Jason Hartman starts the show with Pat Donohoe to have a discussion about Wall Street. He outlines the differences in the investments of the middle-class and the elites. Later on the show, Josh hosts the network’s new lender, Shannon. She gives us an outline of the financing options out there and goes through mortgage sequencing.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for Real estate investors.
Jason Hartman 1:03
One of the unique strategies I implemented a few years ago fit with my 10 commandments of successful investing, especially number eight, thou shalt borrow to accelerate wealth and reduce risk. And number 10 thou shalt only invest in tax favored assets. So my money grows tax free, and I can leverage down payments. My friend Pat Donahoe his team at paradigm life got me started, and I have a few accounts with them now. Check out this perpetual wealth strategy at be your bank.com Welcome to the creating wealth show. This is your host Jason Hartman with episode number 894 894. Thank you so much for joining me today. As I talk to you today from Austin, Texas. We have been here for a couple of days I’m been hanging out with my friend Ryan Moran and we went to dinner with Ryan and with Pat Donovan. Last night, but what’s so special about that? That’s no big deal you ask? Well, we had a four hour dinner. Yes. Do you get the reference folks? That is the reference to the four hour workweek The Four Hour Body and the Four Hour Chef, because we had dinner with Tim Ferriss, the very well known author, and it was interesting. It was a four hour dinner, and then we had an hour of dessert at another place afterwards. So that was really fun talking to him. And, Pat, what were some of your comments on the evening? That was an interesting, interesting dinner. You know,
Pat Donohoe 2:33
I was I mean, I think he’s made a huge name for himself in a lot of different ways. And his books have clearly changed lives. And it was really neat to hear some of his experiences and what he’s working on, obviously, as a new book coming out in the next few weeks about mentors, and which I’m intrigued, very intrigued by but it was a it was his last book being tools for Titans and his last book. Yep. But no, the new one that’s coming out the tribe of mentors is Gonna be. Anyway, I’ve heard it’s a long book.
Jason Hartman 3:03
He does do long books and long dinners for our dinners. I was
Pat Donohoe 3:06
almost five pounds with dessert. It’s five hours. I know I really I really enjoyed the evening was amazing experience. He’s such a, you know, an intuitive insightful guy, and it was cool to hear his take on probably, what 15 topics 16th Oh, yeah, yeah, yeah,
Jason Hartman 3:19
no, it was a lot of topics we talked about. And Tim is definitely a foodie. I mean, we Wow, I didn’t order any food. Last night. Everyone did the ordering for me, especially Tim and well researched restaurant choice and everything like that. So that was interesting. So, once again, as I have found myself for the past, maybe, I don’t know, 15 or 20 years. I am thinking again of moving to Austin. This is not a new theory. You’ve heard me talk about this before listeners. I gotta tell you one of the business plans that I’ve executed on the last several years and I really do like it is the idea of owning a lot of income properties that are low cost. Income properties that have really good rent to value ratios that I rent to other people. So I can be free and be a renter myself. I know it sounds so weird. But you know, it’s so funny. All of these successful real estate moguls, I know they’re all renters. And folks, I’m not gonna mention their names, because some of them are sort of tangential competitors to us. But you might know who they are. Yeah, they all rent, it’s really shocking. But you don’t need to own the place in which you live, because that’s just utility, right? As long as you own a lot of good solid properties, income properties that you rent to other people. One of my sayings that you haven’t heard in a while, by the way I’m going to remind you of this listeners is invest in places that make sense. So you can afford to live in places that don’t make sense. And I’ll say it again, invest in places that make sense. So you can afford to live in places that don’t make sense. That’s a good plan. So yeah, being free. You know, I’ve lived in Las Vegas for A year I’m not crazy about it, you know, especially after the tragic, tragic events of last week. And we did of course profile the shooting on a special episode. Last week my own experiences an eyewitness and one of my friends as well. I had another eyewitness come forward who was a woman that was actually down in the in the concert? Can you imagine the horror? No, that was I mean, yeah, when I first saw your video, it was Yeah, it was really it was really shocking is tragic. Tragic. Lots of people say that the first they knew about the shooting was when they saw my video on Facebook and Twitter. You had kind of that perfect bird’s eye view. That was awful. I mean, you know, but you know, I didn’t I wasn’t that traumatized because I didn’t see I didn’t see the bloodshed. You know, that was just that must have just been awful for people down there, obviously. But yeah, you know, the conspiracy theories are flying. Oh my god. conspiracy theories everywhere. We will see what develops there. ISIS has claimed responsibility twice, not once but twice. But you know, the first Ortiz have not acknowledged that really yet. So we’ll see. We’ll see as it as it unfolds. But I tell you, I bet the music festival business and concert business has changed forever. I will bet you that there will not be public gatherings like that in the future where there is a high vantage point above the crowd. I bet you Those are gone forever. It’s just it’ll change the world that changed me forever. I don’t even know what to think about it yet. But still a little bit in shock about the whole thing. Yeah, crazy stuff. So Pat, I want to run by you a new theory that I’m working on Actually, I don’t think it’s a theory it shouldn’t be called a theory when it’s a fact. This is a fact you listening folks? It’s a fact. So before we get to our guest today, and we’re going to cover some great lending options where you can get financing some really unique financing options today with one of our new lenders that Elizabeth brought on board, and she will be sharing some awesome stuff here in just a moment. But Pat people debate I mean, Look at the three primary economic scenarios that we have to ready ourselves for our inflation, deflation and stagnation. There are various iterations of all of those, but those are the three basic economic maladies, right? And so, you know, some will say, well, inflation is much higher than it seems. And they will cite all the reasons they think that and, of course, the government has a very good incentive to understate the consumer price index, and so on and so forth. And we’ve talked about that many times. But others will say inflation has been very tame over the past several years. By the way, what do you think about that?
Pat Donohoe 7:36
Well, here’s the difficulty is I would say we have more choices than ever before. And so it’s one of those things where the price goes up on one thing, there are many alternatives to it to adjust. So it’s very, I would say, you can easily come up with different scenarios like the PC for instances with the Fed uses, and they have a basket of things that they use and it produces your specific rate. That’s coming Do sieve to their narrative. I would say this Did you mean to say CPI or PC? It’s a personal consumption index or index or personal consumption. expenditure. What is it? Right? Yeah, okay. Yeah. But it’s one of those, they there’s a lot of different ways in which you can measure prices.
Jason Hartman 8:16
And there are the prices and by the way in the PPI, the producer price index. But the, one of the other interesting things you should be reminded of about that is there are different CPI, there’s the CPI, urban, rural, you know, all that stuff. So it’s
Pat Donohoe 8:29
one of those things where Yeah, I would say looking at the the narrative that they have, which is they want to create growth, but they also kind of have this kind of subtle narrative, which is, I would say, known by many of your listeners, which is to increase continuing increase money supply and keep interest rates low. So it fits perfectly with with that, but I would say there’s signs of inflation in certain areas. There are signs of a potential deflation and other other areas. But in the end, it’s one of those Yeah, you don’t know what the future is going to end. Hold on a lot of things that could happen.
Jason Hartman 9:01
And in the in the two big opposing forces here are bad tax or bad fiscal and monetary policy of governments around the world, not just the US, but certainly the US as part of that, obviously is the world’s largest economy, and that those forces say we’re going to have inflation, okay. But the other force that is at war against those forces have bad tax and fiscal policy or bad monetary, fiscal and monetary policy. I needed another cup of coffee. I tell you, I’m so sleepy. I don’t know why just. I think that coffee she gave me lunch today Pat here at the JW Marriott.
Pat Donohoe 9:38
She was decaf. She slipped do something. She slipped me decaf?
Jason Hartman 9:41
Yeah, I think because it didn’t wake me up. So the opposing force at war with a bad monetary and fiscal policy is technology. And technology is a deflationary force. No one would deny that right because it just makes everything faster, better, cheaper. Okay, and gives you wider variety of choices, but Here is the part of inflation that nobody except your illustrious host, Jason Hartman. Yes. Thank you, Jason, pat yourself on the back, is talking about and this is my new theory, right? It’s not that new actually. But is inflation in asset prices? Now, I’ve talked about that before. That’s not really what I mean when I say that, but maybe I got to come up with a good name for this good way to name it, right? Because a lot of things in life are just given them a name. Okay. So the concept is that of course, we even as we see that, you know, technology is cheaper. You go to the store clothing is certainly cheaper. You know, then it’s been from 20 years ago, for sure, because of efficiencies in manufacturing and distribution and so forth, and more competitive markets. But what is definitely not cheaper, and nobody can argue nobody can argue Jeff, in the venture Alliance, one of our venture Alliance members who does these great rants on inflation, and how they There isn’t any. Jeff, you can’t argue with this. And that is the cost of real estate, whether it be for rent or for sale, housing has definitely gone up. And some of that is reflected in the CPI and what they call the owners equivalent rent metric, which is a way to manipulate the CPI again, but we won’t go into that this time. But the other one is asset inflation in the stock market. So, it is a lot more expensive today to become an investor. And I say that if you want to get ahead in life, somewhere in your 20s, hopefully in your 20s, you need to become an investor of some sort. You know, hopefully, it’ll be in good, solid income properties that make sense today you buy them and follow my 10 commandments. But look, Pat, here’s the here’s the point of this discussion. If, if asset inflation makes it harder for people to enter the investors class, then they won’t get ahead. And that takes many years to play out. Okay? They will be for ever living paycheck to paycheck or some iteration of that maybe they live more comfortably, because they have a good paycheck. But you got if you want to get ahead and create any real wealth, you’ve got to be in the investor class. And it’s more expensive to enter the investor class, the membership fee has gone up a lot in the past several years. thoughts. What do you mean by the membership fee? It’s more expensive to buy assets. And
Pat Donohoe 12:33
while I’d also say it’s a very, it’s a much more complex, more complex market, especially the, you know, the equities markets. One thing I’ve been looking at recently, is the amount of we
Jason Hartman 12:44
ought to get my friend Clement over here, too, because he’s a former investment banker, he won’t comment on it. So
Pat Donohoe 12:49
if you look at you know what, one of the ways it’s not it’s not the only but it’s one of the ways in which asset prices have been so high in the market, especially with businesses is because of how low interest rates are. So you see a lot of companies out there that are basically issuing new bonds, right? new offerings, debt, and it’s really cheap for them, you know, 123 percent, and they’re buying
Jason Hartman 13:12
if these companies think that is a good idea, you as an investor should also think it’s
Pat Donohoe 13:16
a good idea now and the point the point is, you know, they’re there. They’re not like investing in infrastructure. They’re not I mean, there’s certain instances, but there’s been a huge amount of stock buybacks, share buyback, right, where they are basically issuing debt at really low interest rates and then buying their own shares with it keeping prices high. And it’s either financing taking some of the company private and I’ve I’ve I’ve looked at really how our whole economy is based and it’s a very debt, it’s very debt based society as far as how prices are created, right? Because again, it keeps the price of a share up when obviously they’re able to take debt is a shirt which didn’t exist, we know it didn’t exist, especially if it’s not their money. So that’s I’ve thought about that. A lot, especially with real estate, right reason real estate prices are as high as they are, is because you can get debt on it all real estate. And debt is part of the money. It’s, it’s it’s, it’s, it’s a it is a vital part, I think it’s like one of the things that creates it. Yeah. So I look at, you know, just kind of the paradox of financial vices out there, right where you have those that are, you know, taught to put money into a 401k put money into mutual funds and then pay off all their debt. Right? It’s a very, it’s interesting, because they’re putting money that’s not debt based into a stock or a share, right? Which value is created by debt, right, but then everything else that they own, whether it’s their house, or whether it’s, you know, cars, etc. They’re told to to get rid of that rid of that debt. So it’s very interesting just to see kind of what the middle class does what individuals are doing what we’re taught to do, which is completely contrary to what what the elites do,
Jason Hartman 14:49
though the wealthy and the elites, as Pat said, use debt as a tool to create wealth and that’s what you need to do as well. It’s interesting because I have called, I tried Think of a really simplified way to say everything if I can write derivatives, right? The financial gurus will talk about derivatives. And I just call it a derivative. The thing about the thing, that’s my simplistic farmer explanation of a derivative, the thing about the thing, and really what you mentioned just now, by company execs, founders, board members for these big publicly traded companies, using debt to buy back their own shares, on one hand, that makes me have more faith, because they think there’s more faith in the future of their company, and they’d rather own more of it, right. But the other part of that that’s interesting is that’s almost a derivative instrument. It’s the thing about the thing, you know, because they’re using really incredibly cheap debt to buy their own shares. And that really becomes a vicious circle. It’s a circle. It’s a it’s a thing about a thing. It’s a derivative almost in a way
Pat Donohoe 15:51
well, also if you don’t add any complexity to it, but I will mean, the true nature of derivatives is kind of that but it’s also there’s other little Beyond that, where the bonds that are being issued, right? if let’s say, you know, Sony, does it or Toyota does they issue you know, issued bond and buy back their shares, right? There are inside essentially default insurance, which are the true kind of derivatives against those bonds. So if those bonds start to go into defaults, right then though that triggers basically a payout on an insurance contract, and that’s really one of the things that led to the collapse 2008 2009 on right now, I believe it’s either there or has just surpassed the amount of derivatives existed then we’re actually beyond that now. So it’s interesting to see kind of where all the bond investments aren’t it’s and it’s everything right there. There are you can buy credit default swaps on you know, automobile debt, you can find out student loan debt, you can buy it on on corporate debt, government debt to make It’s amazing. So it’s like, yeah, the debt based society which you know, essentially goes into circulation and starts to bid up. Price of assets. But now you have, you know, essentially default insurance on that debt. So it’s one of those things where if that debt goes into default, the whole thing kind of starts to unravel, which is it’s interesting. We’re still in this very similar predicament than we were in that we were in in 2008 2009.
Jason Hartman 17:15
I got a question for you. Do you worry about the thing about the thing? Is that a problem derivatives are derivative as a problem? We’ve heard these stats that there are what like, you know, I don’t I don’t remember the numbers. But I had Laurence Kotlikoff on the show twice. Now, you know, the famous economist, and he talked about and many other guests, I’ve had, you know, last 890 something episodes or whatever. I have talked about this stuff. But are derivatives that much of a concern. I mean, you know, we’ve heard these massive numbers that there’s like 700 trillion with a T dollars of derivatives out there. I would, I would submit that I don’t think they’re that big a concern, but most people do most of the doom and gloom errs do
Pat Donohoe 17:58
well. What do you think? Well, I’ll put an operative This way, so when we had our big bailout, the 700 something billion dollar bailout all three of them?
Pat Donohoe 18:06
Yeah, well, the first one, okay, the majority of a large part of it, I can’t remember what percentage but a large part of it went to pay off the essentially the derivative holders, and they got paid 100 cents on the dollar for the most part. So it’s one of those things where Yeah, it’s not a concern, concern unless you start to have like a paper and you know, investment grade stuff start to default. I would say, you know, there’s a large amount on government government debt to large amounts rooms there. So it’s one of those. It’s such a, it’s a very loosely regulated industry. And that’s what’s that’s what’s concerning.
Jason Hartman 18:43
But see, the thing that makes me not that concerned about all the doom and gloom talk about that stuff, is that there’s a Counterparty to every transaction, right. So if somebody gets poorer, somebody else gets richer. And what I always say is that, you know, the lat when the Great Recession began, and it really had two phases. The first phase was the mortgage meltdown. The second phase was what I just call the Wall Street meltdown. And, you know, I predicted the first part, the second part, I had no idea was coming the Michael Lewis part, The Big Short part. I didn’t know. But I did know, I did know that the loans were really stupid. This time. They’re not stupid, at least on the housing front, that the banks have been pretty prudent and conservative. So I’m not worried about that happening this time around. But the thing I always say to listeners is, look, you know, there’s the Wall Street economy that is built on smoke and mirrors and it’s it’s just you know, folks look, it’s it’s Bs, it’s not a real economy, okay. Because the the day before the mortgage meltdown, if you counted all the wealth in the world, all the real estate, all the oil in the ground, all the oil wells, all the skyscrapers, all the commodities, all the gold mines, all the companies, you know, everything Free, all the inventory that Apple had. And I, you know, in terms of iPhones at the time, that’s about all they had at the time, I guess no iPads yet. But you know, if you counted all of that, and the next day you woke up, and we had an economic disaster on our hands, the Great Recession, right? The world didn’t get any poorer. There was the exact same amount of material in the world The next day, or the next month or the next year, okay. It’s not like the real wealth change. Now, it did move around a bit. And it went from party to party, and with the derivative thing, that’s all that’s really going to happen. Okay. And we do have to get to our gas. But let’s go. Here we go on another long
Pat Donohoe 20:42
tangent. The thing is, it’s one of those it’s just one of those anomalies, right? It exists, the significance of it when it comes to what’s going to happen in the future is anyone’s guess. I think there are those that are more aware of it now. And that’s where I mean I’m surprised it has gone on as it has, I mean, there’s a lot But like I said, there’s the derivative market is really big, but really what triggers that is default. And that’s the big that’s the big thing that happened then. Right 2008 2009 is there began to be a lot of default, mainly, obviously, in the mortgage mortgage industry. But then from there it, you know, carried on to, you know, the rest of the world from an economic standpoint, this go round, I don’t know. I mean, it’s we’ve been in the biggest expansion and in history, right kind of base like economic expansion, there’s a lot of things that are out there that are of concern, but at the same time, it’s you’re right in the end, like the resources that are available for everyone to live in abundant life is are there and it’s but at the same time right now who’s in control of interest rates, who’s in control, money supply was in control, you know, regulation around at all I mean, that’s those the ones that are really, I don’t know, I would say positioning the entire economy, for whatever’s gonna happen in the future.
Jason Hartman 21:49
The the doom and gloom ORS are always out there. They’ve been predicting the end of the world since the beginning of the world. Okay. Certainly the Malthusian people a couple hundred years ago, we’re doing it and Everybody today is doing it. And what’s interesting is last night when we were with Tim Ferriss, you know, we talked about every subject under the sun practically. And I asked him, I said, Tim, you know, what’s your view of the future? What do you think is going to happen with the economy? And you know, of course, Tim loves technology. And he thinks it’s No, I mean, he didn’t say it, but I gathered that he thinks it’s an amazing time to be alive, just like I do, right. But he said, you know, the first thing he came with when I said, What do you think is gonna happen with the economy next, what’s the future look like? And he says, Well, you know, we’ve been an expansion for many years now. And, you know, he gives basically, the business cycle argument. He didn’t explain that. But I said, what you’re basically saying is the business cycle, right? You know, there’s always, every seven to 10 years, we have a recession, right? Blah, blah, blah. Everybody says that with lip service, but then I challenged him on that and as I challenged the listeners, and you know, we’ve probably talked about it, Pat. I said to him, I said, Look, but you know, you’re coming off when you’re starting that accent. banshan phase and that number of years, the way you’re counting, you know, maybe you’re starting in 2010 or 2009. I don’t know. But you know, you’re coming off a historic low, you’re coming off, you’re coming off the worst economy in seven decades since the Great Depression. And so I really think you need to adjust for that. I think you need to start that clock in 2013. Maybe, and say that’s a baseline, a more accurate baseline rather than the terrible low of the Great Recession. And if you’re just the business cycle believer, which I’m not completely a business cycle believer, I think there’s way more to it than that, then that’s when you would start the clock and say, okay, seven to 10 years, that’s for 2013 is when the recession will have
Pat Donohoe 23:38
11 or 12, or whenever it kind of started to cross that line. No, I agree. I mean, it’s it’s not only, you know, the the biggest drop that we’re trying to recover from where we have recovered from, but it’s also the biggest kind of bailout government intervention from a monetary standpoint. It’s not just the US it’s like the entire world. Right. And that’s Another, you know, they call it a great experiment. But it’s one of those things where it is it was kicking a can down the road scenario. It’s definitely
Jason Hartman 24:09
kicking the can down the road because we always do that. Because I would argue that there’s also been some really good stuff that
Pat Donohoe 24:13
has come from it. I mean, look at how much money has gone into tech that has gone into the hands of entrepreneurs that have been able to take money and develop. Now, there’s lots of ways so lots of companies go out of business, but money went into the hands of those that have innovated and as you and I have talked about a number of times, but
Jason Hartman 24:29
it wouldn’t have happened that way. Anyway, why did the Great Recession? I
Pat Donohoe 24:32
don’t know. I don’t think maybe maybe not. But I would say because of how low interests, interest rates are. there’s just lots of money circulating throughout the economy is going into the hands where if interest rates were higher, would there be as much No, there wouldn’t. And that’s where you look at you know, the money that’s gone into tech, the money that’s gone into innovative things it has and who knows what it’s gonna, that’s, that’s interesting what what it sounds like,
Jason Hartman 24:57
you’re basically saying Pat is that when Interest rates are low, more people have access to capital. And that’s true. But I would say that you know, and look at I’m a huge fan of the middle class, I love the middle class, I, I always want to live in places with a big middle class because it makes the country safe and secure and peaceful. You know, when you have a banana republic, that’s no fun. Okay, even if you’re rich, okay. I think that really low interest rate environments with a lot of QE like we’ve had really concentrate wealth, I think they make the rich get a lot richer, and the middle class gets smaller. And I don’t I think the poor just kind of do what they do.
Pat Donohoe 25:39
Oh, you’re right. Yeah. And that’s it’s one of those things where you’re, you can kind of carry the kind of the the cycle of money and what it is, you know, create into existence it, you know, QE was obviously buying buying bonds and creating money out of thin air to do it. But also the bailout was more taking over toxic assets and putting them out on the balance sheet of the Fed. But it’s one of those things where if you kind of carry through, you know, a lot of work money went, whether it’s subsidies mean 11 how much money Elon Musk has got from the government?
Jason Hartman 26:04
Yeah, way, way too much way too much. But Tesla sucks. I know.
Pat Donohoe 26:09
But it’s one of those things where it’s not just him, but there are a lot of other examples of those that are crony capitalism as well. Yes. I mean, again, there’s, I it’s too much time to argue that no, there’s way it’s Wait, you don’t have enough time today. But it’s one of those things where money has gone into certain sectors that are, you know, really gotten a lot of money to innovate and to create things that could potentially make life cheaper, more efficient, more abundant. So it’s one of the you know, it’s it’s a it’s just an interesting time to be alive. It’s so unique, you can’t really you know, base what’s gonna happen next on what’s happened in the past. I think there’s some elements and variables that are similar, but but in the end, it’s there’s so many differences that it’s anyone’s it’s anyone’s guess.
Jason Hartman 26:44
Okay. Okay, hey, we got to wrap this part up. Let me mention a couple housekeeping items. And we will play part one of the interview with the lender today and then we’ll play part two, you really want to hear this this because there are some truly you know, And unique financing opportunities for investors out there. If you are a foreign national, if you want to buy American real estate and you live in a foreign country and you’re not an American citizen, you’re going to hear some great news today. Okay, we’re on the next episode. I don’t know where it falls in the interview, and we’re going to split it in half in the interest of time, but you’re also going to hear some great stuff, if you already own have maxed out your Fannie Mae, Freddie Mac 10 property stuff, you’re gonna hear some great stuff. You’re just if you’re an IRA buyer, you’re just gonna hear some good stuff today. You’re gonna hear it today and on the next episode about financing, but be sure to get your tickets for upcoming meet the masters of income property event in January, we will not have an event before them. So other than the venture Alliance events, which of course Pat we’re going to be in Palm Springs in just about a week.
Pat Donohoe 27:46
Yeah, that’ll be fun. I can’t wait.
Jason Hartman 27:48
Good stuff. And then we’ll have another venture lions event probably in December, maybe Hawaii. We were going to go to Cuba but here in Cuba is a little not the place to go right now. There have been some weird things going on in Cuba. That has not been explained yet. So we’ll watch that story. And of course, Key West has been devastated by the hurricane. So that’s not the place to go. So well, maybe we’ll go to Hawaii. But venture Alliance mastermind calm, we’ve got a fantastic event in Palm Springs coming up Palm Springs, California, you could still get in on that, get a last minute ticket as a guest if you want and join us for that. Meet the masters of income property, Jason hartman.com slash events. Jason Hartman comm slash events, get your early bird pricing on that, and we’ll look forward to seeing you there. It’s going to be an awesome event in January of 2018 to kick off the year right and build your investment portfolio.
Let’s go ahead and jump over and let’s do part one with Shannon and talk about some great new new I want to stress that word, investor financing options. Here we go. It’s my pleasure to welcome a new lender. To our organization, she is doing some great work and investor financing has some awesome programs. I think you’re really gonna like what you’re going to hear today. And Shannon from Seattle. Welcome. How are you?
I’m doing great. Jason, thank you for having me on your show.
Jason Hartman 29:16
We’re glad to have you here. For all the investors listening, you will be one of our sponsors and participants in our upcoming meet the Masters event in La Jolla, California in January. So we’re looking forward to seeing you there giving the listeners and our clients an opportunity to meet you in person. So that’ll be exciting. And I want to thank Elizabeth for introducing you to us. She really I think did a great job vetting you because you You are a well qualified person with a lot of investor financing experience and some really unique programs. So let’s dive in. First of all, Shannon, you have a program I believe you call it the investor cash flow program, which can really help expand opportunities for people who want to buy income properties. This one is for married couples. But we’re also going to talk about your foreign national program, and then talk about some general investor financing stuff toward to wrap it all up. So let’s dive in investor cash flow. Tell us about that.
So this program basically works by qualifying the property instead of the borrower. There’s just a few guidelines, they need to qualify to use this program, they have to own a primary residence and have a minimum credit score to qualify, but they look at the cash flow of the property and not the income of the borrower. So there’s no income or taxes necessary to use with the loan and anybody can use this loan as as long as they they own a primary residence. So not to do so.
Jason Hartman 30:48
So no, no, you meant to say no tax returns necessary. So they don’t they don’t qualify the borrower now. Do they run the credit report of the borrower?
Yes, there is a minimum credit score of 660 to
Jason Hartman 31:02
60. Okay, that’s pretty easy for most of our listeners 665. Okay,
absolutely. they lend up to 75% loan to value. And they just look at the property to make sure that it cash flows by 10%.
Jason Hartman 31:15
Okay, so by 10%. So let’s explain that. What does that mean? You buy a property, say it’s $120,000 single family home, which is kind of our sort of target property nowadays, and you put 25% down on that property. Let’s make it easier numbers. Let’s make it 100,000 just to make round numbers, so you put 25% or 25,000 down, you’ve got some closing costs, and you have to have 10% cash flow, explain what that means.
So that means that the rental income on the property needs to have at least a cash flow of what your total expenses on the property would be with the property payment and the taxes and insurance So for round numbers, you would want your total rent to be $1,000. And then your total payments to be no more than 900. That’s
Jason Hartman 32:12
pretty easy most of the time, isn’t it with 25% down, right? Absolutely.
Jason Hartman 32:18
Okay. So basically, everybody can do this program now. It’s not really for married people. I might have misspoken when I said that that was that was only the example you use before we went on the air. It’s for anybody, but it particularly is appealing to the non working spouse scenario that doesn’t have income. And, and the typical thing is, you know, our clients will buy 10 properties, there might be one spouse working, they do it all in that spouse’s name. And then they’re, they’re tapped out because the other spouse could buy 10 more but They can’t qualify because they don’t have income from a from a job or business, right?
That’s exactly right. So this, this program can be used with income, if they have income, the rate will be a little bit better. But so for example, that that spouse that’s not working, she can or he can buy five properties using this program, all on their own.
Jason Hartman 33:23
Okay, so you can do five more without having income, but if you do have income, you get a better rate.
That is correct.
Jason Hartman 33:32
Okay, does the rate change based on that FICO score? I know 660 is the minimum which is pretty lenient, actually,
the minimum loan to value is 75% on this program, but the interest rate will be better with a larger downpayment. And of course, a better credit score gets a better interest rate as well.
Jason Hartman 33:49
Right. And you meant to say maximum loan to value or minimum down is 25%, right? That’s correct. Yeah. Yes. Okay. Got it. So 75% LTV is the most leverage you can get on this program, which is not bad at all by today’s standards. I mean, you’re never going to get more than 80%. LTV. So as an investor nowadays So yeah, that’s fine. Okay. Tell us about the the rate in terms, you know, like what’s, what’s the best rate you’re gonna see on this program and and is it just a 30 year amortization? Or what’s the rest of it look like?
It is a seven one arm. And it has rates that start in the sixes if you have income that we can use to qualify. If we have to use the cash flow program to where we use that 10% cash flow to qualify the borrower, then we’re looking at a rate that’s in the sevens.
Jason Hartman 34:43
Okay, not not terrible. You know, certainly I know everybody’s spoiled and they wanted to get Fannie Mae Freddie Mac rates otherwise, you know, we’re all spoiled like that. But this is not bad at all. Now curious question. What Have that cash flow from just the property is quite a bit better than 10%. I mean, of course, if you lower the loan to value ratio, meaning you put more down, the cash flow is going to get better that way, obviously. But yes, say it’s just a better deal. And you still do 75% loan to value ratio, but you’re getting 15% or 20% rather than the 10%. Minimum. Does the rate get better? You do that?
It does not. It’s just a minimum of 10%. Okay, that is better for the investor, of course,
Jason Hartman 35:38
got it. And what that says to me is that the lender doesn’t believe it. Okay, all right. That’s fine. That’s fine. Anything else you want people to know about this particular program before we go on to the next one?
Oh, we can do five, five loans with this program for each borrower is the maximum that we can go but it’s a great program. I mean, each Each investor has their own unique scenario. And so if anybody is remotely thinking that this would be an option for them, it would be a great, a great way to, to buy more properties. Sure.
Jason Hartman 36:10
Yeah, I think that’s fantastic. Because the property can still make a lot of sense, even when you don’t get those coveted Fannie Mae, Freddie Mac type of terms. So good. Shannon, let’s talk for a moment about a smaller segment of our audience. But, you know, this is should be interesting to everybody. So please, if you are not in the segment we are about to mention. We’re only going to cover it for a few minutes. Don’t tune out. And here’s why it’s important to you, because it shows that there is now a whole new segment of money flowing back into the real estate market when this kind of program exists. And what I’m talking about here is lending programs for foreign national buyers. And for a while, that was zip There was nothing, you know, post Great Recession, and it’s coming back. So tell us about the foreign national financing and and remember this affects everybody, because yes, it pumps more money into the real estate market. And of course, I don’t have to explain to any of our brilliant listeners the law of supply and demand and what that does to prices.
This this Jason is really an amazing program for our foreign nationals. They can invest in real estate in the United States without a credit score without any us credit. What they do is they look at the borrower’s reserves. They also look at credit references. So we have to have basic letters filled out from creditors that they have overseas or from their home country. And that’s what we use to help them qualify. There is a minimum loan amount with this program. And that is $75,000 loan amount. So we need $100,000 purchase price to keep those numbers easy again because the maximum loan to value is 75%. Again with this program
Jason Hartman 38:12
for a foreign folks, do you realize how phenomenal that is for a foreign national, a non US citizen? We’ve got, you know, clients living in Australia, New Zealand, Canada, you’re all over Europe, all over Asia. All you know, we’ve even got and by the way, I want to say congratulations, we’ve even gone I think this might be a first or a second at least, we’ve got one of our clients or listeners at least flying in from Africa to come to meet the masters. So Wow, now that opportunity is available for for nationals. Okay, so 75% LTV lead. That’s That’s excellent. What’s amazing It’s a it’s an amazing time to be alive. Okay, good. So tell us more about the program. So a letter letter. So just any lender you have a relationship with in your home country, writes you a letter, basically. Right? Okay,
yes. And I have a basic form for the borrower to give to that lender to fill out for me. So it’s very, it’s a very simple process. Some of the documents may need to be translated, they all have to be English to be underwritten. But the borrower needs to own a home in their home country. So this is for second homes and investment properties. But they will look at debt ratios up to 50%. And then, of course, they don’t need the social security number because they don’t have the US credit. And the loan can be a 30 year fixed or a five year arm, depending on what scenario is best for the borrower.
Jason Hartman 39:55
Okay. So thoroughly
Jason Hartman 39:57
amazing program. That is a true story. 30 year fixed rate loan for a foreign national with 75%. LTV, Shannon, what’s the interest rate look like?
They interest rates are in the high sevens at the moment, which isn’t bad. Not
Jason Hartman 40:14
bad. No, no 75% LTV. And of course, I want to say with any lender interview, of course, or just in general rates are subject to change without notice, you know, so that’s, we’re only talking about what the rates are today. You know, you might be listening to this three years from now and it’ll be different, of course. Okay, so what else do we need to know about that program?
It’s a very simple program. Honestly, I’ve done a couple of these loans and they are amazingly easy for the borrowers to qualify. The paperwork is not overwhelming. It’s a very easy process that I could help anybody navigate through if they if they were interested in buying a property in the United States. Is there much
Jason Hartman 40:57
fear of something I mean, that’s such an issue. Exceptional programming that’s gonna bring so much money into the real estate market. Is there any fear of that drying up? Like your investor who’s funding those loans? You know, is do they have a lot of money? Because I think that’s going to be very, very high demand.
Of course, I can’t say for sure, but I see this program with a couple to add a couple different lenders. So I don’t see it going anywhere at the moment.
Jason Hartman 41:26
Nothing’s ever guaranteed Of course, right.
Jason Hartman 41:30
Right. Okay. make hay while the sun shines, is the old saying, take advantage and ever. I could even see some Americans wanting to use that program. You know, like, for example, if their credit is dinged up, you know, from the Great Recession, if they did some strategic defaults, I could see them wanting to use that program. So maybe they will move out of the country for a few years and then become a foreign national.
You might be onto something. Yeah,
Jason Hartman 41:58
that’s, that’s a little little wrinkle there.
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