2198: Housing Affordability and Shortage- Investing in Rare Assets

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In the.

Past six months, taking 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, empowered investors. This is episode number 2198 and greetings from Warsaw, Poland, where I just had a really interesting talk with one of the employees here at the hotel and wow, I got a lot of geopolitical information. I gotta tell you something. As great as America is, it is sadly a nation in decline. Hopefully it will recover. We've got an erection coming up. You can't say the other word because I'll be. Well, you know those police that do thought thoughts can't even say that word or that phrase are out there. And we want to get around them as much as we can so we can talk, you know, did you ever think about the number of things you aren't hearing or you aren't seeing on the news or the ideas that you aren't exposed to because all of these big giant companies are controlling. They're controlling everything. Not going to say what they're controlling. Like, you know, this movement of the mouth, you can see it on video, but you can't hear it. Anyway, hey, we got a great show for you today. I hope it's a great show because we got a lot of things to talk about. I'm just going to talk about several items that I've been putting off and waiting to talk to you about. Oh, but I guess what was I going to say about the hotel employee? Really knowledgeable guy. And I got to tell you, Europeans are so knowledgeable about geopolitical information politics. I guess they have to be. You know, everything's so close together, and here in Poland, you've got. Got Russia and Ukraine right on your border, and everything's so affected. So that's just the way it is. But you could say Americans kind of have it too good for too long and they become a little complacent, myself included. I'm including myself in that analysis, by the way. I just want you to know that. But anyway, with this erection going on, we've got a lot of conflict going on. We've got a lot of people talking about different tax plans and so forth. And let's talk about that lady in the White House right now and what she wants to do. This is absolutely crazy. This is a big threat, and let's hope it doesn't happen. So Camela's looming threat of unrealized capital gains taxes. As real estate investors or investors in anything, one of the things we've really got to think about is capital gains taxes. And what does she want to do? Well, she wants to tax gains that you didn't even get. Can you imagine that? Look, under the tax code, there are two important concepts to know. One is realized and one is recognized. Right. It's kind of like when we talk about inflation and the value of the dollar. There is real value and there is nominal value. Okay, well, nominal isn't even what I call value. It's just the name of something. Nominal literally means in name only. It's just the name of something. A dollar is called a dollar. It was called A$50 years ago, but the value is obviously very different. Right? So that's nominal versus real. Well, this is realized versus recognized, important concept here. And it's important in this distinction because our presidential candidate here, who says everything's going to change on day one, yet.

You know, she's been in power for almost four years, but it hasn't changed anything, hasn't fixed anything. But I guess on day one, she's going to fix it all right. Yeah, right. Okay. Oh, gosh, it's. You just can't make this stuff up. It's so ridiculous and so absurd. But anyway, she wants to tax unrealized gains so the IRS would recognize that your house is appreciated, that your stocks have appreciated, that your cryptocurrency has appreciated, that your business has appreciated that your gold and silver and platinum and palladium has appreciated and you're going to pay tax on it even if you don't sell it. That's totally stupid.

It's so ridiculous. I can't even believe it. It's scary. I mean, look, these ideas have been thrown around a bit in the past by the political left, but can you imagine if this happens? Like, this would be absolute insanity. Like, let's not talk about even a real estate investor. Let's just talk about like a typical person, right? Say this typical Joe Six Pack owns a house. Joe and Jane Six Pack, you know, they're drinking some beers. They're just your typical Americans working a typical 9 to 5 job, you know, just trying to get by. Okay? And they did buy a house. That was a smart decision. They bought a house 10 years ago, for example. They got a nice cheap mortgage on that house. You know, the house is appreciated in value. And even though the cost of money tripled a couple of years ago, it's continued to appreciate in value. That's not bad. And they wanted to buy this house 10 years ago, Joe and Jane Six Pack, because, hey, it's the American dream. And they wanted to get in on it and they thought it was a good deal to get in on it. But now every year they're going to file a tax return. And on that tax return, they're now going to have to estimate the value of the house or the government will do it for them and they'll have to pay a tax bill even if they don't sell the house. Now, under current law, they have to pay a tax bill if they have for a married couple more than $500,000 in gain when they sell the house, they got to pay tax on the excess above 500,000. If they're single, you got to pay tax on excess above 250,000. Okay, that's one thing. In the past, before that law changed in the 90s, you could just reinvest. I think that was called section 1035 or 1034, if I'm not mistaken, as opposed to 1031, tax deferred exchange on rental properties, or I should say investment properties where you can exchange them and you could just roll it all into your next property. What about your stock portfolio? What if you have a Vanguard S and P fund, a very common investment, and say that stock appreciates in value every year. Right. You know, it just goes up with inflation. Right. And. And you know, hopefully outperform inflation a little bit, but whatever happens, happens. You're going to get a tax bill every year on stock you didn't even sell. What if you bought some gold and silver and you didn't sell it, you're just keeping it, right? You're doing really the right thing. You're delaying gratification. You know, you're not selling it. You're not killing the golden goose, right? You want to keep letting that goose work for you, right? And you want to keep having that investment. Now you could sell it and take the gain and party and waste the money, right? But you're a prudent investor. You're going to delay gratification. You're going to keep your investments. You're going to hold them for the long term. If you're a bitcoin person, you're going to hoddle, right? That's the word they use, the hodl, which basically means don't sell your bitcoin. Hodl it, hold it, right? And you're going to pay tax even if you don't sell it under Kamala's plan. This is a total disaster, folks. It's absolute insanity. So let's hope it doesn't happen. We got an article in my newsletter coming up about this very topic. Be sure you are subscribed. Just go to Jason Hartman.com and fill out any form on our website. Get on our email list and make sure you're getting our emails with great property deals hand selected weekly for you. We'll send them to you via email. Articles, suggested videos to watch, discounts on upcoming events we have, and so on and so forth. Yeah, you'll like that. So be sure you're on our email list and you're getting emails. If you already signed up for it, check your spam folder. Because you know these big tech companies, they're filtering things that they don't want you to know. If you think about it, spam filtering is really a restriction on speech. Yep, it is. But since a private company does it, there's no recourse. If the government did it, there'd be recourse. But wait a sec. These private companies are all in bed with the government. They're exchanging favors all the time. So I guess they're just proxies for the government. So the government is violating your civil rights by restricting your information. They're burning books. Fahrenheit 451. Here we are. Okay. You know, just last weekend, the big change went into effect. The biggest change in a hundred years in the real estate business, and that is the national association of Realtors the largest trade lobbying organization on planet Earth. Their big lawsuit, their big settlement for over $400 million. And they agreed to some new rules, and that was that the buyer's agent commissions would not be listed in the multiple listing service anymore. So we've talked about this. Of course, you've probably read about it. It's out there. But now America's top listing agents that control the inventory are saying they don't want to deal with this mess. And it is chaos, okay? It is going to be absolute mayhem in the traditional real estate world for a while until this gets figured out. I think basically this will limit choice. It'll make it a lot harder to buy a house. And it's actually going to. Indirectly, it's. It's pretty indirect. It's not a very direct thing, but it will have some slight upward press on rents. So if you own properties, hey, congratulations, because you're going to see your rents go up. I don't think there's going to be any, like, giant surge because of this. But, you know, if people don't move out of the renter pool to be in the buyer homeowner pool, then that's naturally going to push rents up. So we'll monitor this. It's a new change. It just happened. So this article that I'm showing you, if you're watching on video, talks about three of the most prolific listing agents in America. They collectively sold over 10,000 homes last year alone. Okay? They don't want to deal with this. They just want the listing agents, they want to sell their own listings now. They want to sell their own inventory that they're creating the properties they're listing, and they don't want to share them with other people. So it's going to be a big change. And think about it. 10,000 homes right out of maybe less than 4 million sales every year. And if you get enough agents that feel this way, that are listing agents that are controlling the inventory, this is going to have an impact on the market, folks. No question about it. But it. It's tt. It's too early to tell. Okay, so we'll continue to monitor this. Let's keep talking about it. But if you're watching on video, comment below on YouTube. I'd love to know your questions and your comments on all this stuff. I always love to read your comments and questions. I mean, unless they're idiotic. Well, even those I like reading. And thank you for making idiotic comments if you're one of those people, because you're just Helping make my videos more popular. The algorithm loves those idiotic comments. So go ahead, keep making the comments. We're hacking the system. You're helping hack the system. All right. The commandment number three story continues to unfold. This big scandal with Marco Santarelli and Norada Real Estate. Here's another review. These reviews continue to come out. And these are podcast reviews. You can find them on Apple podcast and read them yourself. There's a whole bunch of them, but we're just seeing more and more of these. So this one says, defaulted on notes. Anyone listening to this podcast, be very careful. He's defaulted on notes and investors are not happy. No communication from him or his team and trying to quickly delete all the negative reviews. And by the way, I've accused this guy of putting up false positive reviews. It was pretty obvious that a lot of these reviews were false. I know that Apple took a lot of them down, but still a whole bunch of them remain. If you ask me, that's just my opinion. You won't find a positive review in the last few months. Do not invest with him. I wish I hadn't. Check Reddit. And be warned, I did check Reddit. And again, this all boils down to commandment number three. Thou shalt maintain control. Do not invest in these pooled money assets unless you are really, really sure. You got to be careful. Number one problem, you might be investing with a crook. Number two problem, you might be investing with an idiot. Number three problem, they're going to take a huge management fee off the top for managing the deal. Here's another one. This one says, do not trust his company. Please, please, please do not buy turnkey properties from Nerada Real estate. I purchased two properties when I first started back in 2020. I was a beginner and I didn't know better and have listened to other trusted podcaster about real estate investing. I would have never worked with Nerada. Just a quick summary of my experience. After I purchased two turnkey rentals, the providers, yada yada, goes into all the problems with providers. This person claims that Marco Santarelli does not vet the providers very well. And I can personally say that I actually had experience with this. How and why? Well, we had done a little business with them in the past and Marco Santarelli had actually referred a turnkey provide provider to me and we worked with his turnkey provider and he turned out to be a complete weasel and we are actually suing him. And some of you know who he is. His name starts with Z. Yeah, Zach Henderson. He turned out to be a real piece of work, and we're suing that guy now. He owes us a lot of money. Anyway, we'll see how that goes. I'll let you know. These things take a very long time to work out. Now, this reviewer actually mentioned us in the review and says Marco and his team do not properly vet these providers. Since then, I've worked with the Jason Hartman Network and had a good experience he talks about. So I wish I knew who this was. By the way, if you're listening, because you're using a handle here on this review, I don't know who you are. I asked our investment counselors who you were, but please come forward and let us know who you are. I'm kind of interested in hearing more about your experience here, and I'm sorry you had a bad experience with a competitor of ours, but that's the way it goes. Here's another one. Commandment number three, folks. Stop stealing investor money. Yes, Marco. Don't promote your investment opportunities and lie about its performance to investors. You've lost hundreds of investors money. To the listener, you're listening to a scam artist or Bernie Madoff type. Marco isn't to be trusted. He'll steal what he can from you. So look, folks, work with people you trust, work with people who don't need the money that bad, and work with people where you are direct investor and you are controlling your investments. Okay? And go see these reviews for yourself. There's a whole bunch of information about this on Reddit, Bigger pockets and just the reviews out there. So check them out for yourself. Okay, let's talk about the housing affordability problem for a minute and the deterioration in housing affordability. This is really interesting. It's from our friend Lance Lambert at Resi Club. He's been on the show recently. He puts out some good stuff. So this chart that I'm showing, if you're not watching on video, is a really staggering chart to look at. The title of it is the US Just witnessed the Fastest Ever Deterioration in US Housing Affordability. Federal Reserve bank of Atlanta's National Homeownership Affordability Monitor Index through May of 2024. Okay? And what it has is it has a baseline of a hundred. Okay? And then you see housing affordability go up, up and down. And it goes back to 2006 and shows you that the market in 2006 was very unaffordable. Okay? It was affordable before that, by the way. And then prices went up and the liars loans were made. And we all know this led to the global financial crisis, the GFC and the mortgage meltdown, and so on and so forth. Then housing affordability got very, very good around 2012. And remember, just go back and listen to my episodes. Back then I was telling everybody to buy everything they could. They obviously would have done great. Have they listened to my advice? And you know, thousands of you did listen to my advice. Congratulations. You had all the same negative news back then. You had all the doom and gloomers back then telling you not to buy. Fortunately, you didn't listen to them and you did buy and you made a lot of money. And remember, the housing affordability issue is not the entire issue. What I've always said, said is that income property is a multi dimensional asset class. If you have fallen for, and I hope you haven't, if you're listening to the show, you probably haven't fallen for it. But the doomers out there that just talk about housing prices, Listen carefully please, to what I'm about to say. If anyone out there thinks that the real estate investing game is just about home prices, they have a very shallow understanding of real estate investing because that is only one of many dimensions. Remember, the beautiful thing about income property is there are a lot of different ways we can make our money, right? We don't have to see prices go up. A lot of people can have flat prices or prices literally going down, and you can still make money and make a nice return on your investment. So again, this maniacal, myopic focus on prices, it's just a distraction. Good investors, they don't agonize over that. They buy, right? And they know how to structure their portfolio and they know how to manage their emotions not to get roped in by these doomers out there who are making them miss opportunities over and over again. All right? So be careful who you listen to, all right? And then here the chart goes on and you know, kind of goes up and down. Housing affordability, these aren't prices, this is affordability. This is affordability which do not mirror prices, okay? In fact, the higher the price goes, usually unless interest rates or incomes change dramatically, the lower affordability, right? And so you see here that during the COVID era, as prices rose and then as interest rates skyrocketed, right at the end of the COVID era era, we saw housing affordability just plummet. Boom. It just tanked. It just tanked. It was over, done, baked. Housing affordability was over. And then, you know, it bumped around a little bit. It went up a little bit, you know, down. But it's, it's basically very low, right? It's the lowest it's been in four decades. Well, amazingly, cost of money triples and prices keep going up. Everybody thought that wouldn't happen. I told you it would happen. Because it wasn't all about affordability. Affordability is one of several factors, okay? It's not just about affordability. It's about supply and the mortgage lock in effect, which we've had as a very significant thing, obviously. Okay, so this guy we talked about before, right? He is an institutional investor with AMH, okay? And they have a portfolio of almost 60,000 wholly owned single family rentals. 60,000 of those rental homes, 10,000 of them, were built by their own build to rent operation. Okay? So they got into the building business basically going into the supply chain to not just buy resale homes or buy homes from other developers. They got into that business, right, to build their own stuff. Right? And they've got 10,000 build to rent homes in the development pipeline right now, ranging from raw lots to already under construction properties. So look at this quote. America is woefully under built for housing. America needs more housing. Unquote. Landry at AMH tells Resi Club. Okay? Quote. Certainly need more housing for millennial generation. They're in the household formation years. It's a strong tailwind, unquote. You know, you've heard these millennials complaining quite a bit. Remember I've talked to you many times about the six year lag and how the 30 year old baby boomer parent versus the 30 year old millennial baby boomer are in different places, but they're making a false comparison. You take a 36 year old millennial and they're doing great. Just like they think their 30 year old baby boomer parents were doing. Right? That's the same age. 36 is the new 30 or you know, however you want to look at that. Right? But the other thing that very few people are talking about and we've talked about a little bit on this show, but it is the issue that they are on the verge of the biggest wealth transfer in human history. It's so big, it's 80 plus trillion dollars. 80 plus trillion with a T dollars about to be inherited by millennials and gen zers as their baby boomer parents pass on and they go to heaven and they leave over 80 trillion. That's not billion, that's trillion dollars to their children. Wow. And the millennials think they've been left out and they can't afford anything and they think it's not fair there. Well, just hang on a little bit because mom and pop are going to pass away and you're going to inherit a whole lot of money. The biggest wealth transfer in human history is going to millennials and gen zers and it's coming pretty quick. It's all going to happen in about the next 15 years. 15 years. So let me see, that would take us out to 2038. All this will happen by 2038 or 2039. Sorry, 2003. Without a calculator, I can't even do math anymore. It's really bad because I just, I trained myself a long time ago to not make mistakes. And when I started in my real estate career using the good old fashioned HP12C. I know you probably don't know what that is. Just type it in and look it up. HP12C was the ultimate calculator. I still own three of those things. People that got trained and learned the old fashioned way on the HP12C. We just don't want to give them up, up. They're so great. Greatest calculator ever. Anyway, the good old HP12C. I trained myself to never do math in my head because I didn't want to make a mistake and tell the client the wrong thing. So I always did. If I, if I was going to calculate two plus two, I would pull out my HP12C and go two plus two.

Yeah, that's funny. Anyway, so 2039, we're going to have all of that wealth will have been transferred by them. That's how it's looking. So big wealth transfer coming up. We're gonna have some very, very rich millennials and some very, very rich gen zers. So get ready. That tidal wave is coming. Landry highlighted the usually wide gap in 2024 between renting and buying, noting that many households are paying 800 to 1100 dollars more per month to buy rather than rent a similar home. Wow. What does that mean? Let me tell you what that means. That means rents are going up. That means there is a lot of pressure built up in the rental market that has not yet released itself. Think about a good old fashioned teapot or a pressure cooker, right? Think about that sitting there and the pressure is building, building, building, and eventually it's going to be released and you're going to see much higher rents. I've been predicting that for a while and rents are definitely going up. Folks, I know you think the ren too damn high, but they're still going up. They got a lot more to go Rents are going to be up quite a bit. You just wait. Okay. Quote that's an enormous amount for hard working families. Budgets, unquote, he said, adding that this monthly cost difference is causing some growing families to opt for renting instead of buying. I added the instead of buying part. Okay. That need for more housing coupled with strong demand for single family rentals makes deploying capital into single family home building a no brainer for a giant landlord, Landry says. Landry added that AMH builds three bedroom, four bedroom and five bedroom homes with the most popular being four bedroom homes ranging from 1800 to 2100 square feet. So look, the point I'm making and why I'm sharing this with you and we talked about this company on a prior episode is because if you view these financial engineers, these highly educated people that are just buying, buying, buying and doubling down on single family rentals, you might want to just consider them what investors call the smart money. And you might want to look at their example and get more properties for yourself as a mom and pop investor. That would be a good idea. All right, and here is a chart for you. Remember, we've explored the housing shortage and the estimates from all of these different big entities that say the housing shortage is 5 million homes short in America. Well, this one is just Freddie Mac saying we're only 1.5 million housing units below what they call a balanced market. And if you're watching on video, this is a good chart and graph. You might want to get a screenshot of it. And on any of this stuff, please comment below, let me know what you think and ask your questions below. We'd love to get those questions because we do kind of bring those questions into future content for future shows. It really lets me know know what you want me to cover. And if you are listening to the podcast and not watching on video, then just go to jason hartman.com and any web form there you can just fill it out and ask your question. We'd love to answer them for you. And that'll also get you on our newsletter list as well. Okay, so Freddie Mac quote To bring the vacancy rate, both rental and homeowner vacancy rates, back in line with historical averages, the U. S would need to add an additional 1.5 million vacant for sale and for rent homes. So what's different about this is it's not only talking about the for sale housing shortage, it's talking about the for rent housing shortage and it's saying that there is a massive under supply. So in looking at the Chart. The line in the middle, right down the middle of the chart is the baseline. And it shows how back to 2000, we were under supplied just a little bit in, in the year 2000. And then as we cre into, you know, the early 2000s, we got a little tiny bit oversupplied. And then we got near the financial crisis leading up to it. You know, 2006, we were really, really oversupplied. And that peak would have been in about 2008, 2009, we were massively oversupplied. And now it's like looking at a mirror or a reflection in water. Right. You're seeing the exact opposite. We're very under supplied now in both for rent, end for sale housing, totally under supplied. You know, you want to buy the things that are scarce. That's the stuff to invest in. The stuff that's hard to make more of, that's inelastic. I don't know, I'm probably not saying that. Right. Anyway, there's not enough elasticity for housing supply. You can't just create more of it on a whim. It's not like printing money where you can just print some more or increase the money supply in all sorts of ways that the Fed does. It's very hard to create new supply. And that's the kind of stuff you want to own. You want to own as much of that stuff that's hard to create as possible. So that's the moral of the story and why you should be an empowered investor. All right, thanks for listening. Happy Investing. Be an empowered investor. Take advantage of all of our great content, get on our mailing list, join our Empowered Investor Pro group. You can just go through Jason hartman.com or empowered investor.com and check all of this stuff out. Also, we'll have another masterclass that's going to be really interesting and I think it's going to be on a totally new topic topic for this upcoming next month masterclass. We do these every month and this next one I think we're going to cover a topic that a lot of you been asking me about and that is citizenship by investment. Do you want to have a Plan B? You want to have a second citizenship, a second passport? Do you want to diversify offshore for asset protection? We're going to talk about that and I think that's going to be our next topic for our next masterclass. So more on that coming up. That's it for today. Until next time. Happy testing.

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