2474: The Massive Housing Shortage, Investor Advantage, Property Tracker Tutorial and Q & A with Jason

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Yo, what's up, man? Yeah, things are good. I refinanced one, got 2 new properties, did the refinance and the 2 signings. So up to 9 now. So things are going good there. And the only reason I can walk away from corporate is because I have 9 rental properties. So, I mean, dude, it's— you're— you are an extremely pivotal piece in that. equation. As always, man, thank you so much for being so free with your information and sharing with the world. It's worked so well.

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 Jason Hartman has 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.

Good day, empowered investors, and welcome to episode 2474. Today we have got an interview I did on a paid network. See, I bring these things to you, you don't have to pay for them, they're free on the show. When I do a paid speaking gig or something like that, kind of like this one, you get it for free a lot of times. So that's a good deal, it's a good way to hack the system. Before we get to that though, I just want to share 2 really important important charts, or actually it's one chart but it has a notation on the second slide that I'm going to, going to share with you. And if you are not watching on video, do not worry, I shall explain it. This is a chart of residential units completed in the United States for really a 21-year period from 2000 to 2021, and it just really brings home the point of how we have this massive undersupply problem in housing, this massive housing shortage problem. Because you see, leading up to the Great Recession, home builders built just a record number of new units. They oversupplied the market. And then we had the mortgage meltdown. And then after that, we had the global financial crisis caused by the Wall Street crooks. And it took several years to absorb that supply, but The home builders just put the brakes on building. I mean, think about it. They went from sort of a long-term average of about 1.5 million homes constructing that, right, to a high of nearly— well, I'll say that's about 2.3 million on the chart, down to a very, very low number of about 500,000 homes. Then they just kind of hovered around these low numbers For many, many years. In fact, it took until about 2021 to just get back to the long-term average. But we really need to make up time for the deficit that occurred for so, so many years before 2021, really about a 9-year period. And that gap was a huge, huge number, as you can see if you're watching on video on the next chart. And this is why We have such an acute housing shortage and such an acute housing affordability problem. Now, recently we got what I consider to be bad news. I mean, it's, it's good news for existing owners, but it's not good news for my business where you want new owners to come on board and buy new investment properties. So this is kind of mixed for investors. And let me, let me unpack that with you for just a moment here. So we've got this situation where we see new upward pressure on rates. Of course, the Fed did not hold steady. They did not cut. They raised 25 basis points. So we got a quarter of a point increase on the Fed side. Of course, we all know that the Fed does not directly impact mortgage rates or control mortgage rates, but they certainly do influence them. And the bond market certainly influences mortgage rates. And then just the sentiment and the mortgage spreads, all of these things come together and coalesce massively and influence mortgage rates. So we now have that, and we have all the existing housing owners that have these low COVID-era mortgages, all but maybe 12 million of them. So well over 140 million housing units, and only about 12 million have these higher post-COVID-era interest rates at different numbers. So the vast majority of the housing stock is experiencing a massive mortgage lock-in effect. Well, what does that really mean? Let's put yourself in their shoes. You know the old saying, walk in the other person's shoes for a mile before passing judgment. Well, let's walk in their shoes. They've got this super low mortgage rate, and now the external mortgage rates went up even more. So suddenly they're looking at the delta between the rate they have— maybe it's 2.5% And the rate they'd have to pay if they sold their home and bought another, maybe that one's around 7%. And they think my deal just got better. It didn't get worse. It got better because the quality of the mortgage asset— mortgage asset, not liability asset— they already own happens to be attached to a house. But that's not really the asset. The mortgage is the asset. Certainly in this case, it is. The quality of their mortgage asset just increased in value because it became even more rare and more impossible to replace. I mean, think about it. This is really not hard, but people struggle getting this, and I don't know why they do. If you own— I mean, I was going to use diamonds as the example, but diamonds are like a bad example because they make them in labs now. So De Beers, sorry. Your criminal monopoly that you had for so many years is now falling apart, which is actually great news. So say you own— let's take something simple like gold, and you bought your gold at $1,000 and the price was $3,500, and now it went up to $4,000. I don't know the current gold price, but it's probably hovering around there somewhere. How do you think of that if you paid $1,000 And your gold was worth $3,500 and now it's worth $4,000. How would you think about that? You'd think the value of my asset went up. You would properly think that.

Good.

That's exactly what you should think. And you would now think, gosh, if I wanted to replace my asset, I would have to pay the new higher price. So my decision is a more difficult decision. It's a bigger stretch because The delta between what I paid, which is how I'm looking at it, like in the rearview mirror, I only paid $1,000 versus what I'd have to pay now, $4,000, is now even wider. So I'm gonna pat myself on the back and think, wow, I made a really good deal getting that low COVID-era mortgage, and my deal just got better than it was before the rates went up. So that's one side of the equation. Now let's look at another component. What if you are a renter? Or what if you are one of— what's the number? Something like 25 million young adults living with their parents. And you're thinking, you know, I really want to get out of the renter pool, or I want to get out of my mom and dad's hair and get my own place. And I want to buy something. I've been saving, living at home all these years, saving money. I've been renting a cheap place when I could have afforded a more expensive one because I've been saving money to buy a house. And now you think, wow, rates are even higher. So what am I going to do? I'm going to delay my buying decision even longer unless I have a fear of loss or a FOMO. And that FOMO, fear of missing out, would be, gosh, rates are going to go up even more. So now I better act now because we all know humans will act much more swiftly to prevent a loss than they will to get a gain, right? But that's kind of a side note. Let's go back to just the basic example. They are going to stay in the renter pool. And those people living at home, a lot of them, they can't stand it anymore, you know. And so they're going to move out and they're going to move into the renter pool rather than moving directly into the buying pool, which, by the way, that's what I did. I bought my first rental property at 20 years old. I lived at home, then I bought another property to live in, and I went right from living at home to being a homeowner. And I owned many homes after that. And I actually did not become a renter until like maybe 10 years later when I was waiting for a home that I purchased to be completed, the construction process. You know, for a long time I was only a homeowner. And most people would think, hey, that's a pretty good deal. You know, you really, you really got ahead doing that. And I did get ahead doing that. But now I'm a renter again, and I have no problem being a renter. I think it's very fitting to be a renter many times. But the difference is I own lots of real estate that other people rent from me. So if you're going to live in a high-end place, the best math on it is to rent the place in which you live and to buy a lot of lower-priced properties that you rent to somebody else, because there you have a double arbitrage where the rent-to-value ratio is in favor of you on both sides of that equation. Anyway, tangent alert, I digress. Let's get back to the renter. So the renter stays in the renter pool. The living-at-home person maybe continues to live at home, but some of them peel off and move into the renter pool because they're probably not moving into the buying pool with these elevated rates. So what does that do? Well, that creates more rental demand for existing supply, and it puts upward pressure on rents. I told you there's a lot of upward pressure on rents that has been brewing for years under the surface. And believe me, you're going to start really seeing that as soon as this multifamily catastrophe works itself out. And it is working itself out, but it's going to take time. By the way, you know, I've been wrong on a few predictions, and that one I'm going to say I was wrong. But most people who are wrong would say they were just early. That's a cop-out. Okay. I thought the multifamily market would really be healing by now. And, you know, it looks like it's still not healing. So I was early. That's what all the— that's what all the others would say. I was early. No, I'm just gonna say I was wrong. We'll go with wrong. I'm often wrong about interest rate predictions as well. Just a warning. But I'm right about pretty much everything else. So you be the judge. You can just go listen to my old podcasts, watch my old YouTube videos. It's all there. It's all date stamped. And you can see how right or wrong I've been with my predictions. I was definitely right that the housing market didn't crash, and a lot of you owe me an apology, and I'm still not getting my apologies, but I would really appreciate them. Jason, you were right. When rates went up and the market got slower, I thought prices would come down 25%, and they didn't even get close. In fact, nationally speaking, prices kept going up. Jason was right. Yeah, he was. Yeah, there were a few markets that suffered a little bit, but again, not a crash, just some readjustment, a correction, as they like to say in the Wall Street world. Okay, so upward pressure on rents. And now let's look at one more component. And you all know this because I've been complaining the last 3 years, our business here at Empowered Investor has been on the slow side. We're still making money. That's all great, but it ain't what it used to be, I'll tell you that. Okay, so what does that mean? Well, that's not just us. That's the entire investor market. Because the rates are so high and the prices are so high, it's hard to make the numbers work. And only people with courage will invest, right? Only people who have the fortitude to delay gratification. which is one of the primary success traits in life, is the ability to delay gratification. They're investing, and they are our customers and the customers of other people too. But most people, when they want to invest, is when everything's going crazy and all the news is super positive, and all they hear on the news is prices are going up and it's just a crazy market with bidding wars. And they're, you know, those people are fine, but they're usually too late to the party. Right. The people that win the game are the people that do it beforehand, right? The people that are doing it now. But what does that mean? Well, it means less rental supply. So we examined the upward pressure on rental demand, the decreased supply of rentals because fewer investors are buying properties to rent out. And all of this gives us a formula for big success and good news for investors. Existing property owners who already have a lot of investment properties, they love high interest rates because their renters aren't going anywhere. When rates are low, the renters flee and they've got more turnover, more vacancies, and it's harder to get renters. Renters nowadays, they're sticking around pretty good. Okay, so that's the take on the market. The housing shortage is massive now. Oh, actually, lest I forget to tell you about one more element. And this is a very important element— home builders. Home builders are not happy. Their stocks are not happy, and they are not in expansion mode. In fact, they are in contraction mode. So to add to increased rental demand, decreased rental supply from investors creating new supply of rentals by buying them and placing them into service. Home builders are building less homes when we have a massive housing shortage. So the problem is literally just getting worse. And if you're an investor, that's better for you. Look, we all only have limited control over things. We have to play the cards in which we're dealt, and these are the cards. And you can definitely play these cards to win the game. That's such a great quote from Voltaire where he said, the player can't choose the cards life deals him or her, But must choose how to play the cards to win the game. So reach out to our investment counselors through empoweredinvestor.com or call us at 1-800-HARTMAN and have a free consultation, have a free portfolio makeover, and see what the highest and best use for any of your assets would be. And they can help you redesign that. Get a free Property Tracker account at propertytracker.com so you can analyze deals correctly by doing the math correctly. We're making all sorts of improvements to Property Tracker all the time. And guess what? It's free. So go to propertytracker.com, get yourself a free account there. Investment Counselor is here for you. One other resource I'll mention, our monthly masterclasses on the 2nd Wednesday of every month. Those are free as well. Just go to empoweredinvestor.com/wednesday because they're on the 2nd Wednesday of every month. empoweredinvestor.com/wednesday and register for those, and we will look forward to seeing you there. Okay, let's get into the interview portion of Jason, it's good to see you, buddy.

Uh, man, it's been a month. Uh, how are things going in, in Scottsdale or Paradise Valley? You hanging out in Paradise Valley these days?

Well, it's still hot, but it is cooling off a little bit, so that's nice. And real estate market's actually been heating up, so that's also nice. You know, amazingly, Gene, we've got rates that are Stubbornly high. I mean, Kevin Worsh is not— he's not the easy money guy yet, at least. You know, I just think maybe you attribute it to people are just tired of waiting to make a decision because they seem to have come off the fence. And business has been quite nice for us recently, which is great because, you know, we've had 3 years of sort of a sluggish, frozen market, but it's definitely picked up recently. So that's good news. And interestingly, I'm looking at an article on my screen that says the best time to buy a home is the week of September 27th to October 3rd. There's all these people out there running statistics and things like that, and maybe that's it. Maybe that's the reason. Maybe people intuitively understand that. I don't know.

Yeah, there is— there's definitely, uh, there's probably definitely an uptick in, uh, just the cyclical approach to things. I also think, you know, it's like when I talk to people about rates, you know, they always have this idea like, oh, when the rates come down, I'm going to refinance. And I think that narrative is breaking down a lot. I think people are starting to catch on that rates are just not gonna— I mean, we got a 25 basis point rate hike coming on Wednesday, that's like a 70% gimme. You know, when you start looking at it like that, I think, uh, the, the consumer is starting to realize like, okay, maybe these things aren't coming down as fast as I had predicted them to come down, and I need to, I need to get into something before they go higher.

Yeah, I, I mean, I mean, look, by any objective metric, the stock market is massively overvalued. Okay, sure it is. Yeah, look at, you look at the Buffett indicator, the CAPE ratio, whatever you want to look at, PE ratios in general, everybody will say that. Although how long can they keep kicking the can down the road is anybody's guess. But nobody would argue that the stock market's not overvalued, right? Ultimately, investing, as is everything in life, comes down to life's most important question that I always talk about on my show is compared to what? Income property doesn't have to be as good as it was. It just has to be better than everything else. And I think it's, it's got that mantle. So Maybe that's the reason people are just tired of waiting. So yeah, it's been quite good. But I, you know, I do think rates would have been lower if it wasn't for Iran. That's going to clear itself up in, you know, who knows exactly how long, but it's not going to, we're not going to be stuck there like Afghanistan. Okay. This thing is largely over. I mean, there's no ground troops, right? You know, it's a better way to fight a war for sure than putting boots on the ground like before. What do we put in Afghanistan? A million troops?

Yeah.

Or something, or that was Iraq, I don't know. But huge numbers of boots on the ground, right? This is like a nothing burger compared to that. So this will clear itself up and then we're going to see some relief in the rates, I think, because the inflationary pressure will ease a little bit as much.

Yeah, let's hope so. The bond market's not buying it, you know, obviously. The rates keep going up on the long end because nobody wants to carry long treasuries with lousy rates, you know. And, uh, it's an interesting conundrum. We're in an oil war right now and we're about to raise rates on Wednesday because the long end is a little too frothy. And, you know, the government needs to service that debt, and they can't get too high.

You know, I know, I know. So the government has the incentive, and that's aligned with the real estate market, is to see lower rates. But, you know, we'll see. I mean, listen, I don't know if I'd be so sure about Wednesday because Warsh is tight-lipped. You know, his whole policy that he made a part of his first speech was, let the market figure it out. We're not gonna tell you. Okay.

Yeah, yeah. I mean, the crux of that is, of course, he's literally Bassant's left left-hand man, right-hand man. I mean, you know, so the Treasury and the Fed are working together very, very closely. So my guess is Warsh is going to do what he's told, most likely. So we'll see. You're absolutely right, you know, um, there's a, there's a lot going on in the markets and there's things that we just don't know about. So we'll see. Let's hop into a couple of these questions that we have from our members, and then you got a little education series, uh, that you, you'd want to display. Uh, I think you're gonna teach us a little bit about evaluating a property or something of that nature.

Yeah, you know, one of the most important things is just understanding the math of real estate, and it's really not complex at all. But we've got a couple of new features that you haven't seen yet and the Rebel Capitalist audience hasn't seen yet with our Property Tracker software that is 100% free. I'll share with you some of that because, uh, really cool stuff.

So, all right. All right, this one comes from Adam, uh, from the old forum, so I just pasted it over. Um, he asked, um, hey, uh, Gene and Jason, hope all is well. I'd like to get your thoughts on a deal in Northwest Indiana.

Yeah, that's a single-family home. We're in that market. We like that spot.

Yeah.

I got one in Anderson out there. Here are the rough terms of the deal. Purchase price, $110K. Looks like he's gonna cram $40K in improvements into it. So, he's got $150K cost basis after the renovation, which would equal $200K plus after the renovation. Okay. So, he's gonna force equity up to about $200K, hopefully. After the improvements and in 6 months, I plan to take a mortgage on the property for my cost basis of $150K in cash. out refi on the property worth $200K. Okay. Does that make sense? Now, I'm a little confused here. So, he's buying—

I'm confused too, but maybe Gene, just go to the question first.

Let's do it.

Okay.

So, the bottom line is this is a good deal. So, looking for a $1,000 mortgage, subtract taxes and insurance, a little maintenance, $1,450 per expenses on the rent, $1,500 a month for the house, $300 for a detached heated workshop. That's $1,800 in rent. On a $200,000 house with a $150,000 mortgage, that's pretty good.

Okay, well, I will tell you that $1,800 a month on rent, if that's realistic, on a $200,000 property sounds like a pretty good deal. The other questions would be, where is the property? How old is the property? Is it desirable? That deal sounds like it's maybe an older property that's not super desirable, honestly, because that rent-to-value ratio From just that is pretty decent. But is it $200,000 finished? Is that the finished price or without the improvements?

That's with, that's with the renovation baked into it.

So. Okay. But, but how much is the person spending on it? $150,000, right?

Oh, he's spending on— yeah, $150,000.

Yeah.

Yeah. That's the best way to put it right there.

All right. Well, it sounds pretty good.

Yeah, I would say so. Christian asks, hey, hey, Gene and Jason, hope all your— hope all is well. Late 20s, decent yearly income, moving my money around, looking to buy a house. Confused on which levers to pull. Wants to buy a house, preferably a multi-unit. Time horizon next 6 months. First issue, living in Miami. So that's probably not the market to be playing in. Considering the dollar devalues at 7% a year and seeing the current admin take steps to willfully raise inflation, I fear the stockpiling cash to set up down payment for property will automatically be on an uphill battle. Yeah, so it's kind of like, what do I do here? Chris is not a big fan of the markets, the real estate market, of course. He hates bonds and anything tied to it. So he'd do something else with So as a guy who's in Miami, I mean, this is great because, you know, I bought a bunch of houses from you, Jason, a long time ago, 5, 6 years ago. Never stepped foot in a single one of them. Literally just bought them based off of what was on your website and using your team. For the most part, I can't complain. Literally, when people ask me about my homes, I'm like, I've never stepped in a single one of them. You know, I have no idea what they look like on the inside outside of the pictures I received when I bought the places. with a good property manager in place and then buying from reputable, you know, persons such as yourself.

That's a big leap right there, Gene. A good property manager.

It took me 3. Yeah, it took me 3, and I had to sell 3 houses before I found one, which is a big bummer.

There are not many good property managers. That's why self-management. But, you know, do what you want. Yeah, I agree. But, you know, I, I've never seen most of my properties either.

So yeah, there you go. So for a guy who's living in Miami who wants to get into the market To me, it makes sense that, you know, being a turnkey real estate investor would make a lot of sense. Now, I don't know if this fellow wants to get hands-on. That's a different story. I'm guessing Miami is probably not the place to be playing.

Oh, Miami would be an awful place to invest. That's a disaster.

Yeah, it's a disaster. So, what kind of advice could you give Chris here? I believe that's who this is. Yeah, Christian. Christian is asking, so what would you suggest? I mean, maybe this Property Tracker thing will kind of lead us down a path for him that he's like, oh yeah, I kind of see what you guys are up to.

But live where you want to live. If you are in an expensive market like Miami or anywhere in South Florida or the expensive northeastern markets or the West Coast, you are much better off renting there. Rent your own home and then buy lower-cost rentals in markets that make sense that you rent to other people. Okay, that's the best arbitrage, right? Arbitrage just means exploiting the differences in things. And so you want to exploit that difference because in a high-end expensive market, the rent-to-value ratios are awful. They are just awful. Okay. And those markets usually aren't landlord-friendly. Miami's not that bad in terms of landlord friendliness, but it's also not great. You know, you've got a high concentration of foreigners. A lot of those people are not just not going to pay, like they can't afford it. I mean, the typical, the typical rent to income ratio in Miami is hovering around 50%, 5-0. That means people are spending half of their income, give or take, on rent.

Geez.

They cannot afford the place that they're living in. So the likelihood that you're going to have eviction problems and people who aren't paying you is going to be very high in a market like that versus the markets that we recommend. People are spending maybe 30, 33% of their income on rent. Okay. And so there you have a much more stable tenant. You know, those are a couple of the reasons. You just can't get the property to make sense in an expensive market, whether it be West Coast, Northeast, South Florida. All of those markets are just— they just don't work.

I think, you know, personally, I think the best, the best approach for somebody who's brand new to getting into real estate is to go through a turnkey specialist like yourself.

Yeah.

For the first house, get a feel for what you're getting yourself into with, you know, not as much risk, I don't think. Because you have a support team, you know, you got Carrie and stuff like that there. You're there, houses are vetted.

We got a new investment counselor, by the way. I got to tell you about this guy. You'd love this guy. He's a Navy SEAL.

Very cool.

Yeah, it's pretty awesome. So he just joined our team a few months ago and he's retiring from the SEALs and he's doing really— he's got a bunch of investment properties that he's purchased. And I made the announcement on the podcast and he said, I got to come aboard and work for Empowered Investors. Because I just, I've been following your podcast forever and love the work and love real estate. So, uh, so yeah, we'll, we'll have a, we'll have a, a very tough investment counselor.

I love it, man. I was in the Navy for a long time and I just fixed radars. Yeah, so, uh, it's cool to have a, have a tough guy on the team who's, uh, disciplined, you know. It's always good. Okay, so I guess for, for Christian, I guess really the answer is, you know, I hate to— not that I hate to say it, but because I promote you a lot, Jason, but go check out jasonhartman.com and check out his offerings. Maybe talk to a counselor. And see what, what's available, and maybe you can get started that way, and you can hit that 6-month deadline goal that you have outside of trying to do it all yourself for the very first time.

Yeah, yeah, yeah. Well, hey, I, I appreciate that. I'm glad you like the program, Gene, so that's, that's great to hear.

Right on. All right, so Ron asks a comment and number 2 question regarding the property tax assessment case before the Supreme Court. Comment: it always seems somewhat arbitrary and unfair to tax people's real estate. I agree, unrealized gains on something you own is bullshit. Okay, in light of the extraordinary recent price increases, the property taxes have become a real negative factor in owning and investment viability. Yeah, not to mention insurance too. So question 1, maybe a bit outside—

We are getting some relief on insurance though, I'm happy to say. Rates have actually fallen this time around, so they're past their peak and they're coming down a bit, which is really refreshing. So the insurance thing isn't as bad as it was.

Don't they peg off to the long term? Don't they peg off the long end though with insurance companies? Like 30-year long-term treasuries is kind of where their sweet spot is.

You mean how are they—

how insurance companies charge? That's—

yeah, I think they're analyzing risk really, you know.

And then they parlay that into the bond market, right, so that they can cover their risk?

Well, I mean, I'm not, you know, I'm not analyzing what they're doing with their money. Although the insurance industry, I have to say, is a really interesting industry. I own an insurance company. It's a captive insurance company. But the insurance industry is the only industry in the world with a negative cost of capital. I mean, think about it. Every other business has to provide the service or the product first, and then they get the money. Insurance, they get the money first, which is very interesting.

The premium harvesting. Yeah. It's like, it's like selling puts on the, on the options market. I mean, that's all they're doing. Just every once in a while they have to pay out, you know. But, uh, okay, let's see here. Uh, so question 1, maybe a bit outside today's talk, but if you have any thoughts regarding the case of the general principle of school bonds being so out of control, I think that's what I'm talking about. Number 2, do you see some opportunities and buying opportunities if the Supreme Court rules in favor of the people and strikes down large portions of limits, the unfair tax system in place? So I'm guessing there's a Supreme Court case pending now about this property tax assessment business. Yeah, he literally says that right here. Sometimes I read things and it doesn't process right away.

So, yeah. Oh, well, we all do that. Don't worry. I do it all the time. But, but here's the thing, folks. We have several states and our President Trump, the best president in modern history, by the way. So, you know, critics, listen, if you're being critical of Trump and you're not a Democrat, all you're doing is supporting Gavin Newsom or Kamala. Like, seriously, just pick a team. Okay.

Let me know about that Epstein file list.

I'll get back to you. Sadly, you only have 2 choices. Okay, that's just like— we just—

I don't think you have any choice, honestly. I don't think your voting is going to get anything, dude.

I, I know you don't like it, right, that we only have 2 choices, but the reality is that's the reality. Be practical and, you know, pick a team. Okay, that's, that's all you can do. Okay, yeah, it's, it's not perfect. Okay, it's far from perfect. So, you know, Trump, DeSantis, governors of other states have all said several states that they think they want to do away with property taxes, which is really interesting.

Yeah.

Because Florida says they want to get rid of property taxes. Tennessee, Texas— I don't know how especially Texas would do it without having an income tax, because they have no income tax. Where would they get the revenue? Now Florida can kind of get it from tourism. That's what DeSantis has said, and Florida has a lot of that. But Texas doesn't have the kind of tourism Florida does. Okay, so So, you know, we'll see if they can pull this off or it's, it's just a fantasy. I don't know. But remember, everything in life has an equalizing factor. Okay, so I have predicted, and we'll see if I'm right, that if property taxes go away in any particular jurisdiction, that real estate prices will rise very quickly.

Oh yeah.

By 10 to 14%.

Huge hedge.

Yeah, that's my prediction. Okay, now of course it depends on other factors in the market. Okay, don't blow me up on this. Okay, that, oh, you know, what if we're in a recession? What if interest rates are 30%? Of course, I like— I don't know. Okay, but all things being equal, if the property tax goes away, that would sort of impute a price increase of, of, you know, 10, maybe 14%. Almost very, just very quickly that would happen. The trick is with everything, you've got to sort of front run this, right? If you wait for property taxes to go away, you're just going to see sellers demanding more money because there's going to be more demand of buyers in the market and everything operates on supply and demand. So they're just going to jack up their prices because they can get it. Okay. Because there's more demand. So, you know, that benefit will quickly be just sort of imputed into the price of the property. Yeah. Yeah.

And, you know, they are— the big argument too is by switching the regime up in this way, you're going to make houses more unaffordable, and that's just going to make the lower leg of the K-shaped economy complain even more, right? Because this really does benefit the financialized, uh, upper half of that K-shaped economy, though, the existing homeowners effectively, you know, the people that actually own—

Oh, the existing homeowners will be— they'll be loving it. Yeah, yeah, buy more homes. Okay, you know, let's just peel the onion a little bit on this. Okay, as we unpack it, there is some talk that they would only do away with property taxes for owner-occupied homes.

Oh, so if a rental— okay, well, that kind of makes sense, you know, because yeah, you're earning it anyway.

Investors this benefit, right? Yeah, but they don't need to to cause prices to increase because the investors would still benefit from the comparable sales. The market is mostly owner-occupied, it's not investors, okay? So all the comparable values in any given neighborhood would rise, and that would push the value of the investor's property up too. Even if they're paying taxes and they don't get the benefit, they still get a benefit, okay? Either way, you're gonna win.

Yeah.

So yeah, get, get some properties. Look, folks, you're always going to lose in life if you don't own the asset. You gotta own the assets, accumulate the assets.

You know, I would love to see property taxes go away because again, like I said, it's just a big bullshit. You can't just keep taxing people on stuff that they haven't sold, you know. I wouldn't— they wouldn't do it to your stocks. Why are they doing it to your house?

Yeah, let's see the Department of Education go away too.

Oh, we got a lot of— yeah, the government could really do a lot to reduce its overhead, but we won't see that anytime soon. Nothing stops this train.

It's going in the right direction at least, okay.

I hope so. All right, let's, uh, let's hop into the tracker software.

Okay, so here is everybody's favorite website, empoweredinvestor.com, hopefully. Okay, all you do to start this is you have your— you go to propertytracker.com, you create a free account, you have Property Tracker open on the same browser. I use a couple of different browsers, got to be in the same browser. Log into your Property Tracker account. It's free, propertytracker.com. We have over 10,000 users. Just go get yourself a free account. Okay. And then go to empoweredinvestor.com in another tab and click on the properties page.

Oh, so this works with your properties, but it doesn't work with like Zillow?

Well, no, it does not work with Zillow. But I'm going to show you how to put a property in that's not one of our properties too. It's quite easy.

Okay.

Okay.

But let me just show you with our properties first, because that's super duper easy. Okay. Of course, like anybody, we want to favor our own properties, right? I mean, we are in business here, folks. Okay, sure. So here, if you see, uh, I don't know, you know, pick a property. How about this one? Okay, so this is a property, it's a plex property. Okay, so let's take a look at this one. All right.

There's a multi-family or duplex.

This one, yeah, it's a little duplex. Okay, this is $389,900. That's the price of the property. By the way, All of these little eyes that you see, if you just hover over them, they show you the math, the equation that's being done there, and you can just do it on your own calculator. And it also gives you an explanation of what that thing is. So just hover over the eye, you know, this whole sheet will be explained to you. Okay, so this property, what we're doing here is we're paying $389,900. We're going to put 25% down, so it's a 75% loan. You see my big Big green arrow for the mouse there. You need about $110,000 or $111,000 to buy it with your closing costs. You should have cash reserves of at least 4% of the value. So that calculates it for you. This is almost $16,000 in cash reserves. That's just money in the bank earmarked for problems and emergencies.

Okay.

Vacancies, repairs, whatever it is, you know. This is a brand new property, so hopefully there's going to be no maintenance for the first couple of years. Okay, projected rent is $3,200 a month. And now we're going to come into some new stuff here, Gene. So here's your property taxes we were just talking about. That's taking away $738 a month from your return, right? Think of what that would do if you didn't have it. That would just increase the value of this investment dramatically, right?

Huge.

Here's your insurance. Insurance really isn't that bad in like newer homes. Okay. In older homes, it can be pretty bad in Florida or, you know, California wildfire areas or any wildfire, you know, Colorado, whatever. So here you get all your expenses here, right? And then you take away your debt service, your mortgage payments, right? And your cash flow is projected at $393 per month on this deal. Okay. And you're paying, or your tenants are paying $448 per month down on the principal. Right, they're building up your equity for you. And then what we've added, and this is totally new, is cost segregation. Now, what is cost segregation? One of the wonderful things about income property is you get to take this tax deduction that is the holy grail of tax deductions. It's called depreciation, and what it means is that it's a non-cash write-off. Or a phantom write-off. In other words, the IRS thinks that the property will someday fall to the ground and be of no economic value. So it allows you to, instead of taking one big tax deduction the day that happens in, I don't know, 150 years, right, it'll let you depreciate it on a schedule of 27.5 years. And as you do this depreciation You don't pay anything to get this benefit. It's a phantom write-off. It's like a ghost of a write-off, right? The property could be appreciating in value, have positive cash flow, everything's going great. You think you're winning, but you've convinced the IRS to believe you're actually losing in this little part of it called depreciation. It's the most beautiful tax write-off in the world. There is nothing better than depreciation. But wait, there's more, okay? Because it gets even better. So I told you a moment ago that the depreciation schedule for a residential property is 27.5 years. How did they come up with that number? Lobbyists, okay?

It's a wild number.

There were lobbyists for probably the National Association of Realtors would go and hand money in a brown paper bag to your congressman, and your congressman would vote for this, right? So I don't know, right? Whatever lobbying is all whole corrupt industry. Um, no offense to lobbyists, right?

Criminal.

Anyway, depreciation is great, it's awesome, but it can be actually accelerated through something called cost segregation. Now I do want to make the disclaimer, I am not a CPA, I'm not an accountant. Talk with the appropriate professional on anything I ever tell you. I'm a real estate expert, but legal, tax, those are complicated areas. And And not everybody qualifies for these benefits, but there are ways you can make yourself qualify. So talk to your professional. Okay. Anyway, with a cost segregation study, what we do is we say to the IRS, you know, I know that the deal is 27.5 years, but there are certain components in this property that are going to depreciate faster than others.

The appliances.

The stove, the dishwasher, whatever, right? The water heater, the roof— all of these things depreciate at different rates. The flooring, right? And the IRS, if you hire someone to do what's called a cost segregation study— and we have referrals on this where they'll do this for only like $600 per house, it's super cheap now. In the past, the first time I ever did a cost seg study on one of the properties I owned, it was $22,000.

Holy moly, man.

But it was, it was a 125-unit apartment complex. Okay, but it used to be cost prohibitive even on small single-family houses to where you would spend $3,000, $4,000, $5,000 to get a cost seg study on a house. Now we have some connections, we have a few vendors that we work with, $550, $600 You get it done. Okay, it's great. And, and what's enabled that is technology that's made it a lot easier. Okay, so we can, we can help you with this. Just reach out through empoweredinvestor.com. So you get this cost seg study and it's a report. And the report— this isn't one of them, but this is just a paper. So the report says, look, IRS, here's the house, here's the appliances, here's the water heater, here's the roof, here's this, that, and the other thing. And you know, some of this stuff depreciates Over 5 years, right? Some over 7 years and some things over 15 years. And now I want to take the deduction on those things faster.

Nice.

I want to pull my depreciation benefit forward and take it all this year. And it's awesome. Like, it is awesome. I mean, I love that, folks. Taxes are the single largest expense in anybody's life usually, right? Uh, not everybody, but most people, right? Taxes are your largest single expense. And so if you can learn how to avoid taxes legally, of course, I mean, you're just going to be so far ahead of the game in your wealth creation journey. It's incredible. Okay, so now we have cost seg in the pro forma on Property Tracker, and it's included for free. So what we do is we take the purchase price of $389,900, and we're running just a very simple equation The real-life benefit will vary. It might be higher, might be lower, but it'll be close on a property like this. What we come to is it says the potential cost seg tax savings— and remember, here's your little i that you can click on and it pulls up a whole explanation of how it's calculated and everything, right— is $23,000 per year, or about $1,950 per month.

Wow, man, that's awesome.

Okay, now we also have inflation-induced debt destruction, my trademark strategy that I've been teaching for 22 years. And Gene, we've talked about this before. It's the whole idea that you borrow at today's dollar value and you pay back at tomorrow's lower dollar value. There is certainly nobody in your community who does not believe that there's going to be a lot more inflation in the future, and the current inflation rate is massively understated. Okay, so You know, everybody listening to this will agree with that. I don't— yeah, I don't have to explain it to this group, okay, because they get it.

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