2264: AI-Powered Investments: The Future of Property Technology & Housing Market Predictions

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

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 an 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.

People talking like that in the wake of these fires as they're still going on. Stan Parton is a Pacific Palisades resident. Lost his home in fire. He and his family are able to grab only a couple of bags of belongings before evacuating. Stem joins us now. St thanks for being here. Most importantly, your family is okay, right?

My family's okay, yes.

You went back and you saw what was left of your home today?

Yeah, today we just here in the Palisades family got out. My wife was able to get our kids from our school. They got evacuated from our school to Sunset Boulevard. May have seen the photos of Sunset. People leaving their cars, abandoning their cars. She had to run and grab the hands of our children to get into their home. Able to get a couple bags to get to safety. That's a story. Most of our friends at this community, they got away with what they had and the entire community has been absolutely destroyed. We went and visited a friend's home in the Alphabet streets here in Palisades. Not one home is standing. Not one home. We live in the Will Rogers neighborhood. There's only about four homes standing. And the saddest part is through the entire night we could See the smoke. We could see the fire coming closer and closer to our neighborhood. Not one fire truck was in our neighborhood. It's truly unfortunate the lack of management by our city officials, our elected officials that occurred in this disaster. It was a terrible night. It was an absolutely terrible night. But I think a lot of it could have been avoided with better management by our city officials.

Yeah, you know, the firefighters were. And just unbelievable hours in unbelievable conditions. I know you've talked to some of these firefighters. Is it true in that neighborhood, did the water dry up in the fire hydrants?

Yeah. So firefighters are some of my closest friends. They did all they could. It is mind blowing that our city has chosen to cut their budget by $18 million. It is mind blowing that our state has done such a poor job managing our water supply. So firefighters are risking their life, have no water in the fire hydrants. And even more so, it goes up beyond our mayor and our governor. It goes to President of the United States, which has been told to me the most crucial times of this fire, when the need for support and air support was so key that there was a temporary flight restriction that was put across the airspace of Los Angeles because the president was coming to Los Angeles. And the most pivotal time, our firefighters weren't able to utilize the sky and the. In the water from the sky because our elected officials convenience was more important than our citizen safety.

Yeah, we're going to check that out. We are going to see if the timing of all of that. And they're. They're saying that the aircraft are up now. But you're right, they. There was a lack of it at, for some time at the beginning. Just last thing.

Yeah. And when you're going to grab two bags, two bags of an entire house, what are you grabbing?

Oh.

You grab what you can. You're grateful to be with your kids. My wife was there with our kids. She grabbed what she could. She got her passport, she got her wedding album. One of our closest friends that I'm with right now, as we got home and their house was gone. His wife's wedding ring and an heirloom from her grandma was left in the house. We just went back, we're digging through the ash and one of the only joyful moments that we found is we found in the ash their wedding ring and this family heirloom, which is a miracle. They look a little different. We have them. And so it's been lots of tears, lots of sadness. It needs to be, you know, lots of mourning for this community. But this is a strong community. We will come together and we're grateful to have our family and our loved ones that we can hug and hold close. In a time like this, so many of us have lost.

That's the most important thing. The most important thing. And we really appreciate you telling your story to us here. And good luck.

Welcome Empowered Investors. This is episode 2264 and greetings from Fort Lauderdale, Florida. I am back here for about a week or so just to get ready for my BVI yacht trip that I'm hosting. And I think the next one of these we do, we're going to open this up to all of our listeners and viewers. So get ready for that in the summer, probably in Europe. So listen for more to come on that. But before that, we have Empowered Investor Live, and that is in April in Irvine, California, first weekend of April, early bird pricing@empowered investor live.com. do not miss that. Our conferences are super educational. Of course you'd expect that. But they're also very, very fun. So join us for that. Okay. Hey, it is an amazing time to be alive. I've got some market data, some properties I want to share with you today. But before we do that, obviously we've got the Trump administration doing incredible things. Love them or hate them. You know, you gotta admit, this guy gets stuff done. He is a hard worker and he's working for free. You know, last time when he was president, he donated all of his paychecks back to various charities and great causes. So it's really incredible what he's done in such a short time in his administration. But we're not going to talk about that today. We are going to talk about maybe more amazing stuff and that is the prosperous future, the amazing time to be alive that we are all coming into with such incredible technology. The CEO of Anthropic is out with this big essay. It's a voluminous essay. It is big. But what I did, since he is the CEO of an AI company, I went ahead and summarized it using AI.

And then I turned the text of my summary into speech using AI. So we are living in an artificial intelligence world and it's really incredible. I just want to play for you this short summary that really only covers part of his very long and comprehensive essay, which is pretty darn amazing. So let's listen in and talk about this because it is pretty darn compelling.

Summary of machines, of loving how AI could transform the world for the better Overview. Dario Amade, CEO of Anthropic, envisions a world where powerful AI not only mitigates risks, but drives unparalleled progress in health, governance and global equity. While risks are critical to address, Amadei argues that understanding and planning for the mechanisms of AI's upside is equally essential. How AI will achieve transformative changes 1. Biology and physical health what AI can DO Revolutionize medical research, eradicate diseases and extend human lifespan How AI will do IT Automating experiments AI will design and run complex experiments in silico virtual environments or direct lab robots to do so at speeds far beyond human capabilities. For instance, AI could simulate years of biological processes in weeks. Breakthrough discoveries by analyzing vast datasets, for example genome sequencing, proteomics, AI can identify new therapeutic targets and design personalized medicines.

Everything is going on fast forward nowadays. It is incredible the kinds of innovations we are going to have over the next year, the next two years, but especially over the next three years are going to amaze you. The prosperity that will be created from all of this incredible artificial intelligence technology is nothing short of unimaginable. It really is unimaginable. Probably some of you are familiar with the new launch of Deep Seek, right? This is the Chinese AI competitor that many say is better than OpenAI's product, than ChatGPT, right? That we're all familiar with by now, they claim, and it's probably not true, but they claim that this was developed for only $6 million. Now that is likely a massive exaggeration, but how big can the lie be, right? It probably was developed very inexpensively compared to These models that OpenAI has developed and its competitors have developed like anthropic, okay? But the point being that the cost of AI development is dropping quickly. And the other thing they say about Deep Seq, which if you don't know what it is because it is a relatively new thing, check it out. It's like the number one app in the App Store for iOS. I'm not sure about Android and it is supposedly using inexpensive chips. It doesn't have to have the expensive Nvidia chips to operate. You know, Nvidia, I mean, just think of Nvidia for a moment. Remember their CEO recently said everyone will have an AI computer for $3000. We are moving at warp speed here. This is an incredible time and I don't think anybody is thinking enough about the type of prosperity and the massive prosperity this will create and what this means to all of us as real estate investors, what this means for the market, the amount of extra money people will have to spend and oh, wait a sec, I didn't Even mention the launch of Operator, right? This is the new thing, the new AI agent, right? If you're reading my newsletter, you know this is a real estate newsletter, okay? It's a real estate show, it's an investing show, it's a money show. But if you're reading my newsletter, a lot of you commented on that article I did just a couple of weeks ago about AI agents and how they are going to change the world and how all of us, even people at lower income levels are going to all of a sudden have a whole bunch of assistants that are either free or incredibly inexpensive. All these people to help us manage our life, to build prosperity, to invest, to manage our healthcare, to manage all of these things, right? And now OpenAI has launched its first AI agent. It's called Operator. And if you don't know what that is yet, look it up because it is amazing and it will only get better. It's certainly not perfect yet. There are definitely some bugs, and I don't really mean bugs, but I mean just accessibility and usability issues that they have not quite figured out. But wait two weeks, right? Like wait two weeks and they'll figure it out. It's just an incredible time. The amount of extra money people will have to spend on rent, on houses, on the things that can't be disrupted easily, like housing, right? That's a low tech item. It is very hard to disrupt the cost of housing. But this will enable a lot of extra money to be spent on this. Look at it just like this. Look at it like mortgage rates declining even if they're not declining, right? Think about what happens when mortgage rates decline. If mortgage rates go from 7% to 5%, that is going to bring a whole new slew of buyers into the market. Then they are, they're looking at that limited supply and they're bidding up the prices. The same thing happens with these massive technological advancements and we are in that time now. So there's a lot of reasons to be very, very optimistic. Okay, let's keep listening.

Accelerating clinical trials AI will optimize trial designs, predict outcomes using patient specific data and simulate effects, significantly reducing time and costs. Advanced tools technologies like AlphaFold, which predicts protein structures will be extended to develop new treatments for diseases like cancer, Alzheimer's and genetic disorders. 2. Neuroscience and mental health what AI can do cure mental illnesses, enhance cognitive abilities and improve baseline mental well being. How AI will do it Mapping the brain AI will analyze neural data from advanced tools like optogenetics and neural probes to uncover causes of conditions like schizophrenia or ptsd. Precision treatments AI will create personalized interventions using neural simulations, designing drugs or therapies tailored to specific individuals. Behavioral insights AI powered digital therapists will assist in delivering customized psychological interventions and behavioral coaching in real time.

Wow. And there is so much more. That was just a taste of this giant essay that a lot of people in the technology world are talking about now. So enough of that. But the point is, what is the take home on that, right? What is the, what is the message I'm sending? The message is that a whole lot of new prosperity is about to be created. It already has been created. But a lot more is coming and a lot more efficiency is coming to all of our lives and a lot more opportunities. And this will trickle through people's net worth, people's income, and it is going to increase demand for construction materials, for housing, for the ingredients of housing, and it is going to make all of you real estate investors more and more rich. Think of it like this. Remember when people talk about the gold rush that happened in California, you know, many years ago when Levi's became, you know, such a big deal. That was the big start for Levi's jeans, right? And a lot of people talk about rather than being a gold miner, right? The better business was to be the people selling the blue jeans and the picks and the axes and the shovels to the gold miners, right? Selling the tools, the infrastructure. Well, think of it like this. Yes, there are certainly people in the technology business that sell the AI infrastructure, but I'm going down several levels beyond that. Okay. Or up. I don't know which way you'd look at it. Ask ChatGPT. Is it up or down? Whatever. The point is that money is going to trickle down to the infrastructure, the picks and the shovels and the Levi's jeans. And you know what the big one is for that? It's housing. It's everybody needs housing, the universal need. And remember, it's not just what happens in the United States, it's what happens around the world. Because as this prosperity just flows over the whole planet, as it will, it is going to increase the demand for all of those housing ingredients, all of those construction materials, thereby pushing the price of those materials up, benefiting you as the real estate investor. So I hope I tied that in and I hope my thoughts are somewhat clear on that. Okay, let's take a look at some thoughts on the market. As I have said before, this is a really difficult year to predict prices. And now I'm moving away from this discussion of the technology and the artificial intelligence and the massive boom that that will create in the economy. And I'm just looking at the traditional ways to look at the real estate market. And just from looking at those traditional ways, with so many difficult to predict things this year, this is, as I've said, this is probably the toughest year to predict the real estate market of really any year, any year that I've been in the business and doing this for, you know, the past 21 years. Right. And why is that the case? Well, there's just a lot of question marks. Right. You know, what will the new Trump administration do? What will the Fed do? Will Trump end the Fed? I mean, I don't know. There are just so many things. But I would not worry about any type of crash or downturn in the market this year. If I had to pick a number, I would say that we're probably going to see kind of a modest year where inventory will remain very low and prices will go up at maybe 4 or 5%, which is pretty good. You can make a great ton of money with prices appreciating at that level. And of course, we aren't even about appreciation in our world of investing. We are about income. We are about inflation induced debt destruction. We are about the multi dimensional benefits afforded to real estate investors. So here is a First American chart. And this includes NAR and census data. This says what's for sale? Historically low inventory. Okay, only 134 of every 10,000 homes. Now I never looked at it that way and I did not check their numbers, but they're a pretty credible source for sure. So you can see here, if you're looking at the chart, if you're watching this on video, you can see how very, very low inventory is when it comes to existing home inventory. New home inventory, that has been increasing, by the way, but it's still historically very low. And inventory turnover as well. So this introduces another thing, inventory turnover. All of this is down and sales volume is very much down. And I'm going to share a chart with you on that in just a moment. But first let's look at what they're saying here. This is a report that they came out with First American and it included many predictions. But number three was really interesting. Inventory will remain historically low. At the end of last year, it did bring with it some positive news. New and existing home inventory picked up. Now remember, positive or negative is a matter of which side of the fence you are on. Right? I mean the housing market people. Right. The people that make money on trading and volume. They think low inventory is very negative. And you know, I tend to agree with that actually, because actually I'm one of those people. I make money on volume too. Right. Empowered Investor is a reflection referral network and we help you invest and we match buyers and sellers of properties. And we do this in many markets nationwide. And so when volume is low, obviously we suffer. Listen, last year was not a very good year for us. I'll just be the first to tell you, I've mentioned it before. That's because volume has been down now. First American Empowered Investor. Everybody in the mortgage business, they want to see volume go up, right? But overall, just from a societal perspective, I would like to see increased inventory. But as an investor owning properties already, I like low inventory because low inventory is going to put upward pressure on my prices and my rents. So again, when you're reading reports like this, you just got to think from what perspective are they writing? And that's the perspective. Okay, so what else does it say here? The total inventory of existing homes for sale relative to the total number of households or inventory turnover has historically averaged about 2.5%, or 250 homes per 10,000 that are on the market at any time. Right. So 250 out of 10,000 inventory turnover began last year at a rate of 1.2%, less than half of the historical level, and ended the year at 1.3%, just a speck over half of the normal level. The uptick was due to an increase in both new and existing home inventory as existing homeowners became more comfortable with higher for longer mortgage rate environment and more decided to put their homes on the market. More is a relative term because it's not that many. Okay. It's important to note that the pickup inventory of listings prevalent in the Sunbelt markets, particularly Florida and Texas, which have been the boom markets for many years and now are kind of retrenching a bit and they're not as booming as they were. Certainly, if rates moderate this year, we expect to see inventory pick up slightly. Remember the delta between your existing cheap mortgage that you don't want to give up as a current owner and the new mortgage that you would get gets smaller. And that is your incentive to say, hey honey, finally we can move because we're not that far apart like we used to be. Okay? So however, given the mortgage rate outlook stay above 6%, that's probably true. Still, constrained affordability and the mortgage lock in effect, which is what I was just talking about, will prevent inventory from making a return to pre pandemic normal levels. So we are far below the inventory we need. Now this is an interesting one too, and this is a Redfin chart and it says home prices rise in all major metros for the first time since 2022. So since we saw these high interest rates, some markets, you know, it's been very uneven. They haven't seen much of an increase in prices. Some have even seen a decline in prices, namely Austin, Texas. That's a market that many years ago we recommended and we've been a little bit in and out of it over more recent years. But again, too expensive, doesn't really work very well. So we've not really recommended that market. But that's been one market that has suffered pretty badly. But now home prices in all major metros, all 50 of them basically posted year over year increases in the median sales price. Okay, let's look at a couple of properties. Now here is a market I haven't talked to you about recently. And this is Oklahoma. I've been an investor in Oklahoma, owned many, many units there. This property was built just last year. It's not too large, but this is a very much an entry level property for only $155,000. Rejected rent, twelve hundred and twenty dollars per month. So you're getting close to that 1% that is unbelievably hard to achieve anymore. And here, total cash invested just over $49,000 to buy this property. Your positive cash flow is 199 per month on the Performa here. And here are your return metrics. Debt coverage ratio at 1.29, basically 1.3. Right? That's pretty good. You can get a DSCR loan on this property and you should have no problem doing that. Your cap rate, which, you know, I don't like cap rate that much because it doesn't include appreciation or financing benefits. But that's 6.9, very, very respectable cap rate and cash on cash return of 5% in this market. Darn good. Overall return on investment projected at 26 annually. And as I always say, if it only goes half as well as expected, you're making 13%. So that's not bad. And again, this property was built last year. It's basically a new home property. Now let's look at one near my old stomping grounds. Lisa pulled this one up for us because this is in Long Beach, California where I went to high school and my first year of college. This property, look at this one. It's a million dollars. I mean a million dollars. I recolored. If you're watching on video, I recolored the Performa to look ominous on purpose. It's like this orange color. This Property is only 1500 square feet. $999,888. And it would take you $281,000 to buy this little, very modest shack. And this house was built, by the way, in 1954. A million dollar home built in 1954. That's only 1500 square feet. Hmm. Hey, this is like the neighborhood I used to live in, folks. Okay, so the projected rent on this million dollar Property is only $3600 per month. So that means you've got basically just over a point three rent to value ratio. That's terrible. It's awful. You can do three times better in virtually any market that we're going to recommend for you. You can do a 300% better return on your money. Right? So let's go to the page of the Performa and here we have a cash flow of negative. This is with 25% down by the way. A negative cash flow of just $2,700 per month or just over $32,000 per year. Negative cash flow. Don't touch this with a 10 foot pole. Your debt coverage ratio is 0.4 rather than 1.3. Like the property we would recommend to you. This is 0.4. It's terrible. Cap rate 2.2%. But again, not my favorite metric, cash on cash return though I do like that metric and it's negative 11%. But here's what's interesting when you consider the multi dimensional assets of income property. It is such a forgiving asset class. Even on this property. I wouldn't recommend, I would actually recommend that you run proper for the hills. Looking at this property, your projected return is still positive 13%. So if it only goes half as well as expected, you're at 6.5%. I mean it's not the end of the world by any means. But you know, if you're going to do this, I would rather do something that's even more passive than income property, which is stick your money in the bank. You know, you can, you can almost get that return there, right? Again, don't touch this one. But it's just interesting to share it with you. Anyway, I hope that was helpful today. It's an amazing time to be alive. We have amazing, amazing things happening in the world right now politically. And the political environment is like the air you breathe. It is the context in which we live. We will of course talk more about all the great things that are happening politically. How long has it been since you heard me say that? It's been a very long time and technologically and how these trickle down to your investments and your financial life as an income property investor, the most historically proven asset class in the entire world. Of course, we'll continue to do that on future episodes. If you need our assistance, reach out to us through Jason hartman.com or 714-820-4200. You can always just pick up the phone and call us. We are quite Easy to reach. Press 2 for an investment counselor and if they're not available, they'll get back to you, of course. And register for Empowered Investor Live so you can come meet us and our team members and our providers and our local market specialists and some expert speakers in person in early April in Irvine, California. Beautiful resort property. You'll really love it. It's all freshly remodeled, so it's a nice new hotel. And by the way, our room rates in Orange County, California, which is clearly an expensive place, only 199 per night. We got you a great deal on the rooms at this beautiful, beautiful hotel, so join us. For that go toempowered Investor Live.com that's EmpoweredInvestorLive.com and we'll look forward to meeting you in person. We will see you on the next episode.

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