2197: Leveraging Real Estate: How to "Die with Zero" While Building Wealth Through Smart Investments

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Way, I'm just going to give Jason a shout out. He came on stage at our event. At least at the black card event you talked about. You said inflation's coming. They, they are. Quantity easing is so much. Inflation destroys debt. And you, I, I don't remember. I think we had disclaimers, not financial advice. But I remember you on stage saying it might not be a bad time to get a lot of debt right now. And ta da, we're a couple years out. I don't know, it's been two years, two and a half years later and it's like, wow. The people that follow that counsel have done pretty well so far, which is pretty cool.

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.

And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to episode 2197 and greetings from beautiful Warsaw, Poland. Yes, I've been hanging out here for the last few days, well, several days actually, and I met with a couple of real estate brokers and a real estate developer. Have some things to share with you from that and you. It's interesting to see how prices have risen here and how rents have risen here. Now, of course they had the low interest rate impact, the COVID impact, but one impact they obviously had that you might not be thinking of necessarily is the invasion of Ukraine and a lot of people coming over into Poland. So that has definitely pumped up the real estate market here and in other Polish cities. And one of the brokers I spoke with talked about how prices in one particular property I looked at have doubled and in some cases almost tripled in the past 12 years. So again, the housing shortage is a worldwide issue. It's not just in the US it's in so many parts of the world. But we do see some markets around the US where inventory levels are at pre pandemic levels. So looking at fall of 2019 and we're seeing about the same inventory levels in some of these markets, does that mean it's bad? Does it mean there's a crash? Of course not. It's not even close. Because 2019 was a fine and dandy market if you ask me. Lots of business was being done in 2019. There was certainly no crash in 2019. So again, the crash Bros. You got to temple what they say because they're just so darn wrong all the time. It's absolutely crazy. So, so today we have more good tips on self management from our empowered investor pro meeting. But before we get to that, couple of things. So we've got this proposal out there from you know who, this vice presidential candidate who is now the candidate for the biggest office of all, who has been in power for over three and a half years and is saying that on day one she will fix all the problems. But she hasn't fixed them in three and a half plus years. In fact, she's created a lot of the problems we have. Oh boy. It's just, you can't make this stuff up. You can't write fiction this good. But guess what? One of these proposals that a lot of you are asking me about is this proposal to provide more affordable housing by basically handing people 25 grand. We also know that as the price of housing has gone up, the size of down payments have gone up as well. Even if aspiring homeowners say for years, it often still is not enough. So while we work on the housing shortage, my administration will provide first time.

Home buyers with $25,000 to help with the down payment on a new home. We can do this all to help more Americans experience the pride of homeownership.

And the financial security that it represents and brings in a market where we have a housing shortage and we have no problem with demand. I mean demand isn't as good as it used to be before the rates went up and the cost of money tripled, of course. But demand is still definitely outstripping supply. Why do we know this? Because prices have gone up dramatically since the cost of money tripled and prices are still going up in many, many markets in and even though we see finally a supply increase in some new housing inventory, we're not seeing that in any significant way in the resale inventory. And so we just make the problem worse. But I want to say congratulations to all of you. Congratulations to me. If you hand Everybody an additional $25,000 then I guess that means we can all raise our prices another $25,000, because now we know the marketplace has more money to spend. What if they just gave everybody $200,000? Then everybody could raise their price by $200,000.

I mean, these ideas that come out of Washington are just fricking dumb. These people, you can tell, they have never spent any time in the free market. They have never really spent time in a business. They have only spent time in the world of theory, this theoretical dumb world that they just have no practical experience. It's just terrible. Okay, so that's one thing, and now another thing. I want to talk to you for a moment about illegal immigration, a very hot topic, obviously. And as we see this, we've seen about 10 million people come into the US since she has been in charge of the border. What a disaster, right? What a disaster. But not for them because they've got a lot of new voters, so it's good for them. But what has that done to housing? Well, it's done nothing but push rents up and push prices up. Look at the simple math here, folks. We got about 675,000 homes for sale in the country. If you add another 10 million people, and let's assume that there are four to a household, there's probably more in some cases for sure. But let's just assume there are four people to a household, that's two and a half million new households needed in a market where the for sale inventory is only about 675,000. Now, there's what, 23 million apartments in the United States, but only about 5% of those maybe are vacant. So what does that give us? That gives us some decent inventory. That gives us about a million apartments, right? You know, these are super rough numbers here. No calculator being used. And so you basically have a situation where all of this immigration, and that's only the illegal part we talked about, or, sorry, as Hillary says, the workers without papers, workers without papers part, the legal part is in addition to all of this, and that 10 million number is only the number that is known or being counted, right? It's probably 12 million, maybe 11 million in real life, maybe even more, I don't know. Nobody really knows, right? So just think about what that's done to housing and everybody, the same exact voters are complaining about the lack of housing affordability and why something needs to be done. Well, why not decrease the demand by doing what the vast majority of every other country on earth does, is controlling its entry points. Imagine that. Imagine that.

Oh, this is just so ridiculous, folks. You just, you just can't even comment on it. It's, it's insanity. It's absolute insanity. But here we are and we have what we have. So just sit back and enjoy it and provide rental housing because your rents have a lot of upward pressure under them and your prices have a lot of upward pressure under them. So good for you. And now we have the lowest interest rates in 15 months, and that's without a Fed pivot. No pivot yet. No pivot yet. Imagine what happens when the Fed pivots and we finally see lower rates and we add another 1 million quite easily. If that pivot is bigger, we add another maybe 2, 3, 4 million buyers that come into the market. And I'm not talking about people that can afford to buy as rates go down. I'm talking about people that actually come into the market and start bidding on the 675,000 give or take homes for sale in the U.S. wow, you're going to be rich. So congratulations. We don't know exactly when it'll happen or how much it'll happen by, but it's happening and all the pressures are there. So congratulations to all of you who took action, who didn't wait on the sidelines, who weren't the spectators in life, and you're going to profit and you already have profited. So good for you. All right, without further ado, let's get to our main topic and let's talk more about gaining control. Commandment number three, thou shalt maintain control. Remember we talked about that fund that blew up, Marco Santarelli, Nerada Real Estate fund. And all of this negative stuff that's coming in about that, about how all these investors were ripped off and cheated out of their money and you want to be in control. You want to follow My commandment number three? 21 years I've been telling you this. Commandment number three, thou shalt maintain control. If you don't maintain control, you leave yourself susceptible to three major problems. Number one, might be investing with a crook. Number two, might be investing with an incompetent idiot. Number three, assuming they're honest and competent, which are pretty big hurdles by today's standards. Unfortunately, they shouldn't be, but they are. Then they take a huge management fee off the top for managing the deal. Be a direct investor and take it another step further. Not only be a direct investor, which is what we've been helping people do for a long time, but be an investor who self manages their properties. It's actually Easier takes less time in most cases. And we're here to help you do it.

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, 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.

Well, 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.

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

Look into some more.

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 item. Okay. Okay. Okay, good. Yeah, absolutely. Now, I wish I knew of the right agency. So a few minutes ago I put a link in the chat for an agency that handles licensed activity. Okay. In this state. All right. And so if you have a property manager or a real estate agent who's doing bad, you can just go take literally 10 minutes, maybe even less, to just file a complaint and the government will hopefully help you out. Okay. And many times they do. It really does work. And it's really easy. It takes less time than it does to argue with the property manager to just file the complaint. Okay. Like, it's it's much easier now for building, though. I haven't quite figured out what that agency is that regulates the builders. Right. It sort of meshes together, you know, Is it like the contractors board and not all states license contractors even? I really don't know. If you can figure that out, please let us know. Okay? Just Google it and say, you know, what government agency helps people with construction defects? Okay. The idea is you don't want to have to hire an expensive lawyer. You pay taxes, use the government. You're paying taxes already. Okay, so they should help you. Right? And, you know, many times they do. I mean, it's worked great for a lot of our clients. Okay, I know, Muthaya. It's worked for him. Just do that. But that's not a warranty item. Don't let them tell you that. It's a construction defect item.

Thanks, Lisa.

All right.

The Florida Department of Business and Professional Regulation is in charge of regulating and licensed construction professionals. So that would probably help.

Excellent. Thank you for that, Lisa. Okay, so this is a book that I read last year, and I kind of got interested in it again through a discussion I was having with someone. One of the things the author talks about is that, well, let me just read you something from the. And this is not. Not from the book. It's from a handout that's about the book. Okay. Living is deliberate. Dying is on autopilot. And he says, my overarching goal is to get you to think about life in a more purposeful, deliberate manner instead of simply doing things as you and others have always done. Yes, I want you to plan for your future, but never in such a way that you forget to enjoy the present. We all get one ride on this roller coaster of life. Let's start thinking about how to make it more exciting, exhausting, exhilarating, and satisfying as it can be. Right. And he says, I'm certainly not trying to tell you that one set of experience is better than another, just that these should be deliberate. Right. And he talks about memory dividends. Okay? So one of the things he talks about is. He talks about how life is really about memories. And memories come from experiences, and experiences cost money. Okay? So that's kind of the pattern. Right? And so you do need money to have more and better experiences.

Right.

And so this part is called memory dividends. He says when you buy stock in, say, IBM, you're hoping that you'll be able to sell the stock later for more than you bought it for or at least earn some dividends that IBM Issues to shareholders. A teeny tiny fraction of the company's profits each year are the dividends.

Right?

Experiences have many of the shared properties as financial investments, one of which is called memory dividends. Experiences yield dividends because we humans have memory. We don't start every day with a blank brain like characters in so many sci fi movies. We wake up every morning preloaded with a bunch of memories that we can access at any time, mainly to get around and navigate the world. The memory dividend is so powerful and valuable that tech companies are monetizing it and creating billions of dollars in wealth. Anyone who uses Facebook or Google Photos sees the occasional alert that says, on this day three years ago message. And then you tap your memory dividend, and it sparks good feelings, right? And a desire to reach out to those who are in the photo with you. The whole process makes you happy and makes you a more loyal customer. Buying an experience doesn't just mean you can buy the experience itself. It is also the sum of all the dividends that experience will bring for the rest of your life. Okay? And I just think this is kind of an interesting way to look at things because what most of us who are responsible do is we save, save, save, right? And we invest, we invest, we invest. And that's all good, okay? But there's an important psychological component, and this is not in the book or anything. This is just me talking this part, okay? And, you know, I realized this one a long, long time ago when I was like 20 years old, okay? I was working at ReMax in Irvine, California. You know, I was just like this little kid in the office. And ReMax at the time was this agency that had all the top producing agents. It's all been watered down. It's not like that anymore because you had to rent your office or rent your desk at ReMax. So you actually had to take a risk to go into business. And, you know, usually all the successful agents work there. And I took the risk and I went there just several months into my career. Everybody thought, what is this little stupid kid doing at the office here?

Right?

Anyway, wait four years. And I was one of the top agents. But there was this book that was going around at the time by a guy that I actually interviewed on the podcast decades later. His name is Jerry Gillis, and he wrote this book called Money love. And one of the agents who has passed away now, her name's Ann Tierney, she hired him to come and do a seminar for us, okay? She paid him $500, and Jerry Gillis came and did this seminar for all the agents. One of the things he talked about in the Money Love Book, which was really quite good, at least in its time, is how you need to reward yourself along the way. Right. Don't be such an investor or such a saver that you're not enjoying the fruits of it. Because if you're not doing that, you're not going to set up your subconscious mind to want to do more and to grow bigger and to invest more. Right. And to grow your wealth, because you won't have that reward system. So you kind of need to trick yourself a little bit by rewarding yourself along the way. Okay. That's one of the things he definitely talked about in visualizing and acting like your future self today. Okay. And I gotta tell you, I was kind of surprised. I sort of consider myself just a pretty good worker bee. You know, I get up every day and I work really hard. And then during the pandemic, when I was sitting at home by myself for a year, basically, right. One of the things I did is I took out a spreadsheet and I started adding up all my assets and all my net worth, and I'm like, I'm rich. Yeah.

I didn't even know how rich I actually was, okay. And because I really didn't keep track of it, and, you know, I'm kind of thinking, like, wow, this sort of snuck up on me. You know, I didn't even realize that I was just, like, buying more properties, managing my properties, managing my business, doing my thing. And this kind of, like, sneaks up on you. And you gotta make sure you spend some money to buy those memories and buy those experiences along the way. Because one of the things in the Die With Zero book he talks about is how that is really the richness of life. Okay. And that's why I wanted to bring up that book today. Basically, one of the things he talks about is how in each phase of life, you're trading these three components. So what he talks about is these different phases of life. Like when you're 20 to 30 years old and you're 31 to 60 years old, or 61 plus, right? If you look at these three different triangles, you see how they sort of change what's important, right? Like, at the beginning, in your early stage, you've got really good health and you've got lots of time, but you don't have much money. And I remember at that age in my life, I'm like, all I wanted to do is earn more money and make, like, a dent in the universe, Right. That was my big thing for a long time, Right. And then as I got more and more wealthy, the irony was I didn't really care about money, okay? Honestly, it's not that big a deal to me. Right. You know, when I was this age, I wanted to buy, you know, a Ferrari and all this kind of stuff. Right. I just couldn't care less about that stuff now. Right. It's just another thing that's going to be another thing to ensure more phone calls, more things to deal with. Right. And I just don't want to deal with more things. Right. So here at this 31 to 60 stage, it's pretty balanced. You've got a decent amount of money, you've got a decent amount of time, and you've got a decent amount of health. But here at this stage, you've got lots of money. Or wait, yeah, you've got lots of money, you don't have as much time and your health isn't as good. So he just talks about these different phases, how you should make sure that you kind of balance these things out. And I thought that was kind of interesting. So this PDF is on his website and it's free. You can just go get it. You don't even have to buy the book. But it's different than the book, and it just goes through these different mental models anyway. I just thought it's kind of interesting, like these different charts of, you know, your wealth is rising, your health is declining, and how this kind of all, all plays out in life. And he talks about how to use your money while you're alive. Right. Rather than having other people decide for you after you're dead. It just kind of flips a lot of these things on their head. And this book became very popular in my mastermind groups a couple years ago, so I just wanted to kind of share that with you. Any questions or thoughts?

Jason? I think one of the reasons that book resonated with me is we're focused on retirement planning now and trying to shift life. And when you have enough assets, especially if you spent decades accumulating them, it's easy to just keep doing that thing. And the book was really helpful to me in shifting my attention and helping me understand I need to change the way I think about stuff now. And the most important part of that is if I wait another 20 years, it'll be too late.

Yeah.

One of the guys I love listening to, he talks about how when you, if you're in your 60s, you probably have a thousand weeks of Good, healthy time.

I interviewed that author on my show, the author of the book 4000 Weeks. He's been on the show. Yeah. That's the book you're referring to?

Well, this is a YouTuber who goes by Zool. He's a retirement planner. And. And he just. So I'm not familiar with the book you're talking about.

It's called 4,000 weeks, which is the average lifespan. Yeah, you know what?

I think I need to read it then.

Yeah, yeah, that's good.

But he's listening to. I will. I'll look it up.

But.

But he makes a point. At 60, you probably have about a thousand weeks of good health left, and when that's gone, you don't get it back. So you need to plan ahead as you enter that phase of life and be ready for it. You know, you don't get to do over. So I think that book's particularly helpful for people who are. Have invested well and accumulated well. You know, you have the luxury of being able to make some of those decisions.

That's a very good point. And you know what the key thing is? And, you know, we're all here for this reason, and this is why. And Michael, especially to your question earlier, whatever you do in life, you've got to do things that give you leverage, right? And real estate gives you more leverage than any other thing because you use mostly someone else's money, then you delegate the debt repayment to someone else again, called the tenant, right? And so it's just got this massive amount of leverage. It's such a powerful asset class. And you think all of the time you spend working at your job, and you think, gosh, I have all these little things that come up with my properties here and there, but that takes, like, minuscule amount of time compared to how much you think about your job and how much time you spend at your job, right? So you have something that generates a ton of leverage. Go out and spend some of that money. Okay. And don't leave it all till the end. Okay? Now here's the problem, though. I have been thinking for a long time, you know, and I started my other podcast called the Longevity and Biohacking show, you know, many years ago. We're getting very close to some real breakthroughs in longevity. Okay? I mean, at least I think we are. So the problem is you don't know how long you have, and you might have longer than you think, okay? So most people wouldn't consider that a problem, but they consider that a good thing. But, you know, it Kind of is a problem for financial planning, right? So one of the things, there's a calculator on some financial planner's website that I found the other day, and it's a calculator on basically spending down your wealth, right? And you start to realize, I did the calculator myself. And you start to realize with your properties, because they make such good return on investment, it's really fricking hard to spend your money. I mean, it's like, what do you do? Okay, you buy a nice home, you buy nice cars, you. College is kind of a ripoff. So I don't want to just include, like, expensive colleges in there because they just brainwash your kids and ruin them, basically. So that one I'm going to leave out. You know, you've got good health care, you do some philanthropy, right? And you go on some vacations, right? The only sort of next level thing beyond that is, okay, you fly private. That's a real way to burn up money fast, okay? But even then, it's hard to burn it up, okay? Like, one of my friends who's made a ton of money, you know, a lot of these people in, like, the cryptocurrency world, they just basically got lucky, okay? You know, that wasn't exactly brilliance, right? It's. It's just luck. But they were in the game, right? And, you know, the asset went way up. And one of my friends, he just says, look, really, if you make $50,000 a month, like, you can't even spend that in any realistic way, right? That's 600,000 a year, okay? If your job and your assets produce that much, you're done, okay? So keep acquiring some assets that don't suck up too much time. And this is literally the thing that all of the inventors over a hundred years ago were trying to invent and nobody could figure it out. You know what it is? You know what I'm going to say, folks? It's the perpetual motion machine, right? It violates the laws of physics because it's a machine that you can start moving like a flywheel, but even a flywheel will not keep moving forever. It will stop moving, right? But this machine just keeps moving. And that's the wonderful thing about the asset class. We all love income property, but it's really something you have to think about. And I know this sounds ridiculous to some. It sounds like, oh, first world problems, you know, that's so absurd that you say this stuff, right? But, you know, you really have to start thinking about, how are you going to make your money do some good in your life and in the world in general. That is something to really consider in a responsible way. And, you know, the book talks about that, so it's really quite interesting. By the way, just another thing about that is that as long as you're in the real estate game and you've got properties, it's probably going to be very hard to ever become poor. Right. Okay. Or, you know, or ever have financial problems. But that big wild card is advances in longevity sciences. And, you know, you might live a lot longer than you think and you might have a longer, what they call not lifespan, but health Spanish span, where your health span is longer. And the longer you have that long health span, the more likely you are to spend more money. Except on healthcare. Right. Because you can do more things. Right. When you're healthy and you feel better. And so you want to go do stuff and have experiences and those cost money. Right. So, you know, I guess this kind of subs it up as the old saying, work hard, play hard. Maybe that's it is really what the book is sort of saying in a nutshell.

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