CW 222: Ending Middle Class Poverty & A Review of ‘War on the Middle Class’ by Lou Dobbs with Jason Hartman

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh, new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show.

This is your host, Jason Hartman and.

We are at episode number 222 already. Wow, things are going fast. We've got a lot of great shows coming up. We've been recording a whole bunch of them.

So keep coming back and listening in and telling your friends.

We really appreciate the opportunity to increase the size of our listener family and.

Help people gain ground while most are losing ground.

In fact, got one of my newsletters today and it talked about how the middle class is down this decade, saying.

That the first decade of the 21st.

Century will go down in history. As a step back for the American middle class, last week the government made gloomy headlines when it released the latest census report showing that the poverty level.

Rose to a 17 year high. A whopping 46.2 million people, or 15.1%.

Of the entire US population, live in poverty and 49.9 million live without health insurance.

But the data also gave the first glimpse into what happened to the middle.

Class incomes in this first decade. Now listen to this. This is interesting because I want you to realize before I read you this.

Next little sentence here that this is.

Based on the official inflation statistics the government puts out. And the official stats, as we know, are highly maligned through substitution weighting, hedonics and all that kind of stuff that I've talked about on previous shows and just generally underestimating the whole thing. The real inflation rate is about 10%, give or take a little bit right now, while the government's reporting a far lower rate. Very, very significant difference there. In fact, the real inflation rate, I mean, think about how significant that is.

The real inflation rate about 300% higher.

Than what the government is telling us, 300% higher. I mean, isn't that mind boggling when you think about it? Back to the article, it says, well, middle class, well it says, well, the.

Earnings of middle income Americans have barely budged since the mid-1970s. Can you believe that in 35 years the income of middle class Americans has barely budged. But the new data showed that from 2000 to 2010, these incomes actually went backwards.

They actually regressed.

For American households in the middle of the pay scale, income fell to $49,445.

Last year when adjusted for inflation. Now again adjusted for the official inflation statistics, if you adjusted that for the real inflation numbers over all of those years, you'd find that income of Americans, I'll bet you would be somewhere around 35 to $38,000 per year. I'm not doing the math, that's just out of my head. But based on the real numbers versus the official numbers, that's about what it be.

And over a 10 year period, their income fell by 7%.

Folks, I'm telling you, the middle class in this country is under attack.

Read Lou Dobbs book War on the.

Middle Class and you'll see that the rich are definitely getting richer and a lot are falling out of that middle class position. And what we're here to do on the Creating wealth show and through my.

Businesses, my goal is to help preserve.

As much of the middle class as possible. Look, I have no interest, and I hope you don't either, in living in a country that is styled after a banana republic. And no, I'm not talking about the store. If you don't know what a banana republic is, that phrase, what it refers to, the connotation of it, look it up.

But basically it's a country where you have a huge, huge stretch, a huge gap between rich and poor and very.

Few people, or no people in the middle class. Think South America, think Russia, think a lot of other countries around the world, think Mexico, that's what you have there.

And hey, look it, I've done pretty.

Well for myself, I'm pretty happy with my place in life.

But I don't want to live in a place where other people are struggling.

You kind of think, well, why would.

The uber rich care? I mean, why would Bill Gates, why.

Would Warren Buffett, you know, Warren Buffett, a huge hypocrite if you ask me. But I just did an interview, actually we were talking about him on that interview and it'll be up soon with Bill Whittle. If you don't know who Bill Whittle.

Is, look him up.

He's got some great videos and he's a really, really interesting guy. Has a great way of like Illustrating things and in really interesting perspectives.

But why would the uber rich not.

Want to live in a banana republic type society? Well, they've got theirs. Who cares about everybody else? That's the way a lot of them think.

But the fact is those places are no fun.

You know, I've traveled all around the world and I don't want to be living in a country.

People have bars on their windows and.

Have to worry about ridiculously high crime.

Rates and have bodyguards. And that's not pleasant at all. What one of the things that makes.

America and other countries like America such.

Pleasant places to live is you've got this huge middle class.

You know, when you look at America, you look at Australia, you look at, well, you know, Europe is decaying into an entitlement disaster, frankly. And had another guest on just yesterday talking about that. And you'll have that show up soon too, talking about Europe and Greece and California, interestingly enough.

But those aren't good places to live.

So we don't want to be in a place like that.

My goal in my business and with this show is to help preserve as.

Much of the middle class as possible. And that's what we talk about. I love the middle class. Call me a middle class advocate.

I remember when I went to high.

School in Long Beach, California, it was.

Just such, I had a very pleasant high school experience, moved down from the.

Los Angeles area to Long beach, which is, I don't know, about 30 miles south maybe.

And it was a great experience in high school because Long beach, where I went to high school at the time.

It'S not so much that way anymore.

But it had it like a big middle class. And all of my classmates and friends were pretty much at the same socioeconomic level. And it was just a really nice, nice experience.

I just thought it was really good. So middle class preservation, that's what we're all about here.

So with that, the way to stay.

In the middle class or move up.

A couple notches into the upper middle class, of course, is to invest in good solid income properties. And we've got an Atlanta buying event. Atlanta's been one of our very best.

Markets for the last couple of years. We really like doing business there. One of our investment counselors that you're.

Going to hear on this show where.

We'Re going to do some questions and answers.

She just bought a property in Atlanta. I just financed a property in Atlanta. And by the way, I mentioned to.

You, I am loving doing some of.

These short term private loans.

You know, I don't like being a lender very much. I like being a borrower.

So these short term loans can be fantastic opportunities to increase one's return by 10 or 20 times what the bank is paying and who knows how much better than the stock market. Maybe infinitely better than the stock market.

For all I know.

Just depends what stocks you have. So call me and let me know if you're interested in doing lending because we can tell you how it works and stuff like that. As far as borrowing, we've talked about some special financing opportunities and that does feed the other side of the equation, the borrowing equation, and we'll talk about those. We've got a really interesting one that you're probably going to hear about at our Atlanta buying event on Friday evening. So that's Friday evening at the Crowne Plaza Hotel in irvine. It's from 6 to 8pm this event is only $15. It's a money losing event for sure. But we just wanted to, since our Atlanta local market specialists will be here in California, we wanted to have him do a presentation and talk about some of these opportunities. We'll have some exclusive properties that have not yet been released to the public that we'll have first crack at. And it includes appetizers. And It's Friday evening, 6 to 8pm at the Crowne Plaza Hotel in Irvine. So register@jasonhartman.com events for that one. I know it's right around the corner. It's right here, so register quick. Also, in talking about this whole middle class subject, you might be thinking and the logical question to ask because we do talk about a fair amount of doom and gloom on the show and.

I think there are a lot of.

Doom and gloomy things on the horizon. However, there are ways to of course benefit from the problems and exploit the problems and turn them into opportunities like the Chinese say, where they have that symbol that is the same for crisis as it is for us. Opportunity. And literally translated it means crisis is an opportunity riding the dangerous wind. So every problem does create an opportunity. So make sure you're on the right side of the equation. And with poverty rate increasing, the middle class moving down, all of this stuff.

Going on and a lot of things.

In the future not looking good. The question you might be asking yourself is, hey Jason, you know you're recommending income properties. Well, who's going to wreck my income properties from me if things are bad in the future? And here's how I answer that question.

People will rent them.

They will just formerly have rented a nicer place. The lifestyle for tens if not hundreds of millions of people in this country, a good 200 million people, 2/3 of the population. I think the lifestyle is in decline. And if you were to talk about to your tenant that you'll have in your property five years from now and ask them about their former life, they will tell you that they used to live in a nicer home in a nicer neighborhood. Whether they rented it or owned it doesn't matter. But the fact is the lifestyle for people will decline. There will always be a renter for that property somewhere on the ladder. I'm just saying what they're renting in future will not be as good as what they lived in in the past. They will just move down a few notches on the ladder. And it's unfortunate, but be there to serve them. Be there to provide rental housing and make sure your own lifestyle doesn't decline with all of these problems coming up. So very important thing there. Also, our Meet the Masters event is coming up October 14th through the 16th. We have a sweepstakes that you can enter on Facebook for a chance to win some free tickets. Tickets to this event and all you do is you go to facebook.com jasonhartman.com.

I know that may sound like a.

Double website address, but it's facebook.com jasonhartman.com or just go to Facebook and type in Platinum Properties Investor Network. Find our page on the left side is an icon for sweepstakes and enter the sweepstakes and you can win some free tickets. So don't miss that because there will be winners. Also for members, be sure to take advantage of the Jim Rogers interview and the Garrett Sutton interview. I know I've mentioned the Garrett Sutton one a few times in the members section, but folks, I'm telling you, you're making mistakes. I see people, I'm not saying you individually. I'm saying as a group. I see people making these mistakes all the time with their asset protection plan. And for my money, I think Garrett.

Sutton has outlined a great plan and.

That interview is available in the members section@jasonhartman.com so we're going to take some listener questions today and answer a bunch of your questions that we've accumulated. We appreciate you putting those on our Facebook page. Keep them coming. Sorry it's taken a long time to.

Answer some of them, but we're going to answer them today.

So we will be right back. And Sarah, one of our investment counselors will be joining me to do some listeners Q and A stuff and I think you'll find this very interesting, very educational and we will cover that in just a moment. We'll be right back.

Here's your chance to catch up on all of those creating wealth shows that you've missed. There's a three book set with shows one through 60, all digital download. You save $94 by buying this three book set. Go ahead and get these advanced strategies for wealth creation. For more details go to jasonhartman.com.

Hey, we wanted to do some listener questions and answers. We've already answered a bunch of these.

On this list we've been compiling here.

For a while, but we've got a few that we have not answered yet.

And we'd like to answer those for you now.

We appreciate your questions. Best thing to do is put them.

On our Facebook page, Platinum Properties Investor Network. Look it up on Facebook and ask your questions there and we will get to them.

And in order to do this, I have Sarah with me via Skype and.

We wanted to just answer some of these questions. How are you, Sarah?

Good, good, good. Really excited to be doing this podcast with you. It's been a little while for me.

That's true.

But I know what you're actually really, really, really excited about. And that is I'm going to put you on the spot a little bit here.

That is the property you just purchased in the greater Atlanta area.

Because you just told me you got a pretty swanky appraisal on that, didn't you?

I did, yeah. I'm pretty excited about it. Well, we purchased in early July. We closed and my husband and I flew out there, wanted to go check out the area. It was a little bit of an older property, so we thought, oh, we'll go check it out. And then I was fortunate enough to be able to drive around with our market specialists to look at all of our investors properties out there. So that was really cool.

How old is it, by the way? When you say older, I don't think it's as old as most people are thinking when you say that.

No, it was built, it was built in 86.

Okay.

So 1986. And one of the things we like.

To do whenever possible is buy properties.

That are 1980 and newer because in 78 is when they ended the asbestos and the lead paint and those things aren't prohibitive in properties. You know, you can still make money.

Buying the older properties.

But 1980 is a cutoff point we really like. And in many of our markets the.

Average age is only like 6 years old or 7 years old. But if possible, 1980 and newer is great. How much did you pay for that property, Sarah?

I paid 98,000.

Okay. And do you want to tell the.

Listeners or should I tell them what it appraised for? Why don't you tell me?

We got the appraisal report back and it appraised for 150,000.

So you paid 98 and it appraised for 150,000. Now that is awesome, by the way.

However.

However, here's the big however, folks.

As I'm sure you know, because we have a pretty sophisticated audience listening to the show and a lot of these appraisals are barely worth the paper they're written on.

This is how you double check the appraisal. This is just the quick down and.

Dirty rule of thumb.

Of course, there are several approaches to appraisals.

There's the cost approach, the income approach.

And the comparison approach. And with residential real estate, single family.

Homes, etcetera, less than four units or four units or less, it's done based on the comparison approach.

And what's good to do sometimes is do it based on the cost approach. So the reason I know that Sarah's.

Appraisal is not a bogus appraisal is because the first quarter question I asked.

Her and the first question Sarah was.

What, what did I say to you?

How big is the property?

How many square feet? Because we can instantly know based on square footage approximately what it would cost to build that house. So that one is 2,174 square feet.

Now think about that, folks.

Sarah bought this property 1986.

Property.

You said 1986?

Yep. Okay, not, not that old by most standards, but by our standards it's one of our older ones because we don't really hardly ever go back below 1980.

She got 2174 square feet for $98,000.

So let's do a little math here. Let's take 98,000 divided by 2174 and.

Her cost per square foot is $45.08.

Let's just round it off at 45 bucks.

And here it appraised for 150. Now let's do the appraiser's approach.

Let's take $150,000 and divide by 2174. Divide on the HP12C and you get.

$69 per square foot. And guess what, folks? Bet ya you can't rebuild that house.

Today for $69 per square foot.

So that is how you know that, that appraisal, or I guess you know.

In quotes, K n O w, you.

Know that that appraisal has at least some real validity because they're appraising the.

Property at only $69 per square foot.

It would probably cost you 75, 85.

Even $100 a square foot to rebuild it.

So let's just take, let's just take $80 per.

Times, what is it, 21.

74 again, and we get $173,920.

And you know what we haven't accounted.

For in all of this discussion? The land cost.

So the land is basically free and.

You'Re buying far below the cost of construction.

So, Sarah, I think you have a legitimately good deal there.

So congratulations.

Thank you. And then just one other thing I'd like to add about this deal that I'm really excited about. It's new to me and it's also, and I'm going to surprise you here, it's the last question that we have to answer. So maybe we can start with it, is that I have a tenant in place already and it's a two year lease option to buy. So in other words, they're renting the property for two years. I've got a two year agreement and they have the option to purchase the property within that two years. And the agreed upon price before we got the appraisal was 135. So either way, I've got a pretty nice upside potential if they stay, if they stay and rent the property, I've got great tenant in there that's probably taking care of the property and they execute their option to buy, then you know, I can turn around and maybe purchase another one or two properties with that gain.

Okay, you tricked me a little bit here because that's not actually one of our listener questions.

The actual listener question is, I think it's number 14.

Right. How do you feel about lease options?

Are these good deals for an income property investor?

But you wanted to ask specifically that.

Question about your case, right? Is that what you're saying?

No, I'm just saying I'm excited about it. I just wanted to tell you that I have a lease option tenant in place.

All right, good, good. Yeah, I like lease options.

I think they're really underused from the investor perspective. The only time you probably wouldn't want to do a lease option is in a market that's appreciating really quickly.

And I sure don't think we have that problem nowadays, do we, Sarah? No, no, we don't have that problem.

I wish we had that problem.

Well, we've Got other opportunities in this market. We've got the bond investor opportunity, the income property bonds, don't we? So there are great opportunities in this market. But yeah, appreciation is not one of our problems that we have right now.

So how do I feel about lease options? To answer that question, I think they are a great opportunity and I think so many investors, whenever they've gotten themselves.

Over their head on a property or.

The property just isn't performing that well.

It's just not cash flowing that well.

Really doing some sort of a rent to own program or a lease option.

Program or lease purchase program. They're all really kind of the same thing, just a sort of different slight flavor change of that same thing. But yes, I think lease options are great now.

These are good opportunities. And we did one of our monthly members calls on this and it's in the member section@jason hartman.com so please check that out. If you're not a member, become a.

Member and access that because those are.

Just great monthly calls. Real tactical, down and dirty, lots of.

Lots of information, very detail oriented.

But the overall question is how do.

I feel about lease options? I think they're, they're fine and dandy.

Just make sure you're looking into the future and you don't get yourself caught into a problem. Put yourself in the shoes of one year forward, two years forward so that you can really judge how will things be then. What might you be thinking then? Most of the time on the lease options, the tenants, they don't really exercise them anyway so you don't end up.

Selling the property a lot of times.

And you've got a tenant who many times is taking better care of the property. They're paying you an option consideration.

They might be paying that in the.

Form of an initial option consideration or a larger monthly rent payment so they can work out really well. And again, check out that call for.

A lot more detail on it. But I do think overall it is a good thing.

Other questions or did you have any other comments? Now why we tell you about Sarah's deal, by the way, is because we can do those types of deals for all of you listeners. Look at I just purchased three properties, three single family homes myself in Indianapolis.

I've got another one closing tomorrow.

I just finished rehabbing another one and we're buying the stuff we recommend to you listeners. We do the same thing you do.

And sometimes we don't get the best of the deals even though we see them first because we can't act on everything. And a lot of Times we're just not in a position to take advantage of it.

So you, our clients can get these kind of deals. And wouldn't you love to have a.

Property like Sarah just got? I mean, that's a phenomenal opportunity.

You know, in the three Indianapolis properties I just purchased all three of them, I had to insure them for a higher value than the purchase price, which means if the house burnt, the insurance.

Company could not replace it for the price I paid. And that doesn't even include the land cost. So it's a pretty phenomenal time to be investing in real estate now, isn't it?

Yeah, absolutely.

Well, give me another question, Sarah.

Okay, so another question is why would you want to invest in a place with a high foreclosure rate like Phoenix?

Oh yeah, that's. Hey, that's a great question.

Most of our markets have high. Well, really, the whole United States of America has a high foreclosure rate right now.

And it depends where you are in the cycle. I mean, look it, there are different.

Phases of the cycle and unfortunately I don't have a visual here that I can show you, but I'm kind of motioning it with my hands.

You've all seen these graphs that look.

Like a roller coaster where you've got.

Peaks and valleys, high prices and troughs, Right? And it just depends where you are. Are you in the recovery stage of that trough?

I don't think we're in that now.

Unless you are buying far below the cost of construction, then I do believe we're either in the stabilization phase or the recovery stage. But if you're buying on that graph.

Again visualizing it, looking at it like.

A roller coaster, if you're buying where you are not at, or hopefully far below the cost of replacement or construction, you've probably got some bad times ahead. And this is why again, we have.

Yet to recommend markets like California.

Many areas in Florida still problematic, Las Vegas still problematic. And you know, Las Vegas, that's just.

Sort of an interesting one to mention here.

And that one you can buy well.

Below the cost of construction in Las.

Vegas and you can even do that from time to time in Riverside or San Bernardino, California too.

Especially with Las Vegas being much worse than Riverside.

San Bernardino, you have such a huge, huge segment of vacant property and high vacancy rates that remember income property is a multi dimensional asset class. So when you ask that question about.

Why would you buy in a market.

With a high foreclosure rate like Phoenix, it's a good question. But remember, that is usually when Someone.

Is saying, asking a question like that.

Or saying something like that, they're only usually thinking of one dimension. And that dimension usually is the price dimension. The value dimension are values going up or down, declining or increasing. And so that doesn't account for everything in the picture.

So you can have a market where.

Prices are still falling, but the rental market is so strong that that opportunity to make income, to treat the asset like a cash cow, really offsets any possible decrease in value. And we did this example in our.

Report that we do every year, our.

Forecast book, which forecasts 30 different metropolitan.

Areas across the country. Last year's report, not the 2011 version.

But the 2010 version, we profiled several.

Markets, all 30 markets.

But one of them was particularly interesting.

Because it was Charlotte, North Carolina, and.

It was the market where you could make money by losing money.

And what do I mean by that?

Well, prices, we predicted they would decline in value. We were right. They did decline more. However, the cash flow was so good that even with price depreciation, you could make a positive overall return on investment. Now, we didn't sell in Charlotte that.

Year because there were much. There were far superior places to be.

Investing, even though it's just sort of.

An interesting case study, because you could.

Make money by losing money just by.

Using the property as a cash cow, as a.

As a bond, as an income property bond, Even if the bond goes down in value, if you don't sell it and there's no liquidity event, you just melt it.

It for the income. And that's a. That's a great thing, you know, and that's kind of a good example.

Robert Kiyosaki, in one of his Rich dad series books, he gives the example. He says, are you a cattle rancher.

Or a dairy farmer? And I think this is a good analogy because I said, milk the cow, right?

And, you know, your cows on your farm could go down in value, but if they still produce milk, hey, they're an asset. You can sell that milk and you have income, you can consume that milk. And so that's the same thing with income, property, income, multidimensional.

I just wanted to chime in here. You know, that's a good, really good analogy. And while you were going over that whole concept, I was thinking in my head about a couple investors who I've been working with, one of them for many years, and the other one maybe for the past, I don't know, six to nine months. And I'm thinking about these investors that really want to invest, but they've never purchased income property before, and they're just sitting on all this cash that is obviously losing value each day.

Inflation, inflation. Inflation is destroying the value of the money in your wallet, your bank account, your stockport, your bonds, and your equity in real estate.

Yeah, totally. You know, and I'm thinking, gosh, you know, they. I don't know if they. You know, sometimes you're talking to somebody and they just kind of disappear for a while and, you know, you let them kind of go and then you check in with them and, you know, one of these investors I've been working with, I don't know, maybe the past three to four years, just we've been in touch. He's been to a couple seminars. He gets real hot on wanting to do something, and I'm not sure if he's busy or he just kind of gets cold feet, but he's never actually purchased a property. I'm thinking, God, if he would have just got started a few years ago, that would have been like the perfect example, your Charlotte example. He would have just been sitting on this property. It would have made sense. He probably would have been at a neutral cash flow position, but over the course of time, he'd be taking these tax benefits and probably be purchasing more property and increasing his cash flow over time.

And not just that, Sarah. There's another aspect, and I don't think.

This is a valid investment aspect.

And that's why I really never talk about what I'm about to say. I never talk about this because some of us have certain disciplines and some of us have our extravagances where we kind of waste and we're not very prudent in our life. And I have both in my life.

But one thing I am capable of.

Doing is saving money. And I don't think saving money is a very good deal, especially in an inflationary environment.

But I can do it.

Some people can and some can't. We're all just different.

But I'm willing to delay gratification.

I know I can do that. I grew up without much money at all.

So I was kind of used to.

Not getting what I wanted today in order to wait for a bigger goal later. Right.

But one of the aspects I never talk about income, property. And you just made me think of it because. And this is not an investment aspect. It's not an ROI thing.

It's not sophisticated at all.

But it is psychological. And that is depending on how the deal structured, how the property is structured. At the very least, you know what a good property can do for you. It can be a forced savings program.

A forced savings program.

And what I mean by that is if the property isn't cash flowing and if you financed it in a way where you're putting money into the property or you put a large down payment, and we all know that that equity is very hard to access.

Right.

And again, again, this is just psychological. I don't think it's a true way to invest, but it forces people to save money at the very least depending.

On how the deal is structured. And that's just an offshoot.

Let me take a brief pause. We'll be back in just a minute.

What's great about the shows you'll find on jasonhartman.com is that if you want to learn how to finance your next big real estate deal, there's a show for, for that. If you want to learn more about food storage and the best way to keep those onions from smelling up everything else, there's a show for that. If you honestly want to know more about business ethics, there's a show for that. And if you just want to get away from it all and need to know something about world travel, there's even a show for that. Yep, there's a show for just about anything only from Jason.

Or type in Jason Hartman in the itunes store.

You know, you mentioned inflation and how.

It'S destroying the value of the money in your wallet, in your, in your purse, in your bank account, your stock account, whatever.

Right? And you know, I was reading one of my newsletters, Sarah, and they talked about how it is commonly believed that.

The current inflation rate, and they give all sorts of examples.

Right now, right now is 9.6% where.

The government will tell you it's like 2 or 3%. Right? Complete falsehood on the government's part.

Listen to this example. There's a chart here that shows if you had $100,000 invested today and you wait 10 years, if you just have.

This hundred thousand dollars in the bank.

And you wait 10 years at 9.6% inflation in 5 years in real dollars, in constant dollars, you only have $63,234. And in 10 years, that hundred thousand dollars has declined in value to only $39,985. I mean, that is what is so sad about all those people that have done the right things, save money, buy.

Stocks and bonds and mutual funds.

It just doesn't work. That program is over. The whole financial services industry has had a multi decade long run and that is a bubble. It Is blowing up.

It has been blowing up for a few years now right in front of our face and it just doesn't work.

Income property is the way to go. It seems like you're only going to.

Make the money one of two ways really anymore it's going to be you.

Buy income property or you put it into a business.

And for a business, that's a really complicated asset class.

But those seem to be really the.

Only two real things to do that aren't speculative because precious metals speculative doesn't produce income. One dimensional asset class, huge tax consequences, 28%. Whereas income property is the most tax favored asset. Okay, I'm rambling. Next question. You know, I have attendance. Hey listen folks, nobody ever accused me of being short winded.

All right, moving on. I got to keep you on track here. Okay, Number nine, why are markets with a low cost of living, such as Indianapolis, a good place to invest?

Oh, that's a great question. Thank you for asking that one.

Those are great places to invest. And you know, I wish I had the chart in front of me, but we show it at our Creating wealth.

Seminar and we've shown it at the Masters weekend or the. Sorry, we changed the name of that event. It's Meet the Masters. Okay, I make that mistake once in a while. Or Meet the Masters event.

And when we show, we use this example for one of our markets in.

Texas and another one in when we.

Did the Indianapolis presentation. And what we show Sarah, is how the income, the median income in the United States versus the median house price.

In the United States.

We show that. Then we show the median income in Indianapolis versus the median house price in Indianapolis. And what you see there is you see a lot less stress and a lot less struggle on the typical household budget. In other words, people in Indianapolis, by.

And large, of course there are exceptions.

Can afford to live there. Oh, what a concept. People in California, they can't afford to live there.

Most of them. Yeah, that's a great question. And I think a market like Indianapolis.

Is just a stable, prudent, kind of boring market.

But I love it.

It's an income property bond market.

We've had very good experiences there and so have our clients.

Yeah, I can't keep our cash buyers out of that market. I keep trying to get them to diversify into other markets, but you're paying all cash because you've got to account for rehabbing the property, which we do help with. But clients looking to finance, they want to finance the repairs. And in Indianapolis, as many listeners may know, you can't do that with us. And so our cash buyers, they just keep buying in Indianapolis over and over again. They're just little bonds for them.

I just wrote a check today for one of the properties I'm doing for.

Paying for the second half of the.

Rehab I sent off. Oh, gosh, what did I send off here? I have the paper in front of me somewhere, like $6,600 I sent off for the second half of the rehab bill. And I'm just signing the deal on the. On another rehab today for a property I'm closing on tomorrow.

And that being a cash market, you.

Can see why investors are so attracted to it.

It's because you get the reward right away. You see that it's working. The first month your property is rented.

There, you're going to see an awesome return on investment.

But again, like Sarah's saying, folks, don't.

Put all your eggs in one basket.

You need to div. Why?

We're in several different markets around the country.

Things can go wrong. Markets can change, big employers can move, the government climate can change. Things just change. You want to be diversified. Typical investor, if you've got the wherewithal to where you're buying, like five or six properties, you should be in two to three cities, not all in the same place.

Diversify, diversify, diversify.

Just do it in the most historically.

Proven asset class income property.

Okay, should we go on to the next question?

Absolutely.

Okay. This is from Jason, and he says, isn't it best to own property within one hour drive of your home?

Well, Jason, good name.

So that's an interesting question, and I'm going to answer it this way. It depends where you live, first of all.

That's the first cut. Depends where you live. So if you live in a market where properties make sense the day you buy them.

Sure.

Invest within an hour of your home. Hey, if that house is across the street from you and it makes sense the day you buy it, you can invest there.

Sure.

So the property must make sense the day you buy it. If you live anywhere in the Socialist Republic of California, you probably shouldn't be.

Investing within an hour of your home.

But the second problem you're going to run into, Jason, is if you're doing multiple investments, and I hope you are.

Or at least you're working toward that.

Then you're not going to be diversified.

You've got to diversify.

I have just seen too many people get very hurt.

And, you know, I'll give you a great example. And they're so wealthy by now they're not hurting, but my aunt and uncle.

Own, I think they now own over a hundred or like 120 single family.

Homes in the Sacramento area.

They live in Sacramento and they've been doing this for decades.

They've been buying these properties, fixing them up, renting them out. They, they pretty much never sell anything so far as I know.

And my aunt I and uncle are fabulously wealthy.

They live on the street in the fabulous 40s, they call it area of Sacramento, these beautiful old houses.

And they live right near where Ronald Reagan lived when he was governor of.

The state of California.

And so they have a whole bunch of property. But they could have sold some of those properties or refinanced some of those.

Properties and they're on the old fashioned program. Just pay them off and have it all close to your house.

They could have done that in 2004 or 2005 and they could have purchased.

Properties through our network and diversified around.

The country and they wouldn't have lost.

About half of their wealth.

Now, I was up there with my girlfriend and we took the motorhome up there. And I'm gonna say this was, I.

Always kind of remember my life by, who was my girlfriend at the time, and this was Hillary. And we went up there and took my motorhome up there and you know, we're touring around the state of California.

And that must have been in like 2000, 2003 or something like that. And I remember kind of talking with her, thinking we were kind of doing the math.

We went around, looked at some of their properties and hung out with them a little bit.

And I remember thinking they got to.

Be worth about $30 million at the time. Now Sacramento, as listeners may or may not know, has taken a huge hit.

Just a giant decline in prices. I mean, think how costly not diversifying was to them. That could have cost them 10 or 15 million dollars. I mean, wow, ouch. Granted, they still got 10 or 15.

Million left, so it's not like they'll notice it.

But you got to diversify, folks. Just do not put all your eggs in one geographical basket. The old saying in real estate is all real estate is local. That is true. All real estate is local. Take the most historically proven asset class and diversify geographically. That's what you need to do.

So two reasons there, Jason. Number one, you may not be in the right place. Number two, even if you are in the right place, you're not going to be diversified. Next question.

Okay, we've only got two more. So this is From Jennifer and it's sort of. There's a few questions here. Why doesn't Jason buy property through his business? Wouldn't that allow him to go over 10? Also, I was considering the income motive requirement for small business business and wondering if Jason has any advice on that in terms of being in business as a property manager.

Okay, so the first question, Jennifer, is why don't I buy it through my business? Well, a corporation isn't really the ideal.

Method to purchase these type of income properties through. You would want to do that in a separate entity. I don't want to mix them. Now I have several companies and Platinum Properties and the Hartman Media Company.

These are different corporations and I've got.

A couple others too that are in other businesses.

And with these small, closely held corporations.

Where you don't have shareholders or you don't have a lot of shareholders, what.

The owner is doing of these types.

Of companies where they're S Corp. Subchapter.

S corporations is they're taking the money out of them. So if you have a good year and it's profitable, you take distributions out of your company. You don't retain your earnings in small companies, usually in a large company like.

Apple, who recently Apple Computer had more money than the federal government before Obama and his thugs. Washington D.C. on both sides of the aisle, by the way. I'm not just saying the Democrats raised the debt ceiling when they did that. Do you realize that Apple Computer actually they had $76 billion on hand in cash and the US government had 73 billion. So Apple Computer had more money than the federal government of the United States of America. Amazing.

But Apple is a C corporation. Big publicly traded companies like that are different. They retain earnings, they invest those earnings.

They have what's called the treasury account and so they' invest with that. But in my business, I would not.

Want to do that.

So far as I know, that would not be the smart way to go.

And even if it was to go over the 10 property limit, first of.

All, I'm already over the 10, I'm way over the 10 property limit personally.

But even if it was, the company.

Wouldn'T be able to qualify for the.

Loans because these regular residential income properties.

They don't let a corporation get a loan for those properties. So it wouldn't help me in that case. These are just things that you do outside of your company for your own personal account. And that's exactly the way I do it.

Now the next question is, you were considering, I guess, becoming a property manager. Am I reading that correctly, Sarah?

That's what it sounds like to me.

Yeah. Okay. All right. Well, Jennifer, being a property manager, like any business, can be a good business. I personally think it's kind of a thankless job.

No tenants ever call you up and say, hey, the property is great today. Thank you so much.

They don't really do that. That just doesn't work that way.

But being a property manager can be a good business if you have a lot of accounts.

And, and what you're talking about is.

Not managing your own portf.

You're talking about managing other people's properties for them.

It's competitive like anything and you're trying to get accounts and if you have a couple of hundred accounts, it can be a really profitable business. But of course, like any business, more.

Accounts mean more staff, more complexity, office space, software programs and these corporate type software programs can actually be quite expensive. They're not like buying stuff that you buy off the shelf or on Amazon.com just your software fees in some of these businesses can be expensive alone.

And you know, you need a license in most states.

And that's a complex question because it's just like any other business. There's a lot of, lot of complexity to it.

I have never been in the property.

Management business as a professional. Like I've never managed other people's properties. When I've been in the real estate brokerage business all these years, I would.

Lease properties for people back when I.

Was a traditional real estate agent years ago. Of course I do much of my own property management and we've had members only conference calls on that. You can find those@jason hartman.com on what we call self management, where you can manage your own properties from even thousands of miles away. And I've been doing it pretty successfully.

And I like it.

I have some property managers who I.

Think do a great job and I keep them around.

So, you know, I kind of have.

A dual strategy and that's what I do. But what I would say is if.

You'Re thinking about the property management business.

That'S not what this show is about. But talk to some people in the business, learn the business, go to work.

For one of those companies and learn how it's all done and that's the best way you'll know. And another question, Sarah.

Okay, last question. With a tremendous job growth in Washington D.C. why doesn't Platinum Properties recommend any of the D.C. markets?

Well, the tremendous job growth is really on the part of the government.

Okay. And that's not real job growth. That's public sector economy versus private sector economy.

So yes, there has been job growth in Washington D.C. unfortunately, I wish there.

Wasn'T job growth in Washington D.C. because Washington D.C. has become the handout capital of the world, I think. And it's really sad that that is the way it is.

But even with the job growth there, that doesn't mean the market makes sense. You know, I was just in Washington.

D.C. several months ago. I love D.C. i've been there several times.

It's a great place to visit, obviously.

A lot of great history there and so forth.

But the properties don't work there, the rent to value ratios aren't good there. One of the things we also look for, as Sarah well knows, is we want to be investing in landlord friendly places. And Washington D.C. is definitely not landlord friendly. Any market where you have pretty much.

You can pretty much just go by this as your rule of thumb where.

Democrats or liberals, same thing, really control the state politics and the regulatory environment, you're going to have a landlord unfriendly market.

Those are markets where many times it's.

Better to be a tenant.

So if you ever move to Washington D.C. i would say you might want.

To consider renting instead of buying because you have all the rights as the.

Tenant there and the landlord has very few rights. Same with California, by and large. Those are two reasons I don't like Washington D.C. at all from an investment perspective.

All right, Sarah, we've gone long as usual.

My fault as always. I apologize.

That's okay. My kids are just waiting for me by the curb somewhere. That's all right.

Oh, okay.

Yeah. Make me feel guilty now, why don't you?

All right, well. Hey, Sarah, any closing comments?

No. I look forward to seeing some of you guys at our Meet the Masters event coming up in October. We're really excited about that. We've got a lot of. I know it doesn't seem like we've got a lot of great properties in Atlanta right now. Some of them just recently sold, but they come in waves. So if you're interested in a property that you've seen on our website, don't hesitate to call. You know, we'll be sure to find you a comparable property with a great return. So definitely stay in touch with us, ask questions and we're happy to help.

Meet the Masters is October 14th, 15th and 16th, Hyatt Regency Irvine. We've got a special room rate. Be sure to register and reserve your room soon.

The room block is going pretty fast. We've got a block of rooms, $119 a night. It's a gorgeous hotel. I know many of you listening have already been to prior Meet the Masters events at the Hyatt with us.

We look forward to seeing you again. And anyway, thanks for listening and happy investing everybody.

Everybody take care.

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This show is produced by The Hartman Media Co. All rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email mediaartmanmedia.com Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc. Exclusively.