2392: Protecting Wealth from the "Three L's": The Power of 1031 Exchanges and Income Property

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

Alrighty folks. If you saw the daily financial news this morning, you know it was not the standard session. We just basically did a 30 minute deep dive into the One rental at a Time event. And one of the key key takeaways from day one Morning one was the keynote from Jason Hartman. He wanted to get the room excited and boy, did he deliver. He delivered lots of key messages, but he delivered a lot of messages and I just love to hear what he thought because he's been to hundreds of these things all around the world and he's seen a lot of things. So Jason, what do you think?

Yeah, you know, and not only have I been to a zillion conferences and events and masterminds, but I've also hosted 146 events myself, so.

146. I had no idea. You know, I've done four. I've only done. Four.

Yeah. Yeah. It's. Live events are a lot of work, but, you know, I think you just got to do it. You got to get people together in person. There's no substitute for that, at least not so far. We all know Zoom certainly won't substitute, although that's. That's a tool. But, yeah, it is what it is. But your event was fantastic, Michael. Great job. I really loved meeting your community. A lot of people I already knew there, which is no surprise, but a lot of new people, too, and it was just a. It was just a fantastic event. So I really hats off to you on that, and thank you. Thank you so much for the award.

Yes.

This is like a championship prize fighter belt. And this thing, I heard it weighs six pounds. I believe it's metal. So this is. This is not plastic, and it's really cool. You know, it's got my name on it there. And. And. And go, go, giver. And some cool stuff here, so it's really neat.

Yeah. Hopefully you approve of that picture.

I got a lot of trophies, but not like this one.

There you go. Yeah. Lots of folks hanging on the wall. There's. There's display. There's display brackets and whatnot. But hopefully you approve of the picture because you. You had hundreds. Unlike some of my guys who had a couple, you had hundreds to choose from. So hopefully you approve the picture I selected.

Yeah, yeah. Oh, no, it was great. Yeah. Thank you. That's fine.

Very cool. Very cool. I guess we'll start here. Usually I want to jump in and go, you know, what are some things we can tweak, improve. It's just how my mind is as a sales leader. I'm always on to, you know, let's be better next time, but let's give the room some flowers. Again, the event we have was the blind center. We take over for the weekend. We give back. We make donations to the visually impaired in the blind center. Again, two levels, just to give the audience level one. Level two. I believe you were there for at least lunch on day one, if not a little bit of dinner on day two.

What'd you think of the facility, lunches and the dinner on Saturday? Yeah.

So what'd you think of all of that? The food, the venue? Let's talk. Let's give them some flowers.

I thought it was all fantastic. I think the speakers and the networking were definitely the highlights. I really enjoyed it. It was fantastic. And you know what? If you want me to, I'll share just a couple of slides from the event.

Please.

I Think that'll be good for the viewing audience as well. So I started off with this slide because I think it is so critical. This is from a book called the Behavior Gap. There is a big difference in any investment, in any asset class between the return of the investment and the return the investor gets. Okay, Investment return and investor return are different things most of the time. And why is that? Well, it's because investors need to be really good at. At managing their own psychology, their own emotions, because that's what trips us up. Every asset class goes through cycles, ups and downs, peaks and valleys, and we get excited when the news is all positive and things are going well and prices are going through the roof and rents are going up and all of this stuff. And then we dive in and we just buy more and more and more. Right. That's usually what happens, is the FOMO effect, fear of missing out. And then when the news isn't that great, and this is sort of the last three years, it's just. It hasn't been like bad news, but it hasn't been exciting either. The last few years in the real estate business, it's been. It's just been boring, frankly. You know, I think. I think that's a good way to describe the market the last three years since rates went up so much. So people sell things at inopportune times. And, you know, this is one of the things I've said for 22 years then I've been teaching investing, is that with these cycles, they always say that the number one destroyer of wealth. Well, I don't know if they always say it, but I'll ask the question, what is the number one destroyer of wealth? It's divorce, the big D word. Right. And most people think divorce is so bad because she got half or he got half. Right. The other person made out like a bandit. Right. And that could be true. But the other thing divorce does is it causes people to be forced to sell assets at inopportune times. And the same thing happens with our own psychology, our own emotions. And so I think this is a really important thing to understand that there's a difference between the investment return. An income property is the most historically proven asset class in the entire world, and the return the investor gets. So, you know, I hope you like that, that start.

No, I absolutely did. And I'm just. I'm reminded, since you brought up, you know, divorce is the number one destroyer of wealth. I'm reminded of Shout Out, Rest in peace, Charlie Munger. He said there were the three L's right. And obviously he was talking to men when he said this, but basically there's three Ls that can destroy wealth. Ladies, liquor and leverage.

Yeah, destroyed wealth.

According. That is all. According to Charlie Munger. I'm just quoting him. Don't, don't, don't throw hate my way. But yes. Ladies, liquor and leverage.

Leverage, yeah, sure. No, I mean, for a lot of men, well, almost all of them, probably. Women are a big weakness. Yeah, absolutely. It happens.

Yeah. So again, I loved your talk. The other thing that I told my, my, my team that really struck with me and you've, we've talked about this a bunch, but sometimes the basics need to be reminded was you're talking about the waterline. Right. In all the ways that real estate makes money. Some stuff you can see and some stuff you can't. And it, just because you can't see it doesn't mean it's not there.

Right.

That constant reminder is, you know, I, I don't know what it is. I've been doing this 25, 30 years and it's still, it's still worth saying. It's still, it's still worth reminding us.

Absolutely. You know, I used the metaphor. A lot of the iceberg, most of the iceberg is below the surface of the water. We don't see it. We see what's above the surface. The cash flow, the appreciation. Those are the things investors notice. But there's a lot of stuff going on below the surface of the water. Tax benefits, mortgage pay down leverage, equity growth, and most importantly, inflation induced debt destruction. And it brings it back to this quote. I just took this picture out of a book. I want to say this is probably from Warren Buffett. I can't even remember. I've got to look it up and see if I can find it. The best investors in the world are really good at doing nothing.

When you brought this up, I watched you do this and there's actually a study, I believe it was Fidelity. Fidelity released a survey. I want to say it's 20 years old, but they did a survey on investors. And you know who they said the best investors were? The debt investor.

Right? Yeah. Right. Because they don't move stuff around.

It is that simple. Sometimes folks own assets, own assets for a long time. Don't trade in and out. Don't let emotions back to fear, greed. You know, buy high, sell low. The debt investor is the best return. That should tell you something, folks. Hello, Wake up. That's a telling sign.

You know, actually you just made me think of something, Michael, because that actually speaks to income property in particular. Here's why. With stocks or cryptocurrencies or any other, you know, precious metals, any other asset class, right. You get taxed when you sell it and the money you have left over to reinvest into something else is post tax dollars. The government has already attacked it and taken a big part of your profits. But with income property, we're incentivized through the beautiful, incredible 1031 tax deferred exchange laws. We are incentivized to stay in the asset class. We might move the chips around and instead of having a hotel on Marvin Gardens, we'll have three single family houses on Boardwalk. Going to be using the monopoly metaphor, obviously. Right. And. And so we move it around but we don't sell it. Right. We stay in the game and we don't get taxed as we move stuff around with, with income property. That's another thing that's just so beautiful about it. And you know, so many people are constantly like cannibalizing their hard earned money that they put into that investment and they're left with very little to reinvest with income property. We don't have that problem.

Yeah, no. I mean there's just so many things. Again, folks, if you are a part of my school community, it is my intention to have all the videos up from the sessions in school by Wednesday. End of day likely beat that time. But that is my stated goal. Jason's full presentation will be there. Again, I will load his PowerPoint just for you. Inside school. School only, not YouTube, just school. Again, this is a thank you for joining. Last year we sold these virtual recordings for 99 bucks. I'm not doing that this year. They're all inside school. So. Jason, I appreciate you coming out. It meant a lot to me. But let's talk about what you got coming up. My event's done over and gone. But you got something coming up. What's that all about?

Yeah, so we've got Empowered Investor Live. This is an annual event that we do. It's sort of our main thing. We do some other events every year, but Empowered Investor Live. And I'm honored to have you speaking. I invited you to speak at our event because, you know, Michael, we've really got the right philosophy when it comes to investing. So many other people are into this whole quick buck thing and you know, that's just not realistic. Right. Investing is the legitimate process of creating value over time. This is in Irvine, California. Southern. Beautiful Southern California. Orange County. Great place. To live. You don't want to live there because they'll tax you too much.

Great place to visit. Don't live there.

Yeah, Great place. Did I say that backwards?

Yeah, no, no, no, you're right. I was just repeating it. You said it right.

Yeah. Come and join us in mid May. Michael Zuber will be there as one of our keynote speakers and we'll have a lot of other great content for you. You know, we've been doing this event for many, many years. In the past, we've had Ron Paul, presidential candidate and you know, everybody knows Ron Paul. He's written a zillion books and he's an outspoken guy on and fiscal policy. Sharon Lecter, she's just fantastic. Everybody knows her. She's written so many great books. Michael Maloney, Ken McElroy, George Gammon. And I invited Logan back this time. You know, of course, Michael, I do, of course, with Housing Wire. And he is so good at the data. They call him Chart Daddy. Yes.

He enjoyed. He enjoys battling the Crafts Bros. In their 13 years of spectacularly failures. Yes.

Oh, I know, I know. He's just, he's just totally got it right, you know, as far as the data on income, property and where the market's going and everything. And you know, the crash Bros just get it wrong all the time. Those people are now three. Well, they're more years in, but three years ago they really got a foothold again because rates had gone up, affordability had gone down. They were all predicting a massive crash and it didn't happen. And now.

Yeah, you know, I want to hit, I want to hit that again because, yeah, I got a lot of heat for that. Jason, when I was screaming this three years ago that we were going to have a housing crash in transactions, not in price. And man, was I attacked. I was called lots of nasty names.

Me too.

I'll just take a victory lap because we had a 40 housing crash in transactions and prices went up. All I got to say is neener, neener, neener, I told you so.

Yeah, yeah, yeah. So let's just make sure people really got that point. The activity went down, the sales volume went down, but the prices went up. Okay, and, and that all the doomers were just wrong. I was getting tagged on, on Twitter or X all the time. You know, people telling me that I'm just gonna look so stupid and, and so wrong. And you know, look, folks, this all comes down to the simple law of supply and demand. There is a housing shortage. It is real, it is persistent and it's going to be here for a long time from what all of the experts and all of the data suggests. Of course, everything's subject to change, but Michael and I will keep you informed. If there's new data that we talk

every week, I promise you we will not miss it. We might be a week late, but that'll be. It will only be right?

Yeah, absolutely.

I'm curious, I'm curious. When you put on events like this, I had no idea you done 146. That's amazing. That's like, that's like 15 a year or some crazy.

No, it's over the course of 22 years. So it's not.

So that's. So that's seven a year, though. I mean, rough. I'm just doing. Yeah, you know, that's, that's, that's impressive. I'm curious, when you're putting on this one, right, it's out in May. You've already, you're probably already in the mix, right? You're three months out. When you started to put this agenda together and you started to invite people, what was the overarching theme? And this is three days, right? You're 15, 16, 17. So, like, what's the overarching theme you want people to take away from this?

I don't know that we've really sort of themed this event too much yet. But the overarching theme really has. Has been very consistent over my entire career. Income property is the most historically proven asset class in the entire world. It's the most tax favored asset class in America. One of the things I've said for a long time is invest in places that make sense so you can afford to live in places that don't make any sense.

Live where you want, invest where the numbers make sense, right?

Absolutely, absolutely. And Michael, it's going to be great. It's going to be your first time at our event and we can't wait to have you present. You know, we're going to have a lot of other great content. Yeah. Empowered Investor live dot com. Check that out. Join us. We've got early bird pricing now because we're a few months out. We'd love to see you in May. We've also got special very reasonable hotel prices as well at the venue. So it's going to be great.

Jason, I appreciate you. Take care. Have a wonderful day. Bye.

All right, you too. Happy investing.

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