2137: The Great Rent Surge: Explore the Hottest Markets Driving Income Property Success!

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com in the past six months, taken massive action, and that has not always been my mo so I'm extremely thankful. I think this group has helped me shortcut some of those decisions and taking action. And that's really ultimately what it's about. I think that learning through taking action. And so I'm just very thankful for being able to do that and learning along the way, trying to hold on. And this group has been a big part of that. So thank you.

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 2137. 2137. Thank you for joining me today. Today I would like to take a rather deep dive into the subject of rents. You know, there is way too much focus on the subject of sales prices and housing prices, which are continuing to increase even in light of much higher mortgage rates, even in light of recent rate increases. So it's pretty amazing that we have the most durable asset class, the most resilient asset class in the entire world, income property. When people go into the marketplace, when they go into the housing marketplace, as I've always said, they really only have three choices. They can buy, they can rent, or they can be homeless. And this is just the reality of the marketplace. I know many years ago when I was doing a live conference, I was on stage speaking and someone raised their hand and yelled out, jason, they can live with their parents. Okay, fair enough. And by the way, I have talked to you in the past about this huge shadow demand aspect. I can't remember the numbers offhand, but it's somewhere around 10 million households that need to be created or will be created. These households will be created by people moving out of the nest. There are so many young adults living at home with their parents at the highest rate in history right now. And those people maybe slower than ever, but they will eventually get out of that nest and form their own household and they will either buy or rent that household. So that represents a huge shadow demand for inventory that is simply not there. I mean, look, we are in a world in a market where we only have about 500,000 homes for sale in the United States, just slightly over 500,000 in inventory shortage. At this snapshot in time of about 700,000 houses in an inventory shortage of, depending on the estimate you trust 1 million to 7 million homes overall. That represents the overall under supply of the housing market as researched by many, many very reputable agencies. And I've discussed those with you on a prior episode. Fannie Mae, Freddie Mac, Zillow, CoreLogic, I mean, just all of the usual players, Moody's Analytics, Zonda, et cetera, et cetera. All of those players have talked about this under supply of housing in the U.S. now, that is a different concept than immediate inventory. So in immediate inventory terms, we have a shortage of about 700,000 homes that should be for sale and are not for sale. Okay, that's the immediate thing. But let's talk about these three choices people have and what they might do and what is happening in most specifically the rental market. I want to take a deep dive on that. But before we do, just a couple of quick things. Number one, on Wednesday, and I know this is short notice, but especially if you're somewhat local in Florida, I will be attending an event at Mar a Lago at the gorgeous Mar A Lago Resort and Club. According to this idiotic judge, this property is only worth $18 million. Yeah, right. When. When you know, houses almost immediately near selling for 150 million and they have much smaller pieces of land, so it's just totally ridiculous. This absolutely stunning property by the most loved and hated man in America. Right. You know who I'm talking about. I'm not even going to say his name, but last time I was there, I was at an event for Carrie Lake, also as she was running for governor of Arizona and now she's running for Senate. And you know, I could see her as president someday, definitely as a VP pick. So we'll see how that goes. But anyway, Roseanne Barr will be here. Jim Brewer, Colby Covington, Chad Prather. Last time I was there, I met Mike Lindell, the Mike hello fame guy. Anyway, it should be really fun. I'll be at that event on Wednesday. If you'd like to go reach out to your investment counselor through Jason Hartman.com or just reach out to us in general, we can get you the information on that. So especially if you're a Florida local or you're in a nearby state, it's really easy to come down for that sort of bucket list, once in a lifetime event on Wednesday. So if you're interested, just reach out through Jason Hartman dot com. Okay? Now, are you outraged, as you should be, as I am, at the way people in this country just get such light sentences for white collar fraud and white collar crimes. I mean, whether it be Theranos, Elizabeth Holmes or all of these other people, right? We just got the verdict recently on sbf. Sam Bankman Fried, who just was running this complete scam. I mean, the most irresponsible idiot. Okay? I mean, I mean, it's just unbelievable. And folks, let me tell you something. A lot of the things that you think that I think are reputable today, that we all think are reputable, a lot of these companies, a lot of these real estate syndicators, a lot of these fund managers, you're going to find out in a number of years that they're crooks and they're cheating you. And that's why I say the best investment you can engage in is being a direct investor. Remember, commandment number three of my ten commandments of successful investing? Thou shalt maintain control. Because when you relinquish control, you leave yourself susceptible to three major problems. Number one, you might be investing with a crook. And you know, Sam Bankman, Fried, Bernie Madoff, Bernard Ebers, Dennis Kozlowski, Jeffrey Skilling, Walter Forbes, John Rigas, Sanjay Kumar, Elizabeth Holmes, Charles McCall, I mean, you know, Martha Stewart, the list is here, right? And so these are all the sentences they got. And I just want to review those in a moment. But you might be investing with a crook. That's the number one problem. And it takes a long time to figure out whether they're a crook. I mean, Bernie Madoff ran his scam for decades before anybody knew. Well, one guy knew and he went to the SEC and they ignored him. You know the story, right? Okay. So might be investing with a crook. Number one problem. Number two problem, you might be investing with an idiot. I mean, Sam Bankman fried idiot and crook, right? He was both all at once. It's kind of hard to say that someone who pulls off such a massive fraud is an idiot because there are a lot of smart criminals out there, no question about it. Anyway, the number two problem, you might be investing with an idiot and you'll lose money because of number one, their crookery, or number two, their incompetence. And assuming they're honest and competent, you have a third problem. And the third problem is they take a giant management fee off the top for managing the deal. So the best thing to do is be a direct investor. Get direct on your investments so that you, in the example of the most historically proven asset class in the entire world, income property, you buy it, you choose the tenant, you decide on the rent, you maintain control over the deal, right? You decide what to buy, where to buy, when to buy. You decide how to finance it, how to refinance it, when to refinance it. You decide everything. And this gives you a huge advantage in the investment landscape, in the investment marketplace where you can get ahead. Now, I know what some of you are saying. Well, Jason, to be a direct investor, that involves more responsibility and it takes more of my time. You are right. But it doesn't take as much time or responsibility as you think it does. And that's what we do at Empowered Investor. We make that whole process much, much easier. We give you the tools and the knowledge that you need to win at the game of direct investing. And you might be thinking, well, what if I'm already wealthy or I'm getting closer and closer to being wealthy? I don't want to deal with anything, folks. Let me tell you something. You always have to deal with stuff. The most passive investments aren't even passive. The most passive investment in the world should be what, a bank account, right? Or buying some precious metals. So let me tell you about how those aren't passive because you are losing your money to taxation and inflation. And I dealt with a problem a while back where I had some precious metals in a safe deposit box. And then they tell me, oh, well, we're closing the branch for that bank where your safe deposit box is, so you got to come and move it. And I used to live in that area and now, you know, thousands of miles away. I got to fly there. I got to go take the big security risk of taking these precious metals out of the safe deposit box, finding a new place to put them. I mean, there is no such thing as a passive investment, folks. Get over it. This whole idea of passive investing simply does not really exist in the real world, okay? It just doesn't exist in the real estate game. We love leverage because we can do more with less. If you're in the active side of the real estate business, like wholesaling or flipping, great software offers even more leverage because it solves problems like lead tracking, marketing, sales and even operations. That's where our sponsor Resimply comes in. Like list stacking, driving for dollars, automated drip campaigns, cold calling, dialer, complete phone system, email management, speed to lead, buyer management, task tracking, accounting, and so much more. This powerhouse software eliminates the need for juggling multiple subscriptions and different complicated integrations. So check out Resimply if you want to streamline your investing business and start closing more deals. They made a special discount offer for my followers where you get 50% off your first month at resimply.com hartman that's R E S I M P L-I dot com hartman plus they're throwing in a 14 day free trial, so don't miss out. Take a look today. Bank accounts. I mean, during the Great Recession I had different amounts of money back when the FDIC insurance was $100,000 and I would put $100,000 in a bunch of banks because you know, look, and I know, I know putting your money in the bank is terrible, but you know, sometimes you just have a glut of cash. I know. Great problem to have. Hashtag first world problems. I feel very grateful that I have that problem sometimes. And it's undeployed capital. You know, all of my money is not always invested. And I remember seven of my banks went under and they got taken over by the fdic. So I had to deal with that. I got letters, I had to move the money, I had to find a new bank or maybe they got taken over by another bank and then my FDIC limits at that bank were exceeded, right? There is no passive investment, folks. That's the most passive thing. Now you take the stock market and the brokerage. I mean, I have stocks, I have brokerage accounts and they're just a monumental hassle. First of all, you don't get any service anymore. You can have loads of money with these banks and brokerages and they still treat you like crap. I mean, the service sucks. It just sucks. Everywhere you look nowadays. It's awful. And it went really down the tubes during the COVID era and it just never really recovered. So just suffice it to say there's no such thing as a passive investment. And one of the areas where people get really screwed in stocks. And I'm not talking about by the crooked CEOs, the crooked investment bankers, the crooked fund managers, the crooked people running Wall street. Because Wall street is the modern version of organized crime, right? I'm not talking about that normal level of crookery or them paying themselves giant Bonuses, taking huge management fees off the top of the deal. I'm not talking about any of that, okay? I'm just talking about the fact that they're not managing your accounts correctly, they're not tax loss harvesting and you are getting screwed on taxes. Right? Or they're not tax loss harvesting properly and you are overpaying on taxes. You're not getting all your tax advantages. So these things are all extremely complicated. And I tell you, owning rental properties and being a direct investor is so much easier than most people think it is. I know there's a few horror stories that get all the attention, but the vast majority of the time you get your rent and your tenants are great people and they just want a nice place to live and they're your customers and they treat you well, you treat them well and it goes perfectly fine, you know, 95, 99% of the time. Right? Especially if you're a direct investor who is engaging in the hybrid self management program that we recommend. And by the way, tomorrow is the first Tuesday of the month for our empowered Investor pro members and we will be talking about this as well as lease options and rent to own programs. We're going to talk about that tomorrow night. And next week we have a wide open monthly meeting that's open to everybody, not just our pro members. Everybody can attend. Go to Jason Hartman.com Wednesday and you can register for that where we're going to have one of our lease option or rent to own experts on talking about those programs. I tell you those have changed my life recently. Multiple deals, highly profitable that I have personally done. And two of our clients in the program have big success stories as well. Maybe I'll get them there on Wednesday so they can share those with you. And that's the second Wednesday of the month. Remember, every month on the second Wednesday we have a meeting that is open to all of our followers, fans and audience and you're welcome to attend. Just go to Jason hartman.com Wednesday and by the way, if you're listening to this like right away and that link is not working, just go back a day later and it'll be working. Okay? Sometimes I announce things a little fast and I didn't have time to check what was there. But look at the outrage of these crooks on Wall street, these white collar crooks. Bernie Madoff got 150 years. Bernard Ebers, WorldCom, right. He got 25 years. Dennis Kozlowski got up to 25 years. And by the way, he was a big spender. But I don't even know if he was actually a crooked by legal standards, yet somehow he's in prison. Okay, that's sort of a little different one than most of them. Jeffrey Skilling, remember Enron and all the people that lost their lives and livelihood over all of these different scandals? I mean, people commit suicide over this stuff, folks. It ruins people's lives, okay? These people should be treated like real criminals. They get off too easily. I mean, Martha Stewart, she got five months in a luxury prison, okay? I mean, it's just ridiculous. Some of these sentences are so light. And these are the sentences. It's not showing the time they actually serve, which they usually get off early, right? So it's just awful. Anyway, let's get back to these three choices and let's talk about rents. I got some big rent surveys from our friend Lance Lambert, who, by the way, I recorded a show with last week. We'll probably air that one next week. He's with Resi Club. It's got some great data. But I wanted to share some of this stuff because the rental income is critically important to real estate investors. So here is a chart, if you're watching on video, of single family rents and what they've been doing since 2016 in a whole bunch of different cities. So overall, in the United States in 2016, rents went up by 3.2%. Now, remember, I have always said that you want to try and increase Your rents by 4% annually. 4% per year is the ideal target rent increase on average, but some of these years it's a lot better than 4%. Just look in the US in 2017, 5.1%. 2018, 4.7%. 2019, 4.4% in 2020, 6.8%. And in 2021, a whopping 13%. Wow. 13% rent increase in 2021. In 2022, 8.5% in 2023, 4.6%. United States single family home rent increases. Now, these are the top 40 markets, the top 40 metro areas in the United States, and even New York City last year had big rent increases, which, by the way, I have been very wrong about one thing in the 20 years since I've been talking to you here on either the predecessor, the radio show I used to have, or the podcast, and then much later, YouTube. And the one thing I've been wrong about is interest rates, mortgage rates. Okay, I have admitted that. Very hard to predict interest rates, but I've been right about pretty much everything else. And you know that if you've been following me for 20 years. And you listen to flashback Friday episodes where you can hold me accountable, you can hear what my old predictions used to be, or you can just go back and listen to the old ones anytime you want. They're all published. I can't change them. Okay? It's there. It's in the record. It's carved in stone. All right, so these different markets around the US Right. I am amazed at New York City. Another thing I think I've been wrong about. I mean, New York City is a disaster. No question about it. It's got rent control. Crime is spiraling out of control. I mean, New York City's a mess. I wouldn't recommend it. But during the COVID era, I really thought New York was dead. And even New York City has shown an amazing amount of resilience. I mean, New York, New York rent increases last year, 5.2%. They beat the nation. Now, they did suffer really badly during the COVID era. So you got to balance all this stuff out, right? Anyway, you look around the country. Let's just pick a few of our markets. Los Angeles, my hometown. Not our market, but 3.9% last year, 11% in 2021. Lagging the nation pretty much across the board in terms of rent increases is LA. Okay, let's go to Chicago. Wow. Chicago, 2021, 10.1% increase. Lagged the nation by 1.9%. But last year it beat the nation. It was 6.7% rent increases last year. All right, let's go to the next page of this. You see that? Phoenix, a depressed market, oversupplied with apartments, oversupplied with housing. And a challenging market, for sure. Not one of our markets for many, many years. We used to recommend Phoenix, but it's been a very long time. Even Phoenix had positive rent growth of 2.9% last year. As meager as it was. Orlando, up 3.3% last year and a whopping 18.8% increase two years ago. Wow. Last year or the year before last? 9.8%, but 3.3% last year. So Orlando definitely calming down, but it's had some meteoric rent increases. Really? Charlotte, North Carolina, really good increases. The best year, 13.3%, 10.4% year before last. And definitely softening to 2.9% last year, but still positive. Okay. Cincinnati. Wow. That's amazing. Last year, Cincinnati, Ohio, 9.4%. In fact, the only one on this entire chart that had break even was Austin. No increase last year. Austin, Texas, not one of our markets anymore. Many years ago. I Used to recommend Austin, but again, that market's been highly overvalued. But during its best year, 16% rent increases. Imagine that. So Indianapolis last year, 4.8%. Last month we talked about the Indiana market. Not Indianapolis specifically, but northwest Indiana. And during its best year, 10.8% rent increases in Indianapolis. Now in Columbus, 5.5% last year, 9.6% in the best year. And positive across the board for all of these markets that I've discussed. I mean, just amazing. Okay, now let's talk about the multifamily market. This is the single family market. Let's talk about apartment complexes because they have been suffering. They have been massively oversupplied and over speculated by syndicators, many of whom are either incompetent or they are crooks. Remember, commandment number three, maintain control. So don't be investing with those guys. Right. So looking at that, here is how the multifamily or apartment market looks compared to single family. It's not pretty and it's going to get worse before it gets better. As I've said before, this will work itself out, but it's going to take two or three years because there is just a massive amount of oversupply in the apartment market and a massive amount of overvalued over speculation with all these apartment syndicators. We've reported on that extensively in prior episodes. Overall in the United States, apartment rents, Let me go over them year by year. 2016, 3.2%. 2017, 3.3%. 2018, 3.6%. 2019, 3.4%. 2020, negative. Ouch. Negative 2%. But 2021, positive 15.8%. Wow. Massive increases in 2021. And these are the kinds of things that causes everybody and their brother to jump into the market. Right? And when they do, look what happens. Then we went down to 6.5%. And last year, 2.7% negative rents in many markets for multifamily. Dallas, Last year, negative 0.1%. Atlanta, negative 1.4%. Phoenix, negative 1.1%. San Francisco, negative 1%. But check this out. San Francisco in 2020 was negative. And this is startling. You ready for this? In 2020, San Francisco apartment rents were negative 11.6%. Ouch. Whoa. That's bad. 11.6% negative in 2020. Whoa. Ouch. That hurt. Seattle, 2020, negative 6.7% last year, though, 2% positive. So, you know, it's not much you want. Remember, 4% is your ideal number on those. All right? So I hope that helps. Give you some rental information. Now, our Empowered Investor cruise, which is coming up in just three weeks. Wow. We're going to be in the high season. Three weeks can be great. That has been sold out. But guess what? We have a team member on our staff who has a veranda room. So one or two people with a balcony who cannot go. So this room is available. We literally have one more room. Our travel agent, as I reported before, told us that the ship is sold out. The entire ship, as well as our room block. We sold out our room block quite a while ago. But we do have this one room that there's a 90% chance it's coming back on the market. So if you want to go on the cruise, okay, go to Empowered Investor Live and go ahead and book that one room. And as soon as it's booked, I will tell our team member that it's good to go to relinquish that room and you can have it. Okay, so it's a veranda room. There's only one cabin choice. It's a veranda that is available for one or two people. So go ahead and go to Empowered Investor Live or if you have questions, just reach out to us through Jason hartman.com or reach out to your investment counselor directly. And last thing, I want you to know that the podcast has a slightly modified logo. It's the same podcast, but here's the new logo if you're looking at it. We kind of took that circle thing out of it to make it a little less busy looking, but it's the, it's the same great show that I appreciate all of you listening to for so many years. I know many of you have been listening for 10, 15, 17, 18 years, 19 years you've been listening to the show. So I am very grateful for that and I'm glad the content is valuable to you. So we appreciate you listening. And by the way, if you are listening, please rate and review the show. We'd really appreciate that it helps us and please share it with your friends, your family, your colleagues at work, whomever to help get the word out so people can improve their financial future. And until next time, 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, 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.