Jason Hartman argues rental properties beat stocks because the housing market is fragmented and emotional. Unlike stocks with fixed prices, investors can add value through improvements and marketing, then sell to homebuyers driven by loss-aversion and scarcity. Owner-occupants eliminate options emotionally while investors analyze data rationally.
How many of you own stocks? Why do you own stocks? Wall street is the modern version of organized crime. Okay? So if you own a stock and let someone name a company they own stock in and that they know what it's trading for, somewhere around what it's worth. Now, who name them? Apple. Someone said, oh, because it's split. Yeah. So Apple's like 110, right? Anybody own Apple? One. Really? Seriously? One person? You really are not voting? Okay, a couple people in the back. Okay, so you own Apple stock, right? So if it's trading at 110, I want you to do this experiment. You know, say you're with Schwab and you trade online with Schwab. Call up the rep at Schwab, and they're really good. Schwab is a great company, by the way. Really helpful. They answer the phone and they'll help you. And I just want you to call them up and say, hey, look, I know that my Apple stock is trading at 110, and, you know, but I'd really like to see if I can get more money. Can you do a little extra marketing and a little extra promotion and, you know, put a coat of paint on it and see if you can sell it for 150? You can't do that. Right? Because of the perfection of the market. The market is perfected. It will only trade for what it trades for, period. Same with gold or silver or any of the precious metals. It's a perfected market. But take the metals, for example, that becomes more imperfect in the field of numismatics. Okay? Rare coins, they're made out of the same precious metals, but they become more imperfect because of their art value. Right? And so this is true. This is the advantages. It's one of the huge strengths of income property in the residential market, the one to four unit market as an investment. The fragmentation, it's huge. Believe me, this is a big deal. Now, there's another aspect of this fragmentation that I want to mention to you. When you're looking to buy a property that might be a single family home or a fourplex or a duplex, when you're looking at this asset, you look at it through the eyes of an investor. When I got into this business 11 years ago, the first thing I decided I had to do is standardize the data, data standardization. And so we do that. If you Look@Jason Hartman.com, you see our properties presented in a standardized format. So here's a huge advantage for you as residential income property investors. You buy the property like an Investor. But if you decide someday to sell the property, who you gonna end up selling it to? Another investor? Are you gonna sell it to a homeowner, an owner occupant? The likelihood is you're gonna sell it to an owner occupant who looks at it through rose colored glasses. They look at it from an illogical, emotional perspective in a fragmented market. And they always view. Remember, I was in the traditional real estate business for many years, okay? That's how I did most. Actually, most of my career has been in that field. I worked for ReMax for many years. I worked for Century 21 when I started for about nine months, and then I worked for ReMax for 12 years. And I can tell you that when people look at a house that they want to buy to live in as an owner occupant, they look at it through the process of elimination, and they look at it through the process of scarcity and comparison to what else they have out there in the marketplace and their expectations. When someone calls on a property and they're considering living in it, they have one goal when they call. Before Al Gore invented the Internet, we had this thing called the newspaper. We'd place ads in the newspaper and people would call, or they'd see a sign in front of the house and they'd call on the property. And when they call you, they have only one goal, and the goal is to eliminate the property, to move on, to consider another property. It's simply a process of deduction elimination. That's how a home buyer thinks. And so when they do that, they have this view of the world and it's out of scarcity. And what motivation do you think is more powerful for humans? Is it the possibility that I might gain something or the possibility that I might lose something? Definitely fear of loss. Far more powerful. In fact, just test yourself, you know, go into a transaction and, you know, think, well, you know, if someone takes advantage of me in the deal and they overcharge me by a hundred bucks, you know, how long does it take you to earn 100 bucks? Especially if you're in your own business or you have a little of your own business on the side, right? You can earn 100 bucks pretty quickly, but if you check out of the hotel and your hotel bill overcharges you 100 bucks, you're going to be mad, right? And it's just the way we operate. We operate this way out of scarcity, out of fear of loss. Because for eons before this, that's how our world was. Our world was not abundant, it was scarce. And, you know, maybe over the last hundred years, during the Industrial Revolution, we have the first time in human history that we've actually had abundance. And so our minds have not adjusted to the new world at all. We can earn the hundred dollars a lot faster than we can bitch and complain about losing it. Right? That's just the way our minds are. And so we take advantage of this. And even if we don't sell our property, the whole marketplace is operating like this out there. You know, when you sell a commercial property, it's sold by a strict measure of cap rate, capitalization rate, in other words, the income the property produces. So fragmentation. Huge strength, huge strength. Don't minimize that.
