern is about all the radiation they're putting into my brain. But, you know, there's a thought that even the wired earbuds do the same thing and they in fact might, some say they may be worse because that wire that goes to your phone acts like a conduit, like a conductor, like an antenna that conducts all that, you know, radiation or EMP energy into your brain. So I don't know, you know, who knows? Look, we're all taking a lot of risk living nowadays, so that's that. But I love those AirPods and they have increased my listening time dramatically. It's. They're fantastic. I would run out, I would order them, go online right now, go to apple.com and buy those things. They are phenomenal. I love, love, love those things. And by the way, if you don't have an iPhone, I think you're really missing out. Android users, I just, I know so many of them and they just don't get as much value out of their phone as the iPhone users seem to. But anyway, just a thought there. Okay, this one great book. I did listen to this one on audio. It's called Smaller, Faster, Lighter, Denser, Cheaper, How Innovation Keeps Proving the Catastrophist. Boy, is that a word wrong. You know, all the doom and gloomers. Technology keeps proving them wrong. Innovation Keeps proving them wrong. That book was fantastic. Talked a lot about energy and issues like that that were great. The other one is called the Bet and the Bet, anyway, it's really good. It's about the two environmentalists who were big in the 70s and they just had this huge bet. And you know, on one side it was catastrophe and on the other side it was this bright future. Obviously the catastrophe didn't happen. The bright future did happen. And anyway, the BET is really quite interesting. Now remember we had Darren Bloomquist from Realty Track on the show before also spoke at our Meet the Masters event last January. Well, this is an interesting article and I don't know how much time I'm going to have to dive into it deeply today. But this again is on our content group. Venture alliance members, of course, need to take a look at this because you have access to it. Our private Facebook group there. Are we headed for another bursting housing bubble in 2017? I'll just gloss through a little bit of this with you real quickly. And by the way, I think so. In the highly overvalued cyclical markets, the west coast, the Northeast, South Florida, those markets, I believe, are dramatically overvalued. They are in bubble territory. But the question always is that doesn't mean it's going to pop in 2017. You know, how much longer could it go? As you know, I'm pretty bullish on the Trump administration. And you know, although there I definitely have a lot of disagreements with Trump, but I think he's going to bring more jobs to America. He's going to repeal or soften Dodd Frank. You've heard me talk about all this stuff and that's going to be a huge boon for housing. Okay, so housing prices may be approaching maybe appreciating at seemingly unsustainable rate once again in some markets around the country, but Christopher Thornburg believes that the nation's economic funnels will continue to be much more sound in 2017 than when the market began to implode back in 2005. By the way, I love that he points out began to implode in 2005 because that's when I said it would implode in late 2005. Nobody seemed to notice it until early 2006 to really mid 2007. But that's when the bubble burst, okay, late 2005, just as I had predicted it back then. There's no housing bubble, not even close, assures Thornburg, founding partner at Beacon Economics LLC in Los Angeles. There are three basic worry indicators and all three were very scary in 2005. And all, all three today suggest, if anything, that the housing market is still in the process of recovery instead of being near a new bubble. Now, again, I just want you to know I'm not reading this as some Pollyanna real estate guru promoting real estate because I believe in the multidimensional nature of real estate. I believe that income property, not real estate, but income property specifically is a multi dimensional asset class. And, and if the prices decline and we have what most people call a crash, that actually has a inverse effect on the rental market and it improves the rental market. So again, you just adjust your strategy. That's all you have to do. Because income property is a multi dimensional asset class. If you want to know more about that, go to jasonhartman.com type in three dimensions of real estate three dimensions of real Estate on the search bar@jason hartman.com and you can learn more about the multi dimensional nature. Okay, so the apple A Matter of Apples versus Oranges. The article says the state of the nation's housing economy and the economic variables that actually lead the country to the great or led the country into the Great Recession were vastly different back then compared to the more stable trends that currently exist. While overheated home prices may have been a contributing factor to the housing bubble, they alone were not the needle that finally burst the over inflated bubble after prices peaked in 2006, prices are an important contributing factor. But Thornburg cites three more crucial economic factors he believes led to the market's final undoing and the loss of of so much equity so quickly. Well, certainly wasn't as quick as the stock market. And that by the way is one of the other loves I have for real estate or income property not very liquid and lack of liquidity reduces volatility dramatically. Okay, These three factors were declining affordability, the overbuilding of housing supply and the abuse of leveraged debt. Well, I agree with you completely by the way. That is very true. Back in 2005, while affordability was falling, Thornburg explained home price increases were being driven by markets on the periphery instead of the nation's big markets which remained relatively cool. Really? Wait a sec. Did I understand? I'm not sure I'm understanding or agreeing with that. By the way, at the same time, the pace of home construction, construction was out of control with builders adding roughly 2 million housing units instead of 1 million he estimates the March market actually needed at that time. That by the way is true. Okay, I'm not sure about the other comment. Let's look at this a little more and dive down in it. Okay. Plus, the number of outstanding home mortgages were growing exponentially thanks to some creative financing vehicles and such as so called no doc and subprime financing. Absolutely true. And see the problem we have have with the mortgage business and so many other businesses in the world. Everybody is incentivized for bad behavior. Nobody is incentivized to not to put the brakes on things. Now that isn't quite as true nowadays because of the way we use appraisal management services versus back then the appraisers were bringing in, you know, bagels and donuts into the mortgage offices to get more business for them. So they had to bring the appraisal price in. There was always too much pressure back then. So it is better now. And the banks are far more conservative now and have been for years. I mean really props to the banks. I do not think you're being, you know, too crazy on the lending. I mean there are some little examples I've talked about here and there, some little signs where you thought they're getting a little bit too aggressive, they're getting a little crazy. But really overall the banks have been pretty sane. Okay. And by the way, my comments previously on Dodd Frank are not necessarily a promotion of the banks getting stupid again. I don't believe they should. I hope they never do. But I am Just more being a commentator on how I think that the repeal or softening of Dodd Frank by the Trump administration is going to make money just massively flow into real estate. Okay, so again, it's an observation, not an endorsement, by the way. Okay, so affordability index had hit 103 in 2016. It's the lowest level since 102 was reported in the same quarter of 2008. And yes, I agree with that, but that's only true in the cyclical bubble markets. Affordability is actually quite solid in the linear markets that we promote. I mean, affordability is quite good. Okay, I don't know. You know, I'm going to have to revisit this article on a, on a future episode because there's really a lot more to this and I should probably have one of our guest experts come on and debate and hash this out to me a little bit. The point being that, okay, so look at here in the article, they say the most populated counties with the most improvement in affordability for the quarter. Okay. And this is Q4 of 2016 as Adam Data and Realty Track Report. Okay. Were Suffolk County, New York, Bronx County, New York, Fairfax County, Virginia, Washington, D.C. metro area, Fulton County, Georgia and Fairfield County, Connecticut, the most populated county with worsening affordability. This is not going to surprise any of you. Okay, well, one might, and that's Harris County, Los Angeles County, California. Harris County, Texas might be a little surprise. Maricopa County, Arizona. I used to live there. San Diego County. I used to live there. I used to live in Los Angeles, as you know, in Orange County, California, where I spent most of my adult life. No surprises there. So look, we'll keep track of all this stuff for you. We'll keep talking about it, but some of these other headlines are quite interesting. And before we wrap up today's episode, let me just share a couple of these headlines that you know, headlines, a lot of times they're clickbait. You know what clickbait is, right? But they're also telling, you know, just the headline alone tells you a lot about the state of people's minds and, and the state of the crowd. Right? So realty Track Rates Best US markets for buying residential properties in the first quarter of 2015. Property tax rates highest for homeowners who have owned between 5 and 15 years own high end or low end homes buying more affordable than renting in 58 of the US markets according to 2016 Rental Affordability Analysis. Okay. Renting less affordable than buying. And this is the next headline in most US markets, but not where millennials are moving most. Let me read that one again. Renting is less affordable than buying in most U.S. cities. Okay, so renting is less affordable. In other words, saying you should buy, not rent. But this is not true. Where millennials, the Gen Y people, the young people just moving into the workforce are moving the most. Yeah, I'd agree with that. I'd agree with that completely. Interesting. 87% of US homes qualify for down payment help according to Realty track and down payment Resource Analysis. And then the last 1/3 quarter foreclosure activity increases from a year ago in 32 states. That's not really surprising. And the increase is pretty minimal. Nothing to where we were before. So very interesting stuff. You know, I'm going to bring this article back and dissect it a little more. It's pretty long and there's just more to it I want to talk to you about and we will do this in a future episode. Anyway, go to jason hartman.com check out some of our resources there. Check out the resources page for our property tracking and analysis software there. And also the great educational products and properties we have. Again, as you know, we are in a very low inventory marketplace right now. You're not just going to find properties probably on our website. At first glance, you got to be working with an investment counselor. So any of the web forms you fill out on our site@jason hartman.com will help an investment counselor get in touch with you, especially if you leave your phone number. And we will help you individually in picking the best properties to build your nationwide income property portfolio. Until the next episode on Wednesday. I'll see you in just I'll talk to you in just two days from now. Happy Investing. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own, and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. 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