CW 659 - Jared Lichtin - Oil & Gas Investments

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Hey. Welcome listeners from 164 countries worldwide. This is Jason Hartman. Thank you so much for joining me today for episode number 659. 659. And I am so glad you're here with me today. We're going to talk a little bit about the oil and gas market. This obviously has a huge impact on real estate prices and really the prices of everything. Because every single product that we could ever buy or every service that we could ever buy or hire has an energy component. Energy is the root of everything. I mean, the. The speaker you're listening to this on right now obviously is priced largely because of its energy component. How much energy does it take to create the raw materials, to mine them out of the ground, to assemble them, to distribute them, to ship them, etc. Etc. Etc. So energy is in everything we buy. It is vitally important. And as you know, I am not a huge fan of real estate.

Whoa.

What did you just say? Are you kidding me? You didn't really say that. Wait, is that a blooper? Okay, no, it's not a blooper. I said it on purpose. Real estate is okay. But what I'm really a fan of, and I stick to this completely, even though we are not experiencing much inflation at all. I am a packaged commodity investor, an assembled commodities investor. When I discovered the Hartman Risk Evaluator, as I Now call it, 19 years into my career, 19 years into my career. I've been thinking about real estate since I was 16 years old. That's when I became fascinated by the concept of income producing real estate after seeing that guru on tv. That guru was Robert Allen, by the way. Still around. Controversial guy nonetheless, but still around. He got me interested in this whole topic of income property investing at age 16 because I grew up with lack, with scarcity and I didn't think that was the best way to live. I wanted to create some abundance in my life and I thought this is probably the way to do it. This whole real estate thing is pretty interesting. People call it real estate generically, and it's really not. It's not what we're really buying. I mean, think about it in the Hartman Risk evaluator model and if you're a newer listener and you don't know what the heck is he talking about, this Hartman risk evaluator thing? Well, just go to jasonhartman.com and type that in the search bar. And you can learn all about the Hartman Risk evaluator by listening to prior podcasts where we've discussed that extensively. But it includes, of course, the LTI ratio, the land to improvement ratio. And what we discover is that there are two components. Everyone calls it just generically. Well, I invest in real estate. Okay, that's good. That's the generic name for it. But when we drill down, we understand that it consists of these two very critical components, the land component, which in our model, because we like linear markets that aren't the high flying markets, they're not the markets that make the news. Okay, These are the markets you'll find find if you go to jasonhartman.com and you click on the property section. These are the stable, conservative, somewhat admittedly boring markets like Jacksonville. We are going to be doing a little VIP mini tour of Jacksonville before we head over to Jekyll island, where it is the infamous birthplace of the Federal Reserve. This is a linear market. You don't hear a lot about Jacksonville real estate. You don't hear a lot about Memphis real estate or Little Rock or Atlanta or Indianapolis or even Dallas or Houston or San Antonio or yeah, even Austin. Well, you hear a little bit more about Austin, okay, Because that's more into the area of the hybrid market. And Phoenix would be one of those hybrid markets, right? So most of you understand this, but in that model, understand that 80%, roughly, this is a rough estimate. 80% of our investment is an investment not in real estate.

It's an investment in packaged commodities, as I call it, or assembled commodities. Being a packaged commodities investor or an assembled commodities investor, that's what we're buying. That's 80% of the equation in most cases. For example, you've purchased this $100,000 property and the value of the improvement, the house sitting on the land is $80,000. And the lot, the real estate, the land value is only about $20,000. This, in my opinion, is the prudent way to invest. So if we understand that 80% of the value of our investment is commodities, it's the ingredients and the energy it takes to assemble those ingredients. All that glass, all that concrete, all that lumber, all of that copper wire, all the, of all of those petroleum products, refining, assembling, delivering them to the work site and then assembling them there because they come partially assembled, obviously, and assembling that house, or that apartment complex for that matter, on that inexpensive land. We understand that energy is a big component of our investment. Now, oil prices have gone down. Many people, and I would rightly agree with them, by the way, think that they are artificially low. There are many theories about this, of course, and we've had various experts on the show go back and listen to the interview with, oh, what was that gentleman's name? Brilliant oil industry analyst, now retired. Jim Norman, I believe was his name. He wrote the book called the Oil Card and he has some interesting insights. We had him on the show twice. You could listen on my holistic survival show. And by the way, we've been meaning to replay that episode on Creating wealth where I interviewed John Perkins. Yes, he wrote many books. One entitled A Game As Old as Empire and the other one, probably his most famous work, Confessions of an Economic Hitman, very interesting. Talks a lot about the economic hitmen and their role in the oil markets. In the deal with Saudi Arabia that was just sort of a desert wasteland before the US came there and turned it into an energy capital. Right, an oil capital. And so this is all very interesting. Many theories claim that suppressing the oil prices has a lot to do with, with Saudi Arabia trying to put so many of the oil exploration companies and the fracking companies, which one in the same. But that's really a subcategory of exploration out of business in the US and one would argue that they've done that fairly effectively so far. So that's artificially suppressing oil prices. Right, because you can play with the supply and demand curves. You can manipulate markets when you have big oil reserves like Saudi Arabia. And so they want to, they want to see this tar sand production in the US and Canada slow to a grinding halt. And then for a while there, what will happen in, in the marketplace, Remember, it's all about the supply and demand curve. Well, in the marketplace they will cause prices to decline at first and they look at this as an investment in the decline, right? And then they cause all these producers to fold up, to shrink dramatically, to reduce their capacity or even to go bankrupt. And when they do that, all these players will be out of the business for several years and then they can start seeing the demand spring up, the supply. There's a shortage and then they turn around and raise prices and be before new production reassimilates and reassembles and comes back online, they've got a captive market where they can raise prices. So this is one big theory out there and then there's a completely different theory. I think Jim Norman expressed this one and this theory and this is these are only two of many theories, folks. There are many more to it. But this theory goes something like this. The US is trying to artificially suppress the price of oil and they would be interested in doing that to punish Russia and to hurt places like Venezuela. Because if they can cause Venezuela to literally collapse, which it is pretty much doing, you know, communism, socialism, that stuff doesn't work. When will we learn the lesson, people? Seriously? Please alert Bernie Sanders. Oh my God, why do we keep trying to try this failed experiment over and over again? I do not know. But whatever the reason is. So oil prices in countries that are heavily dependent on them, obviously it hurts them. So Russia, Venezuela, two great examples, hurt those countries, cause Venezuela to collapse, punish Russia by manipulating prices. And then these countries obviously get mad. They want to trade outside the dollar and the reserve currency. And that's a whole other discussion for another day. We're probably going to have a little bit of that discussion at the Venture Alliance Mastermind Group in Jekyll island the first weekend of May. So go to venturealliancemastermind.com Hope you'll join us for that. This is all really interesting stuff. It has huge impact on real estate prices. So this is very much on topic if you're not a myopic investor who's just looking for your next deal and thinking about that next house you're going to buy. But hey, that's okay too because we cover that more micro stuff too. And it's all very interesting. And by the way, go to jason hartman.com click on the properties page and check out some of our property inventory there. And don't forget, you know, a lot of you are in the position where you have passed your 10 property investment limit or your 10 property financing limit. And if you have a spouse and you can do 20 properties financed through what they call the agency financing, Fannie Mae, Freddie Mac, the really desirable financing that you get on that property that give you these big, beautiful, wonderful, artificially low interest rates for three long decades. Think about it. You get one of those mortgages today, if you keep it the whole time, you're not going to make the last payment on that mortgage until2046. Whoa, 2046. Do you really ponder how different the world will be by 2046? Do you really think about the amount of inflation that we will probably experience somewhere in the next three decades? I bet we will have three significant runs of inflationary pressure, one every 10 years in those next three decades. And you will put both. Mother Nature, because Mother Nature has to do with determining commodity prices. And we are packaged commodities investors in real estate. And then you also put Father Time on your side. And you will love it when the government is irresponsible, and not just the US Government, all governments. And when they spend too much. When you see some natural disaster on the news, it's terrible, obviously terrible news. But just know that when you hold commodities and these disasters happen as they will inevitably happen.

You will likely see commodity prices increase. And that is good for your real estate portfolio. Yes, I know.

Who is it? What's her name? Naomi. I wanted to say Naomi Watts. That's an actress, isn't it? She's kind of hot too, I think, right? No, not her. Naomi.

Wolf. Isn't that the feminist author or something? Anyway, I can't remember her name. Naomi something. You know, she's the one who talked about disaster capitalism. I want to get her on the show. Her stuff's pretty interesting. But she's far on the left there, but still interesting nonetheless. I consume a lot of this far left information. You know, I want to see what people are thinking out there. And some of, you know, in a lot of ways they're right. They're right about a lot of stuff. They're just wrong about a lot of stuff too. Okay, well, anyway, that would be disaster capitalism to some degree. But understand that in that next three decades you get these artificially cheap three decade long fixed rate mortgages. You control packaged commodities that are needed by the entire world that are not indexed to any one currency. Not the dollar, not the euro, not the yen, not the yuan, not any one currency. They're just universal because every human being needs these commodities. And think of how much the world will change in the next three decades. And you've locked in your cost of ownership. That is a beautiful, beautiful thing. You certainly can't do that on the commodities exchanges. You can't do that on The Chicago Mercantile Exchange, you can't get that kind of financing. You can't get the tax favored status of income property on that exchange. But you can do it here. You own real estate, you own commodities, you own a beautiful three decade long, incredibly cheap fixed rate mortgage income property. Most historically proven asset class in the entire world. Nothing beats it. Check out the properties. Jason hartman.com. click on Properties. You love what you see there. Even if it only works half as well as projected, you're still going to profit very, very handsomely. Okay, so without further ado, I guess let's get to our guest. Let's talk about some oil and gas investments, get an insider's view of some of this stuff. Jared Lichten, Here we go.

Hey, it's my pleasure to welcome Jared Lichten to the show. He is an expert on oil and gas investments and deals and leases and has a good resume in that world. He also flips properties now, so he's, he's got an interesting background. Going to dive into that, take a look at some of these investments and it's just a pleasure to have them on. Jared, welcome. How you doing?

What's going on? Jason, glad to be on your show.

Yeah, it's good to have you. So the oil and gas market, you know, I have been pitched these deals so many times over the years and I've long heard that the promoters of them get giant commissions and that there's just a lot of risk in these deals and they're not very good. I don't remember having ever done one, although I may have a long time ago that I don't remember. But I don't think I've ever jumped into one of these deals. And when I spoke at one of the money shows in Orlando, Florida a few years ago, I remember it seemed like every other booth was a guy selling an oil and gas deal, you know, a share in it, an interest, either an existing well that was working or exploration, which is even more risky. And I just would love to get some thoughts from an expert like yourself on what's involved in this. But first maybe give us a little background as to, you know, what you've done in your career and so forth.

Sure, Jason. So a little bit of background on myself after I graduated law school as a 26 year old, I got a job doing some oil and gas work, a lot of mineral title work for a large law firm in Appalachia. And for anybody out there who's really familiar with the oil and gas industry is there's huge Influx of work and be it title work, drilling. I mean there's just a ton of stuff going on in the pa, West Virginia, Ohio region. And I was hired at a law firm to do a lot of that title work. And so I did that for about two years. And just broad perspective on me. I was flipping houses on the side. I saw a lot of volatility in the oil and gas market recently and decided why working a job that, you know, I'm worried I'm getting fired at every week when I can just make as much money or more flipping houses. So I just kind of went all in. Quit my job in February. But I had a good two years experience working in the oil and gas industry as an attorney. Seeing the behind the scenes kind of stuff that goes on with a lot of these deals.

Yeah, really interesting. You do have some insight for sure. So tell us about the types of deals you would do. I mean, there's so many different structures, so many kinds of deals, so many angles to this industry. I mean the energy industry is a giant industry for sure, and oil and gas is a huge part of it, obviously. Just give us a little background on the type of deals you were doing.

Well, the stuff that I was doing and we can go into the stuff that I did and the stuff that I saw because I was kind of just like a low man on the totem pole, just, you know, drafting some mineral title opinions which basically states to oil companies who owns what in the oil and gas on a particular piece of property. So I was just drafting those and you know, it's legal work and you have to get legal title to the land before you drill or frack on it. So that's what I was doing. But as far as the deals I saw being done, I mean, pretty much a little bit of everything. It was mostly company to company, you know, either selling batches of leases together. I can't state exactly who, I mean, some of them I don't remember. But I just, as far as confidentiality reasons, can't really say. But there was usually a large company selling off some of their assets to a smaller company for whatever reason. Sometimes they saw that some companies were either more into the liquid natural gas side of things, so they kind of sold their dry gas to another company. And usually that company would set up some sort of either limited partnership or, or a new entity to kind of absorb those assets for whatever tax reasons, which is beyond me. But I was just more on the title side. Basically I would be given a tract of land to run I would run the entire oil and gas title back to 1860. So anybody out there who owns a piece of property and is wondering if they own the oil and gas in it, they pretty much just have to contact a law firm like the one I was working at or an independent oil and gas abstracting company that can run the title for them. So I saw all sorts of deals from selling leases, buying leases, buying surface interest.

Shallow interest, deep interest, anything below the Marcellus and Utica Shale.

Okay, hang on, slow down. I got a couple questions for you before you go that's really interesting. So, first of all, what's the significance of 1860?

Well, every title firm is different, but as far as the laws up in West Virginia, Penns, Ohio, if you have any defect in title when, say you lease your oil and gas on your property and the energy companies pay you out royalties, and then you have heirs of some random family from back in the day stating, hey, what about this document back in 1880 that gave me one half interest in oil and gas? Then everybody's going to lawyer up and go into court. And the significance of all that is pretty much anything before 1860.

I can't say that it doesn't matter, but it's just anything going back all the way to 1860, if you get around that 1860, 1870, especially in every state's different. You shouldn't take this as actual legal advice. But that's pretty long, far enough, long ago that, you know, everything's been taken care of and the oil and gas hasn't been severed.

Interesting. Okay, and tell us about the different interests. You said deep interest, surface interest. Did you say like middle interest or what are those things you talked about? Those, those industry terms?

Yeah. So when you're working in oil and gas, you see all sorts of things there. You can see a shallow lease, which, I mean, some of the technology back in the day just wasn't good enough to drill 8,000, 15,000ft in the land. And basically, if you've ever heard of fracking, it's been going on since, I mean, for years.

But really, we've definitely heard of fracking. Yeah, go ahead. Yeah.

If you look at a map, it almost looks like a spider web. It's like you go drill down and then you drill sideways through the shale to extract the natural gas or oil out of the property. So really, since 2005, 2006, you see these quads within the least encompassing, this sort of fracking language. And it's just the technology in the past 10, 15 years, has really taken off to where we can almost guarantee that this country's energy is going to be really, I mean, the next 30, 40 years we're going to be fine. As far as the natural gas in Appalachia is controlled, but all the sort of political stuff with are we going to export and all that, we're really not sure. So anyways, going back to what I was saying, as far as surface interest, shallow interest, sometimes the technology wasn't there or certain companies specialized in shallow drilling, sometimes you'll see companies leasing the entire depth. So basically, when you buy a piece of property, surface and oil and gas, you own everything from the surface down to the core of the earth. And if your oil and gas hasn't been severed ever, you own 100% interest on that oil and gas track. You can give 116 interest of 5000ft below to your son for a Christmas gift. You can deed out 1/2 interest in all the oil and gas to your heirs. You can do all sorts of things with it. And there's a very small percentage of people in the country who own oil and gas interest still in Appalachia, most of it's been either sold out to oil and gas company or their heirs retained it and they lease it out.

Sometimes you'll see a debt restriction in a lease because the Marcellus Shale and the Utica Shale, which are the main two shales in the Appalachian region, basically encompasses upstate New York, western pa, eastern Ohio and most of West Virginia. Those two shales, typically, like I said, it's different in every region, but about 8 to 12,000ft depending upon where you are in the state. So sometimes you'll see companies deeding out the Marcellus rights and retaining the surface interest. And there's all sorts of reasons why they do that.

It's kind of beyond, to me, very interesting. Wow, that's fascinating stuff. So one of the things that I believe is that all wealth comes from the land altogether ultimately. And that's what's one of the probably our interest in real estate is mutual in that way because whether it be agriculture, oil, all of these resources, they come from the land. Another interesting thing is that with the new technologies, as you talked about, how we have so much plentiful oil and gas resource, I just want to bring up the fact that one of these idiotic left wing ideas, these Malthusian ideas that just amazingly still pervade society after, you know, hundreds of years since Malthus is gone, President Jimmy Carter. Okay, said, and this was a New York Times article 3-4-1977, Carter said the world would run out of oil by 2010.

And it's, you know, if, I mean, Jimmy Carter is, was just such an ineffectual, terrible president in so many ways. It says the hard truth as the Carter administration sees it, and this right from the New York Times is that oil supplies cannot much longer sustain the world's increasing oil consumption. And all the peak oil theories that existed in the 70s and so forth, it said, and this is, this is highlight world capacity to sustain such an expansion will flatten out in the 1980s if consumption then continued at the same level. And of course it's increased, the world's oil will disappear in the first decade of the 21st century. Well, gee, Jimmy Carter, that didn't quite happen. See, what they never count on is they never consider people to be a resource. People that invent technology, right? And that's how we always solve all our problems. It's just mind boggling that these people still believe this kind of stuff. But go ahead, it's my, my, my tangent.

Yeah, no, it's fine. I mean politically, you know, everybody has a right to have their own opinion, but it's, it's tough because Jimmy Carter is not the only person that ever said that. And you know, every, you know, the world economy kind of ties into all that. And you know, there's certain war, I mean this is nine years before I was born you're talking about. So I really don't even know what the political landscape looked like then. But certainly I understand that in the last 10 years, since US invaded Iraq in 2003, and ever since, natural gas fracking has really taken off in 2005-2008. Ish. I mean, no one knew how much natural gas resources were in America. And if they did know about it, only the geologists were really at the forefront of knowing how much and if it was even able to be extracted at the rate it's been able to be extracted from. So there's certain risks that people take when they drill in the land. But politically, if people come at me, to tell you the truth, I don't have much of an affiliation either way. But if someone comes at me really one way or the other, I say, look, listen, oil and gas extracting, drilling for oil and gas is just like anything else. It's like sending a man to the moon. It's just like any other technology. There's risks involved. But most likely if you hear a news story about it, if there's something put out in the paper, if there's some house of cards reason behind the. Behind the reason it was put out there. I mean, there are things. Jason, didn't you say that people were kind of pitching you oil and gas deals back in Orlando or something?

Yeah, two years ago when I spoke at a conference there.

Yeah. So part of the reason why some of that can be risky is because the deal might be good. But in a place like Dimmock, Pennsylvania, or Youngstown, Ohio, you have huge lawsuits coming out of those regions because either the oil and gas companies did some really negligent things, either destroying the roads or the natural landscape. I mean, excuse me, the natural resources around the area, and just doing some really negligent things. And the lawsuit really favored the plaintiffs, the people who own the land or the city. And then in Youngstown, you got the oil and gas companies fracking for natural gas and it caused an earthquake. So now there's a moratorium on drilling in. In Youngstown, Ohio, in like, I think a three or four mile radius of the site of that earthquake. And, you know, everything that's put out in the newspaper is really, really anti drilling. So any deal that's around that might have been a good deal technologically, you know, might have been a good deal geologically, and it might have been a good deal financially for everybody. But when those kind of things happen, there's nothing to prevent the political landscape from pushing everything. And upstate New and upstate New York, you can still not even drill in because there's an entire moratorium on drilling in the entire region because of the mayor. Excuse me, because of the governor up there.

Yeah, very interesting. So let's talk about the actual deals. I mean, should investors invest in this stuff? I have heard just this market of these smaller promoters. You probably didn't deal with any of this kind of stuff, at least not directly. But there's all these guys out there promoting oil and gas deals, whether they be exploration, they be all operating wells, which are much less risky, of course. But I've just heard the scamming in this industry is rampant. Can you speak to that at all or tell us about it? You know what?

I can't speak to exactly that kind of stuff because I don't know really who those deals are marketed to. They might be dealt like maybe marketed toward guys with huge IRAs who have a chunk of their portfolio that they might want to put into something new or interesting, something more risky and volatile. And I can't really say that I was on the forefront of any of those, but I understand that either they have a group of wells that they are really hot and they need some money to either run the wells or do the drilling or extract the gas or lease the land. There are so many different reasons why people would want or need money for this stuff. And a lot of the money is either bank loans or it's backed by private investors or larger companies. And if you're an individual investor and you want to get into oil and gas, to tell you, the only way I can speak to this is basically in Appalachia. I can't speak to any other area of the country because I haven't dealt with any other area. But if you want to start investing in oil and gas, just look to purchase oil and gas properties from private landowners or oil and gas companies who already own the interests in the area. And the only way you're going to do that is you're going to have to hire either a law firm or, or an oil and gas title abstracting company to run the title on the property, which is what I did when I was working at the law firm. So you got to understand like they'll give you a title opinion. It might cost you maybe a couple thousand dollars, but if you purchase 10 acres and you know before you purchase it that it includes one half the oil and gas interest, I mean, there's three things that oil and gas companies will pay you on. If you're leasing oil and gas and you own attractive land, say it's a 10 acre farm in eastern Ohio, you're going to get paid a bonus for signing the lease, which is usually 5,000 to $10,000 an acre. And I saw definitely things in that range, they have to pay you delay rentals, which is basically just a couple hundred dollars a month to make sure that they can keep up the lease. If they haven't drilled yet and they have to pay you that stuff, or the lease expires or the lease terminates. And the royalties, which is the main money, you see mailbox money when they drill for oil, the standard royalty on a lot of these leases is 1, 8 to the landowner. So if they drill for natural gas in your property, they make a million dollars just on your property, then you're going to get one eighth of that and that's royalties. So bonus delay rentals and royalties are what you're going to get as a landowner. So if you're thinking of purchasing attractive land, you have to do your own independent investigation and you have to have a professional, either an attorney or an oil and gas title abstracting company. Run title on the property and give you a report of who owns what percent of the oil at what depth and if it's leased or not, and if it's held by production.

Okay, but that's for the landowner or the land buyer. I'm wanting to address a little bit more of these deals out there where people are saying, you know, invest in this llc, we're the landowner, or we're doing exploration or we're leasing a well or stuff like this. I mean, how rel. You know, in the, in the exploration business, how reliable is that? I mean, is, is the, is that more of a sure thing nowadays? Because the technology is so good and so amazing in terms of how far you can drill, how deep you can drill and, and how you can drill at an angle and the types of instruments that they use to explore. Maybe tell us what you know about the exploration side of the business. That's pretty interesting.

Well, the ET side is kind of exploration, production side is. It's kind of beyond me, but I understand how it works. So, like, you know, the geologists from these oil and gas companies are going to, they use this, these like seismic machines to get like super, super specific readouts of the oil is. So they don't even have to drill. They get these readouts from technology. I mean, really, in the past four or five years, they've been able to tell where the natural gas is pocketed. Because a lot of times natural gas is like if you have a bowl and you pour some olive oil on it, it's going to pull to the top. Or say if you have a pocket of air in an underwater cave, that's where the natural gas is. In those little pockets, they can get kind of like a 3D layout of what it was like, and they couldn't do that a couple years ago. So when someone comes to you with an opportunity to invest in an E and P thing, it's really something that is going to take a lot of time, it's going to need a lot of money, and it's extreme. I mean, I don't want to be the one to tell you not to do something like that. But unless they have an extremely, extremely consistent track record, unless they're, to me, like, the larger companies do it better. But, you know, it just depends where you're drilling because in some areas, you know, you only have to go down 5,000ft and in some areas you're going down 15,000ft. And you know, you're getting in the Appalachian Mountains down in West Virginia, it's really tricky to like explore and like there's just some certain companies are. Have interest in exploring for it and other companies have interest in really getting out there and drilling for it. And it's really risky. That's all I can say is I personally wouldn't do it. I'd rather research who owns the oil and gas on certain tracts. I'd rather buy a 60 acre farm in Ohio and wait till the lease expires and then lease it and sell the lease. I'd see royalties for the rest of my life for that because it most likely would be held by production.

I would rather research certain tracks. I don't really know enough about the E and P side to say how risky it is, but to me, if you have a lot of your money, I would just flip houses like I do or get some long term rentals to, you know, create cash flow income.

Property is the most historically proven asset class in the world. So.

Yep, absolutely. I just rented out my house in Cleveland, Ohio. I moved down to Houston and I'm getting 600 bucks a month cash flow from really doing nothing.

Yeah, fantastic. Isn't that great? I mean it's, it's just great. So what, what made you switch from being in the oil and gas business into going into the real estate business?

Well, being an oil and gas attorney, it was a good job. But like I had, I had to travel a lot. It involves like, I don't know, it was very volatile. Like I would see people get fired and hired every week. You know, sometimes we would have to work 60, 70 hours a week and other times we'd be, you know, there wouldn't be much work to go around. And like for two years while I was doing the oil and gas thing, I was flipping houses on the side as like a side project. And I got good at it enough to where I was like, man, if I just went all in and spent all my time flipping properties, I could create enough income for myself to replace my income probably within a year. And you're like, for anyone listening, we're recording this in June 2015. So I've only been four months out quitting my job and I've already produced the podcast, built an email list. I'm selling my flip, you know, it's going to be on the MLS next week. It's, you know, it looks like we're going to make 25 or $30,000 on it. So, you know.

So is that your first flip?

No, that's about it. It's like technically like my fifth I've done a couple ones before that have kind of one kind of got wholesaled out, but I would say it's about my fifth deal.

Yeah, good, good deal. Yeah. No, I love real estate, there's no question about it. And you know, either you, you give your money and it's usually IRA money that these promoters are seeking, right? Yeah. And they, they just take advantage of older people because it's all like older people at the money show type event and they're just, okay, you know, let's take 50 grand from this guy in his IRA and we'll put it in this oil and gas deal. And usually the only guy making any money is the promoter. Have you heard the saying? It's a kind of a funny riddle, you know, at the beginning of a transaction, the general partner has all the experience and no money. And at the end of the deal and the limited partner has all of the money and no experience and at the end of the deal they switch places. Now you've got the experience because you just lost your money with this guy. Yeah.

I mean, it's just like anything, it's any investment, be it real estate, oil and gas related, whether it's the stock market, do your homework. You know, you have to understand who you're getting involved with. If you, if you meet somebody who's like, hey, I got this great deal going on, you know, we're going to drill and we're going to make a ton of money, you're going to triple your money. You know, if it sounds too good to be true, it most likely is. And that's what I found.

It probably is. But the difference is in real estate, don't invest in a fund or a partnership or something like that. Just go be a direct investor and do your own deal. You know, you don't have to rely on anybody else.

Yeah. And I mean, like, think about the. What's the worst thing that can happen? Even if you buy an old home and remodel it, Worst comes to worst, your numbers are off and you rent out the house, you get some cash flow and you eventually sell it. Like, how can you go wrong if you really do your homework the right way? Like, even if the market crashes, even if, I mean, you live in la, you saw some people who owned homes that were, you know, a million dollars and in the stock market crash the last couple years, Maybe it's worth 775, but they still either live in it or they can rent it out and you know, no one's forcing them to Sell that asset. You know, you can Airbnb it, you can have someone, you can rent it out to fork students. I mean, you can do whatever you want.

But like, there's all kinds of choices. But where they get limited is in those expensive properties, there are fewer choices because that, that million dollar property in LA where I grew up, I don't live there now, by the way, but I live in La Jolla, California, but I grew up in la. And you know, that property is not a sustainable investment. But if you have ten $100,000 houses, that'll all rent for a thousand a month, I mean, if they go down in value by 50%, who cares if you're getting a thousand per month, you got 1% of the value or the original value value every month, you're doing great. I mean, you're getting your, your overall return on investment there is probably, well, it's cash on cash, probably about 11%. And overall return, if it's having some modest normal appreciation, which in that case it didn't, I know, is probably 30%.

Yeah. And on top of that, if you own 10 houses and you go to a bank and you're like, hey, I see a really good deal for like a $300,000 house that you want to flip, they're going to look at all those assets that you own. I mean, you could be unemployed like me. And you know, they'll give you money because you own all those assets and they're borrowable against that. If you default on the loan, you know, the bank looks at you and they're like, hey, if he defaults, we'll just take his other houses. Or you can just sell half your portfolio and just buy a property with cash. I mean, the possibilities are just endless.

They really are. You can apply a lot of creativity to it, but the thing is, you got to control the assets. It. And when you don't do that, you know, when you go into someone's limited partnership deal, right, you're not in control. You can't go to a bank with that share and say, hey, I want to sell my share or refinance my share of this deal I'm in. You just have nothing. It's paper.

And even when the house is gone, if a tornado or a flood takes it away, insurance is always there in the back end. There's always something. There's always something to protect you.

Oh, it's even better than that because oddly sometimes, and I know it doesn't always happen, but sometimes it does. You look at like Hurricane Katrina Right. Terrible disaster. But a lot of people profited handsomely from that because they had this little crappy shack of a house that the hurricane just washed away. Right. The storm surge did probably, and it just washed away. And then, then some condo developer comes along and they've got this piece of land with no house anymore, right? And the condo developer comes along and says, hey, I'll give you three times what that house was worth because I want to build a condo here and I need to do an assemblage of your property and two other properties to do my condo development. And they'll pay you it's worth more with the house gone. Sometimes, I mean, it's a rare case, I admit, but, you know, there are options. That's the point.

Between that and insurance and fema, you know, they probably got a lot of their money out, Right?

Absolutely. Yeah. Good stuff. Well, hey, thank you for sharing this with us. Any final comments or resources you want to share, please go for it.

Really, just if you want to check out my podcast, I mean, it's just called Flip, it's on itunes. Just search Flip. And you know, my podcast basically just follows me live through my house flipping journey.

So wrap it all up for us, Jared.

So basically, if you're looking to get into oil and gas, I would just be very cautious about who you deal with. Check out if you're interested in the Appalachian region, contact a law firm up there, someone who does oil and gas title abstracting. They can really give you an idea of where the major players there who to contact. There are some firms out there that are very, very experienced in either selling you oil and gas interest, whether it be maybe one half oil and gas and or, you know, some royalties or whatever. You know, just contact some energy companies up there and see what you can find out. It's really just you doing your homework and not anybody else telling you that the homework's already been done. So do your due diligence and that's about it.

Good advice. Jared, thanks so much for joining us.

Absolutely. Jason, thank you so much.

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This show is produced by the Heart Master 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.