1889: Raising Rents & Lease Expiration with Self Management Pro, Jason Hartman Live at Market Disruptors, Inflation Arbitrage

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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 1889. 1889. Thank you for joining us today. And I invited my mom back on the show. We are here staying in the same.

Hotel with a few other people by the way.

And I said, mom, wheel your desk chair down the hall to my room because I wanna have you back on the show. So welcome back, mom.

Well, it's nice to be here, Jason.

Good to have you when you're on. People always say great things and they love to have you on.

And my mom shared with me just a few days ago a pro tip. Now if you haven't heard her on the show before, she's got a long experience, a long history of managing rental properties and I call her an extreme do it yourselfer. You know that, right?

Definitely, yeah.

She self manages everything and her methodology think too active.

Most of you won't want to do that.

I believe in a hybrid approach which I've taught on many previous shows before as far as self management. But with all of my mom's experience, she had a great tip about when you should have your leases expire. So say for example, you have someone that is renting from you and they want to sign a lease and they want to have that lease start on October 1st, for example. And the important thing is not as much always when they start the lease, but it's when you make the lease expire. Tell them about that.

Well, here's the whole thing. Everyone thinks about the first, the month, the first of the month. Well, did you ever try to rent a house on the first of the month? That's what you're all probably doing. And that is the worst time in the world to try to rent a house because everybody has Already rented the house from last month.

So have your rented another house.

Rented, you know, someone else, some competing house. Yeah, at the end of the month. So the point is, have your leases expire about the 15th of the month and then it is just great timing because everyone, renters don't do anything until the last minute, okay? So the point is your, your calls will increase 100 fold on that house if you put that house up for rent the last two weeks of the month. Because it's just total wasted time. It's just total wasted time. And if you're putting it on Zillow, don't even do it. I just did it here in Pompano beach. And that was a total waste of 15 days, okay. Because the calls just started in huge masses from the 15th to the end of the month.

Okay, so have your leases expire on the 15th of the month. Now also think of the seasons in your area. You know, and I haven't done this lately, shame on me. But I used to always have this clause that the property can't go vacant in November or December. I used to do that. You know, so I would, I would have like 14 month leases depending on when they started or whatever. But I love your idea of having it expire on the 15th of the month. So you give your tenant notice or they give you notice the 15th of the prior month. And you know, you've got that house coming up and you're going to have that last two weeks of that month to get someone in there by the first of the following month. Mom, this is an awesome pro tip.

So I love that pro tip. That's, that's really good.

So thank you for, thank you for sharing that and also share with us just your experience and your outlook on the rental market.

You know, I've been talking on the.

Show for quite a while about no matter what you think your rent should be, just go up by 100 bucks, 200 bucks, maybe even $300 higher because you will probably get it. I mean, rents are pretty amazing.

And I just did that to you basically because, you know, you had this.

House that you were renting and I think you said you were going to rent it for 3,000amonth. And I said, mom, make it 3,200.

And what happened?

And I did. And they were perfectly happy to rent it for 3200. But here's the other thing. On the first of the month, if you put the house up for rent on the first of the month, the people will try to negotiate you down.

Because They've got a whole month because.

They'Ve got a whole month to negotiate. Yeah.

So if, if they've only got a week, they'll take it.

Yeah, right, so, so you're going to get that last minute renter that's going to, going to be willing to pay more and, and not negotiate with you so much.

So yeah, a guy just said to me, oh yeah, I'll pay that price.

Yeah, right, so, so you got your 3200.

Now, you were really happy about it at the time. And then I said to you, you know, maybe it should have been 33 or 3400.

You never know.

Right.

Well, I suggest that you always, you know, check things out by looking at Zillow, see how things are going, you know, and then, and then decide on your prices. And the whole point is always try it for more than you think you can get.

Especially now, you know, everybody's talking about will the real estate market have a correction? Will the real estate market collapse? Is the housing market in a bubble that's popping, you know, yada yada, we can have those discussions forever, right? And nobody is for sure, nobody for sure knows what's going to happen. But I'll tell you this for sure. As the housing market softens in terms of the sales market, the rental market improves. So you're going to win either way. As long as you have the right mindset. As long as you've listened to my three dimensions of real estate talk. If you don't know what that is, if you're a newer listener, just go to Jason hartman.com, use the search engine there, type three dimensions of real estate and understand the dynamics between the sales market and the rental market. But speaking of the sales market, and before we get to a clip of one of my recent speeches, I just want to share with you what's on the screen. If you're not seeing this on video, this is a chart from Knight Frank Global House Price Index before and after adjusting for inflation. Now, you know, as you've listened to my discussions about the Hartman Comparison Index, the hci, the index that I created to help people really understand whether housing is underpriced or overpriced or fairly priced. Right? This is just one aspect of the HCI basically, but it's from another source. So I want to validate the Hartman Comparison Index by sharing this. Okay? And what this index shows is it shows house prices adjusted for inflation and not adjusted for inflation. Now the caveat here is that we know the inflation adjustment is Never realistic, because they are using the Consumer Price Index. That is massively understated. Always. Right. Ever since 1980, it's been really, really manipulated. But we have what we have. So just using the Consumer Price Index, right? And knowing that the 2000 house price, right, it just as the Great Recession was coming on, there was already the house prices were correcting since about late 2005. So they decided to use 2007 as their baseline. And, you know, that's probably pretty reasonable. I'm not going to argue with it too much, but that's the baseline. That's what equals 100 in this index. And it shows that nominal house prices are way up.

Right?

They're way, way up. And that's what's freaking everybody out because they say, oh my gosh, house prices are so high, we must be in for a correction, we must be expecting a crash, et cetera, et cetera. You've heard all of this stuff. You're hearing it every day in the news media and you've heard it for several years, frankly. Actually, you definitely heard that prior to Trump coming in. You heard this in 2015, 2016, a lot. And the conversation continues, Right? But what you see here is that real house prices adjusted for the understated level of the Consumer Price Index, the cpi, are really pretty low. Now imagine if you adjusted them for the real rate of inflation. They would actually be lower than they were in 2007. So just understand that everything is relative to interest rates, prices, the value of the dollar versus inflation. That's what you've got to understand when you're looking at house prices. Okay, a couple more things before we get to this live clip of a recent speech. This is Mohamed El Erian. I was actually on television with him years ago when he was not as big a deal as he is now with Jim Doty from Chapman University.

And I really didn't know who he.

Was at the time.

I'm kind of ashamed to say that.

But he is a great prognosticator. He's got great views on the economy and he' all over the news and this is last month. But it's interesting. Awful US inflation data headline at 9.1%, well above the median forecast of 8.8% and the highest since 1991. Core also higher than expected. Now, what does he mean by that? That means the core inflation rate where you strip out food and energy because it's too volatile. As they say, you can't count that, but yet none of us can live without food and energy. And Just look to what's going on in Europe. I'm going to try and cover some of this stuff next week. But what's going on in Europe is absolute, it's an absolute travesty. It's a total shame with their energy policies and their greenness that is leading them to just absolute disaster. And what's coming for Europe is not going to be good in Europe. And that's a big deal because this is the Western world, right? That, I mean, you've got the us, you've got Europe, right? That's the biggest, other component of the Western world. Okay, so details appear equally worrisome. Bottom line, further blow to economic and social well being highlights Fed's worst policy mistakes in decades. And I've been very critical of the Federal Reserve. They should have raised rates sooner, but more subtly, they waited way too long. They let the economy run way too hot for way too long. And then this knee jerk reaction, they've overreacted now. So we'll see what happens as this plays out. But speaking of energy, can you believe the absolute disaster of our current administration? I mean, Biden taking Air Force One, which is a very high carbon footprint.

To Saudi Arabia to beg for more.

Oil when he could have just gone to Texas or Oklahoma. I mean, you can't make this stuff up, folks. It's pathetic. It's absolutely pathetic.

And he could have gone on the train like he used to.

Yeah, he could have taken the train.

Yes.

Well, not to Saudi Arabia, but yeah.

To Texas or Oklahoma.

To Texas or Oklahoma, yes, absolutely.

Yeah. It's just, you can't write fiction this good, folks. It's just ridiculous. Danil McElroy, this is Ken McElroy's wife. Of course. Ken is my business partner in the Collective Mastermind and she posted this on Facebook recently. Just thought I'd share it. Welcome to inflation. This is why it's getting so expensive to go out to eat. And this was just posted by a local restaurant and you might have seen this. It's definitely been viral around social media. But fryer oil, you shouldn't eat fried food, folks. But anyway, if you do, 12 months ago was $12. Six months ago was $35, today it's $50.

And mom, since we've been here, you know, for a little over a week, I mean, we've been going out to eat a lot and can you believe the prices?

It's outrageous.

It's just, it's just unbelievable. Chicken wings, $45 a case. 12 months ago, $175 a case. Today take out boxes. So these are the boxes that your food goes in. $25 12 months ago, $95 today. And you know, you just see it all over the place. Inflation is running rampant. It is absolutely crazy. It benefits us as real estate investors. It hurts most people. Get yourself on the right side of that equation. Go to Jason hartman.com and really consider joining our Empowered Investor Pro group, which is@empoweredinvestor.com where we're going to talk interactively instead of one way on several zoom meetings every month. And we've got social network, we've got all kinds of benefits to that, discounts on our events, et cetera, et cetera. That's@empoweredinvestor.com and then of course Jason hartman.com our main website. Anyway, let's get to this clip from a recent live talk that I did. And I think you'll find it very enlightening.

So here we go.

So to dovetail on what Mark was talking about back in about 1989, I think it was Alvin and Heidi Toffler wrote a book called Power Shift. It's a fascinating episode. Excellent book. I highly recommend. It talked about the three forms of power throughout history. And the first form of power that you know is still a form of power today, but not the highest grade form of power is the ability to inflict violence, right? We, we were barbarians in the past. The human race was very barbaric, as we all know.

Right.

And so that was a form of power, the ability to inflict violence. And the problem with that form is that eventually you can't control a person with that form of power. It's a very low grade form of power. You ultimately destroy what you're trying to control and influence. Right. So the next higher grade form of power was the ability to control capital. The ability to control capital, Right. And you could motivate people with money, you could have influence with money. Right. We all certainly agree with that. I'm sure we saw this during the, you know, the real dawn and preeminence of the industrial age, right? We saw the Rockefellers, the Vanderbilts, the Mellons, the Carnegie's, all of these, right. And so they used their capital as a form of power and it was a higher grade form of power for sure. But even that form of power wasn't great because eventually even the fattest wallets, the richest people run out of money. And maybe that's what's happening to our government today, right? It's running out of money, or it ran out of money. A Long time ago. So that was the second form of power. But then came the information age. And that's what Mark was talking about earlier. And information, if you think about it, is so far the highest grade form of power. Because with information, you can have a piece of information and I can have that same piece of information. And we can both use that information simultaneously with the ability to inflict violence. You know, a duel, a fight that ends pretty quickly.

Right.

With capital, we can't use the same dollar or the same currency unit, whatever it is. Right. To influence and control, we have to have different currency units. But with information, we can have the exact same information.

And we can both use it in a different way and have a different form of power. So who believes that? Like Mark said, knowledge is power, information is power. Yes, it is to an extent. But when it becomes very powerful is when you use it in action. So that's what we're going to try and talk about today, of course, in a more workshop oriented format. So I'm Jason Hartman. I'm CEO of Empowered Investor. I have several businesses, but I guess it's fair to say that that's my main business. And what we do is we help people build real estate portfolios nationwide. Now, I've been in the business of helping investors do this for the last 18 years in different markets around the country. And it's been really interesting working with thousands and thousands and thousands of investors and, you know, hearing what they say over the years, understanding their thought process over the the years and understanding, you know, their reservations when it comes to investing and how they make their choices. Because today I'm going to talk to you about what I believe is life's most important question.

And that question is compared to what? Okay, compared to what? With a question mark at the end, I think that's really life's most important question. And I think it's the way we really make all decisions as people. So we'll dive into that. And in this changing market, as we're in a time of serious transition, probably. Right. I mean, who believes this is a time when the economy and real estate market, which is a huge, obviously is transitioning.

Right.

Is this a time where things are changing?

For sure.

I mean, like Mark was saying, you know, there are decades when nothing happens and days that are like decades where things change so, so quickly. And past month, I mean, the mortgage.

Rates have changed substantially. Right.

So what does that mean to the real estate market? What does it mean to the overall economy? Because real estate is such a giant, giant Part of the economy.

Economy.

So we're going to look at that and I'm going to dare to make some predictions today. Now, predictions are a dangerous business because they can obviously be wrong. But you know, if you think about it, it's important to try and think about what is coming next. Right. Who was that quote? I think it was Oliver Wendell Holmes, I want to say, had this great quote. He says some see things as they are, say why I dream of things that never were and say why not?

Right.

That's a great quote. I love that quote. And I might give it the wrong attribution for sure. But I'll give you one example of foresight. That was an incredible foresight back in 1485. Leonardo da Vinci, before we could fly, hundreds of years before we could fly, invented the parachute. Isn't that amazing? And okay, so you're saying, well, you could jump off a building or a cliff, right. And use a parachute. Well, the tallest building at the time was the Leaning Tower of Pisa.

Right.

How many of you have been there? I've been there back in the day when you could go up and climb up on it. So I actually went up there and I think it's only like 130ft or something like that.

Right.

So there was really no use for a parachute back then. But talk about foresight to come up with that idea back in 1485. So I think we are at a turning point and we're going to have to adjust our strategy. One of the beautiful things I love about certain investments is they are multi dimensional asset classes and income property is definitely one of those. So simply by adjusting strategy, we can always make money no matter what the market's doing.

In a country like the US we saw our freedoms just evaporate. Think about the First Amendment in the Bill of Rights for our Constitution, one of the most beautiful documents ever written. I mean, before the Constitution of the United States, the only document ever before that that really gave humans any rights was the Magna Carta. A few hundred years before that was it. And then the Constitution came along and said, hey, look, you know, for the first real time in history, the Magna Carta kind of, you know, skewed in that direction a little bit. But for the first time in the history of the human race, we're going to set up a government and a document that governs the government, that says, here's what the government doesn't get to do.

The people are more important than the government. And sadly, we are seeing a major shift right now away from that beautiful idea that individuals should have the rights and governments are there to serve the individual. And Covid, January 6th, all of these power grabs, they just keep going. Another emergency, more fear porn in the media.

Right?

This is just one thing after another. Soon it'll be climate lockdowns, or probably before that it'll be a food shortage. Right? They're engineering this stuff or they're just using it to their advantage.

Right?

The elites that want to control us, they just look at these things opportunistically sometimes. Other times they actually help them occur, they engineer them.

What are some action items we want to leave you with today? You gotta have the right thinking, the right philosophy about this stuff. And understand too that many of these things we've talked about are ways to game the system. There are hacks, there are ways to hack the system. The system is a disaster. It sucks. But all we can do instead of cursing the darkness is we got to simply light a candle. We need to align our interest with the two most powerful forces the human race has ever known outside of God. They are governments and central banks, the most powerful entities the world has ever known. So we got to have the right thinking about this stuff. We've got to have the right assets, the assets that benefit from all of these treacherous, tyrannical things that are going on. We've got to have the right capital stack to acquire these assets. The kind of capital stack meaning the way you finance the deal that benefit from inflation induced debt destruction.

Okay, and that one is a mortgage. Like think about this.

Even today with these higher mortgage rates, if you borrow at five and a half percent, and I know most of you think that's terrible, it's ridiculous because, you know, it was only 2 and 2.5 or 3% a year, a year and a half ago. Right? I know, I get it. Right, you feel that way. I totally understand, but. But it's still dramatically lower than the rate of official inflation.

There are very few times in history where the official CPI inflation rate has.

Been lower than the 30 year fixed rate mortgage.

That almost never happens. And it's happening right now. Right now.

Now compare that to the real inflation rate. Okay, so CPI rate, just for a minute. If the government tells us inflation officially is 8% and you at five or five and a half, you're making the margin on that. You're an arbitrager, right? Arbitrage simply means exploiting the differences in things. So you hear about all these big arbitrageurs, like the disgusting George Soros. He's One of them, right. Not a good example, but the guy's a billionaire. Right? And there's lots of others that get very rich by exploiting differences in things. You get a three decade long fixed rate mortgage on a set of packaged commodities, all those ingredients of a house, and you've got a 2 1/2% margin, maybe a 3% margin over the official rate of inflation. But what about the real rate of inflation? Inflation, your margin over that, if that's say 16% is like 10 and a.

Half percent.

And you still have all of those other benefits I mentioned in.

The ultimate investing equation.

It's an incredible, incredible asset class. You got to choose it in the right markets. Linear, hybrid, cyclical markets. Right. This is what my company does. We help people choose the right market and the right properties in those markets to build their wealth.

So George Gammon, Jason Hartman and I have, we've created a high level mastermind group called the Collective. The goal of the Collective is for you to learn from the three of us as well as of course the other members on how to build and more importantly how to maintain your wealth. In this video we're going to go into detail about what the Collective is and what it can do for you. Enjoy. So I'm Ken McElroy, I've been in real estate for over 30 years. Started with a two bedroom, two bath, using my own money and now I own over a billion dollars worth of real estate that I bought over the years. Built a big company, we have a construction company, a development company, a property management company and of course an investment company. And typically now we syndicate and work with large, both private and public institutions for the equity and the debt. And so what I bring to the Collective is how to scale, how to grow. Starting with one really small property with no experience at all and growing it into an organization which I've been able to do that basically runs almost without me. So that's what I'm going to bring to the Collective. We decided to start the Collective because one I met George Gammon and George brings a very interesting perspective about the economy and the Fed and the way money works and Bitcoin and alternative types of investments, which quite honestly I was super focused on real estate almost the entire time and even I want to be a little bit more diverse. So when I talked to George and to Jason and they're always doing very, very different things on the investment side. Jason specifically is more focused on the single family housing and what's going on in that market so that we could collaborate and have different viewpoints on different things. And so that's why I thought the collective would be good because I think everybody's kind of searching for the same kinds of answers. So the collective means to me basically the collective group, the whole. And I've always been a big believer of team and collaboration. So for me it really means collaboration of everyone kind of coming into a room and learning from each other based on their individual highs and their individual lows and to be very, very respectful of all their independent views on things and to be more open minded, transparent and authentic. So I cannot wait for the group to get together each and every quarter because we all have very different walks of life that we're going through. And so it's very, very cool to get into one room with like minded people. I think the right person for the collective is somebody who's into personal development, somebody who's trying to be a better individual, somebody who's trying to have that work life balance, trying to figure out good decision making on the investment side, specifically good decision making on the personal side perhaps certainly on their health and on their wealth. The members that have already signed up are people typically that have businesses that they're growing, businesses that they've started or businesses that they've sold. So typically they're higher net worth and they're trying to figure out what to do with their money. They're probably a little bit afraid of invest inflation. They're probably a little bit concerned about where to invest. And they're obviously looking at real estate as one component. Somebody that's trying to do the right things both on the personal side and on the financial side. So some of the experiences that members can expect to get out of the collective are certainly the network. And I think that's always super powerful. I've been involved in groups like this before like EO and Wife, the Entrepreneurs Organization and ypo, which is Young Presidents Organization, which is kind of a peer to peer network. And I, that's what I envisioned and I think people are going to certainly get that out of there. They're going to have lifelong friends for sure from this and they're going to meet people at every single event. But also we're going to have fun. So as an example, things like race car driving and doing all kinds of really cool things and meeting celebrities and things like that and fashion shows are going to be part of it. So it's kind of a how do we have fun and learn together? And we're going to have that at each and every event. If you guys are interested, there's a link below you can click on. It'll take you right to the website which has a load of information on exactly what the collective is, where the next events are, and what exactly you'll be getting if you become a member.

I just want to say thank you. Thanks to you because I would never been able to retire if I hadn't got hooked on to you 10 years ago. And I really owe this to you that I met my goal to retire early and not work for the man and kind of be my own boss. And I would never been able to do that had I not said I was a little discouraged 10 years ago. But hooking onto your podcast and learning from what you were teaching has made this all possible.

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 and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.