2382: Refi Till You Die: The Wealthy Strategy for Real Estate Leverage

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I've got something to tell you. Something is happening across the Western world. You can feel it on the streets, in the courts, at work and online. It's not just political, it's not just cultural. It's psychological asylum. Shift is underway and it has a name. The Inversion Matrix. Five sections. Section one. The reversal begins. In this new system. The native becomes the intruder, the majority becomes the villain, and the truth becomes hate speech. The very people whose ancestors built these nations, who raised the families, killed the land and pay taxes, now find themselves apologizing for simply existing. How did this happen? Section 2 Psychological Engineering and Guilt Programming it began with psychological engineering. First inject guilt programming. A constant stream of reminders about colonialism, slavery, privilege and oppression. Then flood the language with weaponized labels. Racist, transphobe, Islamophobe, far right. Each designed to shut down conversation, to train you to self censor and to submit. This isn't about justice. It's about control to confusion. Section 3. The two tier system of compassion. Look around and you'll see it. As a matter of fact, I think that you know it already. Certain groups can gather publicly in the name of religion or pride. Others are fined, silenced or arrested for praying silently. Crimes by one group are explained away as trauma, misunderstanding or cultural norms. The same crime committed by someone else. Instant outrage, national headlines and cancellation. We moved from equal rights to engineered imbalance, from justice for all to justice selectively applied. Section 4 institutional capture. Every major institution in the Western world has been taken over by the same ideological virus. Schools no longer teach pride in culture, but shame in history. Police now investigate killings, not felonies. Media filters truth through an ideological lens where facts are problematic and narratives are sacred. Even churches and temples now bow down to slogans instead of scriptures. This is called institutional capture. And it's not accidental. Section 5 has the long game. Divide, demoralize and replace. But why? Because a divided, guilt ridden and morally paralyzed society is easier to govern. Shatter itself, strategy. Drown it in important ideologies, redefine its language and turn its people against themselves. This is what I keep trying to say. These are the true cracks through the matrix. The end goal. Not justice, not harmony, but the population. Too confused to resist and too fragmented to unite. But let's be clear. This isn't a war between. Between races or religions or genders. It's a war between. Between truth and. And programming. Between those who remember who they are and those who've been rethought to forget. You don't need to hate anyone. But you do need to see. Because the longer we stay silent, the more the inversion matrix tightens until what was once solid identity, family, faith, law becomes liquid, then meaningless, then gone. This isn't about hate. I Repeat this, it's about 6 survival. And if you're still listening, it means the program didn't fully work on you. Not yet.

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.

So I have been thinking a lot lately about a concept that was first introduced to me by Anna Kelly, and that is life by design. I honestly don't know what that means in general, but we're going to go deeper with Ana on that. But what I want to do here is go into the weeds about a concept called refi till you die. This is a strategy first coined and trademarked by Jason Hartman and really figure out what are the nuts and bolts behind this. Isn't this a strategy that the wealthy do? Is it a strategy that all real estate investors should do? Jason, I know you're passionate about this trademarking the term refi till you die. Tell us about it. When did you first stumble across this amazing strategy?

About 22 years ago. I started teaching this idea of what I call refi till you die. You know, I'm applying it to real estate investing, of course, but if you think about it, it's what all of the wealthy people do. Just look at the billionaires, right? They try to minimize any kind of income or capital gains. What they do is they keep their assets and they finance their assets and live on the borrowed money because there's no tax on borrowed money. And this is a strategy that's been employed by the elites forever, really, I think, because the idea being there's no tax on borrowed money and you want to extract wealth from Whatever assets you have in the most tax efficient way possible. Because taxes are the largest expense any of us have, usually. Yeah.

I mean, when you think about being efficient with capital, one of the things that you should be thinking about is how to minimize your taxes either via active income, via capital gains. That is why this refi till you die strategy makes complete sense. You spend in my world a decade buying assets, those assets appreciates. And then every other year you go back and refi the oldest asset, pull out a gob of money and live on that. It just makes total sense to me.

This is a very specific example and it is an example. It has to be for in the interest of time, oversimplified. So it is simplified. But basically it's the strategy, like we said before, employed by all of the wealthiest people. Now, the wealthiest people in the world started businesses, sold stock in the businesses, did initial public offerings or IPOs. And one thing investors should really remember, Michael, and this is kind of a tangent to the topic, but this is important. Okay? Just remember the IPO is their exit strategy. Okay. That's when they dump stock onto the market. You know, a lot of people think, oh, it's my opportunity, but it's their exit. Okay. They're selling a large share of their stock and then they'll keep a portion. Of course, you know, Elon owns I think about 12% of Tesla, something like that. And what they will do do throughout the rest of their lives is they will simply borrow against that stock. Okay, you can, you can do that. And of course, real estate is the most debt favored asset class in America. It's the most tax favored asset class in America and it is the most historically proven asset class in the entire world. So it's actually better than stocks. But they've just got so many billions of dollars in stock value. You know, that's what they do. Of course, all the wealthy people are into real est, these ultra billionaires. It's, it's not their main thing. Their main thing was their business. You know, whether it be Facebook or Tesla or whatever. Yeah.

When I think about mom and pop investors, our communities, you know, it certainly you could leverage a stock portfolio. You know, it's not, certainly not as easy. It's not as, it's not as common.

Right.

Yeah. Real estate, I mean, Olivia and I mean full, full transparency. We're currently refining a couple of assets where the debt on one asset was under 10%, the other asset is about 25%. So again, we almost have no basis in these or a debt on These buildings. And we're going back and getting 60% and we're getting 599 cash out refis multiple six figures. Yeah. And again, this is, this is a strategy that we're actively doing now. They should both close this week or next. Why? Well, again, you know, I think it's time to prepare and I see a bunch of opportunities coming, so I prepare early so I can write disrespectful cash offers. So that's what we're doing.

Yeah. And you know, it's kind of interesting. Like people try to fit a square peg in a round hole all the time in life, right? And one of the things they try to do with income property is they try to use it to get income to replace their job. And it's just very hard to do that, folks, unless you have a fairly low paying job. Okay, and why do I say that? Because, you know, it's really not the best bank. You want to keep it leveraged. You want to constantly be equity stripping from your properties. That is the most efficient way to do it. And that's what we're going to show you today. So let's dive into it. Okay, so here's just an example of a portfolio. This might be, you know, four or five nice quality properties in diverse markets. You know, a million dollar portfolio value. You put $200,000 down about 35 grand in closing cost. You should have reserves in cash of about 4% of the portfolio value. That's the minimum reserve requirement, in my opinion. So 4%, $40,000. You need 275,000 to execute this strategy.

Okay, again, just people together, because the number wasn't on the screen. That's a million bucks in assets.

Yeah, a million dollar portfolio, exactly. So 275,000. Remember, you basically multiply your ability to do things with leverage. So it's a very, very powerful tool to use it. And then there's something called the rule of 72s that most people have heard of, some haven't. But this just basically tells you at a certain rate, how long will it take to double your money. Okay, so at 12%, 6 years, 8%, 9 years, 6%, which is, most experts will agree, the average appreciation rate for residential real estate over long periods of time. Now, of course, you can cherry pick certain time frames and that'll be different. Certain markets, certain price ranges, whatever. Okay. You know, but, but we're going to use 6% as our example and say that the portfolio value doubles every 12 years. Okay.

And just to make sure we're still on the same page, when you're saying double here, it's not double the 275, it's double the million.

That's the. Yes, exactly. That's the beautiful thing about it. You can do much more. Remember, if you buy mutual fund stock, bonds, cryptocurrency, precious metals, you're not usually using any leverage to do that. Okay? Now you can, but it doesn't really work very well because, number one, the banks don't offer really good leverage terms against those assets for a great reason. They're just not as proven as income property is. And number two, you can't outsource the debt repayment to someone called a tenant. You know, try renting out your gold. Try renting out your cryptocurrency. I know that there are creative ways you can do this. I own all these assets, okay? But my main thing is real estate, because it's the best thing, okay? But you can do it with stocks, with everything right there. There are ways to do it, but they're considered very abstract, expensive. And again, you can't get a tenant to. To repay that debt obligation for you. And that's why real estate's very, very special asset class. So here's the way our example starts, Michael. We start at a one million dollar value, okay? Nothing has happened yet because we're just starting, so there's no gain, okay? We've got $800,000 in loans. We haven't done a refinance yet, so there's no cash out. We don't have any cash out or money to invest under our mattress yet because we haven't done anything. We gotta wait, okay? So we have $200,000 in equity when we start because that was our down payment, okay? And let's use the example. We're 35 years old in this example, okay? Now remember, the rule of 72 says we will double every 12 years at 6%. Okay? So let's look at the next stage of the portfolio. Now, we're 47 years old. The portfolio went from 1 million to 2 million. We have a $1 million gain. We now go back to the bank and we say, hey, I want to extract equity from my portfolio. And they'll say, sure, we'll give you an 80% loan. So we're going to now get a 1.6 million in loans, okay? We're going to have $800,000 cash out. And if we don't invest that money, okay, if we don't invest it, we are going to basically put it under our mattress and do nothing with it. We're going to simply divide by twelve sixty seven thousand dollars a year. Okay? Now of course, we're going to invest it and make it work. We have 400,000 in equity. We're 47. And here we go, 4 million. We've got a $3 million gain now. We're 59 years young. Okay, 3.2 million in loans here. We've got 1.6 million cash out. We divide 800,000 equity, 59 years old. We do it one more time and we're 71, okay? 8 million, 7 million gain, etc. Etc. And basically what you see here is that we are living. If we don't reinvest that money, which of course we will, we're living on about a quarter million dollars a year. Now, a couple things. Number one, we've increased the debt on the properties. So the question I always get is, well, what about cash flow? Okay, you know, what's going to happen to our cash flow then? Well, our cash flow, historically at least, will be covered. The new higher debt will be covered by the rents. Historically that has happened. Okay, Nothing's for sure in the future. Okay? But historically that's been the norm, that the rents will rise to offset that new higher loan balance. Okay, this is a very simplified example. So it doesn't really include all the benefits of leverage because we get leveraged returns. We have positive cash flow throughout these years. I hope, okay, I hope you know, that each property is producing maybe, you know, 200, $250 a month positive cash flow. And remember how we started when we talked about how it's not a very cash flow asset because you would have to own a giant portfolio and have it paid off, which you shouldn't pay it off because you want to keep the leverage on that portfolio. You would have to have a very big portfolio to produce enough cash flow, usually to replace your job or your business. So that goal of people doesn't usually work if they're doing it the smart way because then they're paying things off. And the cash flow to asset value ratio on real estate really isn't anything to write home about. It's okay, but it's not where the investment really, really sings. Okay? It doesn't work that great. We get tax benefits throughout all of those years. We get the tenant paying down our equity. I didn't include that. Okay, there's no equity pay down included here. And most importantly, inflation induced debt destruction, which we've talked about before. The idea of borrowing at today's dollar value and paying back at tomorrow's lower dollar value after inflation has debased the investment. So very, very powerful tool here.

Yeah, when I think about refi till you die, it really is, frankly, I think, I frankly think it's a strategy that the IRS hates. Right.

Because again, the IRS encourage it. I mean, you might be right that they hate it, but at least the tax code encourages it.

No, clearly. And again, to say that I' I'm saying that just because they're not getting their drip of capital gains, they're not getting their income tax, they're not doing what the normies do. This is what the rich do. And again, I always talk about getting wealthy taking a decade and then after that decade you have this asset base, in this example, four properties. It could be eight, whatever it is. And then you're just.

Well, hopefully what you're doing. And by the way, we should do another show someday on what I call the perpetual motion machine. Because hopefully what you're doing is you're using that borrowed money gain to have your portfolio buy more properties for you. And this is like the perpetual motion machine that they tried to invent but you know, it defies the laws of physics so it can't be invented. So far at least there is no perpetual motion machine. But it's something that inventors were fascinated with around the turn of the century, from the 1800s to the 1900s and it just, it couldn't be done. Yeah, but it can be done with, with income, property.

Actually this, this is why again, I always talk about the build phase or the grind phase, in the chill phase. Again folks, this is something you're going to be alive in 10 years. At least. That's our hope. And you just grind for 10 years. Buy assets when you can structure them correctly so you don't lose them.

No short term debt, no variability, and don't sell them. Yes, right. That's what the billionaires do.

Yeah, that's the magic.

Absolutely. So this is just the, you know, the acronym ideal. Okay, ideal. It's it. This asset is ideal because it produces income depreciation, tax benefits, equity growth appreciation and leverage. But really there is a sixth thing to the IDEAL acronym and that's inflation induced debt destruction. So it's very, very powerful. There's no other asset that has these special multidimensional characteristics like this.

Yeah, I couldn't agree more. Again folks, this is a strategy that you can start to deploy. Obviously something Olivia and I have been doing, will be doing in the future. And Again, the other thing about this, until you die. Again, if you don't know about this, at death, your heirs will get what's called a stepped up basis, which is the ultimate cherry on the top of this very powerful.

Yeah, absolutely. Yeah. So, you know, I mean, look, you know, we should both say we're not tax professionals, we're not attorneys. Okay?

Correct.

Consult the appropriate advantage. Things could change and the laws could change. Right. But under current law, my understanding is when you die with a real estate portfolio, the basis steps up to market value. Now, actually, that might be bad in a way if you want to create generational wealth, because your heirs might sell that portfolio. They don't have any tax liability if they sell it the day you pass. Right. And then they can just, you know, waste all the money. Okay. So that opportunity is available to them. So that's why you want to create a trust, and you want to have rules in that trust that, you know doesn't necessarily allow them to do that.

Yeah, no. This is why the refi till you die, borrow till you die strategy is so powerful. You spend a. You spend a decade or two building this asset base. You then spend the next 30 to 40 years enjoying life by borrowing against it with leverage, having others paying off inflation and debt destruction. And then the kicker, you get stepped up basis. So your heirs could theoretically sell everything and pay no taxes.

It's an incredible asset class. It really.

What's the puppy right there? We're seeing a little bit of it.

Well, this is you. You will meet her at your upcoming event. So at the ORAD event, this dog will be there. Her name or her name is Sophie. I guess so. I've really struggled with this. Maybe it should be Panda. I don't know. Maybe we can take a vote. She's getting very. That's right.

We'll take a vote. Panda or Sophie. Well, Jason, you're amazing. Thank you again for coming out to Vegas. We're going to love seeing you. Take care.

All right. I'm looking forward to it. That's coming up fast. And until then, happy investing. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own. And if you require specific legal or tax advice or advice in any other specialized area, please consult an appointment professional. And we also very much appreciate you reviewing the show. Please go to itunes. Or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.