CW 465 – Jason Hartman – Bitcoin Plummets, Rent-to-Value Ratios & Volatile Property Markets in Texas and North Dakota

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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 multi millionaire 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 this is episode number 465. Thank you so much much for joining me today. I am coming to you from beautiful La Jolla, California. I'm down here in the San Diego area. Why am I here? Well, so we had our, our Meet the Masters event and it was fantastic. Thank you all for coming. All of those who attended really enjoyed seeing you and you know, we didn't really debrief on that yet, which I'm not going to do now. I thought I'd spend a couple more days in Southern California and come down to San Diego and I have an actual reason for being here. It's not vacation.

You're not going to believe this. And you know, there's a song. Who is that? By Alanis Morissette. Isn't it ironic, don't you think? Isn't it ironic, don't you think? Why am I here? I've actually been looking for places to live. Oh my God, did you hear that, right? Yes. Yes. The guy who famously moved out of the Socialist Republic of California three and a half years ago to move to an environment with lower taxes and less government intrusion may well be the first person on planet Earth. I don't know. It's possible that I may well be the first person on planet Earth to actually be considering moving back to the Socialist Republic of California to get this. You ready? I'm letting you in on this big secret to actually save on taxes.

And how would I possibly be able to do that, you ask? California is probably the least business friendly and highest tax state in the union, rivaled only to, you know, New York, which is pretty bad. Illinois is pretty bad. Well, guess what, you know, I'm not usually early on filing my tax returns. So this year. Well, actually, I should say last year, as usual. It's October 15th and the last day you can file. And I'm talking to my CPA on the phone, and he says to me, did you know, Jason, that I found a big tax deduction for you, but in order to get it, you have to re. Establish residency in. Yes. The Socialist Republic of California. I couldn't believe it. I couldn't believe it. I couldn't believe it. So I've been in kind of. I've been in serious denial for two and what, two and a half, three months now about this thing, and I kind of want to get my tax deduction. So I'm actually thinking of moving back to California for a year. I don't like the idea too much, but, you know, the past few days, it's been pretty beautiful. Looking around here. It's cold in California, I tell you. Arizona, the temperature may be as cold, but you add the humidity to it and it just gets into your bones here. I know all of you back east and, you know, in northern climates are thinking I'm absolutely psychotic for saying that, but I'm a wimp when it comes to gold. And, you know, I've been in warm places the vast, vast, vast majority of my life. So it does feel kind of cold here. I mean, during the day, it's nice. You know, it's 72 degrees. But at night, you know, it. It's chilly out there. I don't. You know, anyway, whatever. So I am toying with the idea of actually moving back to California for a year, because I could live here for about a year to a year and a half for free. I mean, the state of California would essentially pay me to come and live here due to my tax deduction that I cannot take, at least that I know of, unless there's some loophole I don't know about and my accountant doesn't know about that I cannot take unless I become a California resident. And this, again, is one of the reasons, as much as I love being a landlord and as much as I love renting properties to other people.

And as much as I have made a small fortune doing so.

I love being a renter myself. It's actually really darn convenient. You know, my lease was up last month. I can just move, just move. Don't need to show the house, don't need to hire a realtor, don't need to clean up, don't need to take all my private things and all my valuables and stick them into a storage unit. Don't need to do anything with the dog, you know, like boarding the dog or something like that. Don't need to do a thing, don't need to do any fix up work. It is so convenient to just be able to move. You can live somewhere for a couple of years and if you get sick of it or if you discover you have a big fat tax write off in the socialist Republic of California, you can take advantage of it. So it's a pretty great deal. And I have been amazed at how expensive things are out here. Yes, I know, I used to live here just three and a half years ago, but wow, the rental market is booming. Well, why wouldn't it be booming in San Diego? I mean the rent to value ratios are terrible. So let me give you a couple of examples and you know, I've got several things to talk to you about here today, time permitting. But you know how I am, I usually ramble on and on. So maybe we won't even run the guest on this episode and we'll run the guest on the next episode. By the way, we've got some great stuff coming up for you. You know who's coming up in either one or two episodes? Paul Craig Roberts, you may have heard of him. He's the nationally syndicated columnist who was the assistant Secretary of Treasury for Ronald Reagan and he is considered to be the co founder of Reaganomics. Yeah, pretty famous guy. Doesn't have a lot of great stuff to say though, I'll tell you that when I interviewed him he was, he was kind of gloomy about things, but you can judge for yourself. And then we have Bill Tetro, really interesting talk show host that I, I don't know if he's syndicated or not, but I would listen to him all the time on the radio in Phoenix and he's out with a book called 44th Presidential Conspiracy. Pretty interesting, pretty interesting insights into the economy and politics and some interesting stuff. And then Harvey Silvergate is coming up. He's the author of, he's the lawyer who is the author of Three Felonies a Day. An incredibly important subject for all, all people around the world to be concerned with. And it really shows you how, how governments can target people. And they've, they've got something on all of us because they've got so many laws and that is their weapon. So at the point where they suddenly decide they don't like you for whatever reason down with you. It's scary stuff. So three felonies a Day basically illustrating how we're all, we're all committing three felonies a day. Felonies. I mean I consider myself to be a law abiding citizen. You know, maybe he's being a little dramatic, but I don't know, listen to some of his examples. It's, it's pretty compelling stuff. I, I did the interview with him, so. And then Peter Sage, the youngest coaching client of Anthony Robbins. Tony Robbins and a really interesting and innovative guy on his own. Right. So he's coming up too. And yeah, a bunch of other stuff coming up San Diego. Back to that. And if we get to our guest today, it'll be Robert Carr with him. I talked about payments and how Apple pay and different payment systems will have a big impact on the economy. And he also runs a foundation that's really interesting, that's sending kids to college. Really, really cool stuff that he's doing there. But you know, speaking of payments, bitcoin that we have talked much about over, over the last year and a half. Well, let me just check because you know, Coinbase is one of the big bitcoin companies, right as the price of bitcoin was plummeting. And I think it's still plummeting. And you know why I think that? Because I just hit the coinbase.com websites that used to, right on the front page publish the price of a bitcoin and they took it down just about a week and a half ago. Now I think that's kind of lame that when your deal doesn't go right you take the price off and it was there. Let's see if I can find it here. Nope, I can't find it. Well, let me click on the buy and sell bitcoin button. It's got to have the price there, right? Doesn't look like it. It just you gotta sign up and then you get to see the price. You know, it's like Nancy Pelosi, we gotta pass the bill to see what's in it.

So let me just type this in. I predicted bitcoin would go to 250 bucks. All my friends told me I was nuts. And let's see if it's getting close. Oh wow, Jason.

Just like oil. Here we go. Just like the fdic. Just like the fha. Just like Fannie Mae, Freddie Mac. Just like the end of the last bull market in real estate in 2005. You were right about Bitcoin. It's only $212.59 now. Gosh, I'm glad I Only bought one of those puppies for like $800, mind you. Unbelievable. You know, I would love nothing more than to be wrong about bitcoin, but I don't think I am. And it is amazing. The believers, the cult members kind of, you know, kind of the way I'm sort of cultish about Apple products. I like Apple products if you can't tell. I've said it before, but the way these gold bugs and these bitcoin people, like, it's like they're hypnotized, they're brainwashed. It's unbelievable. I mean, you know, gold, at least it's real. Okay. Bitcoin is just a construct, you know, it's. It's a great one, mind you. Don't get me wrong. I again, I would love nothing more than to be wrong about bitcoin. We've done shows on it. Look at, I don't need to go into it here. $212.59 per bitcoin down from what. What was that? That was like eleven hundred dollars. Was that the peak? Something like that. Amazing, amazing stuff. You know, that was the hope for the great payment system that would be frictionless and people could transfer money around the world and escrow money and it had all sorts of cool features. It still does, of course, but just, you know, what is the value of it? Is the question. So interesting stuff there, but yeah, San Diego, incredibly bad rent to value ratios. That's why I want to be a renter. So I look at this high rise condo today with an agent. I asked the agent, how much is that property worth? He goes, it's probably worth about $800,000. It has a gorgeous view of the, the sunset over the water, the Coronado Bay Bridge, the, the baseball field, Petco Park. Not that I care, but you know, it's what a lot of see and city lights and it was nice. Okay. Not very big, mind you. Just a two bedroom, two bath place maybe. I don't know. How big was that one? 1300 square feet, something like that. And $800,000 value. I could rent it for $4,000 a month. That would be a 5 RV ratio. But wait, when you consider condos, you have to add another $90,000 to the value calculation. What do I mean by that? Here's what I mean. The association fees for that particular condo I previewed today that you don't have to pay when you're the renter. The association fees are a very meager and nominal and reasonable $900 a month. Of course, I'm being completely sarcastic when I say that, because that's a ripoff. It's outrageous. Okay, $900 a month. That means in our model, when you can get 1% of the value per month, you could buy a $90,000 house in Memphis, in Little Rock, in Indianapolis, in. It'd be hard to do in Atlanta, but, you know, it certainly possible in Dallas, even hard to do there, but, you know, it can be done. And you would get $900 a month for it. Just the price of your association fees on this stupid condo you would never want to buy. Okay? And in doing that, that basically makes it essentially an $890,000 condo. The way I'm doing the valuation kind of roundabout backwards here. So the $890,000 condo, because that 90, that $900 a month is a $90,000 house. You see how I'm doing that? Okay, I know it's kind of. It's kind of backwards, but you get it. So it only rents for 4,000amonth, and that's less than 1% RV ratio or rent to value ratio. That stinks. I mean, if I'm going to invest $890,000, I want to get $8,900 per month, not $4,000 per month. So it's better to rent than buy many times. And as you go up higher in price. I really looked at a swanky one, too. Well, I didn't actually look at it, but I looked at the listing with the agent because it's leased right now, so I couldn't look inside. But it's at the top of the Omni Hotel here in San Diego, in downtown San Diego. And that place was gorgeous. I could rent that one for $6,000 a month. And, you know, most people would think, well, why would you want to throw away $6,000 per month? Are you crazy? You're just throwing money away. No, you're not. Not at all. Because guess what? Owning that property would probably be upwards of a million five, a million six. And if I'm going to invest a million five or a million six, and then I'm going to put on the association fee tax, the homeowner's association fee tax, we'll call it on top of that, that's going to make it about a million eight. Because I'll bet you the association fees are 1500, maybe even $2000 a month for that. I don't even know what they were, but they're. Believe me, they're enormously high. Okay, If I'm going to do that Then I want to get $18,000 per month and if I can live in that and get the use out of the property without any of the maintenance responsibilities for only 6,000amonth. Basically only paying one third of retail. It's like a sale. Two thirds off sale, 66% discount. You gotta live somewhere. The place you live is an expense. We all have that expense. Unless we're homeless. Okay. Or unless we live with our parents. We all have that expense. We gotta pay to live somewhere. So the only question is, do you want to pay too much or do you want to pay less? It's counterintuitive. I know the real estate guy, your, your real estate guru that you are listening to and hopefully following his advice. Yours truly. Thank you. Is telling you that if you're going to live in a high end property, it's almost always going to be a much better deal to rent it and to buy a lot of less expensive properties you can rent to somebody else. So that's that. I'll let you know if I decide to actually do this move. But would sure like to live here for free for a year, which is what the, what the state of California is willing to do to pay me back. So I think I should accept their gift. But it's kind of contingent on what I find More to follow on that. But isn't it ironic, don't you think? Yes, it is. Okay. Falling mortgage rates. Wow. There is a revival going on in the mortgage market because mortgage rates getting lower. Mortgage applications rose by A seasonally adjusted 49% in the week ending January 9th from the previous week and 30% from a year ago. So all of those mortgage brokers out there, those mortgage originators, they got to be happy about that because they're probably making a bunch of money on loans. So I remember when I owned mortgage companies and that was, you know, when we saw those rates go down, it's like you could refi the whole country again. It was ridiculous. One of the warnings I gave you, dear listeners, is I told you we were going to stop recommending Houston. Now again, don't panic. I own property in Houston. I'm not selling. You know, if you, if you got stabilized property in a market, usually the best thing to do is just keep it and just sit tight and don't panic. But if you've got a lease coming up for renewal in Houston, I would not be aggressive on any rent increases. In fact, I might not increase it at all because as I told you, there would be a round of layoffs and Here we go right out of today's Wall Street Journal. It says oil producer Apache to shed 5% of workers. Apache Corp. Is laying off as many as 250 employees this week in one of the first major workforce cuts at an American oil producer since crude prices began to plunge last summer. And by the way, who predicted that? Yep, me. When everybody else was saying oil would go higher. Well, not everybody else, obviously some people were probably predicting it also, but I thought it would go lower. And just like the bitcoin, it went a lot lower, lower than I even predicted, but moved right through my prediction and went down even lower. It says that the Houston based energy company, one of the biggest in the U.S. pumps oil and gas in places from Texas to Egypt and employs about 5,000 workers around the globe. The workforce reduction amounts to roughly 5% of its staff, company spokesman woman said Wednesday evening. So keep in mind that is something to look out for if you are in an oil affected market. And boy am I glad that I'm not too impulsive. And I did not recommend even though so many of you kept asking me and I know we could have made a lot of money recommending it.

North Dakota, Yep. Didn't do it. Competitors did it. And I have a feeling because that really is a one horse town. Okay, I have a feeling they are going to be hurting bad. So hopefully too many. Well, hopefully nothing. I know tons of investors went into those markets and paid a lot of money, way above cost of construction. So regression to replacement cost isn't even in the ballpark for them. And of course, if you don't know what that is, talked about it many times on prior shows. That's not even in the ballpark for those people because.

They paid, you know, two, maybe three times cost of construction in that North Dakota market. So we didn't do that. We sat tight when everybody around us was throwing dollars in our face saying, hey, you can make a lot of money doing this. Well, we sort of didn't get around to it. So I'm glad for that. The interview with Aunt Joan, remember that one? Several episodes ago? Well, I asked our producer to go back and see if he could improve the sound quality because it was not up to par. And of course it was an impromptu interview. Thanksgiving Day I got Aunt Joan to do I didn't have my proper microphone set up and so forth. But you know.

Who was it? Abraham Lincoln who said I'd rather see a crooked furrow than a field unplowed. And I always have said I'd rather do Something imperfectly than nothing. Flawlessly. Well, you know, I had Aunt Joan there. I finally got her to agree to come on the podcast. I had my recorder without my microphones and I just used the internal recorder and it, you know, it didn't come out so great, but the content was good. And.

The producer went back and he was able to get a new, a new plugin, a new little feature, a new little app, and republish that show to where it sounds a lot better. So check that out, that interview with Aunt Joan. And you know, you can see how my aunt and uncle got so rich buying and holding rental property for the long term. Like I always say, you know, I've been doing this many years. I've helped lots and lots of investors. I've seen the ones who tend to create the real wealth and the ones who are the flash in the pan. And as I always say, the people who flip properties have spending money and the people who buy and hold are the ones who create real long term wealth. So which one do you want to be? That's why I like to buy and hold, create the real long term wealth. The stock market has been nuts lately. And you know, I mean, you adjust these numbers for inflation still, even with these peaks that the stock market has experienced recently, although it's not lately, it's been diving terribly, but you know, it's always an up and down and who the heck knows what it's going to do next, which is ridiculous. But even with that, when you adjust them for inflation, the stock market doesn't even come close to income property. I mean, it's not even a contest. That's why I like to say that income property on its worst day, because it's multi dimensional, because it's a multi dimensional asset class, outperforms the stock market on its best day. I know that maybe sound like a leap, but if you really do the math and you look at the multi dimensional aspects of the income property, I'll bet you you'd agree with me. Okay, so this roller coaster ride, you know, one of the things I think you've got to put into your the cost of stock market investing is number one, most stock market investors have a guru. They pay a lot of money to the guru. They subscribe to a bunch of financial newsletters, they spend a lot of time reading about the market, reading the Wall Street Journal, Investors Business Daily, all those expensive financial newsletters, stock market newsletters they subscribe to. And I think it's fair to say that one of the expenses other than the ones I've already mentioned of being a stock market investor are the expenses of the stress it causes you. Are the expenses of the antacid you need to buy for your stomach. Because these ups and downs, these emotional roller coasters, I mean, this is. It's really like a form of psychosis. It's the total gambler's mentality, okay? And USA Today on the COVID of the Money section today, I mean, it talks about these. These incredible crazy changes, you know, I don't need to read all this to you. Volatility way up, stocks down, you know, of course, oil is down, 10 year, treasury note is down, etc. Etc. Etc. It's just. I mean, I don't know why. Even if the investment was just as good as income, property, and it's not even close. I don't know why someone, you know, can you imagine someone who's like a total stock market investor if they're married? The kind of marital discord they must have because of the stress it causes them. You know, one day they're in a good mood, the next day they're in a terrible mood. Honey, what's wrong? Oh, the market's down, you know, this is terrible. Blah, blah, blah. That's no way to live, okay? That is no way to live. Just go ahead and get yourself some simple little houses. Rent them out. Yeah, you'll have a few problems. You'll have some ups and downs, certainly, but it's nothing like the stock market, the modern version of organized crime. Another thing on bitcoin, by the way, there's an article here in the Wall Street Journal. See, when I travel, I read the newspaper. I actually read paper. Newspapers, I never do at home. But you know, the hotels, they always put them out in front of your door and so you can't help but look at them. So bitcoin's rapid plunge is biting the miners, the bitcoin miners, those are the people that invested a bunch of money and buying servers and, you know, setting up the software to mine the bitcoin off the Internet. It's like most. It's the funniest idea ever. I mean, it really. Bitcoin really is a brilliant construct. It. It is in so many ways. The fact that you can do virtual mining and that's how you create more money instead of the way governments and central banks create money, just poof. They do it out of thin air, you know, and bitcoin's kind of poof too, but it's a little less poofy because you got to run a software program and spend a lot of electricity running servers and a lot of Internet bandwidth, you've got to suck it up to. To mine. To mine. That so crazy. Interesting stuff. All right, so I've been asking you for a while, and by the way, you know, as typical as is usual, I've gone a little long with my intro portion, so this will be the show, and on the next show, we'll have our guest, Robert Carr. But.

I have decided that we need to scale to two shows per week. And I've already gotten several complaints about this, including one from another listener, another Jason. Okay. And Jason, thank you for sending me this note. I do appreciate it. And I have a solution for you. I know you don't want me to go to two days a week, and several other people have told me that, but, you know, it takes a lot of time to, you know, come up with a content. Maybe you think my content's terrible, I don't know. But it takes a lot of time still to come up with the content, to record the shows, to publish them. Three episodes per week is. It's weighing on us. It really is. Okay. But don't worry, do not fret, because I have so many other shows out there. Not only do I have 465 episodes of the Creating wealth show, but I've got all these other shows, not the least of which is my new longevity and biohacking show that I have a feeling is going to be of tremendous interest to our listeners of the Creating wealth show because we've talked about longevity, and it's big, big implications on the economy, on the problem that we're all facing, which is too much life at the end of the money. Okay? So we've got to learn how to invest for that, and we've got to make sure we plan and we carefully execute our plan. But there are many things. You know, the holistic survival show has some fantastic content for quite a while. I haven't checked the stats lately, but that was my number two show. Okay. The holistic survival show. And you know, the tagline for that one is protecting the people, places and profits you care about in uncertain times. Yeah, it's more the negative side, the doom and gloom side, but not, not completely. It's, you know, there's a lot of great stuff there. We've got well over 200 episodes of that one you can listen to. We've got the Jet Setter show where we talk about offshore and overseas investing and asset protection structures. Still, I haven't been able to find anything that works better than what we're already doing. Otherwise we would recommend all of that. But anyway, still interesting. You'll learn a lot listening to that show. I interview a lot of great people on that show. If you're interested in information marketing and entrepreneurship and publishing, maybe you've always thought you want to write a book, maybe produce a documentary. You've got the great American novel inside you, my Speaking of Wealth show, my American Monetary association show, my Young wealth show. There's a whole bunch of other great content out there from the Hartman Media Company, so check it all out. You have. If you like listening to me, you got no shortage of my content. Okay. We've got well over 1600 episodes out there, so I'll just. I'll just share the note I got from Jason. He said, I wanted to let you know that I do not want you to reduce the number of podcasts that you put out per week. When you said on your podcast last week, when you said that on your podcast last week, I got a sick feeling in my stomach and I knew I needed to give you my opinion. If anything, I would like to see you add more episodes per week. Your Creating wealth podcast is amazing. Please don't change the way you conduct yourself on the show so my bad behavior can continue. Thank you for allowing that. I appreciate it. My little commentary there, you have a great way of putting things, and your variety of guests are second to none. Anyway, we're going to go to two episodes per week, at least for now. It's just taken so much time to publish three per week. It's. It's really hard to do, believe me, but we're publishing a lot of episodes. I mean, the average episode frequency for all of the other shows, and I didn't even mention all of them because we have 19 other shows that we do is one episode per week. Okay, so you got loads of content out there. And just check it out. If you're. If you're in itunes, just go to the itunes store, type Jason Hartman, and all the shows will come up. Stitcher, Radio, soundcloud, you can do it there, too. So. So check it all out. With that, I will say go to Jason Hartman.com, check out the properties we've got. We've got some phenomenal properties up there for you. Oh, and many of you have been asking about the paper investments, land contract investing and so forth, which we, of course, presented for the first time at Meet the Masters last weekend. And we're working out. We found a few kinks in, in that system that we're working out. And I they're not major because I think they're pretty easy to work out. So, you know, more on that. There's some Dodd Frank compliance issues that need to be worked out. We're working on that with the provider and we'll get back to you with more. But I think that represents a great opportunity. Again, not as good as the real estate because the real estate owning the physical property has all of those multidimensional benefits, not the least of which is tax benefits, you know, paper investing in notes, trust deeds, land contracts. That scales. It scales pretty well. So more to come on that. Stay tuned. And in the meantime, check out the properties@JasonHartman.com, of course, our blog, our free resources there and all the great stuff. And we will see you on the next episode. Thanks for listening.

I've never really thought of Jason as subversive, but I just found out that's what Wall street considers him to be.

Really? Now, how is that possible at all?

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