Episode 114: The Future of Real Estate Investing with Jason Hartman

Announcer:
This is The WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes.

Tom Wheelwright:

Welcome to The WealthAbility Show where we're always discovering how to make way more money and pay way less taxes. Hi, this is Tom Wheelwright, your host, founder, and CEO of WealthAbility.

                So big topic right now, inflation, interest rates and real estate. So if you're a real estate investor, what do you do over the next 12 months? If you're not real estate investor, should you become a real estate investor or is it too late to become a real estate investor? Just what is going on in the real estate world?

                It's certainly, there's a lot of discussion about, oh, we're in this big bubble. It's going to come crashing down. There are other people saying, no, it's just going to keep going up. And we know probably neither of those is accurate, but what do you do about if you are a real estate investor or you're thinking of investing in real estate, or you own a home? What are you doing when it comes to your real estate? And today I'm very grateful to have a very special guest, Jason Hartman, who's an old, old friend. Jason, welcome to the show.

Jason Hartman:

Tom, it's great to be here. And I hope I can share some new ideas and perspectives on the current state of the market and maybe a little bit of history as well and answer those questions, what should people be doing? That's on everybody's mind right now because we might be at a point of real transition. We will see. We'll explore it together.

Tom Wheelwright:

This will be interesting. So I love doing these podcasts because I'm the student and I get to rely on experts like Jason. But if you would, Jason, how'd you get into real estate in the first place? Give us just 30 seconds about your background and how you got to this space.

Jason Hartman:

Sure. Yeah, just quickly. I grew up in Los Angeles, California. I grew up poor, didn't like being poor very much. By about the time ninth grade rolled around and I noticed that all the pretty girls were hanging out with the rich guys in school, in junior high school, and I thought I want to be in that crowd, not in the crowd I'm in.

                And so I saw an infomercial when I was 16 and I got the guru's book and I read three chapters, put it down. But my mom picked it up and she read the rest and got really interested in the topic.

Tom Wheelwright:

Interesting.

Jason Hartman:

And about two years later she said, “Jason, I've been studying this stuff. There's a big seminar in Anaheim by Disneyland. Why don't you go?” And so I went and that seminar really just inspired me to get my real estate license, learn the basics.

                My first year of college, Tom, I got my real estate license. I started selling real estate part-time while I was going to college for Century 21. And about six months into my career, I actually did pretty well selling real estate as an agent. But about six months into my career, one of my clients who was an investor, his name was Jim Wool, he bought several properties from me, HUD and VA repo properties, boarded up properties, really, really ugly properties.

                And he had one that he didn't like very much and he said he wanted to sell it. And so he said, “Jason, why don't you list the property for me? I'll buy another one for you after you sell it.” And I said, “Jim, I don't want to sell it for you, I want to buy it from you.” And that was my first rental property at age 20.

Tom Wheelwright:

That's awesome.

Jason Hartman:

So it all started from there.

Tom Wheelwright:

That's a great story. So here's where we are right now. The way I think most of us see it, we've had an amazing bull market in real estate for the last really 12 years. Okay, so since basically 2009, '10. It came crashing down in ‘8, ‘9, '10, started coming back up in '11. It's been this incredible run. And at the same time, we've had incredibly low interest rates.

                So if you didn't make money in real estate in the last 10 years, you just had to be really stupid. I mean, seriously. I mean, everybody made money. It was kind of like from 2000 to 2007, if you didn't make money during that time, it's because you weren't investing, right?

Jason Hartman:

Yeah.

Tom Wheelwright:

So now we have this shift. We have the federal reserve that's raised interest rates several times. They're saying the next raise is going to be another half percentage point. So they keep talking about raising interest rates. We know it slowed down housing starts. We know it slowed down the mortgage financing and refinancing, which we kind of expected, that was the whole goal of it.

                And the question though is, what does it do? Because normally, and I'll have you talk a little bit about cap rates and how investment real estate is priced because-

Jason Hartman:

Sure.

Tom Wheelwright:

Make sure everybody gets on the same page with us. But typically what happens is interest rates go up frequently, then prices come down, right?

Jason Hartman:

Yep.

Tom Wheelwright:

Actually, that's the fed's goal. The fed's goal is to bring down prices by increasing interest rates. So if that's the case, I have two primary questions for you, Jason. The first one is are prices going to come down and if they are, by how much? And then second of all, if you're still wanting to invest in real estate, because we've got horrible inflation, we've got the crypto market. Everybody going well, that's an inflation edge. Well, that hasn't been an inflation hedge. Gold hasn't really done anything.

                So you're thinking about a hard asset and outside of oil, which is you're selling it, so it's yes, you can invest in it, but you are actually losing that, whereas real estate you don't actually lose, you just rent it. Is this still the place to put money? I mean, it has been for the last 12 years, is it going to be for the next two or three years?

Jason Hartman:

Well, so far this year, as we've seen rates go up and the stock market go down and the crypto market go down and precious metals do almost nothing, income property is the best performing asset class in the entire world this year, so far. Okay? No question about it.

                The thing we've got to remember about income property, Tom, is that it's a multidimensional asset class and we earn our return in a lot of different ways. And you asked about interest rates and most people, when they think about interest rates, they compare them to themselves. And I see all these funny posts on Facebook and so forth. Someone will say, well, interest rates are too high and then a whole bunch of people will chime in and say, well when I bought my first house, the interest rate was 14% or 18% or whatever. So interest rates are actually really low. But none of those are the right ways to think about this.

                The right way to think about it is by asking yourself the question I ask all the time on the podcast, on my podcast and my listeners even dubbed it the Jason Hartman question, and that question is, compared to what? You shouldn't compare interest rates to themselves. You have to compare interest rates to the inflation rate because that tells us whether or not we're paying a lot or a little, and that's the key thing.

                Life's most important question for really anything, and we'll explore this today, as far as money goes, but in every area of life, we simply ask ourselves, subconsciously, compared to what, when we're evaluating anything. Is the food good at this restaurant, or is it bad? Well, compared to our experience, that's what we're going to compare it to.

                If someone just got out of the Army and they were eating terrible food, any restaurant's going to have great food. But if they just went to a really fine dining restaurant, then they go to this one, it might be terrible. In the dating and mating market, we simply choose a mate by saying, compared to what? What other experiences did we have?

                Well, when we compare interest rates, we shouldn't compare them to themselves, we should compare them to the inflation rate. And so everybody's out there saying rates are too high, but to answer the compared to what question we have to do math like this. We look at the inflation rate and right now it's actually about eight and a half percent officially.

Tom Wheelwright:

Right. We all know it's higher than that.

Jason Hartman:

Yeah, we know it's higher and I'll get to that in a moment.

Tom Wheelwright:

Arizona, Jason, just so you know, we're the best in the country right now, we're at 11% officially in the country.

Jason Hartman:

Right.

Tom Wheelwright:

It's pretty high.

Jason Hartman:

So the official inflation rate judged by the consumer price index is a total scam. It's manipulated down and the government has a huge incentive for telling us the inflation rate is lower than it really is. They manipulate it in three major ways, waiting, substitution, and hedonic indexing.

                But if you think about it, the logic of the consumer price index is sound because it takes a basket of things and compares them. That is the right way to do it, but of course the index is highly manipulated. So we don't need to go down that rabbit hole too much.

                But if you can borrow today on a 30 year fixed rate mortgage at around five and a half percent, you're literally getting paid 2.5% to borrow money. That's a miracle, but let's look at the real rate of inflation. I say it's about 15%.

Tom Wheelwright:

I think you're about right.

Jason Hartman:

Do you agree, Tom?

Tom Wheelwright:

Yeah, I think you're about right. It depends. I mean, if I look at food inflation over the last two years, I'd say it's closer to 40%.

Jason Hartman:

Sure.

Tom Wheelwright:

If you look at gas inflation, it's close to 100%. But I think overall, I think you're about right. I think it's 15%, or more.

Jason Hartman:

Yeah. So all of these things go into that basket to determine the real inflation rate. And we all have our own personal inflation rate because we all spend differently, right?

Tom Wheelwright:

Of course.

Jason Hartman:

A poor person will spend differently than a middle class person that will spend differently than a wealthy person. And so inflation rates differ for everybody, but let's call it 15%. Your listeners are sophisticated, so I think most of them will probably agree with that as we do.

                So now if you can borrow it 5.5%, you're getting paid 9.5% to borrow the money, but wait, there's more, interest of course, you're a tax professional, so you know interest is deductible.

Tom Wheelwright:

It's deductible.

Jason Hartman:

And so depending on your state and federal combined rate that kicker might be about a 2.2% bonus, so people are literally getting paid 11.7% to borrow money. It's a miracle. And this assumes that you're not even renting the property out. You're simply making money on the arbitrage between a mortgage rate and the inflation rate.

Tom Wheelwright:

So let me ask you this. Of course price inflation, which like asset inflation is different from commodity inflation.

Jason Hartman:

Absolutely. Yes.

Tom Wheelwright:

Right now, I'm hearing commodity inflation. When we look at 8%, we look at the CPI, that's commodity inflation, that's not price inflation. And over the last couple of years, we've seen huge price inflation, largely I think because of the low interest rates. So when you're talking before you rented out, et cetera, you're really talking about asset inflation, not commodity inflation. Correct?

Jason Hartman:

Well, it depends. And that's an interesting question you ask, because the way we spend money is in price inflation most of the time.

Tom Wheelwright:

Right.

Jason Hartman:

And the way we invest money is in asset inflation most of the time.

Tom Wheelwright:

Correct.

Jason Hartman:

So you really do have to segment those two, but for the purposes of discussion, we could just say everything is at 15% inflation and then the example holds true. The funny thing too, is that the fed and the government and the current administration, this one is terrible, the one before was better, but certainly not perfect. Every administration brags about asset inflation and tries to deny price inflation. It's really interesting. Why is that? It's just a weird thing, but yeah.

Tom Wheelwright:

Right. But let me ask you this question then, of course I want your predictions now. So from an asset inflation standpoint … Because we've seen housing starts come down recently, we've seen them come way down and that is what you would expect. We've seen more inventory on the market. You were showing me that earlier. So we've got more inventory in the market.

                So what do you see just from an asset inflation standpoint for, and let's just take single family homes because I know you're big into single family homes? Let's take that asset inflation. What do you see happening to housing prices this year?

Jason Hartman:

Well, when we look at the supply demand metrics, things are still very, very low in terms of supply. I posted this on social media maybe a month ago. And basically what it says is it says, let's say there's 1,000 buyers who can afford a home with the old 3% mortgage, and there's only 800 who can afford it at 4%, and only 600 who can afford it at 5%, obviously increased mortgage rates reduces affordability and it limits the buyer pool. We all know that, but none of this matters when there are only 100 homes for sale. There's still a huge shortage-

Tom Wheelwright:

Is there that much of a demand versus supply issue still in the housing market?

Jason Hartman:

Well, I updated this post and here's what I put, and you're probably going to laugh Tom, 120 homes for sale.

Tom Wheelwright:

Love it. Okay.

Jason Hartman:

So a little bit more.

Tom Wheelwright:

So those are the numbers you're finding is that there's one home for five buyers?

Jason Hartman:

No, these aren't exact numbers. This is meant to illustrate a point, but here are the exact numbers. So we started off the year with historically low inventory, the lowest inventory ever since they've been tracking this stuff. And I think that comes from the '60s, but don't quote me on that. It depends who's tracking.

                And I do want to say also that it depends on what survey you look at because they have a different way of calculating this. So NAR, the National Association of Realtors, they always post inventory, but they count it differently, and so their number is higher. They include contingent sales and pending sales, which I don't really agree with the way they do it. But if you're using that survey, then use it consistently and you'll be okay because you know what's going on, right?

Tom Wheelwright:

Sure.

Jason Hartman:

This is from Altos, and they just look at only the actual for sale homes in the MLS, every listing in the country. And we started out with 293,000 homes for sale and then at the end of the first quarter, we actually went down to 241,000 homes. So inventory declined as rates were actually rising, but then rates rose even more.

                Now this put us in a position where the experts will tell us that we should have anywhere between 900,000 and 1.5 Million homes for sale. So think of it like this. You walk into the grocery store and 66 to 80% of the shelves are empty, that's the housing market.

                Now recently though, it has increased a bit and inventory is increasing and now we're at about 344,000 homes for sale and it's still ticking up and it's going to get higher. But the message I want to convey as of today is that we have a long, long way to go.

                We need to see inventory increase by 3 to 500% to get to what most experts would agree on as normal. We're not even close to normal. So that's what's going to cause prices to continue to rise even in the face of lower affordability and higher interest rates.

Tom Wheelwright:

Okay, so if you will, for those who aren't … I think that's a really good explanation of what happens with general home prices, because home prices generally are supply and demand, right? That's what they are, whereas investment real estate is different, right?

Jason Hartman:

Yeah.

Tom Wheelwright:

Because investment real estate is based on income. Would you just, just for the sake of making sure everybody's on the same page, walk through how investment properties are priced?

Jason Hartman:

Yeah. So investment properties are priced based on the income they produce. In commercial real estate, the common metric is the capitalization rate or cap rate, they call it. And I don't like that metric very much because it excludes two big factors, Tom, one is leverage and another is appreciation. And the reason I think they use that in commercial real estate mostly is because number one, the properties don't usually appreciate that much because their metric is tied to income on a residential investment.

Tom Wheelwright:

Right. So you're talking about appreciation coming from demand as opposed to appreciation coming from income?

Jason Hartman:

Forced appreciation.

Tom Wheelwright:

Got it.

Jason Hartman:

Yeah. Yeah. Yeah. Definitely. And forced appreciation is a concept more applicable to commercial real estate because you can increase income by, if you have an apartment complex, adding a laundromat, for example, or something like that.

                But here's the thing, the metric we really want to use is overall return on investment. At least use cash on cash return because then you're including leverage and appreciation and that's a more accurate view.

                But here's the thing people have to remember is that it's not a game of comparing to what used to be. Yes, that'll bum people out, psychologically humans say, shoulda, coulda, woulda, we all do that to ourselves. We torture ourselves with, hey, I should have bought all these houses in 2010 or whatever. We all say that stuff.

                But what we really have to do as investors is use the acronym, TINA, T-I-N-A. And that acronym, TINA, is used to describe the alternatives available. And it means there is no alternative, T-I-N-A, the acronym. And so all we do as investors is we go out into the marketplace, if we have capital that is not being invested or used and we want to deploy it, we simply look out in the market and we say, what is the best available thing I can do with my capital?

                And no one at the moment is going to say stocks, cryptocurrencies or precious metals or bonds. And even though real estate isn't as good as it used to be, I'll be the first to say that, it's still better than everything else because it's a multidimensional asset class and we earn our return in a lot of different ways.

Tom Wheelwright:

And I do think cap rate is important just because like you say, that is how commercial real estate is priced. And when you look at cap rates, a lot of cap rates really is what you're talking about because it's, what is real estate compared to everything else? Because cap rate is basically cash return on the asset, right?

Jason Hartman:

Yeah.

Tom Wheelwright:

So if I pay cash for it, I don't leverage it, what's my return on my investment? And so if my cash return on real estate is 5%, but my cash return on a bond is 1%, then real estate is five times better than a bond, right?

Jason Hartman:

Absolutely.

Tom Wheelwright:

So it's that simple.

Jason Hartman:

It's 500% better, yeah.

Tom Wheelwright:

And that's why there's been so much money going into the real estate market because what we've seen is a flood. The demand is much higher than it's ever been, that we've just seen a flood of money coming into the real estate market because like you say, there is no alternative. So what is the alternative here? So let me ask you the next question because obviously-

Jason Hartman:

Tom, before you ask that next question, I just want to say one more thing-

Tom Wheelwright:

Sure.

Jason Hartman:

… that I forgot to say earlier. And that is that everything you say is absolutely accurate about how people value investments based on income. Definitely all true. The beauty of single family homes or residential real estate in general though, is that we have two different sets of buyers when we sell it. We have investor buyers and we have homeowner, owner occupant buyers. And they are not-

Tom Wheelwright:

That's true. That's why the market in single family homes is so different from the commercial market.

Jason Hartman:

In a good way. Yeah, absolutely.

Tom Wheelwright:

Hey, if you like financial education, the way I do, you're going to love Buck Joffrey's podcast. Buck's a friend of mine. He's a client of mine. He's a former board certified surgeon and he's turned into a real estate professional. So he has this podcast that is geared towards high paid professionals. That's who he's geared towards.

                So if you're a high paid professional, you're going look, I'd like to do something different with my money than what I'm doing, I'd like to get financially educated, I'd like to take control of my money and my life and my taxes, I would love to recommend Buck Joffrey's podcast, which is called Wealth Formula Podcast with Buck Joffrey. I hope you join Buck on this adventure of a lifetime.

                But I do want to go back to the investor market because we're talking about real estate as investment for most people.

Jason Hartman:

Sure.

Tom Wheelwright:

So what do you see happening with rents? Because rents have just skyrocketed over the last two years. And so inflation actually, as long as you don't have rent controls, which I think we're going to start seeing more and more of frankly, as long as you don't have rent control, so as long as you're staying out of California and New York, New Jersey, et cetera, where the rent controls are-

Jason Hartman:

The socialist countries. Yeah.

Tom Wheelwright:

We call it the PRC, the People's Republic of California. As long as you're staying out of those states and you're in states like Arizona and Texas and Florida and Georgia, et cetera, then you tend to not have that same rent control type issue. But the reality is there's got to be an upper limit on rents anyway, because it's an affordability issue.

                And so right now rents will be … I remember back in 2008 when one of the problems was when the housing market came down, rents also came down because people started moving in with each other and you started to have multi-generational living conditions. And so rent, I actually saw some rents come down by 50% or more in some projects at the same time when there was less housing available, which I thought was a really interesting condition.

                And so when you see that with rents going up and affordability getting lower and lower, because we don't see wages keeping up with inflation, so what's that cap and how do you see those rents going over the next couple of years?

Jason Hartman:

So at the beginning of the year, I predicted prices would increase by 12% this year. And I think I'm going to be right, even though I did not expect interest rates to increase this much. I also predicted that rents would increase by 8%. So if someone is renting a house or apartment or whatever for 2,000 a month, that means next year they're going to be paying 2,160. And here's the thing that people make a huge mistake about, they think that will be the same person renting the house and that is a giant blind spot.

                So you mentioned something very astute. You said there has to be a limit because affordability. And here's the rub on that. Yes, that is true, but inflation is a robber and a thief. It's a pick pocket. And what it pick pockets is people's standard of living. So you ask yourself what gives? Well, what gives is the standard of living, the quality of life, that declines, that's what goes down. It's not that there's really any big limit to how high prices can go. The limit is only can the same person continue to afford to occupy the same property?

                I'll give you an example of that. About a month and a half ago, I went on Zillow and I said, what can you buy for a million dollars in Jacksonville, Florida? That's one of the markets we do business in. And so for a million dollars, you got this beautiful home and it's almost 5,000 square feet. It's a gorgeous home. It looks like it's in great shape. It's got marble floors, a big lot, big yard, et cetera.

                But if you take that same million dollars and you go to New York City, this is what you're going to get. You're going to get a 653 square feet, little efficiency unit with a compact mini dishwasher and a mini stove like I used to have in my old motor home. I mean, your money just doesn't spend as well there.

                And so that's what happens, it's an illustration of how the standard of living just declines. And if you look at, look, I was born in Europe and Europe is a socialist disaster, most of it.

Tom Wheelwright:

For sure.

Jason Hartman:

And Europeans don't realize how really bad their standard of living is, frankly. Now I'm not saying money-

Tom Wheelwright:

No, because they have nothing to compare to.

Jason Hartman:

Yeah. Right. Exactly.

Tom Wheelwright:

It's the reason that back in the Soviet days, they didn't let people leave, because-

Jason Hartman:

Yeah, because they didn't want them to see-

Tom Wheelwright:

… when people came to the US, they go, wait a minute, this isn't what I was told. I was told this horrible place and people were just degenerate and so on and so forth and here are these beautiful houses and beautiful cars and people are enjoying life and so forth. So that is comparison. That reminds me of a lesson I learned a couple of years ago. I'd like your comments on it. I was sitting with the marketing director of Marcus & Millichap, big commercial [inaudible 00:26:23]-

Jason Hartman:

Yeah, big commercial real estate firm. Yeah.

Tom Wheelwright:

And he said something really interesting, he said, “Local people value real estate based on the past. And people looking from the outside in value it based on the Future.” can you comment on that?

Jason Hartman:

That's a good statement. There's a poem that I share on my show sometimes called The Reluctant Investor's Lament. And it talks about how this real estate broker and investor who wrote it in 1977 is commiserating about all the deals he's missed out on and that he should have bought, because he thought in 1977, Tom, everything was so overpriced. And look, we always think that. And the saying I've always used is that every real estate deal looks like a great deal in the rear view mirror.

Tom Wheelwright:

Exactly.

Jason Hartman:

There is no time, almost no time that someone thinks they got the most incredible deal ever when they bought it. But time makes it better because we know for sure that the strategy that the government is going to employ, and every government, not just the US government, and the strategy every central bank on the planet will employ is to simply inflate away their debt obligations.

Tom Wheelwright:

Sure. Sure.

Jason Hartman:

That is the strategy they're going to use. And so we can complain about it, philosophically, it's terrible, I agree completely. But the fact is, like the old saying, if you can't beat them, join them. You've got to align your interest with the two most powerful forces the world has ever known, governments and central banks. And that's what we want to do as real estate investors and we have the perfect vehicle-

Tom Wheelwright:

So let's talk just for a second, if we can, let's talk about something I can't help but talk about it, which is the government side of that, which is the tax side.

Jason Hartman:

Sure.

Tom Wheelwright:

And I want you to think back to the numbers that you showed and you showed, if you had 15% and you had five and half percent, then you have nine and half percent return. But I think what we forget is that it's really not the deduction of the interest that matters, it's the non-taxability of the income that matters.

                So in real estate, so what you really have to compare it to, like in my new book, The Win-Win Wealth Strategy, I look at real estate specifically and say, what does an investor get? What's their share of the deal? Because the government gets a share, because the government's your partner and you get a share. The government puts in money and then you both take out money. That's the way it works as a general rule.

                What's interesting with real estate is not only do you not pay tax on the front end, but you don't have to pay tax on the back end. So if you compare, for example, a 10% return in real estate to a 10% return in the stock market, the stock market, you can't get out without paying tax, and especially if you're in a 401k.

                So let's say you're at a 30% tax rate. I mean, that's a minimum tax rate you're going to be at. So at a 30% tax rate in the stock market, basically you're going to get 7%, but in real estate, you're going to get the whole 10%, and plus you might even get more because you might get an offset to other income and actually may reduce your overall taxes.

                I think there's really a couple of things that are magic with real estate and one is certainly the tax benefits and that you never have to pay tax. That was the whole buy, borrow, die, that we had this whole discussion about this the last couple of years and I talk about it in my book, Buy, Borrow, Die, which is, you never really have to pay tax on real estate. You can eliminate the tax forever.

                But there's also the idea that remember, you're paying down the mortgage, so that's another return on your investment. You're paying down the mortgage, so you get more of that equity. Actually your tenants are paying down the mortgage.

                So you've got the appreciation, you've got the depreciation, which is the tax benefit. You've got the amortization of the loan and you've got the income. So I do think real estate is one of those hard assets. One of my favorite personal stories, I was in Africa, Southern Africa, in Zimbabwe, a number of years ago on an eco safari and our guide was talking about what happened when the Zimbabwe dollar went to zero.

Jason Hartman:

I've got some right here for you, Tom.

Tom Wheelwright:

There you go. There you go.

Jason Hartman:

I've got 100 trillion Zimbabwe dollars.

Tom Wheelwright:

So he's lived there his whole life, and so he said, every time he got paid, he went and bought a cow, a sheep or a pig, because he needed to turn it into a hard asset.

Jason Hartman:

Yep, quickly.

Tom Wheelwright:

And so something that our mutual friend, Robert Kiyosaki always says is the purpose of business is to buy real estate. You generate income and then you buy real estate. And I think a lot of what you're talking about is I think there's a lot of fear right now in the market.

                But I do remember it, I mean, it wasn't that long ago that interest rates were over five and a half percent. Yeah. And even if you're inflation rates only at 8% and you can get that two and a half percent spread, as long as you're, again, not in one of those communist areas, frankly, one of those socialist, sorry, they're not really communist, but one of those areas that puts rent controls and so forth, that government controls the economy so much.

                But when you can do that, then what happens is, is that you've constantly got this increase in value in a hard asset and you're actually protecting against inflation. So I really appreciate that. So if you would just give us-

Jason Hartman:

Let me just comment on that for a second, if I may.

Tom Wheelwright:

Yeah. Sure.

Jason Hartman:

So tangible things have intrinsic value, like your friend in Zimbabwe. And I've studied Zimbabwe and all the inflation stories around the world intensely. Those stories are really educational and really important to learn from. But people in Zimbabwe would literally, they'd get paid, they'd rush out to convert their money to goods as quickly as possible because the goods had intrinsic value and the fake fiat currency did not have intrinsic value, they just kept printing it. And so one of my listeners sent me these Zimbabwe dollars and here's a 100 trillion dollar Zimbabwe bill, and so it has no value at all. And you're absolutely right.

                The other thing I wanted to say is that if anybody goes to our website, which is just my name, jasonhartman.com and you click on the properties page and you look at the pro formas on the properties, you'll see that we even have properties now, because rates are up and prices are up, and some of them have like 1% cash on cash return. It look terrible. But the overall return on investment, when you take into account all the things you just mentioned, because it's a multidimensional asset class, can be 20 or 25%. People don't know how to do the math.

                And you just alluded to it so brilliantly, and so I just wanted to share that. And when you learn how to do the math of real estate, you realize that it's not this simple thing. Most people in these one dimensional assets, they think, oh, well, I'm going to buy this stock, or I'm going to buy this crypto, I'm going to buy precious metals, buy low, sell high, that's the whole strategy. If it pays dividends, buy low, sell high, get some dividends in between. But income property has so many ways you earn your return. And that's why it is the most historically proven asset class in the world. And to your point, it's the most tax favored asset class in America.

Tom Wheelwright:

Yeah, interesting enough, in the new book, The Win-Win Wealth Strategy, we actually looked at 15 countries. And it's actually-

Jason Hartman:

I can't wait to interview you on your new book, by the way.

Tom Wheelwright:

It's actually a preferred asset in most countries. So interesting, business and real estate, top two asset classes. And one thing I love about what you've been saying about real estate is, so I'm the youngest of six children, so I never had control of anything. I didn't get to control what was on my plate. I didn't get to control my time. I didn't get to control my thoughts. So I love … Anything I can control is like a bonus for me.

                And that's one thing I like about when you talk about adding value to real estate. Real estate is something I can add value to. I can't add value in an oil well. That is a price fluctuation and that's what it is. I can't add value in the stock market, but I can add value in real estate. I can add value in business.

                And so if you would, just finish up, let's just wrap this up. And if you would just give your top two things that people can do and should do over the next six to 12 months when it comes to their investing in the economy.

Jason Hartman:

One of the things I love about income property as an asset class is that when you buy the property, you haven't finished negotiating the deal. Here's what I mean by that. You buy the property today and then maybe you do what you said, you add value down the road, or you refinance the property, or you do a 1031 tax deferred exchange, so you never have to pay tax. And you can constantly renegotiate the deal along the way.

                When you buy a stock or an oil well, or cryptocurrency, you don't get to renegotiate the deal. The deal you bought it at is the deal forever until you sell it or liquidate the asset. The income property, though, you can constantly redo the deal and keep making it over. If interest rates go down, you can refinance, you can do all of these great things. You can do creative things on the rental strategy, lease options, rent to own deals, just an endless number of interesting, unique things you can do.

                So I would keep buying properties. I'm in escrow to buy a property right now, myself, a property in Phoenix, actually and I'm closing probably next week or the week after. And you always want to be buying properties and building your portfolio. Just make sure you follow my 10 commandments of successful investing, which is a good outline to make sure you don't make mistakes. And you can find out about that at jasonhartman.com, or on my podcast or YouTube channel.

                And also, I've got a great free video that helps people do the math of real estate, Tom, it's how to evaluate an investment property, how to read the pro forma, how to look at the numbers.

Tom Wheelwright:

I love it.

Jason Hartman:

In 30 minutes, boom, people just get it. If they do nothing else, go to jasonhartman.com and just watch that video. It'll really help you.

Tom Wheelwright:

I love it. Jason Hartman, jasonhartman.com. I love this whole discussion because we're talking about again, multidimensional, what can you control? What can you actually do over the next six months, 12 months, two years? Everybody's worried about the economy. Everybody's worried about the political situation. Everybody's worried about inflation. So you have all these things that we can worry about, what is it we can control? We can control our money. We can control our investing. We can, to a large extent, like you said, in real estate control our assets. And what I find is when we do that, we always are going to make way more money and pay way less tax.

Announcer:

You've been listening to the WealthAbility Show, with Tom Wheelwright. Way more money, way less taxes. To learn more, go to wealthability.com.