CW 504 FBF – Nominal Dollars vs Real Dollars and Understanding Investor Psychology with Investment Counselor Sara

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Our great podcasts, visit hartmanmedia.com hey, this is Jason Hartman. Thank you so much for joining me. Do you know what day it is? Yes. It is Flashback Friday where you hear the best of the Creating wealth show and you hear some good prior episodes, some good review. Remember, we've got almost 5, 500 episodes out. And you know what? Itunes doesn't even hold them all. If you're an itunes listener, if you are listening on stitcher. Thank you for joining us. So we want to bring you some good review stuff. Now, what's interesting about Flashback Friday, it's a little scary for me.

I gotta be very, very candid with.

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I've been right about a lot of things, but I've been wrong about a few.

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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 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 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 304304. Glad you joined us today on this historic day. Why is it a historic day? Because when I turned on television today, started making my coffee and my cereal and you know, I watch about maybe 10 minutes of television per day. I almost never watch TV. And there it was, all the people on CNN, the communist news network talking about the historic new high and the Dow, which folks I'm going to debunk that it is not true. They were telling a complete falsehood as a driveled on and on about it for, I don't know, 10 minutes. It was beyond ridiculous. So I'll debunk that for you in just a moment with some real facts, some real numbers, and we'll examine the real truth of it. But I wanted to tell you that I have Sarah, our investment counselor, here with me. You've heard her on prior episodes and we want to talk about a few things, not the least of which is our upcoming Memphis Creating wealth boot camp and property tour, a change in the podcast system and some clients and one of our markets. Sarah, welcome. How are you? Good.

Thanks for having me back.

Good. Well, hey, glad to have you back. Last time you were on was Our episode number 302 just two episodes ago with Steve Forbes as he talked about the Freedom Manifesto. So he was a great guest. We've had a lot of great feedback on that on that episode. But folks, go back to some of the old shows. If you're a newer listener, make sure you listen to the entire back catalog, as it's called the because we've got Peter Schiff, Pat Buchanan. We've now had two presidential candidates on the show, Pat Buchanan and Steve Forbes, and we've had G. Edward Griffin on a couple of times. We just got so many great guests. Be sure you're listening to those old episodes as well. But Sarah, first. Gosh, where shall we start today? You want me to go over this Dow thing? You want to talk about clients and some of the times how they get in their own way, or you want to talk about markets? I'll let you take the lead here.

Yeah, well, I was actually just listening to Podcast 303 with Carl Richards, and I had a client email me on that this morning as well, asking which market, which market is Jason talking about? So I thought I would just jump on and we can kind of hash it out a little bit. But it was interesting because my perspective changed a little bit after listening to Carl Richards.

Right.

And how we can be our own worst enemy sometimes. Maybe we should give them a little bit of the listeners a little bit of background here on this market. And the market is St. Louis.

There you go.

I know you were all waiting with bated breath.

I didn't want to say the market last time, but it is St. Louis and we've got some very happy clients in St. Louis, but we've had a few little incidents. We've certainly had delays in construction and we've talked about that in prior episodes. And when I say construction, I mean rehab of the properties. But Sarah, you are in this every day. You're talking to clients every single day about their experiences. So what say you?

Well, I mean, we had a few red flags about, you know, the delays with construction. And I've had a couple complaints with property management which we have, you know, switched to another property manager. And I'm also researching a couple others. So, you know, we have a backup plan. But the most recent red flag was from a client who, you know, also attended our meet the Masters event. And she went out and did a walkthrough, she did her inspection, you know, on.

Which is honestly somewhat rare that a client actually visits the property or at least before they buy it. And we always recommend it, folks. We, we recommend that you do that, but the fact is very few people actually do. And by the way, Sarah, I'd love to get your estimate on this. I'm going to estimate that's maybe 3 or 4% of the clients go to the property.

Yeah, I mean, I think that number is increasing, but I would say, you know, less than 5%. Had a guess.

It's a pretty small number. And some people go after they buy too. And you know, if you, if you're a new listener listening to the show, you might think, oh gosh, these people are nuts. What are they talking about? I would never buy a property without seeing it, folks. I've purchased a lot of properties without seeing them. I've still never seen them. I've owned them for years. I have tenants in there I've never met, never spoken to, and I'm making money. So again, like I always say, geography is less meaningful than it's ever been in human history. It's still meaningful. It, it's just less meaningful than ever before in human history. With the tools we've got nowadays, the online tools and so forth, and the network that my company offers. And you can find out more about that by listening to the old episodes and reading the blog@jasonhartman.com but go ahead. Okay. You know, folks, I gotta tell you, I have a big challenge here in doing this show. It's really rather difficult because I've got to speak to a brand new listener that might be listening to this episode for the first time. And that's a listener that, that I obviously, as the show's host, I want to get your attention. I want you to dive in and listen to the prior 303 episodes and understand our very unique and frankly, to pat myself on the back and our whole team on the back, highly acclaimed investment philosophy. Just read the reviews on itunes. I Mean, I was reading them last night. One of our clients said, you got to read this review. And I thought, oh, God, should I be worried? So I got out of bed because I checked my email on my iPhone.

And I read the review and it wasn't that bad.

They just said, oh, Jason's a conservative hack, which is better than a liberal hack, but he's still a hack. So I read your comment there. Yeah.

Does it say who that was from?

It was from Gloria Kramer.

Hi, Gloria. And I just got to let you.

Know, I'm not a conservative hack. I'm a libertarian hack. There's a difference. Okay. But anyway, let's.

Well, let's move on from this tangent. So back to the client and her walkthrough of the inspection. And so she called me with some real concerns on this inspection. And I'm pretty quick, quick to defend our clients and to jump in and help them resolve issues and so forth.

And so, yeah, yeah, you know, I gotta mention something on that at the risk of another tangent, but, you know, we are not on the side of our vendors. Most of the time. We ride them pretty hard. I mean, it's like the customer is number one. And we will get on that. I mean, listen, Sarah, you've been copied on some of these emails that get a little ridiculous where I will just call them on the carpet if they are not doing their job and I'll tell them, look, we're going to yank our business. You're probably making a million dollars a year or more from our referrals. Do you want to lose our account? I use that leverage. And I mean, that's what our clients, that's the benefit they get. That's what we bring them, is we bring them that leverage of our bulk buying power. The same way Walmart, frankly. Oh, risk of another tangent warning here. The same way Walmart has been criticiz for beating up its vendors and making them take lower prices and make better products and take returns. Because, you know, when you return something at a retail store, most of the time, from what I understand, the store doesn't take the hit. It's the vendor or the manufacturer that takes the hit. So you return a pair of shoes to Nordstrom, Nordstrom isn't taking the hit. They're sending those shoes back to Ferragamo or whoever made them. And that's who's. Who's taking the loss there. But I remember I heard the CEO of Walmart on CNBC once in an interview saying, you know, they said, look, how do you respond to this criticism that you just beat up your vendors, that you. That Walmart is like this impossible to deal with company. And he says, look, we are the agent for the customer. We want to bring our customers the best products at the lowest possible prices. And that's how I feel. I'm the agent for the customer. That's what my company is.

Well, let me just interject here with my own tangent and tell everybody what makes my job hard now that they've heard what makes your job hard. I'm dealing with both the client, which, like I said, I tend to be on the side of the client, but I'm also working with these local market specialists every day. And I've seen some of the incredible deals that they've provided. I see how hard they're working, you know, and they've done some great things for us. So, yes, we do call them out, but, you know, it's kind of case by case. And so, you know, we have to be careful not to step on shoes and not to step on shoes, step on toes. Whoa, is that an edit?

No, it's not an edit. Let's just, you know, let's just be real here. Many times shoes have toes in them. So I think people get the idea. Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday.

So anyways, you know, sometimes I'm kind of stuck in the middle and I have to point out the good and bad for both the client and the local market specialist. And so in this case, I'm concerned that I may have jumped the gun. And we haven't totally gotten through this one issue. So I'm not sure how it'll work out. But what I found out is that the client hadn't given the market specialist a chance to go through the inspection report with them and rectify the issues that came up. So that's where we're at now. We're going to go through that. They're going through that inspection report most of the time. What I advise the client to do is to give them the chance to fix the problems. If it's too big of an issue and they're not going to agree to fix that problem, then they have the right to back out of the deal.

So nothing lost.

Okay?

But the important thing is here as a reminder, and I know at the risk of repeating myself, and that is, this is part of the embracing the fragmentation, folks, that's what you gotta do. Because all of these little bumps in the road that you feel, these little hassles here and there. Number one, many of them don't cost you any money. Occasionally they do. But keep perspective and know that your return, because it's so high to start with, if it meets Performa, even if it doesn't, you're still doing extremely well. And then the question to also ask yourself is, compared to what? What else can you do that's any better? That's the, that's the other issue. And then also is that fragmentation is what keeps the big institutional investors out. Those are just things to remember to keep it in perspective.

Well, and just one more thing to mention. You know, and this kind of goes back to the conversation. I'm well aware that, you know, a lot of our clients, you know, they attend our Meet the Masters events or property tours, and sometimes they exchange email addresses. And I've been told, and not just from the most recent event, but several events over the years, that there's these different kind of email chains, which is great. It's great to share information. It's great to network, to share the good, the bad and the ugly.

Well, Sarah, what you're saying is that so many people fall victim to listening to the armchair quarterbacks, the people that either aren't doing it at all, they're the, you know, spectators in life, or they're doing it but they're doing it poorly. You've got to listen to someone who's doing it well, and sometimes the person doing it well isn't. I mean, are they making money or are they the type of person who's maybe doing it well because they're paying attention to every little detail. But by doing that, they're getting in their own way and they're shooting themselves in the foot, or in your case, shooting themselves in the shoe, which hopefully at least they have a shoe on before they accidentally shoot themselves in the foot. But what I wanted to say is that compared to what question, that's one of the acronyms they kept saying on CNN this morning. And it's the acronym is called TINA T I N A and it's there is no alternative. As though there they were talking about, oh, well, the Dow is now at a new record high and saying, well, there is no alternative. The stock market is the only thing to do. Are you kidding me? I mean, obviously, who advertises on these, these stations, especially CNBC, that's the worst. But CNN's not a financial station per se. But all of them, they're all part of the vast Wall street that there is no alternative. Are you kidding? People are Making fortunes in income property right now. I mean, how can you say there's no alternative to the stock market? That's a mind boggling lie anyway. So anything more on the whole listening to armchair quarterbacks that don't know what they're talking about half the time? Sometimes they do. You know, not all critics are bad. Some critics are right, some critics are correct. Look, I'm a critic of Wall street, okay? And I'm correct. Just a reminder, you're listening to Flashback Friday. Our new epis are published every Monday and every Wednesday.

I would just say to these different email chains going on and things like that is, don't forget, if you're on an email chain with 10, 15 people, we have hundreds of clients. And a lot of our St. Louis clients are on their second, third deal. They're happy with their deals and they're repeat buyers and others are frustrated with the bump in the road of rehabs and things like that.

Well, actually, Sarah, we have thousands of clients, but you have hundreds. Yes, you, you as one investment counselor for the company. But in terms of the history, we have thousands of clients. So yeah, so, you know, they always get that one negative voice that makes you doubt things. And that's just part of life. It's true in everything. And that's just part of the thing. Hey, but you want to hear about this DAO thing nowadays? So this, this is unbelievable. So just Google inflation calculator and unfortunately I couldn't find a calculator for inflation that does it by the month. And of course I can't find a calculator that does it by the real rate of inflation. I can only find one using the official statistics. There are calculators out there where you can plug in the numbers, but the problem with those is that you can't plug them in for each year or month by month. And so this is a rough estimate. And what I want to say to you is that the numbers I'm about to tell you are quite a bit more in the favor of my example than the calculator would imply because of those reasons I just mentioned. And of course the government maligns inflation and under reports it through the three major things, weighting, substitution and hedonics. The pleasure index, so to speak, the hedonic index. And if you don't know what that is, go back and listen to prior episodes. We talk about it extensively. But here's the deal. The Dow in 2007, okay, at its last high, before the big crash, before the financial crisis, okay, was at 14,165. That was the number now back then at that time. And this is Steve posted an article from one of the great websites, Zero Hedge that I really enjoy. A lot of great data there they said. And their commentary on it was this morning. Mission accomplished with CNBC now lost for the countdownable targets through 20,000 though 20,000 is so close. We leave it to none other than Jim Cramer talking about where we stand in terms of the market.

Okay.

And here is the contrast. It's really mind boggling. Okay, so the Dow Jones industrial average then 14,165, I'm rounding here slightly now it's 14,165 I guess and I don't. It may be up a little bit by now or down. But he did this article right at the time it hit that other peak. But here's the difference. Think about what has happened in terms of the cost of living. A gallon of regular gas back then was $2.75. Now it's $3.73. Almost a dollar more. That's about a 20. What's that about a 25% increase approximately. So very significant difference GDP then and these are the government stats of course. GDP then was positive at 2.5%. Now it's positive only 1.6%. And by the way, GDP, the gross domestic product is a total misnomer because they've got, you've got to, to understand that properly. You've got to adjust for population increases and you've got to adjust for inflation, which they usually don't do. A number of Americans in the labor force who are unemployed and of course this is totally maligned. Go listen to my episode with John Williams, the founder of Shadowstats.com about this one. But then it was only 6.7 million people unemployed. Now it's 13.2 million. That's basically double Americans on food stamps. Back then it was 26.9 million. Now it's 48 million. The size of the Fed's balance sheet back then was a mere 0.89 trillion. Now it's 3.01 trillion. And get this one Sarah, mind boggling number here. US debt, the country's debt as a percentage of GDP. Back then it was about 38% and now it is 74.2%. That is insane. We are only talking about 2007 until now. February of 2013, that's not much time. And household debt then 13.5 trillion now actually lower. And if you adjust for inflation a lot lower. People have gotten themselves out of debt, okay, at 12.87 trillion, doing the right thing, which is what the government doesn't want because they want you spending money. You know, remember George Bush, go out and spend some money. Consumer confidence, mind blowing number here though. Back then it was 99.5% the consumer confidence index. Now it's only 69.6%. It's just mind boggling how much things have changed since then. And if you look at gold, which I think is a rather mediocre quote, investment, unquote, I think it's just a savings account, not an investment at all. Talked about that many times in last shows, prior shows, but then it was $748 an ounce. Now 1583, down from an even higher point recently. But that's a measure of inflation and I think that's why, you know, it's worth discussing but not as an investment. But look at this now. Okay, so I went to this inflation calculator and I punched in 14,165 which is the value of the Dow at its peak then and what it passed at least for a little while this morning. Now today they, they all say, oh well, the stock market's going through the roof. It's a total lie. Today that same Dow adjusted for the official understated rates of inflation needs to be at 15,672 to be equivalent to by non real understated inflation statistics. You need to be at 15,631 to have any real gain in the value of your stock portfolio. So again, a total and complete bold faced lie. The vast majority of Americans are just too dumb to figure it out. They don't understand how things work. They don't understand the difference between reality and nominal value of things. Oh and by the way, as I speak, The Dow is at 14,257, so up 129 points on the day. Okay, so still we are still behind. That's my point. We are still behind. In fact, if you had your money in and you left it in and you went through the down cycle and you didn't take it out, the value of that money when we hit that same historic peak today was only $12,748. So in other words, by the official and understated statistics based on inflation, you have lost money. You've lost money. And most people, they don't know how to keep score so they think they're winning in the stock market when they're really losing. You're going backwards. You're not even treading water. You're not even keeping pace. You're losing ground. Your wealth is being eroded by that insidious hidden tax called inflation. So that's my take on the Dow. I wish the mainstream or lamestream media would tell the truth, but I doubt that's going to happen. Hey, let's move on, Sarah. We got two more things to talk about. We do have not a guest today, but we are going to play a panel discussion from our last Meet the Masters event. And it's a lender panel discussion so people can hear what lenders are saying. We've got a panel of three lenders and we recorded it. We got a lot of audience participation and questions here. And so we're going to play that here in just a moment for our listeners. That'll be today's. In place of a guest, we have three guests, we have a panel of mortgage experts. So that's what we're talking about. But I wanted people to know we are about to make a big change in our podcasting system. So with changes, sometimes what, Pray that there's no technical problems. But if there are any technical problems and for some reason you don't get the podcast in your feedback, go to the jasonhartman.com website. Just know that we're still here, we're still podcasting. We do this regularly, you know, once or twice or maybe three or four times a week. Sometimes we get a show out to you. So just understand that we hope there's no problems with this changeover. But I wanted to just put that out there and let everybody know we are making a change in the system and it's going to be better. But we always take a risk of changing things when we do that. And there can be technical problems.

Okay.

For some reason you don't see the show on itunes or you don't see it showing up on whatever podcast or aggregation platform you're using. Know that we are not going away. We'll be podcasting. We'll have you know we'll eventually get to episode 1000. So keep listening and always look for us if for some reason you lose us. Okay? And then, and I know, Sarah, you think this is great news. We finally booked our Memphis property tour and Creating Wealth Boot camp. Aren't you happy about that?

I am super excited. I've been talking it up for the past two months.

And these hotels, it's complicated to book these things. You've got to book the hotel, you've got to get the good room rate deal for all the guests, which is $114 per night on our room block. So we got a great deal. And we're at the Hilton in Memphis. Okay. Which is a beautiful hotel. We like to stay at the classier, swankier places. That's where we are. And the dates, should we give the date? Sarah, are we ready to do that? Okay, drum roll please. This will be at the end of April, and the dates will be April 26th, 7th and 8th for the Memphis Creating Wealth Boot Camp and Property tour. And it's at the Hilton Hotel in Memphis, which is a great location for everything we want to do on the tour. And we'll probably have Elvis come by and speak for a few minutes because a trip to Memphis would not be complete without Elvis.

So I thought you were dressing up as Elvis.

I don't know about that. You know, I've never dressed up as Elvis. I know that's a popular Halloween costume, but never have never done it. So anyway, this will very shortly. It's not as we speak, as we record. It's not up on the website, but it may be by the time you listen@jasonhartman.com under the event section. And early bird pricing at $247. That will go up quickly as the tour starts to fill. So book early, make sure you get on the $114 room block option. And Sarah, how about if we talk about the schedule? So it'll start on Friday evening at 7pm with a welcome dinner that we're hosting. Keep your wallet in your pocket and don't pull it out because we're hosting that. And so we'll have a welcome dinner Friday evening. And that'll be April 26th at 7pm in Memphis at the Hilton Hotel. And then Saturday all day from 9am to 6pm will be doing the creating wealth in today's economy Boot camp, the one I have given for thousands and thousands of people. And you know, even if you're not interested in Memphis as a market by any chance, come and just go to the boot camp and and hear that. I mean, people love that seminar. So that'll be a full day, nine hour day from 9 to 6pm and then we'll have a dinner, everybody together, Saturday evening. And then Sunday morning we'll have breakfast and we will board the bus and we will look at distressed properties, we'll look at foreclos, we'll look at properties before and after the rehab process. And you'll get a sense of what our local market specialists do in terms of rehab. And by the way, Sarah, this is kind of unique. We did this once before in Phoenix, but we have two local market specialists hosting this tour with us. Not one, but two. So you're going to see some different types of properties, some different perspectives, some different operations, frankly. Any thoughts on that?

Yeah, I really like both of our providers, which, which is why we're having two. I mean, it was, it would, would have been too tough of a decision to leave one out. So we like them both. Property management is solid with both. I mean, we've really got two great teams in Memphis and there are a lot of providers in Memphis that we turned away just because we like these two systems.

Oh yeah.

Haven't had any complaints, so.

Well, we've been, we've been, you know, and I said when we, when we introduced Memphis on the show many, many episodes ago, but you know, when I said that, I said that we've been avoiding this market for several years. I mean, I was getting the call once every couple of weeks for a long time, refer your investors to Memphis. And what finally convinced me was a couple of clients. And I think one of them at least was your client. And I think one was another investment counselors client calling me and talking to me about their experiences in Memphis, not buying through our network, buying through another provider, going directly. And they had mentioned that they were very happy with the provider. So we started really looking at that market in a little more depth and screening different providers there. There are many providers that do Memphis. There's a lot of, a lot of rehabbers in Memphis. It's a big area for that.

And if I could just chime in on that, I have heard good and bad about some of the other providers, which is, you know, part of the reason that we've stayed clear from some. So, you know, there are some providers that I've heard are under hot water in Memphis. So, you know, again, do your due diligence. We've found a couple of great teams, so we'd love to have you all on our tour.

You know what I'm sort of noticing about you, Sarah? As long as I've known you, and that's many years now, you sort of, you kind of change old sayings. You say they're under hot water instead of in hot water.

In hot water, you're right.

Yeah.

We don't want to step on anyone's shoes.

Yeah, I like to put my own twist on the sink there.

You do you really remake these old sayings. Okay, good. Anything else before we go to our panel discussion?

Oh, no, I'm definitely not going to listen to this podcast.

Hey, we got to have a little fun and be a little bit corny here and there.

Okay, everybody.

Hey, thanks for listening and happy investing. We are going to go to our panel discussion and we're going to talk about mortgage financing. You know, we don't do that enough on the show. And I think you'll really enjoy this panel. And it was very well attended at our Meet the Masters event, which was at the Hyatt Regency in Irvine, California in January and just about a month and a half ago. So I think you'll really enjoy this. And we'll be back with a panel discussion in just about 60 seconds. Thanks for joining me, Sarah.

Thanks so much.

Now you can get Jason's Creating wealth in today's Economy home study course. All the knowledge and education revealed in a nine hour day of the Creating wealth bootcamp created in a home study course for you to dive into at your convenience. For more details, go to Jason Hartman.

Let's invite our mortgage experts up here. Come on up. So, first of all, I'd like to go now. This is the time where you should be asking a lot of questions. This is a much more open forum. This particular thing, what we found with mortgage speakers is that everybody would hear one thing from one mortgage person and a different thing from another one. So I want to put them all up here at once and we'll see if they agree. Okay? All right. But first of all, give us a little two minute elevator speech. If you would tell us who you are, where you're located, what company you're with, how long you've been in the business, anything you want to say that's unique like that?

Steve Bighouse with Guild Mortgage. I've been in the business about 25 years, so I'm one of the old timers. 15 years of that was spent in banking where I ran a real estate department for a bank. Decided to make that move out of banking because I could actually make more money being an LO than they could a VP at a bank. So made sense for me to do that. We're headquartered the company I'm with Guild Mortgage. We're headquartered out of San Diego. I work out of the Lynwood office, which is just about 20 minutes north of Seattle.

Hi, my name is Chailie Ridge. For those of you that I know already, you know how that's spelled. And I'm wondering, first off, does anybody want to take a crack at the pronunciation? Maybe should we should say it together? Should we Try it one time. It looks like Kaylee. For those of you that have seen it, let's do it. Okay. One, two, three. Chailie. Well, that'll be on the test later. Hi, you guys. I'm so excited to be here. This is my first meet the masters. I'm down from Portland, Oregon. That's where my office is. We have corporate offices in Los Angeles. Quickly, about Ridge Lending. We are a second generation company. I'm the second generation. My father founded it. I've been in the industry for about 15 years. I'm an investor myself. At the height of the last cycle, I own 42 properties collectively. So I come with a unique perspective. I think that I can add to the education, which is a big part of what we do to our clients, our investors. And having that background and that experience, I think adds. It's a value add. I think that we can help support the goals and the financial strategies. I find that the financing piece is. Is very intimidating for most people. So we really try to do a good job in taking you through the process, trying to get you to understand it and giving you the tools and the education necessary to go from A to Z, depending on what that looks like for you, and supporting that with the financing and making sure that you're positioned properly. We're nationwide and we have fantastic products that exceed past the 10 barometer that you guys have heard about. Conventionally. We can do four more after that. It sounds like we don't have a lot of time, so I'll go into that in more detail on a one on one basis. And I'm super excited to get to know each of you and talk about what your goals are for investing and how we can help support that.

Thanks.

I'm Aaron Chapman, also spent some time in the industry. 16 years. Came into the industry from the mines in New Mexico. So I was working underground with explosives and that kind of thing. So it was an interesting transition. Exactly. It's the same. It's very. It's a lot dirtier now than what I do compared to the other. But so that kind of adds a little bit different spin on it going from heavy equipment, operating the mines, and somehow I, Forrest Gump my way into this. It's been very successful for 16 years. It's not easy. It's definitely not easy. And you know what I found also investing all kinds of different parts that I was involved in. And then the mess that's happened is that it's really a people thing and that if we don't get along and you and I don't have a basis or a relationship to continue to do business just based upon how we, we speak to one another, then really, there's really no reason to continue to move forward in this particular transaction because it will be miserable. No matter who you pick on this panel to work with or somebody outside of us, it's not going to be fun. So I would just let you know that up front and it's nothing against you, it's just part of the, part of the. So we need to build a relationship right up front is really the main thing as far as personal life. Wife, three children. My wife and I both are technical rescuers for the sheriff's department. That's where we spend our extra time outside of the office.

And I'll tell you, Aaron, I live in Phoenix, as does Aaron and he was on the news, he made a big rescue. Guy like fell down a cliff and I saw that on the news and he was the guy who actually rescued him, him. So yeah.

There was a, some base jumpers decided to jump off a 800 foot cliff on the front of the face of Superstitions on Leap Day last year. And I was the lucky one that got chosen to get sent down to the cliff to go get him. It was really, really cool.

He likes to risk his life. That's why he got into lending and mortgages. First of all, maybe if you want to pass back to Steve here, I wanted to ask you all, what is the sentiment you're hearing from investors? What is the feedback? What is your take on the market right now? I just wanted to kind of get your thoughts on the market, the real estate market, the economy in general, maybe any feelings about where interest rates are going and so forth and just kind of a minute on that one. And you know, we'll just get everybody's and we'll go into some specific lending stuff after that.

Right now we're in, we're in record lows as far as as rates and you know, it could really go either way in that as far as going up or down right now. I think what we're going to see is we're going to see the rates start to, you know, stay down. A lot of the investors that do come to me and that they've had experience with other lenders good and bad and you know, my job is really to, you know, just kind of help them through because let's face it, the lending, you know, lending arena right now we're back at what it was 20 years ago. I mean they're looking at everything. And so it's, it's important to have somebody that's got some experience, can foresee some of the problems up front. You know, nobody likes getting that call saying 30, 45 days into the process that you don't qualify, something happens. So again, really, really important and the complexity and what the investors are trying to do right now is you get those people that get up in the 10 properties, they want to get to 20, they want to get to 30. How do you get them there? Years back, when I was in banking, what we used to do and that was we used to bundle them commercial loans, have them form a corporation, do it that way there. And you know, the banks lost a lot of their appetites for the, you know, for the real estate, real estate investing. Now we're going to start seeing some of that come back. I'm talking to a couple lenders right now that I want to be able to refer over to, refer my clients to and that, and you know, that's kind of where I see things going.

So you think rates will stay low, in other words, right?

Yes, correct.

And by the way, I agree. And Doug mentioned that earlier. Remember what low rates mean? People buy properties not on the price, they buy it on the payment. So if someone can get a loan and rates are low, that means price pressure is definitely upward.

Well, can I, can I comment on the rate thing? So I don't know how much you guys spend on figuring out what your payments are going to be. It's probably a lot per property, right? And in the price points that we're finding are in the market right now and having been through the last cycle, I mean, the sweet spots are what, on average, 80 to 120, 130 single family residents. Would everybody agree with that? So let's figure an 80% mortgage on that purchase price. Do you guys know the difference between a 4% interest rate and let's say 5, 6% interest rate? It's negligible. And in the big picture, if you're looking into the future, the difference, even if rates did go up a little bit, which I agree with Steve, that that's probably not likely, I don't like to predict past. What time is it? You know what I mean? It's very difficult. There's so many different variables that go into how the rates are going to go from one day to the next. They change daily, sometimes a few times a day. So I would advise my recommendation, and I used to get really hung up on interest rates is I Wouldn't focus so much on that number. I think that it's a lot less important than the actual process and kind of understanding financing and how to position yourself through education. And hopefully that's what we're here to do for you guys so that you know how to take one property at a 10, if that's your goal, and make sure that you can still qualify in the process. It can be tricky, right?

Just so you know, what I was kind of getting at there is the investor urgency issue. Because when rates are this low, I mean, we've seen prices in Phoenix that are up about 34% off the bottom. I mean, prices are rising in pretty.

Much every city now.

That's the thing that needs to create urgency with all of us to buy up more properties is that that issue of the low rates. Now, it's kind of an odd thing that we have right now because we have very, very low rates, which usually. And so housing affordability is the best it's ever been. Okay. Since nar national association of Realtors started keeping statistics. However, people can't get the loans, a lot of them. So it's kind of like a real quandary here where, you know, you've got these incredibly good interest rates, but it's also still at the same time, hard to get the actual loans.

Aaron, your thoughts?

I think that actually those. One exists because of the other, because rates are supply and demand of money. If you're not tearing at that supply, of course the cost stays low. So because of the fact that we're preventing so many people from getting these loans, that's what I think is contributing to it. I wouldn't say it's the total reason, but it's a definite contribution. When we're talking about the financing piece, what a person needs to do is be preemptive with this. Take the time to sit with somebody, whether it be one of us or somebody, and figure out your financial profile well ahead of time. You've spent the last 10, 15, 20, 30 years setting up your financial situation. We are giving a matter of moments to dissect it and tell you whether or not we can get something done. And a lot of times things can creep up in the process that we don't find until we really dig deep. And that process can eat up into your escrow time. Take the time ahead of time to get that figured out, because it's not a science anymore. It's a moving freaking target is what it is.

Freaking target.

I'm trying to. Yeah, I'm trying to it is. It's a mess. So that being the situation, let's sit down, let's go through everything in great detail well ahead of time before you want to waste your time. Don't be paperwork apprehensive. That's the biggest problem we have. At least I have. I don't know about you guys, but people are very paperwork apprehensive. They like to say, well, this is my private information. I don't want to hand it in right away. We're going to need it. You're going to have to get. You're going to have to expose yourself. Literally. Yes. And if we say you do have to do all this, unfortunately, and one thing you also have to know, please, we don't want to see it any more than you want to give it. Because if you give it to me, I got to read it. And I don't like reading, just to be honest with you. We have a question back here, Jason, if you're asking me personally, there's not a money issue that we're talking about. Because if I'm working with. When you guys one time, I'm working with you three, four, five times. So I'm not worried about one price point being low personally, but we do. The banks do have limits. If the institutions I've worked with, it's depending upon which, whether you're the first four loans or the five to ten loans or higher. It's 40,000 for one and 50,000 for the other. That's just where their breakeven point points.

Are because they're 50,000 minimum.

So that's, remember, that's 50,000 loan amount, not property price. That's the minimum loan amount they'll do. Because think about it. They don't want to hassle with these small loans. They're not very lucrative for them. You know, $50,000, if you live in Orange county, is a car loan. Okay.

You know, for the lower income people.

Yes. Microphones.

Microphone, sorry. Just to add to that sentiment, the $50,000 loan amounts too, there's something now the powers that be decided that high cost limits loan limits. It becomes very problematic to make any kind of money on the smaller loan amounts and be able to have compensation. So there's Fannie Mae tests that you either fail or pass. And most often those $50,000 loan amounts, you're failing. And so what you think you're making 1000 bucks or whatever is really more like half that is it. It gets complicated. So $50,000 are minimum. Do you have a minimum?

I've Done for my, some of my investors in that because I have a tough time turning somebody away that wants to buy a property for 55 and they're going to put 25% down. I mean I'll look at the loan. My branch manager Randy over here, not really thrilled with the idea, but I've done a lot, I've done loans right over here.

So he doesn't look thrilled.

You know, I've done 30,000 loan for the customer. You talked about the high cost, you know, we, we. Well basically. But I charge you for it. Okay. You know what you're going to do is my rate caps out at four and three quarters, 4.8. That's where you're going to end up. You're going to the highest rate I've got on my ratio. That's where you're going to end up. I'm going to hit you, I'm going to charge you back because we get hit for the loan size, you're going to pay that. I'm not. And I'll charge you 1% loan fee. So we get back in that basically even with the high cost test and that, that one and a quarter I charge you for being under $55,000. That absorbs the majority of that. So I do make a little bit of money but at the same time I don't look at the customers coming back. If you're telling me you're going to bring me five or six $30,000 loans, we're going to have a talk because I'm just not going to do that.

Because he doesn't want to do it. But isn't it interesting what they're saying about this? Remember the second next Ten Commandments this morning? It's the same thing as a landlord. You don't want to deal with super low quality, super low end properties because if they have to, if the lender not they, but you know, the actual ultimate lender has to foreclose on that property or the servicer, it's like not worth it if it's too cheap of a property. That's why those ultra cheap properties, you can't finance them.

There's just no fight, no bank wants to do it.

If you, if you have a need for that smaller loan amount, usually what I'll tell my clients is find the on the ground smaller bank in the area that the property is located in. Detroit invariably, yeah, they'll be able to do it for you. They can do it. Yeah, right.

If they haven't left the city yet anyway. Okay, so Next question. So the question is, how do I know, you know, when I'm getting a loan that I'm not being nickel and dime to death? You are. Okay, next. They hate me now.

We're. And we're not the ones trying to nickel and die. It's more or less we're getting hit with it. We've got to pass it on. The end result is you're going to have certain charges. If we can minimize it, we'd love to, because believe me, we don't want to hear that question. We don't want to have to answer that question. But I've gotten very good at answering that question, actually now, after my career, I'm easily. I could just put on a black suit, go to the hospitals and tell people their mom just died on the operating table because I have no feelings left.

Okay, pass the mic over. Steve. Steve, at least you're compassionate. Go. You know, but you don't rescue people when they fall off a cliff.

I do not.

Steve would charge him. Actually.

When you get down there, you're on the helicopter, you know, hanging on the line, you have some money sign over your house, all right?

There's no equity.

It's upside down.

You know, you talk about the fees and a lot of the fees that we have in that irregardless of, you know, you go here, you go there, you're going to get charged. Now the thing with the fees, though, I understand too, that a lot of the third party fees like your credit report, your appraisal fees, title and escrow, and that those are fees in that, that, you know, as lenders, we can't make money on. So if we get charged 18 bucks, you get charged 18 bucks.

It's.

It might be a different kind of credit report, but it might also be a different type of credit report.

With that particular situation. Many times I know because people ask me that same question I've gotten that many times recently. With us, we have to verify so many things with the types of loans that we're doing. We have to update many a bunch of your accounts, update all your mortgages, and if you're an investor, it's got several mortgages on there. We've got to update them to the most recent payment. So we have to have our credit reporting agency call your mortgage company update and make sure you're current up to the very day that we're doing the loan. And many times you're going to be on a conference call with them and you're going to be saying, now I'm wasting my time. I'm sitting on a freaking conference call for an hour talking to people about the stuff I already know because I made the payment myself, but that's what it is and they charge for that. So if you're talking $10 credit report, actually it's 15 bucks. We charge five bucks for every, for every repository. So we got Equifax, TransUnion and Experian. So we got the 15 bucks there. Plus you get charged for every time they got to make a call, every time we have to do a supplement update one of your accounts anytime you have something on there we need to verify. So 65 bucks, it gets ramped up to that pretty darn quick.

So that's the different, that's what's called a tri merge report when it's all three. Okay, I believe you were next. I'm not sure, but okay. So the question is, can you offer some options on investors trying to get more than 10 loans?

Yes, and I, I can't speak for them but our portfolio product allows us to do another four. After you've reached that 10 threshold we can do another four. You can have up to 20 finance properties but this particular investor for us will let us do four of those.

What kind of rates?

Very good question. The terms of this particular loan are as follows. And one of the, the bigger I think deterrence that I'm finding and I can't get them to budge on it, the minimum loan amount for them is 100,000. So you're looking at, I think and the LTV maximum you're going to lose some leverage on this is 65. So I believe I've done the math. $154,000 purchase price is what you would be at a minimum to qualify for this particular product. 6.5% interest rate. This is a 30 year fixed, not bad at all. The only other thing that I'd like to mention as a bullet point is this particular product has a three year hard prepayment penalty. So what that means to you is that for three years, 36 months it's really doesn't mean much but you should be aware it's a 3, 2, 1. So in year one, if you go to sell or refinance that property, which isn't going to happen, you're going to pay 3% of your existing balance as a penalty. So if you owe 100,000, you're paying 3,000 in the first year. Second year is 2% 2,000, third year is 1% 1,000. But you're not Going to be doing anything, refinancing or selling that property in the first 36 months, almost guaranteed.

35%.

Yeah. 65% LTV. 35% down.

Yep. LTV means loan to valuation.

Loan to value.

Yeah.

Okay. Wait, not you yet. We have one over here. Yeah. You may not know this because probably none of you listen to the podcast like you should. Okay, so mortgage sequencing. So what I've talked about on the show several times is something, I just gave it the name, mortgage sequencing, meaning when you're trying to execute a plan and buy, you know, a whole bunch of properties. It's how you sequence the mortgages. And the advantage there may be if, you know, if you can only get 10 regular Fannie Mae loans, you want to buy more expensive properties like Plexes. So, for example, you know, you want to get as much since they go by loan number of loans rather than loan amount. It might be better to buy 10, 4 plexes and get 40 units than it would be. And, you know, maybe those are more expensive. Then buy 10 single family homes and only get 10 units. You still have only 10 loans. You see what I mean? So, you know, we've talked about that and then. And they really can't necessarily address this, although they can have at it in a moment. But the reason that mostly came up is because we had some special financing at the time, which has now run out so far as I know. Maybe Sarah, Steve or Ari can address this in Dallas. And with that lender doing these, it was a small community bank, they didn't care how many finance properties you had. So the first thing you want to do is run out and get your 10 Fannie Mae finance properties and not.

Buy in Dallas first.

You want to buy after that. Okay. Because you don't want to have other finance properties where they, the Fannie Mae would say, well, you've got four, you can only do six more. So that was kind of the mortgage sequencing thing. You guys may have some stuff to say about that, and I'm sure you do. But that's where it. Why he's asking the question, I think.

Right.

Well, it is a common question, and that is how do you get past 10? And right now it's tough. I mean, it really is. But the solution is in that is that you have to get out of the mindset of thinking yourself as a single family real estate investor and quit thinking Fannie Mae. Because once you go past 10, you're really into the commercial realm. And that's really the mindset that you have to put yourself in. Ten years ago I started working with the guy at the foreclosure auctions in Seattle. Came to me, he had had half a dozen restaurants, he was working, he wanted to buy a bunch of properties. So we got him to 10 banks at that point in time. And now what they would do is I took into a community bank that I had some relations with and what they would do and as they went ahead, they bundled them together, he formed an S corporation, he dumped them into there. We started the cycle over again. Six years later he owns 44 houses. Houses. Now he's not going to get the same terms. Just absolutely not.

They're definitely not as good.

You're not going to find 30 year money if you're dealing with some of the seven to 10 years smaller community banks. Yeah, seven to 10 years. They're going to reprice.

And I want to give a shout out to Zach henderson over there, St. Robert in the corner because he's got an excellent community bank and Joe has taken advantage of that. I think you have. I think so. Where he can do some commercial financing on non commercial commercial properties. Which of course isn't as good as the fan. The Fannie Mae thing is the best. It's subsidized by the stupid government. Take advantage of socialism. Real estate here has always been subsidized by the government since the depressions. That's the thing. But your mortgage sequencing thoughts?

Yeah, I have some comments on that. But quickly, are you guys. Is anyone aware of how many countries in, in the world that actually offer a 30 year fixed mortgage?

I think one, the United States, there.

Might be one other in one of the European countries and I'm not remembering which one it is, but everybody else is. Ten years is a long time.

Oh, even. Or any mortgage at all.

Right.

I mean I, you know, I've said this on the show, folks, exactly what Shaylee's saying. I've been to 64 countries and I have looked at real estate. I have gone around with real estate brokers. A lot of them aren't licensed. They just. I'm a real estate broker and I've gone around and looked. I did it all over Eastern Europe, Central America, South America. And mortgages are like a totally foreign concept to them, even any mortgage at all.

So we're very lucky to have an opportunity. I mean think about what the difference between a 15 year mortgage and a 30 year fixed mortgage is. It's huge to have that amortization at 30 years makes a big difference to what we're talking about today. Huge difference. It's a difference between $300 a month in cash flow and maybe 100. It's a big deal. So I just.

And the massive amount of inflation that will take place in that second six, 15 years.

But just to go back to your question about sequencing, that's a fantastic question. And a lot of what we do, I was touching on earlier about the education. Sequencing is actually pretty important. So let's just assume that the scenario is we have an investor that wants to get to 10 and they have a primary residence and that's all they have to start with. They're a clean slate, they're new to this. The first thing we're going to do is we're going to take your blood type and some DNA samples and we're going to get you pre qualified. Right. We're going to go through all of that. We require what most might consider an inordinate amount of information up front. We do a tremendous amount of due diligence on the front end so that hopefully in the middle and the end it's a little less painful. So we go through that and then we spend some time talking to you about what your strategy is, giving you the information about where your qualification is today. So that when we talk about that sequencing the first four. Let me give you just a quick. If anyone wants to write this down, this may be important. For those that don't know. Properties one through four financed and that is one to four units that include your primary residence, does not include commercial or bare land, you can leverage as an investor to 80% loan to value on a single family residence. So which properties do you want to get in spots 1, 2, 3 and 4? If you can leverage to 80, the most expensive. Exactly. You want to get the highest end properties in those first four spots. If you can, then you've got five through 10 properties five through 10, you're going to lose 5% of leverage. You're at 75%. Again, we're talking single family residents. These numbers are different for plexes. So it's really important to work with somebody that really understands the non owner occupied model. Because if you just go to your B of a loan officer that's sitting there counting paperclips, he or she is probably not going to be able to help you strategize this. The other thing I want to mention to you guys real quickly and I'll turn it over to somebody else. One of the things I want to mention you guys, and this is a pretty Big deal. And if you want to take notes, great. We can talk about it one on one qualification. The acquisition years are very simple. When you're calculating a debt to income ratio specific to the rental income that we can use to offset that debt to income ratio. This is a little off, off topic, but it's very important. In the acquisition year of purchasing property, the formula for calculating the rental income is a very simple 75% of your rents. You take your rental income, the gross rental income, and multiply it times 75%. Then you take that number and subtract it from your piti, principal, interest, tax and insurance. Very simple, right? What happens though when those properties hit your schedule E of your tax return? Very different, very complicated. These guys can probably speak to this financial formula that is going to potentially inhibit you from getting to that number 10 goal. So it's very important that working with someone that knows what they're doing related to non owner occupied so that they can set up that appropriate strategy. So, for example, we're in the beginning of 2013, okay, you bought three, four properties last year. We want to look at a draft copy of that tax return before it's filed to make sure that those losses that you're going to be taking, because you're going to take your depreciation, there's going to be some maintenance. Let's say that those properties went unrented for two months last year. You're going to have less income to offset those things. We want to look at that draft copy to make sure that before it's filed. Once that bell is rung, that's it, it's done. But we want to make sure that you're positioned in that debt to income ratio to be able to achieve what goals you have planned for this year. So that's a really important piece and it kind of plays into the sequencing.

So to repeat the question, sorry, she asked, if you were on the fourth property, you had four properties already going on to the fifth and you're going to buy another primary. Are you stuck at that 25% down? And the answer is no. You fall under the primary guidelines no matter how many properties you have. You could have 40 properties and the primary is still your primary. You could still get away with 5% down, 10% down, whatever your intentions are.

So the primary residence loan is much more desirable than your investment investment property loans. And it's the same regardless of the sequence, is what he's saying. Right?

Exactly that one.

Do we need to belabor that? Okay, you agree?

No, that what he said was, if you're married and you can both qualify separately, that might be a strategy to look at. And again, talk up front with somebody and let's talk about the goals, let's talk about the options, let's get the strategy down, let's talk about the sequencing. Too often you guys start seeing the dollar signs in your head and you get excited and you start signing contracts like crazy and buying property like crazy without taking the time to look and see what you're doing. So then it's left up to us after the fact and those that you're working with, whether it be Ari or Sarah or whoever you're working with, to sit down and try and help you strategize with what you already have. That's got closing dates coming up. So it's important that you sit down and get the strategy put together first and decide what your end goal is and how to get there in the smartest way possible. And not just start shotgunning property. You start doing that. There's a lot of opportunity missed. Yes, I've got several clients going in tandem like that. As long as you guys are not on the. I mean, you may have a different situation. How we, How I've. How we've done them up to this point, at least. How I have done to this point. If you guys are completely separate, they're both separate on your, on your, your credit reports, filing. And I've actually seen them file jointly. We've had a file jointly. Been able to make that work. We just have to separate, get all the paper, paperwork. It's a paperwork nightmare. So if you're all about paperwork and you just get off on that kind of thing, you can do it. There's a cost to getting off on 20 properties, and it's called paperwork.

I've talked on a subject for several years right now, and what I tell married couple, significant other, if you're going to buy separate, you build a wall. I mean, that's exactly what. Build a wall. So. And when I say that, because what I'll see is clients, what they'll do is they'll come back and they try and get sophisticated. Their tax attorney, their accountants told them to set up an LLC. They do this. And the husband is 99, you know, 99.9% owner of the LLC and the wife's got a tenth of a percent ownership in the LLC. Guess what? You just knocked your wall down because now all of a sudden, you've tied it back. I had a gentleman in that, that he created A corporation. Good move. Moved all of his properties into the corporation. Guess who won the corporation his trust. And so guess what, guess who was on the trust? Him and the wife. So you've really got to think this thing, really think it through. And what Fannie Mae has looked at is that they're looking at the obligation, they're looking at seeing who's obligated on it. Now the other thing that you're going to take into consideration and that is if you've got a joint mortgage and that's one of the things that I look at, can the spouse qualify with the mortgage mortgage and the debt that she has? And if the answer is no, then it's probably not going to work. But again, it's very, very important in that, that you create that division between the two of them now assets. Majority of the married couples that I deal with, they have joint accounts. And so what we'll do is we'll have the non borrowing spouse sign an access letter that they've got access to the funds in the account and then we're good for the good for the funds. But again, there's got to be that division. If you've got anything that ties the two of you together, we're probably going to find it because somewhere it's going to be in your tax returns, there's going to be a document that's floating out there that's going to tie the two together. So you've really got to be careful with that.

With him bringing up the asset thing that brings another thought process into this. That's not to say down the road, they're not going to say, well you guys have a joint account and you're making the payments on all 20 properties at that account. So in reality she does have a stake in it. So yes, we're going to count that as part of it. So they're getting really picky and again, like I said before, moving targets. So think about that. Even though up to this point I've been able to do it with on joint tax returns, it's a, you know, others have a different situation. Doesn't mean tomorrow they're not going to pull the rug out from underneath me because they've been doing it on other things. So quite literally Steve's advice on build a wall is build a wall and make that sucker really thick back here. Yes, the over 10. I want to be able to do that. I do. Right now I'm in a unique position of I am not affiliated right now. I was with a lender and they successfully screwed me out of a lot of things in the last 12, 15 days. So I am. I'm in negotiations with two entities right now. One of the ones I'm working with, we're actually working with a fund on 20. I don't know if it's going to come through. We're working on it. So that's my take on it. It's something I'm working towards. But whether or not I'm going to get there, I can't say the 10 is still an attainable thing.

So in other words, you're saying in the mortgage sequencing issue by your primary residence is property number 11, is that property number anything?

Buy a primary, you're willing to rent out to buy the last.

Yeah, right.

I don't think for a primary there, there is no limitation to how many that you can own as long as you still qualify. And that's something that we would want to look at closely. It's going to be individual. Did everybody hear his question? I'm bad about that. I'm sorry. No, his question was, at what point do you want to buy? Let's say you're renting right now. When do you buy the owner occupied. When do you buy the primary residence? Do you buy it first or do you buy it last? I would say you probably want to buy it last because the primary will eat up one of those 10 spots. So, yeah, number 11 seems like a good spot to me because the four number after the fact for us can go to 20, so it wouldn't, it wouldn't mess that up.

And I say rent your own high end primary and rent lots of low end properties to other people. But you already heard that one.

Can you do a 1031 exchange on property 11? Yeah, if you're paying cash, yeah. So you can take, let's say property number 10, you mean? Right, and sell it. And into a 1031 exchange. You've got one spot for conventional financing. The rest of it would be cash or the four portfolio.

Yeah, the 1031 though, really has nothing.

To do with it. We're just about talking. Talking about lending. It's 10 properties.

So what's the question, Elton? Debt to income ratio, DTI.

Well, 50% is where we cap. In other words. Annette, I cannot. I don't care how good you are, Annette. The du stops at 50%.

Desktop underwriter.

Yeah, desktop underwriter.

No acronyms, folks.

Come on. Fannie Mae's automated underwriting system. So 50%. If you have 50.01. I don't care. If you got 3 million bucks in the bank, you got 850 credit scores, it is not going to prove it. Okay, right now, now that's not to say it wasn't going to change because back in 2007 and 2008, we were doing 65. I mean it was, I mean it was just, it was to the point of being stupid is what it was.

Of course, obviously, look at the results.

That's true. But 50%, that's where we stop at.

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 the if you want to learn about some cool new investor software, there's a show for that. If you want to learn why Rome fell, Hitler rose and Enron failed, there's a show for that. If you want to know about property evaluation technology on the iPhone, there's a show for that. And if you'd like to know how to make millions with mobile homes, there's even a show for that. Yep, there's a show for just about anything Only from Jason Hartman.com or type in Jason Hartman in the iTunes store.

I just, I had a comment to your question. I think that what you should do before you file 2012s is speak to someone and have them look at your schedule E and calculate the rental income for you. Figure out where you are and how it's affecting you. And you know you can make adjustments, you can make adjustments to your tax return before it's filed.

And what I think what she's saying is that your DTI may be better than you think. If you add up all those schedule E's and count the income, what's the limit on how many properties I can acquire? His issue is that it's not really the limit of 10 Fannie Mae. It's that he's bumping up the debt to income ratio limit. So there are different limits. I got a question I don't want to forget to ask, so just hang on to that for a second. What about credit repair? A lot of people have done some strategic defaults. Are these all scams or do any of them work? Do you have anyone that you want to refer? I mean, I know some of them really work out there. Credit repair issues. I guess since you got them.

There was word in our industry that for a while there, I don't know what the standing is now, but that it was illegal. They were actually calling the credit repair companies, they were driving them out of town faster than you can. This has been some years ago. I'm not sure the status on it right now, But I can just tell you the guidelines will tell you if you had issues in the past. I'm one of those. I. We lost several properties, a short sale and things like that. The rule of thumb is for a short sale, you've got 24 months from the sale of that short sale before you're mortgage eligible again. If by chance in that short sale process you went into foreclosure or pre foreclosure, that two years goes to four. So if that is the case, just.

Okay, let's just define this a little bit. So if you did a strategic default and the property went to foreclosure, now here's where people get confused. The foreclosure actually stays on your credit report for I believe, seven years. But you can get a new mortgage in four years even though it shows up on the credit report. Okay, so people always ask that question, question that confuses people. Aaron, do you want to address the credit repair?

Just to define one, the foreclosure thing. That's if you ever made to the point of 90 days delinquent, that's when they go to the point of being able to go into foreclosure. They didn't have to walk in and take the property. You just had to be in the position where they could exercise that had they wanted to. So if you're 90 days delinquent while you're doing a strategic sale, short sale, something to that effect, then you are subject to that foreclosure rule. Now on the credit repair thing, if you've got somebody that can get it done, that's great because I've never seen it happen. I've talked to thousands of these guys. They've come to my office, they sent me stuff I've never seen when actually repaired. I've seen people spend a lot of money on repair but end up with the exact same thing they would have otherwise.

Really?

Yes. That's my experience. I've never seen it happen. Now the credit repair that I have seen done is stuff that's just stuff that should be repaired. They send me the paperwork. I have my credit reporting agency clean it up. It takes five days, do a rescore, and we're done with it. It's stuff that's erroneous. But if it's something that you committed, I mean it's something you literally did that would. That should be on your current report. I've not seen anybody Magically erase it.

Yet I've got, I've got a credit repair guy that I do work with. But let's face it, ned, if you're 30 day lights on something and you think a credit repair guy is going to get it removed, it's not going to happen. If there's a judgment on your report, it's valid, they're not going to remove it. I mean it's there. What I've utilized my credit repair gentleman for in that is stuff that has erroneously been put on your credit report. I'm working with a lady in Chicago right now, had a judgment and she had a rental property. She was sued by her tenant and she in turn countersued. So it basically wiped the judgment out. But they still recorded it on her, on her credit report. And if you call, if you call the Cook county magistrate's office, they'll tell you that a judgment was never entered. So they give me the, they give me the document, they send it to me. Guess who wouldn't accept it. The Bureau's. Well, absolutely will not accept it because it was handwritten. So now what I did was I talked to my credit repair guy and I said, and I talked to her attorney and I said, you guys figure it out. I mean, because I'm, you know, I mean there's nothing I can do. But that's where I'm going to utilize a credit repair. I mean I've seen a lot of people that have promised the world and they can't deliver anything. The only thing they do is have you open up your checkbook and start writing them a bunch of checks.

Just so you know, I know there's a ton of those that are scams out there, but some of our clients have had some success with them. They pay $700 or $800 and then they do like a one year program where they're dinging the credit report agency sending the letters and they have to respond. And a lot of times they. The way it works, basically, I'm no expert, but the way it works is if the creditor the, that put the derogatory thing on the report doesn't respond in 30 days, it automatically comes off. And so, you know, it's playing a game, there's no question about it. But the fact is they sometimes win.

But again, where I've utilized them in that is if there's errors on the credit report, it shouldn't be there.

Right.

That's where I've used it and they've been real successful.

Our question was over Here the typical.

Rule is two years.

The question is how many months income to qualify for a mortgage. It's, they average it over, over two years, right.

Self employed, net they're going to look at two years. But typically you've got to have two years on your application and that's what.

They'Re going to look at, two years of income. So if you just started making a.

Bunch of money, there's exceptions to the rules, okay. And that where, you know, you get a teacher that's recently graduated and that from college, okay. So she's, when she's got a contract for September, they'll utilize that. I've got a guy that just finished up his, his residency now he's a doctor. He went to, to an er. He's only been an ER doctor for three months.

Those are major, those are pretty secure jobs though. Medical, you know, doctor, dentist, that kind of thing.

But the normal rule is two years, right?

Oh, so that's a quite good question. So to do a cash out refi, how long do you have to have that loan or let it season? That's the terminology. How long do you have to let the loan season before you can do a cash out refi or can you even do a cash out refi anymore? Does anyone have any equity due to cash out refi?

Cash out refi. Now you've got to be on title for six months. And the other thing is you cannot own more than four finance properties. And so that's very, very important to do. Now Fannie Mae came out about a year and a half ago with investors that pay cash for their properties. Now they've got a program, it's called the delayed financing exception, which states that if you pay cash for the property, you can get your original purchase price back plus roll in your closing costs and we can utilize the appraised value to drive that loan to value. You've got a six month window to accomplish that.

Oh, that's really interesting.

So this is.

Yeah, now. So I said you've got a six month window to complete it in. Once you go past six months, then it falls into.

Let me frame this for people. So if you buy a property with cash, and I know a lot of you are doing that and you want to finance it, this is not a refinance, it's a delayed financing. You've acquired the property with cash and then you finance it after the fact and you have up to six months to do. But is it 10 loans?

Four loans?

You can have up to 10 loans. And so that's where, that's where the, the variation comes in. And that's the distinction between that and an actual cash out refinance.

Okay.

And Shaylee, it looks like you had something to say about that.

Yeah, just. I just wanted to clarify the wait time on the delayed financing rule. There is no seasoning, there's no six months. You have to wait or have ownership for six months. And you can actually use the delayed financing rule, even if you don't have more than four financ properties, you could use that for property two or three so that you wouldn't have to wait. And the rule of thumb is that 70% loan to value and let's say that your property appraises for more than what you paid for it. You figure what 70% of the appraised value is, as long as you're not getting back more than what you put into it originally, you could theoretically get back every penny that you stuck in if it's on the hud.

So the question was, does it include rehab in the purchase price and yes, if it's on the HUD and it's not outside of escrow or settlement, is that. Okay, I've got a question.

One thing that I ridiculous amount of paperwork still applies that loan. So just because you own it, for some reason people get the idea because they already own it and that it's worth more than what they paid for it, that all of a sudden it lightens the load. No, the load is still just as heavy, if not heavier.

Now here's one that I really want you to address because I know everybody in this room, you know, one time or another, is having a challenge with this one. I know our local market specialists are. And that is the issue of appraisals. Ah, nobody's asked this. This one needs to be discussed for sure. So appraisals are, they're just tough. It seems like the banks are just, they've overcorrected at the height of the financial stupidity. They were valuing properties way higher than they should have been. And now the pendulum, instead of swinging to the middle, middle, swaying back completely the other way, and property, the value is there and they won't even give you an appraisal so you can get the loan.

Yeah, that comes up a lot. Some of the changes to the industry include big changes to the appraisal. H vac. H Vac.

And what does that mean?

Home valuation.

Oh, someone actually knew that. Who said that? Okay.

Are you in the business?

Oh, okay. Well, no acronyms, folks.

So now all all appraisals are ordered through third parties called AMCs, appraisal management companies. All of them. One of the things that we've been able to adopt is we have our own self managed AMCs in many of the markets that we're in. So we have been lucky in being able to do that because what happens is, is that we maintain just a little bit extra control. When you've got the problem, I think in a lot of cases with the appraisals coming in low or having issues with that is you've got appraisers that are, first of all, they don't really understand rental properties. They don't understand the rehab that goes into it. They're scared of their own shadow these days because of all the new regulations and Maybe they live 100 miles from the subject property. They don't know the area, they don't know the neighborhood. So it's problematic. So we were able to adopt our own self managed amc. And in certain markets what we've done is, is we've gone to our vendors and our agents that are on the ground and said give us five or ten appraisers that you know that are within a ten mile radius, that know your work, that know the market, that know the neighborhoods and we put them on our panel. So it's still a random selection, but we've narrowed the playing field a little bit so that we're getting nine times out of 10, we hope, good solid appraisals. I mean it still happens, but that's helped us kind of combat that kind of touchy issue.

Anybody else lucky to have the same situation? We self managed our own ordering. Talk to the people in the marketplaces, find out who is doing a good job in that area, have them send those names in, have our appraisal ordering department review them, put them on the panel Again, we can't pick the exact appraiser, but at least we've been able to narrow it down to the six, eight people that know what they're doing in that area. That is a huge difference between. So I haven't seen a lot of problems with appraisals lately. I don't know about you guys. I've had one or two in the last five, six months that's come in lower than the purchase price. I think it's also the individual selling the homes are getting realistic about what they're selling it for and the appraisers that we're choosing are a little bit better than what we had in the past.

We don't have our own internal amc. We actually use a company out of Canada called Solidified. But what I've done in that is everyone. One of the markets that I work in and at, I've done basically the same thing, set up a panel, we put them on the. Put them on the approved list. And those are the only people I travel to, all my markets, I know all my appraisers. And they have to understand because the product that you folks are buying is unique. And when I won't mention any names here, but when we had some of the other appraisal management companies that were out there, what they would do is, you know, you'd get an appraiser would go out there and say, okay, so if you buy it for 40, you put 10 into it, it's only worth 50. And that's not the case because a lot of times these bank, you know, these properties are bought at foreclosure auctions or bought from banks. The banks themselves. Now when they sell them, they can't make a profit. They can only sell it for what's worth, what the property is owed to them. So if they've got a property that's 40, that's worth 60, there's a perception, or at least some equity that's in that property that's not being taken into account. And so I ensure that the appraisers that we have in that, you know, they recognize that they'll get the information as far as, like, the sales history, they'll see that and we'll get, you know, get some good values. The other thing that I see right now in that is I'm seeing a little bit more prevalent, and we've seen with some, you know, other companies is sometimes lenders charge, you know, they'll have two appraisals done or maybe they'll do a desk review. Now, one of the issues that you have right now is when you send an appraiser another appraisal's work over to say, like a desk reviewer, he may not see it the same. So I've had a few issues in that area, not a lot of them, but we can still continue to see that because an appraisal really is. It's just an opinion of value.

Sure.

The question is he's getting ready maybe to file his 2012 tax return. And I had mentioned earlier that it's a good idea to have someone, if you're, if you're building your strategy for where you want to go, go with your real estate investments before that tax return is filed. Let us take a look at it. Because the computation for figuring out that Schedule E rental income is very specific. And if we don't look at it and tell you where you stand, then you may file and be put out of the game for qualifying this year because it's very difficult to file a tax return and then say, oops, I want to amend it. I probably wouldn't mess with something like that. If there are going to be changes made, maybe take less of the, the loss last year and forward it over to 2014. If it means that you can continue to invest this year and that's the primary goal, then that's probably what you want to do. And we're really good about. I mean that's what we do. We should be able to look at your scheduling and tell you that I would, I would rather talk to you about it just so that we can, we can get, get down to specifics. I'll answer your question. I'll, we'll talk.

Sounds like a backroom deal here.

But ultimately that in that situation your accountant's trying to get you to pay in a position we pay the least amount of taxes by having them.

They're trying to get you to pay more so you can qualify for loans.

Yeah. Trying to get to the most write offs. We're trying to show you where sometimes those write offs can impede your ability to show income.

And that is very legit.

Well, let me repeat. Why are there, why are the rules switching so much? So when he started, started on his path to 10 at 1, 2 and 3, the rules were one way. Now as he's getting closer to 10, it seems like it's changing. He has to provide things differently. Things are getting more difficult. The reasons being is we have to keep adapting with what's happening in the market. In the sense now we're not adapting, we're adapting to Fannie Mae and the rules as much as you guys are. What's happening is you've got fraud schemes, things like that. What I've been running into personally was one fraud scheme in a particular area. Some lenders had to buy back and eat some things. So they take a look at it and say what are the elements of all those loans that we had to eat that several million dollars? We're going to take whatever element that is and apply it to our guidelines across the board. Now is that good strategy for them? I don't think so, but it's what they're doing. Because what does a wounded animal do? It backs into a corner and bites everything. That's what they're doing right now. It's a knee jerk reaction. So some of these responses you're going to see, you're going to see changes that we won't even know until we get your file into underwriting. It will look perfect. We're proud of ourselves. We finally got one of these things built because some of you suckers have them that thick and we send it in to get underwritten and it comes back with more conditions than we'd ever seen. And because of situations like that, they adapt things before we have a chance to even see them because of the fact that things go south on other loans. So they're constantly evaluating the loans on a minute by minute minute basis as they take them back or as they foreclose on them and add those elements into their guidelines and keep adapting them. That's why I keep saying it's a moving target. Well, the question is, is you guys will leave here with three people's contacts and how do you go into the multiple different markets that you're going to go into and not spread yourself between three different people, four or five, because you think one may be better than the other. What I always tell everybody is it's a relationship business. It's going to suck. Whether you to want work with me, him or her, either of them. It's just not going to be fun. So pick who you want to deal with. You've got to pick somebody because when it comes down to it, you're both. You're going to be standing in the ring next to one of us. Our knuckles will be up, they're going to be bloody, we're going to be hurting and we're going to be tired. But you're going to get to the finish line somehow. But pick who you want to be fighting with. That's what it boils down to. We're all bound by some rules. So do you want to fight with me? Do you want to be in the ring with me by your side, her by your side or Steve by your side? It's up to you. That's what I say.

Let me mention something about that property tracker. That is by the way, if you go to jasonartman.com and you click on Resources and you scroll down property tracking and analysis software. That's where you get Property Tracker. It holds your entire 1003 loan application and your schedule of real estate owned. It makes it so much easier. Just use Property Tracker. I'm telling you, really, you need to use it so Zach, I think was next.

Well, depreciation is an item that you can add back. What I'm going to do is I'm going to expand upon the, the tax returns. You know, a lot of times the clients, obviously I'd love to see a draft I don't get, you know, I don't get them. And so what I'll do is I'll get the finished product. There's some tricks that I, I shouldn't say tricks, but there's some things that I learned. Look at that. Go back. First thing I go back is I go back to the depreciation schedule and look at when the property is placed in service. So I've had people come to me and says, my lender says, you know, I bought it in September, that because it's on the tax return. So I've got to utilize that figure. And that's not true. There's a certain amount of common sense that's allowed because let's face it, my job or our jobs up here are necessary to disqualify you to try and get you a loan. And my, I guess my comment to the customer is at. Or the underwriters is what I'm looking at is if you bought a property in September, I know right off the bat, one, you had repairs, you probably have some additional costs that you're not going to incur that were one time expenses and so you've had some added expenses that aren't going to be the norm. The other, the other thing that we look at too in that is it if I utilize that figure and so if I'm only utilizing four months, is that really a true representation as far as the properties of the ability to cash flow? And the answer is probably no, it's probably not. So in my, in, in my side, what I've been able to do and that is substitute and utilize the rental agreements in those situations. So there's a little bit more. I really don't feel that when I look at a set of tax returns, when I'm looking at somebody, that's my place to tell you how, how you're accountant to do your tax returns. Because one, I'm not licensed and I'm not definitely not going to prison for that one. But you know, it's so, you know, my expertise is lending. Your accountant, your accountant, he does your tax returns for you. You know, I'm going to look at him. If it works, it works. Now can I give my two cents? Absolutely.

Okay, I think that's good on that. 1. Fernando gets the last question and we've got to adjourn for dinner. Okay, so the question is basically, investors, if you're following our plan, you want to diversify and maybe you want to be do 10 properties in three different markets. That would be kind of a logical amount of diversification, in my opinion. And the question is, if you go with one lender and do three properties and another lender and do four, and another lender and do three, there's your 10. How do you do the closing order of those? Can you do all those apps at the same time, pick 10 this weekend and do that? Is that what you're getting at? Yeah, yeah. In other words, you're going to be in the purchase process and closing them all over the map? Basically, yeah.

The answer is yes, you can do that. Do I advise that?

No.

I think that for ease of brain damage or limiting brain damage for all of us, you probably want to do some due diligence. And I believe all of us can lend in all the markets that you're going to be in, correct? Yes, yes, we're going to be in all those different markets. So what my recommendation would be is speak to each of us and, or a few others, find who you're comfortable with and that's where you want to stay. It comes down to ultimately you can do this, but it's going to be very challenging for you to do. So I think you'd be opening up a can of worms that I don't think you would enjoy that process of already a very convoluted process as it is. The other thing is, it's very important, you guys, this is so important. Disclosure, if you do do this, if you decide you want to buy two from Memphis and I'm going to close those for you and, and two more in Missouri and Steve is going to close them. It is highly important that you disclose to all of us what's going on because you could lose deals by not disclosing. That's really a big deal. Fannie and Freddie have gotten really weird about that.

So that type of situation, you're not going to hide it. It's like my mom, she always knew. So we're going to find out and then it's gonna slow, it's gonna slow down your process. So really a worst case scenario, you tell us that you like chocolate, vanilla and strawberry and you're gonna do all three. And so what we're gonna do is we're just gonna conference call a lot and we're just gonna need you to say, hey, you guys are open to talk and we're gonna share information like crazy. That way we get them done on time. Otherwise, I find out two weeks later that she's got a couple. And then two weeks later I find out he's got a couple. Well, I'm delaying the heck out of your loans because I have to keep updating your paperwork. So if that's a situation like you were told, just disclose. If you disclose everything, keep it out in the open and we're able to do our job because everything's in the open, then it makes it much easier for you to hit your target date. It's when we have to start finding stuff out two weeks later, three weeks later, that it just becomes a maddening mess and you start to hate us.

Steve, any comments? And then we'll wrap up. This is it.

Well, it definitely is a headache. And yes, you can do it. You know, I've had a couple of situations now where there's been a couple of states where I'm not licensed in. They've tried to buy a couple properties there. They're doing a couple of properties with me, say, like in Memphis, and their purchase transactions. When I tell them everything's got to close at the same time, they just have a cow. And it's just. And working with another lender is not always the easiest thing to do because a lot of times those other lenders, when these two can probably agree with me on this one and that a lot of the people that are out there in the industry just don't have our level of expertise and just don't understand how to get this through. So purchase transaction, they all have to close at the same time. And I know I get a lot of people to come back and say, why is that? And I said, because really, the only way to paint. You, paint that picture of you financially is to have them all closed. That means I've got to have a settlement statement on the ones that you're closing with the other lender in the first payment letter to be able to calculate the payments. The other thing we get into, and that if you buy, if you buy, buy a property, cash, I still need to know about it because I still need to hit you for the taxes and insurance. If you utilize private money, now, that's a little bit different story. So if you're buying a couple, if you're buying four properties with private money and they're spread out, I'll hit you with the private money payment. I'll hit you with the taxes on that property, and then I can close them. I can stagger the closes.

Good.

So our panel will all be at dinner, so sit next to them. You guys sit far apart so there can be a crowd around each of you. And now you can pick your flavor, so give them a big hand, okay?

All right.

Thank you, guys. Appreciate it.

This show is produced by the Hartman Media company. 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.