2195: Empowered Investing: Mastering Self-Management, Control and Outgrowing Dave Ramsey’s Advice

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Hey Jason, I just want to say this. Your presentation in Tampa was one of my favorites. I have been sharing that slide that I took a picture of with like just about everybody I know about price of housing versus gold per ounce.

Man.

Just incredible.

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 whose own project 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 empowered investors and greetings from Warsaw, Poland. This is episode almost 2200. We are at 2195 today. Wow. This has been a long and wonderful journey and thank you for always tuning into the show and also thank you for writing a review about the show.

We would really appreciate that. Always.

Today we've got some good stuff for you. The main part of our show today will be more on self management and being an empowered investor. Empowering yourself. We've talked over the years so many times about commandment number three, thou shalt maintain control. And as the Norada Real Estate Marco.

Santarelli story continues to unfold.

I've got so many people asking me about this. I read a little bit about it on Bigger Pockets the other day and have seen these reviews. And of course investors are alleging a fraud, a Ponzi scheme. We'll see how this really shakes out. But I want to tell you this is not just unique, certainly to Marco Santarelli or Norada Real Estate. It is something that is in the background. I will bet you of a whole bunch of funds and syndications out there. This issue of potential fraud or incompetence, whatever it is, it's usually a blend of both. Remember, commandment number three says thou shalt maintain control. Be a direct investor so you do not leave yourself susceptible to three major problems. Number one, you might be investing with a crook and you will lose money because of their dishonesty. Number two, you might be investing with an Idiot. And you will lose money because of their incompetence. And number three, if they're honest and competent and they pass those first two hurdles, you will be paying a huge management fee, taken off the top to manage the deal. When you're a direct investor, yes, you feel the bumps in the road. You're going to experience them because you're driving. You're in control, right? You're not on the back of the bus in some luxury tour bus being insulated from all of that. But you can make that ride easier with our help. And that's what we're here to do. That's why we have our free Wednesday zoom meetings. That's why we have especially our Empowered Investor program. That is cheaper than a gym membership and extremely valuable.

That's going to help you a lot.

So join Empowered Investor Pro. Get fully empowered. You know, just take advantage of all of these things where you can get our assistance and you can get the education, the contacts, the referrals of all the resources you need to be in control. Thou shalt maintain control. You know, in the Marco Santarelli situation, you know, they're alleging hundreds of investors.

Will lose all their money.

Now. We'll see. I don't know how it'll work out. You know, again, I don't know the details, but that's what people are saying. You can read these reviews yourself. You can go do your own research.

Apparently there's a whole bunch of stuff on Reddit.

I don't really use Reddit too much, so.

So I haven't looked there yet, but I'll check it out so we can.

Report to you on that later. Anyway, before we jump into our main topic of self management again, because this is such an important topic, I want to make sure that we talk a little bit with none other than Dave Ramsey.

I know you're thinking Jason. Dave Ramsey.

You're kidding. You're not a Dave Ramsey fan? You know, I have tried to be really balanced about this and really call it like it is, okay? And here's how it is. Look, Dave Ramsey is great for the market he serves. He is great for the typical consumer that is spending too much money for their income. He is great for the person who has got credit card debt, who's buying those appearances of wealth, the fake wealth that just create an obligation rather than.

Helping them create wealth long term.

Right? Dave Ramsey is great for that, for that market. He is helping people. The problem is that market will, you know, to liken it to maybe a grade school metaphor that goes up to sixth grade or junior high school, right? And that's fine. Most people really are in that situation. That's the biggest market. But if you want to get into high school and college, so to speak, I hate to say college because it's.

Such a fricking ripoff. And you know, a lot of these.

People that are in trouble that Dave Ramsey is giving some pretty good advice for have big student loan debt, right? So if you want to graduate to the next stage, you need to change your instructors, right? If you're in a high school, you're not learning much from your elementary school teacher, okay? And that's where Ramsey can help you. But once you want to be an investor and you are proactively creating wealth rather than reactively or defensively defending yourself against debt and trying to get out of debt, you got to change your instructors, okay? And Dave Ramsey is no good for that. He doesn't teach or understand the benefits of leverage and how to use the extreme power of that to make money. Right. It's just not his thing. So, you know, that's where people get confused about him and his situation.

Okay?

So the doomers like to share the videos of people and I saw this one shared recently that I'm about to share with you, which is Dave Ramsey 2 years ago making an assessment of the real estate market and a prediction on the real estate market. You know, the doomers love to say this video won't age well. Well, they say that about some of my videos and they've aged very well.

So sorry, doomers, you're wrong again. You'll be right someday.

You know, a broken clock is right twice a day.

You've been wrong, wrong, wrong for 15 years, okay? And a lot of people have lost a lot of money listening to you doomers. And you know what? This is a two year old Dave Ramsey video and they're saying, oh, don't listen to the propaganda. You know, he's wrong, but he's been right, you know, since then. The cost of money has tripled, interest rates have skyrocketed, and he's still right. Okay? And you know what? Overall, the big macro trend, there will always be ups and downs along the way. There will always be bumps in the road. But the big macro trend is that housing shortage is real. And when the Fed pivots, and they will pivot, they might even pivot within.

The next month or so.

People are really thinking they will this time. When they do, that's going to create a lot more housing demand. Remember, just a half point Reduction in mortgage rates. As I've shown you before in prior episodes, just a half point reduction means 2.8 million additional people can qualify for a mortgage on the median price home if we get a full point reduction in mortgage rates. And right now, as I'm talking, we have the lowest mortgage rates in 15 months. Yes, they're still high compared to the COVID era when they were so cheap, you know, it was absurd. So then we're going to have almost 6 million new people that can qualify. I mean, folks, if just a third or 40% of those people enter the market and start bidding on a measly inventory of just over 600,000 homes for sale, what do you think is going to happen to prices? You know what's going to happen? There's an old saying I used to repeat a lot way back, a long.

Time ago, longer ago than I want.

To mention, but I used to train real estate agents and do big seminars.

With, you know, hundreds and hundreds of.

People in the room, sometimes even thousands. And I used to train them on how to be successful in the real estate business. And one of the things I used to always say way back then is that the key to success is staying in business long enough for something good to happen. Yeah, that's endurance. You know, that's treating your investments and your career and your whole life like a marathon and not a sprint. Not being focused on the instant gratification, being able to overcome the problems of today for the bigger long term goal. And that's what it's all about. Okay, so maybe too much build up here. Let's hear what Dave Ramsey has to say. Here he is.

All right, let's talk real estate. A lot of folks are saying, I'm going to sit on the sidelines and wait on buying because house prices are going to go down. Let me help you with this. House prices are caused by one thing and one thing only. Supply versus demand. How many houses are for sale versus how many buyers there are? Buyers are fewer. In a bad economy, a high interest rate economy, there's fewer buyers, but they have to be less buyers than supply for house prices to go down. That's not going to happen. Here's the real numbers. Here's data, not feelings. Let's talk this through. 5 million more 35 year olds right now in the millennial generation prime house buying age than there were in 2007. 128 million households right now in 2007, only 116 million households. 12 million more households operating that need a house. And yet There's a shortage of housing. In 2007, we had 2.1 million new housing starts. This year we'll have 1.4 million new housing starts. We have 50% as many houses for sale right now as we had in 2007. Inventory's at half. So the number of buyers would have to go down so dramatically before the house market prices go down. It's not going to happen, guys. House prices went up 32% in 2020, 18% in 2021, 7% this year in 2022, next year. Projected to be a 5% increase every year for the next five years. We're going to have fewer houses for sale than buyers wanting to buy them, driving the price up. House prices are going to go up every year for the next five years. If you're ready to buy, you're in good shape financially. You need to buy now. Don't wait on house prices to go down. They're not going down. What goes up must go down. No, it doesn't. I just gave you data, real facts. They're not coming down.

Well, I hope you enjoyed that. And you see that he was right two years ago, even though we've had massive inflation in rates and, you know, he doesn't go as deep into the stats as I do. It's not his thing. It is my thing, and so I.

Won'T go into all that.

But, you know, the bottom line is, you heard what he said, and he's still been right, and he's probably going to continue to be right at least as far as entry level housing for a very long time to come. So that's that. All right, let's get into the main part of our show today. I don't want to talk too long because I want to play more of this great content from our Empowered Investor Pro private group that you need to join. Go to empowered investor.com. look, folks, I'm just telling you this.

For your own good.

I certainly don't need the money. I haven't needed to work for 17 years now. I could have quit 17 years ago. Maybe I'm crazy still working, but, you know, I just love it and I really do think it's a mission. So if you join Empowered Investor Pro or you don't join, it's not going.

To change anything for me, but it.

Will change something for you. So you really should join it and join us every month on our private Zoom calls. Those are just really, really powerful small group and we really dive into this stuff deeply. As you will hear right now.

Jason, I think what you said about seeing the leads being generated is super important, especially Derek, with these, these bigger companies because they've got so many houses that they're managing. And let's say they just have like one or two people managing those leads coming in. They're reactive, they're not proactive. So they're waiting for somebody to fill out an application and then they're going with the property that's been probably sitting on the market the longest. And so the leasing process is like almost like a machine, you know, and so you're just kind of like waiting in line versus if you see the lead flow coming in, you know, like Carrie was talking about earlier, you know, she just picked up the phone, called the tenant and decided which one she wanted. And you know, I've had similar experiences in my self management. You know, I lease my property so fast, and it's just because I'm proactive rather than reactive, you know, that that person working for the big management company, you know, they're getting probably an hourly rate, maybe they're getting a little bonus, but they're not incentivized like you to get at least quickly.

So, yeah, you care about one property. They're trying to care about, you know, 30 properties, right, that might be up for lease at a time. So, yeah, I really want you to have the advantage. And when you're in control, Derek, you're going to have it that way. Bob, we'll get to you in a second. Paul and Sandra had their hand up and I didn't quite get to them. Did you have a question or a comment?

Yeah, Jason, so getting back to banks, can you or the group recommend any banks that are LLC friendly? Because we're having a little issue with a bank that we kind of open up an account with, and we have a holding company and we also have an llc and our name is not really attached to that. And now they want to see our personal information regarding that.

By the way, did you listen to yesterday's podcast episode?

Not yet.

Okay, so you know, yesterday, literally the Corporate Transparency act went into effect, the new law. Right. So, you know, everything's just getting more difficult. Okay. That's life. But you know, with more red tape, more bureaucracy. Remember that barrier to entry is a barrier to other people too. Okay. The people that win in life are the people that are willing to go through the hassle to take the extra steps, right? They're willing to qualify for mortgages. When it's hard, it's a pain. Right. Your tenants, you know, they're not willing to do that. They're going to give up. Right. Another landlord investor. They should be setting up an llc, but they don't because, you know, it's one more step, it's harder. Right. And yesterday it just got a little tougher with this new corporate transparency act. But any bank should be fine with opening up an LLC. I mean I have 42 entities, I think or something like that. Now all I do with my banker is I just email him the ein letter from the irs. That's my tax ID letter. And then I email the articles of organization for the LLC from the state, the Secretary of State website. Then he sends me back the forms I need to sign. Okay. I tell him who the owner of the LLC is, you know, or what percentages or whatever, and he sends me back the forms to sign and then the account is open. This should not be difficult. Is it a series llc just out of curiosity?

No. And what they're.

Those are.

That's why the account and everything was fine with that. The banker, and she was a business banker too. So supposedly she knew what she was doing. But she like was trying to get us to put all of our personal stuff and now she just called today and is like, I need what, what.

Kind of address she wanted are basically our home address. And we have.

Yeah, you got to give them your home address. You have to. They're not going to open an account without a home address anymore.

Well, I mean they have our home address, but she now she wanted to change the mailing address, which is in Las Vegas to our home address. Right. Or yeah.

So, well, mailing address, you don't, you know, you can have that separate. But you do have to give them a home address now and. Yeah, and if you're using a mailbox they will know you used to be able to get away with that. You can't anymore. Okay. You got to give them a home, a residential address. Which makes me wonder what do you do if you're digital Nomad, like what address do you give them then? Maybe your parents address, I don't know.

But, but one, one other question real quick. So with the properties in the LLC now we've assigned the benefic of the property to an LLC in Florida. Like in California we use the preliminary change of ownership form. In Florida, what is it called?

I don't know.

Oh, you don't know because yeah, we need to try to record those properties into.

You're saying you want to put the property into the llc.

Right.

So we need to Go to the county recorder. And I don't know how it's done in Florida.

I think that's just called a deed.

Yeah, transfer deed.

I mean, that's just a deed.

It's okay.

Yeah, you're just deeding.

So we just go to the county that the property is in and ask for a transfer deed?

Well, yeah, it's going to be a grant bead or a warranty deed. Likely you're just going to transfer the property into that. Now, did you use Bob Bloom to set this up? Because his office will help you do all that.

No, we were with Anderson's.

Well, they might do it, too.

We were already in bed with Anderson, so.

I mean, they're expensive, but, you know, they're really expensive. But they might do it as well. They might be able to help you with that. Did you ask them?

Well, you know, they'll do it all, of course, for a fee. I think, though, our attorney that we're working with will give us some guidance. But I know how to do it in California. I just don't know how it works in Florida, so.

Okay. Yeah, but you're just deeding the property into the llc. Just make sure you want to do that, though. So you want to make sure you just run that by your tax advisor and the lawyer will help you do it because you don't want to get stuck paying like a transfer tax.

Okay, Right, right.

You got to be a little careful of that stuff. But, you know, they. They know how to do that. Okay. Okay. All right. Okay.

Thanks.

Thank you.

Thank you.

Bob, you're up.

Yeah, I was just going to comment that when you were talking about America's rental managers in Alabama, that I had one experience with them, with the house I have in north side of Alabama. What's the name of that town? Huntsville. They had put a section 8 in on me without my permission. So just keep an eye.

Just.

That's just from my experience, that was one thing they did. So just keep that in mind. If they're having trouble finding tenants, they might start sourcing section 8. If you don't want section 8, make sure you make that pretty clear to them.

Another reason to self manage, right?

Yeah, exactly.

Was that it, Bob?

Yes, that's all. I just wanted to add in.

Okay. Okay. So I want to keep you on for another minute, though, because let's talk about the other thing that you brought up earlier today. So first off, I want to say Bob is one of our students in our lease option. Fire your managers, rent to own class, and we're going through that course and it's been really great having him there. Bob, can you just talk a little bit about that and share your experience?

Yes. So the idea here is instead of just doing the conventional rent to your tenant or have a management company do it. The idea here is to find somebody who's interested in possibly doing a rent to own. And what happens when you go that route is you get somebody who's going to give you a larger down payment because there's going to be a consideration. Yeah, yeah, 10%. Yeah, exactly.

You're going to get eight to 10 times the money down.

So instead of getting one month's rent as a deposit, you're going to get like, you know, 10% or something like that, maybe, you know. Yeah. And you're going to be getting rid of your management company because they're going to be responsible for all, all the maintenance. So if there's ever a plumbing or a problem or something like that, they have to fix it and you know, and they don't bug you for it. So they give them the option to buy the house like, let's say like 24 months down the road. If they're unable to do that, you can always renegotiate it. But at the same time, you're still getting your rent and you usually get a premium on everything, including the rent. So it increases your cash flow and it gives you a lot more money in your pocket up front and makes.

Your management a whole lot easier. There's a spectrum of active to passive in every investment. Right. And it just moves you much further along that spectrum toward passive with higher return on investment. And my understanding is you do not have to declare that option consideration money when they give it to you. No, you only have to declare it when either they forfeit it when they move out. Then it's income to you.

Right.

Or capital gain. I'm not.

It might be capital.

That becomes income. Yeah. And then if you sell the property, you know, it becomes part of the sale of the property.

Right.

Oh, so you might be able to bury that in a 1031 exchange. Huh? I didn't even think of that. Yeah, that's interesting too.

That's true.

But it's just a super good deal all the way around. So that's another thing besides the hybrid self management that we're talking about. And by the way, I do want to say we're not really talking about. About self management. Our recommendation is hybrid self management. Okay, so besides that, you want to learn lease options, rent, own programs, so you can fire your managers and increase your return on investment. Now Bob, before we go to Michael, you also wanted to fire one of your managers, right?

Yeah. So I have a property I bought in the Florida market and, and they're.

Doing a great job. And you love them and want to keep them forever.

Yeah, I don't know, call me crazy.

So it's one of those situations where they just don't have enough help and they're really hard to get a hold of and every time I reach out to them, if I hear from them, it's literally like two or three days later if, if I get a reply.

So yeah, like I said about the seller earlier having the power, right?

Yeah.

And once you become the owner, then you have the power. Okay. But until you're the owner, you don't have the power. So are you still on their like tying arrangement where you, you're, you're still under their management contract for a year or two?

Yeah. So we were obligated to use them for two years. So we're coming up at that halfway point which I'm still trying to figure out is halfway point. Meaning they put the first tenant in last February. They gave their notice to vacate.

So the management contract is different than the lease.

Right. So the map, my management contract in September 21st of 2022. So if that's the case and I'm, you know, I got eight months to go with them. But, but with somebody vacating, I thought maybe I could take this opportunity to, you know, tell my. I want to cancel. I was reading through the, there is a cancellation clause but then, you know, cost you a few bucks.

So here's the deal. When you don't have a manager, it's one less contract that you have to deal with. It's one less obligation you have. Right. You don't have to read their contract, you don't have to negotiate with them, you don't have talk to anybody. So that's the other doing the hybrid self management. That's the other thing about that is you don't have to deal with a management contract. Okay? You don't have any of those problems. But look, a contract is a bilateral obligation, okay? If they don't fulfill their contract, then you have the right to get out. Okay? So if they've screwed up, then bring that to their attention, tell them you want out. And if they make a fuss about it and they don't want to let you out, you can always just become the difficult client. They don't want to deal with and then they'll just let you go. You know, I think getting fired is a really feather in your cap. Okay, so get fired, Sarah.

Yeah, So I was actually just gonna say that we were talking. Bob and I were talking on Voxer a little bit earlier this morning and I hadn't yet disclosed to you that I, I got fired by Suncoast, so.

Yay.

What's really happening by you getting fired is you're firing them.

Well, I mean, I got fired because I'm an advocate for all of our clients. And so actually it had nothing to do with my property. My property was performing nicely and I wasn't complaining about my property, but they don't want me to be involved with client complaints. They started taking me off of email communication. I got several clients out of these two year contracts that wanted out and I think they got sick of it. And so on the last one they did say no. But like Jason said, if you just become difficult and complain about the things that weren't a complaint, they're just going to eventually say we don't want to deal with you and hopefully let you out with no penalty. So I would just put together a nicely written email and point out where they're falling short.

Sure.

Well, one, I asked them if I could get the phone number of the tenants so I could.

They'll. They'll be an impediment and a block.

Well, they did.

This is, this is the first time a management company has refused to give me their contact information. So I, I sent a letter to the tenant and you know, but I never heard back from them because I wanted to say, ask them directly, say, hey, is the management company treating you fairly? Yeah. And you know, it's almost like they're trying to hide something.

You're. You're not going to hear anything good from the tenant either. It's usually both side. They're terrible.

And full disclosure, I, I chickened out on self management of that property. I, I was going to, but I, I hired another property manager. Sorry. I'm gonna give, give it one more chance. Maybe, maybe next year. It's a duplex and I can't keep track of which one's A and which one's B and which one speaks English.

Yeah, well. Well, Jason, my intentions too was, was when this came up over the weekend now I thought it's like, well, this might be another opportunity for a rent to own.

Yeah, absolutely. A good opportunity there. All right, so let's move on to Michael. Thank you for sharing that. Michael, what's going on. So one of my, my wife Anna has been telling me that it's better to invest. Let's say you have 500k, right? You better invest in one property, queen clear than five properties, 100k down. What are your thoughts on that? She needs to learn about inflation induced debt destruction. It's absolutely a terrible idea to have one of those properties paid off. Don't do it. Okay? Because of tax advantage also. Oh no, tax advantage is the most minor thing you get out of it. You get the leverage and you get the inflation induced debt destruction where inflation basically pays off your loans. So I've got lots of podcast content on that from the old days. I probably need to bring some of that back and just remind everybody, everybody of the power of that. But suffice it to say that income, property is the best investment in the world, but it's not the best bank. Okay? It's not the best bank. It's not the best place to keep your money, but it's the best place to keep the bank's money because you get leverage on it. If you have 20% equity in the property and the property appreciates at 10%, for example, in any given year, you multiply your return by 5. It's a 5x return. If you have 100% in your property, you only get the 10% appreciation versus 50% if you have only 20% equity in the property. That's the power of leverage. Okay. And then if there's inflation on top of that, inflation is making that debt cheaper to repay. So definitely leverage your properties. There's almost never a good reason to pay cash for a property. Okay. And your investment counselor can help you with more about that. I, I don't want to burn up too much of the time here on that because it's a, it's a longer topic but. Okay, got it. Thanks, Jason. Okay, thank you.

Can I ask just one more thing about the self management?

I.

The only gap sometimes I, I did have an issue with because you know the properties are far away is like getting the tenant and like they want to walk in and look at the property. So like what I did, I have a friend who's a realtor, he goes when you go work out a deal with a real estate agent, they could just, you can give them a one time fee. So I called, I call some manager companies and I just give them like either 50 or 75. I give them like the one time fee like 50 or 75% rent. I let them screen attendant do the background walk through, put the lockbox on, and then I self manage from there. Is that like.

Yeah, that's called hybrid self management. Now, they'll do much more than that for you. They'll do the whole process for 75% of one month's rent. They'll do the walkthrough with the existing tenant, send you pictures, market the property to new tenants, help you screen the new tenant, do the walkthrough with the new tenant and everything, the handle the lockbox, all of that stuff. But Hemlane is trying to disrupt that and they're doing a pretty decent job of it. And you just heard all about Carrie's experience and had someone on here last month or the month before that, told all about their experience. Okay. And it was great. So they do it for even cheaper and with lockbox and everything. Okay. Because they're developing a whole network of leasing agents around the country. Okay, Jerry and Amina, fire away.

Yeah, quickly, Jason. So warranties in your experience, is it usually only for the house? And I guess we can look at the warranty in more detail, but there was an issue where the land wasn't leveled properly that was mentioned in a condition review. It said that the construction people didn't level it properly. And so there's ponding and it's destroying the grass. And it was within the one year of the warranty. And so we were thinking that because it was like mentioned about construction, that that should be kind of covered. But I don't know if maybe if in your experience we shouldn't forget about that and it's mainly the building and not the land and leveling or when.

You, when you say warranty, who are you talking about?

Construction? Yeah, builder. Builder's warranty.

That isn't a warranty issue. That's a construction defect issue. Okay. There's a difference. A warranty fixes something that was operating, that breaks. Okay. This is a defect from the start. It sounds like. Okay, remember, I'm not a lawyer and I'm not an accountant. Okay, there's my disclaimers. Okay. But I think in most states, construction defect liability is 10 years. Okay, so just tell them they have to fix it. Okay, what state is it in? This is Florida.

And it, you know, it's a. It's in a flood zone and so there's more water. And we knew that, but they're like, oh, this December 19th has passed. But we have been trying to get them to address this issue.

Doesn't matter. December 19th. This is not a one year warranty. It's a construction defect. Okay. Yeah.

Thank you.

Yeah.

Don't. Don't fall for this. It's a warranty item. It's not a warranty item. It's. You didn't build it right in the first place or item. Okay. Okay, good. Yeah.

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