To start the show, Jason Hartman discusses the three different types of market – linear, cyclical, and hybrid. He explains that with income property, you outsource the debts to tenants while your property appreciates. Then, Jason talks about the intricacies of inflation and explores how asset classes perform against inflation.
I’ve known Jason for about 10 years now, and his company does amazing things for their clients. I found his knowledge on real estate, unsurpassed. He’s straightforward, honest about his approach and gives you the information you need without any BS. I’ve been a real estate broker for over 30 years. And when I was looking to learn about investing, I found his podcast along with a few others, and dismissed most of them immediately because they weren’t giving any concrete information. Jason was and I knew what he was saying was straightforward, honest, to the point. And it led me down the right path, I ended up buying about 68 properties, flipping most of them during that time of 2010 to 2013. But keeping at that time, 33 rentals, and it was all because of the knowledge I learned from Jason. He’s the real deal, I highly endorse him.
Welcome to this week’s edition of Flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy. 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 1000s 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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 2:12
Welcome to the creating wealth show, episode number 596 596. This is your host, Jason Hartman, thank you so much for joining me today. As we talk about a variety of things. Your guest today will be Dr. Jason Hartman. Yes, he’s your guest. That somewhat outspoken guy, that guy that goes on tangents. I know. He probably gets sick of them once in a while. But I don’t know you keep listening. So something must be alright. Anyway, hey, you know, I mentioned to you on some prior episodes, I was looking for that old chart that I used to use in my presentations way back 1011 years ago. Yes, way back a long time ago. You know, there’s a website called the Wayback Machine. Have you ever checked this one out? It’s pretty interesting. You can go to the Wayback Machine. And you can see what websites were and what things were on the internet, way back as it would imply. So if you go to the Wayback Machine and you look up Jason hartman.com, our website, you can go and look at it back in maybe 1995. You know, right after al gore invented the internet. Now, that’s a joke. Al Gore is a joke, too. In fact, Al Gore, the complete environmental hypocrite that he is, has now changed his tune on the environment. What is he doing? Getting ready to run for president again, he says, even though every night on television news is like nature through the book of Revelation. You know, I so wish we would have had all this news media coverage 100 years ago, 200 years ago. So we would all realize that extreme weather is really not extreme at all. We’ve always had weather, you know, it’s it’s mind boggling how these people think these Malthusian people who think people are the enemy, and you know, the scourge of people. I’m surprised they don’t look at every mass killer is some kind of environmental hero. Really, it’s a dangerous ideology. I’m telling you. This is a dangerous ideology. So don’t buy into it. Don’t believe it.
But anyway, lest we go on another stupid tangent. Okay, get back on track, Jason get back on track. So the chart I was looking for I presented it at the Orlando property tour last weekend, for the first time in years and years and years. Well, you know what this is about? Hopefully you remember from a couple prior episodes I’ve been talking about it. There are three types of markets. There is the linear market, the cyclical market and the hybrid market, the mix of those two kind of like those hybrid cars, right? So the hybrid market is in between the linear and the cyclical, of course, the cyclical is the one that makes the news. It’s the market you always hear about It’s New York City. It’s Boston. It’s San Francisco. It’s LA, it’s Orange County, it’s San Diego. It’s virtually all of California, itself, Florida, Miami, Fort Lauderdale, all these crazy markets where you have these glorious appreciation cycles in these tragically bad cycles, where everything just falls apart, and everybody loses their shirt. So I found the chart. Yes, this is old, but it’s new again. The same goes and it is Ash, what was this guy’s name? I, if you look back to a really old episode, I had him on the show. I want to say his name was Christopher something or rather, a really interesting PhD nerd. brilliant guy. a nerd nerd nowadays is a compliment. By the way, if you say someone is a geek or a nerd, by the way, what’s the difference between a geek and a nerd? I don’t know. They’re both like really smart people. You know, when I went to school people used to make fun of these people, you know, wasn’t very nice, of course. Then we had the tech revolution. While we’ve had a lot of tech revolutions. Remember that old movie called Revenge of the Nerds? Well, we really do have Revenge of the Nerds, because nerds are running the world. And they’re, they’re really smart. And they’re really rich. Hats off to nerds, I kind of wish I was more of a nerd. And I understood some of this stuff more, more deeply, you know, if I knew how to program computers, or even use a computer for that matter. I do know how to basically use a computer, but they’re constantly frustrating to me.
Anyway. So this nerdy guy, he was on the show way back, maybe? I don’t know, I want to say episode number 20 3040. A long time ago, you know, we’re at Episode 596. Today. And it’s long time ago, I interviewed him on the show. And he published a report, at least at the time, he worked for first American title. And in this report, I mean, this is so telling about real estate investing, this is a big deal. It is a big, big deal. It really is. So what he did is he compared cyclical and linear markets in their appreciation over time. He took Orange County, California, you know, my home for most of my adult life, Orange County, California, most people would consider Orange County a super desirable place. You know, most of now, there are many cities in California in Orange County, some are not very nice, but most of them are pretty nice. You know, it’s a nice place to live. And a lot of high end homes. You know, crime is relatively low in a lot of these cities. But I must go off on a little tangent here for just a moment, because it shows you how statistics can be misleading to Okay, now, or it’s not misleading In this sense, in that Orange County, California is a cyclical market. But it is misleading. If you were to look, you know, at the data and you look at an MSA a Metropolitan Statistical Area that you know, would include Orange County, right? You would think it’s like the same thing, right? You might read an article while Orange County real estate, it’s the best thing ever, you might go out and think you should invest in that market. Well, certainly, you wouldn’t after you hear this. But But I’ll give you an example of why real estate is so hyper local. If you look at two Orange County cities that border each other. I mean, they’re, they’re right next to each other. They’re they’re contiguous cities, okay. And I’ve lived in both of them. By the way. I lived in Santa Ana, California, on Freeman Avenue or Freeman Street, I’m not sure which, right by the downtown Civic Center. That was a pretty crappy area. I remember when I lived there. The windows on my car were broken twice, and my stereo was stolen out of the car twice. I was really upset about it. And I complained to my mom and I told her that one of my favorite Denis waitley tapes, yes, cassette tapes was in the tape player.
And they stole that too. And she says, Well, maybe they’ll get their act together and learn something you know, and it will do them good. You know, so maybe, maybe the thief turned their life around by listening to Denis waitley who knows. So excuse me a sec. My dog is literally chasing her tail. Coco What are you doing? You don’t see that very often, at least with Coco change the chasing her tail like that. And so Santa Ana is not a very nice place to live. Okay. I mean, there are a couple nice areas within Santa Ana, but overall, that city is not very nice, right? But right next door to it, hey, Coco. You’re making noise for the listeners here, Coco. But right next door to it is Irvine, California, a very nice city. So, you know, very high priced very low crime. And, you know, these are right next door to each other, and they couldn’t be more different. I mean, it really couldn’t be more different. They are opposite ends of the spectrum. So all real estate is local. First of all, there are macro markets and micro markets. There’s no certainly no such thing as a national housing market. Not in the US not even close. So here, we’re comparing Orange County, California to a linear market. And you know what? Um, well, I don’t know. Should I tell you now what the linear market is? Okay. Well, yeah, I’m going to tell you, I’m going to tell you right now. Now, this is a long survey. Okay. It’s from 1988 to 2004. What is that? 16 years, right? 16 years? I mean, you could go from zero to driving a car in this time. Right. And I won’t go off on that tangent. Well, yeah, I will. Okay, so we’re doing our Orlando property tour. I wake up Saturday morning, I’m on the club for the hotel, and I go in there and grab something quick to eat. And there’s a woman in there with a super cute baby, you know? No, frankly, you know, I do love kids. But most babies aren’t that cute. They get really cute when they’re like two and higher. Okay? I mean, women like babies more than men. I found that to be true. And it’s a good thing for the survival of the species. But this this was a little baby, just that, you know, almost a newborn. really super cute baby, right? And so the baby’s in the stroller, and I I look over and say, Oh, what a cute baby. And I asked, I asked mom there, how old and and she says four months old. And I go, I turned to the baby. And I say, You are so cute. Do you know you’ll net? Probably never learn how to drive a car. And mom looks at me like what kind of weirdo? Are you talking to my baby like that? I explained to her that I just bought a Tesla with an autopilot. And, you know, it’s pretty much self driving.
That kid probably will never learn how to drive a car. You know, listeners if you have children. And those children are, let’s say 10 and younger. Okay, there’s a good chance your kids may never learn how to drive a car. Isn’t that a wild thought? Totally wild thought. Totally wild thought. So anyway, she didn’t think I was so weird after we talked for a moment there. But at first probably you know, rightfully so she didn’t get it. Right. So where were we with this? So 16 years survey, Orange County, California. cyclical market, glorious highs, really ugly lows troughs in the cycle as it goes up and down compared to the linear market. And this is a great comparison. By the way. Lansing, Michigan. Yes, Lansing, Michigan. Okay. Now, Michigan, the poster child for big government disaster, but especially Detroit, the super poster child for big government disaster, right. And Lansing, Michigan is so linear. It’s not even funny, right? I’m looking at the two charts. Now I see Orange County going up and down. I see Lansing, Michigan, just Chug, chug, chug along, you know, slowly appreciating, right. And we of course, prefer the linear markets when we’re investing. Because the cyclical markets, number one, never give us cash flow. But if we’re looking for that more speculative side of the real estate investment, what about appreciation? And you know, I always say appreciation is the icing on the cake. It’s the icing on the cake. commandment number five of my 10. And now 20 commandments, is Thou shalt not gamble. The property must make sense the day you buy it, or you don’t buy it. And you know, we we can lean into the hybrid markets a little bit. But the linear markets are, you know, they’re just great because they have awesome, awesome rent to value ratios. Really good cash on cash returns, you know, good cap rates. And guess what, over time, they might even appreciate more than the cyclical markets. Now, why is that?
Of course you know what I’m going to say right? Because in the cyclical market, you know, you’ll have those glorious highs Nobody seems to be able to truly time market accurately. Everybody, you know, is this renowned guru with market timing until they’re wrong and they fall on their sword. So, you know, it goes up and down. It’s like the elevator business. Bad joke. You know, whenever you meet someone who’s in the elevator business, just say, has its ups and downs, doesn’t it? Okay, so Lansing, Michigan compared to Orange County, California now, you would think that this is a no brainer, that, of course, Orange County, California, the really nice place Orange County, California with great weather and you know, all of this stuff, you know, good economic engine. That’s certainly gonna do better than Lansing, Michigan. Right? Yeah. I mean, right. It’s got it, it’s got to appreciate more than Lansing, Michigan, well over 16 years now, listen, go read the book, how to lie with statistics, which I have not completely read, by the way. But you know, I think the title is very interesting, because you see all these stats out there that lie, especially coming from the government. And of course, you can pick your poison, right, you can pick a certain period that makes it look, one look more desirable than another I get it, you know, you can, you can play with these numbers. But this is 16 years. And in this 16 years, Orange County went through two huge upcycles I mean, where the market was booming, where it was booming, people were making fortunes. And Lansing, Michigan was just chugging along doing its thing, you know, never made the news, I’m sure. Boring, boring, boring, right. But get this Orange County, California, over this 16 year period, had an average growth rate or appreciation rate of 5.3% 5.3%. Not quite the 6%. That is sort of considered the nationwide average over over time. You know, that’s what if you ask anybody in real estate, they’ll tell you that real estate appreciates about 6% per year on average, you know, give it a couple decades, and that’s where you’re going to be about 6%. Okay, but Lansing, Michigan? It beat Orange County 5.7% 5.7%. It beat Orange County. I mean, that’s unbelievable. That you would get it? You know, this just goes it shows to go. Yeah, I mean, it goes to show you. It
Wait, it’s it goes to show you that the linear market, obviously from a cash flow perspective is a much better investment. But even from an appreciation perspective, it’s so much better. Wow, amazing. Amazing. So hey, let’s do our affirmations for today. What time is it? It’s an amazing time to be alive. That’s that’s the one you remember from a couple episodes ago. And we did it last weekend in Orlando. What time is it? Whenever you ask yourself that question? Or someone asked you that question. The answer is, it’s an amazing time to be alive. With all the bad stuff going on on the world with the, you know, Muslim extremist, and the terrorism and all of this stuff, you know, on on net. It’s an amazing time to be alive, the government debt, all of this, you know, it’s, it’s bad. You can look at the bad news out there. It’s certainly there. There’s no question about it. There’s a lot of bad things going on in the world. But on balance, it’s an amazing time to be alive. It really is.
Okay, here’s something I did not have time to talk about. At the revise the newly revised creating wealth seminar that we did in Orlando, remember, I put all this stuff in the workbook, I knew I wouldn’t get through it all. But I thought, you know what, why not pay the printer print several extra pages in the workbook, just so people can have this stuff. And they can look at it at their convenience. That’s the same way our last workbook was before we revised it, where there were a bunch of extra pages in there, you know, just informational things that you can’t cover in a seminar. There’s just not enough time. I’ve estimated that if we were to have a really long seminar or conference, that and this excludes the podcast, by the way, because you know, the creating wealth shows got 596 episodes coming right up on 600. And all of the other shows we have probably 3000 episodes, and people say Jason, do you really record those all yourself? Yes. Guilty as charged, I’ve had three I think three guest hosts, never on the creating wealth show. But I’d love to have a guest host sometime, fill in for me. And and on the other shows, I have had people guest host them, I think three times. Other than that, you know about 3000 episodes, and it’s all yours truly. So one of the things I didn’t get time to cover is the asset matrix. And that is the concept of different investments, and their strength or weakness versus inflation, deflation, and taxation. Okay, so let’s dive into this a little bit, you know, didn’t get a chance to cover this. It’s something that many years ago, we touched on at a meet the Masters event several years ago. And by the way, of course, meet the Masters is coming up and it’s going to sell out, it’s probably going to sell out fairly quickly. The room is about half full Now get your tickets at Jason hartman.com. In the events section, it’s coming up fast, it’s in January. So we just got a couple of months. And we have a rich dad adviser, Garrett Sutton, speaking, multiple best selling author, he’s gonna be awesome. And then of course, we fly in our local market specialists from all over the country, our property management teams, you will really enjoy this event, if you haven’t been to meet the Masters, you got to get there. It’s in San Diego, California, January. So great time to come to San Diego, of course, get out of that winter weather wherever you are, if you’re in one of those places, and come to beautiful San Diego in January.
So let’s take a look at investment strength versus inflation. Okay, and let’s look at a couple of different asset classes. Now I’m looking at a graphic, okay. And it’s in the creating wealth workbook for people who went to Orlando, you know, of course, I’m just going to explain this to you because you can’t see it visually. Okay. And so here, here, here it is, maybe we’ll put this together as a little report or something and get it out to you later. But we’re not exactly quick about some of this stuff. We have a few things on our to do list around here. But maybe we’ll get these slides out to you. I you know, we’ll try and do that look for an announcement on that next week on next week’s show. This is so visual that i i really kind of want you to have it, okay. But certainly if you come to masters, we can present this for you. Okay, we can put the slides up there on the screen and present it. So the top performers have income. Now this is incomes, investment, strength versus inflation, okay. And we’re gonna divide these into low, medium, and high. And in the low category, we’ve got cash bonds, pension income and taxes. In the medium category, we’ve got the income from your job or business. We’ve got rental income, and we’ve got stocks. And then the high category we’ve got gold, your mortgage. Yes, I know many of you don’t consider your mortgage to be an asset or an investment. But we do because we are better informed here listening to the show, and the value of your real estate that is in the high category, those three items, right. So why is this true? You know, so the top performers gold is a good inflation hedge or at least it’s been considered to be one for a couple 1000 years. But the problem with gold well gold has many problems number one, it’s got terrible tax treatment, and it’s got no income. Try renting out your stupid gold or your silver to somebody.
Good luck. Hey, where you rent my gold coin? No, I do not think so. Nobody rents gold coins. Okay, what is not that I know of? So gold, no income, no financing, no leverage, terrible tax treatment. tax is a collectible. So it’s really highly taxed. Okay, I believe that’s 28% collectible tax when you sell it. So it’s it’s awful. Okay, it’s awful. your mortgage. Why is your mortgage? Why does that have really good strength versus inflation? Well, because of you know, what my trademark term inflation induced debt destruction, say at 10 times fast inflation induced debt destruction. That’s a mouthful. Okay. So your mortgage gets basically paid off by inflation. If you have a million dollars in loans, say you got 10 properties, they’re worth 1.2 million total, and they’ve each got $100,000 loan against them. If inflation is just 4% annually, which it’s hard to argue that real inflation regard arlis of what the government says when they try to lie to you, and the CPI and you know, their their bs manipulation. And how do they manipulate this, by the way, they manipulate it in three major ways waiting substitution and hidden x, waiting substitution hidden x. That’s how they make us think the inflation rate is lower than it really is. Okay. And why do they do this? Well, number one, to keep people voting for the people in power for the incumbents, and to keep the population happy and mislead them. Number two, the government entitlements and the government salaries where we’ve got a government that is ridiculously over 20% of the economy is government is that insane? socialism meal with them? Yeah, socialism. here we come. So if inflation is only 4% per year, which, you know, I don’t think anybody with a brain could argue that it’s lower than that even now, and it’s pretty tame at the moment.
Okay. So if it’s 4% a year, and you got a million dollars in loans, you just it’s like getting a raise of $40,000 per year. $40,000 per year is just paid off by inflation, inflation induced debt destruction. Beautiful. But what if the real inflation rate is what it was just a few years ago? The real inflation I’m not talking about the government lie? I’m talking about reality here. Okay, if the real inflation rate is 8%, which we’ve experienced that many times in very recent history, okay, not long ago at all, if the real inflation rate is 8%, then it’s like getting a bonus of $80,000 per year on your portfolio. And look, those mortgages, you’re not paying them, you’re outsourcing them, to these people that are happy to take care of them for you. They’re called tenants. Okay? We don’t pay our own debt with investment with income property. I almost said investment property. It’s called income property or cash flow property. Okay. So we outsource the debt to the tenant. And they’re paying the debt down for us, but also inflation and dousset, destructions. Paying it down as well. It is a beautiful, beautiful, beautiful thing. Okay. Now, the income from your job, your rental income on your income properties, and your stocks, if they pay dividends, especially, okay. They are in the medium category in their income and investment strength versus inflation. Well, your job income, theoretically, is indexed to inflation, because hopefully, although this has not happened in a few decades, you will get cost of living increases. Now the problem is and why workers keep losing is number one, they don’t even get cost of living increases in these anemic economies. You know, look at Obamacare, ruining people’s lives, right. I just read an article yesterday about the big shocker that’s coming with Obamacare is these huge deductibles, deductibles of like $3,000 and $5,000.
You know, premiums seem low, but you know, the deductibles being huge, right. But what was I going with that? Oh, yeah, yeah. Ups, right. So I was just being driven to the airport by an Uber driver, who was telling me I, you know, I always talk to these guys. They’re really interesting. He was telling me that he used to work for ups. And as soon as the Affordable Care Act came in, when the scumbags in Washington, pushed it through on a Sunday night at like midnight, you know, Nancy Pelosi, the idiot that she is the idiot, scumbag hypocrite that she is not that I have an opinion about this or anything. She said, Well, we got it. We got to pass the bill to see what’s in it. Yeah. Great, Nancy. So they they passed the Affordable Care Act Obamacare, and, and what happens? instantaneously ups. The guy, the Uber driver, he told me this firsthand. He had a great career with ups, he really liked it. And almost instantaneously, they converted their entire workforce to part time. Now, actually, I shouldn’t say entire workforce. I bet they kept a few full time people. Okay. But the large part of their drivers, their ups drivers, they converted them all to part time, he said, so that they could get around the Obamacare legislation. You know, the left, the liberal left thinks everything happens in a vacuum. Oh, well, we’ll just pay people $15 an hour for minimum wage jobs. You know, whoever thought these minimum wage jobs were meant to be careers. I mean, minimum wage jobs are meant for young People, teenagers, college kids, okay, you know, they’re, they’re, they’re meant to be transitional things. They’re not meant to be careers. I mean, give me a break, what are you thinking here? You know, and we got the working poor, because the working poor isn’t moving into real careers. Why not? Well, many reasons. It’s a complex problem, obviously. But you’ve got lack of education, okay, because the government has made college so unaffordable by ensuring student loans, they made the price increase dramatically, you know, 234 times the rate of real inflation. And then you’ve got this anemic job market, right? Because businesses don’t know what to do, you know, they don’t know what’s coming next from the comrades in Washington, they can’t plan and make investment when the Obama administration keeps changing things. And they’re so inconsistent about stuff, but they’re certainly attacking business. So you’ve got that. And so your job income, if you get cost of living increases, should have medium strength against inflation.
The problem is, even if you get those cost of living increases, they’re only going to be based on the official stats, which are always understated have been for decades. And so if they say the CPI, the consumer price index is three or 4%, for example, maybe if you’re lucky, you’ll get a three or 4% raise, but real inflation is 678 percent. So you’re losing ground with that job income, rental income, same thing, you know, it’s kind of indexed to inflation, okay, and rents certainly go up. But it’s only got medium strength, because it doesn’t usually exceed inflation by much. And the other thing about rental income. So this is this is like not a plus, right? I’m obviously not selling the idea here very well, in my head, I don’t want to sell it very well, I just want to, you know, share the truth and the reality of it, the rental income, it will go up in inflationary times. But remember, like the job income, it has another issue in the marketplace. It’s not just governed by, you know, what is the consumer price index, that’s how much rent goes up. It’s governed by housing affordability mostly. So if housing affordability is very high, and it’s really easy to qualify for a loan, people will move out of the renter pool, they will move into the home owner pool, and you’ll have fewer renters. Now, if people are saddled with student loan debt, if they’re putting off marriage and family formation, if the rates are low, and affordability appears to be high, but the banks are really careful in lending and they don’t want to make any loans. Well, then, you know, so what if affordability is high, if they won’t loan you the money to buy the house, right? So that makes rents go up? It puts upward pressure on rents, because as the population keeps increasing, the renter pool swells, and you’ve got more renters out there.
Now stocks, you know, the stock market is reasonably well indexed to inflation. I’ll give it that. I mean, you know, the stock market is the the modern version of organized crime, as I always say, Wall Street is the modern version of organized crime. But you know, stocks are fairly indexed to inflation over time, of course, they are subject to market forces and manipulation and scumbag investment banks and financial firms and CEOs and boards of directors are skimming all the profits off the top. But you know, even in the non dividend paying stock part where you’re only buying for capital appreciation, you know, you can see it no matter what index you’re looking at, you know, whether it be the Dow the s&p, the Russell 2000, you know, stocks are reasonably well indexed to inflation. Not bad, okay, they’re, they’re in the medium category with your job income, your rental income in the stocks, okay. But stocks have a zillion other problems. so shy away from stocks, I am glad to say that I am out of the stock market. Except I think, you know, I think my mom, I bought me some at&t stock for my birthday A long time ago, in the account is in both of our names. It’s a small amount of money. So I actually don’t think I can completely say that I, I just remembered I do get these statements once in a while. And I think I still own some at&t stock, I got to figure out how to liquidate that. And, you know, I’d much rather turn that into a real estate investment or a hard money loan. Or maybe buying a land contract. Those are pretty great to kind of like lending Okay, low strength against inflation. We got to wrap up here, Jason, you’re rambling on and on. Again, too many tangents. Low strength versus inflation, cash, cash is terrible. It’s the worst thing going bonds awful, awful, awful. Inflation, just the basis the value of these things. pension income Hmm. The income in your pension plan? Yeah, pretty bad, awful, low taxes. Well, this one’s complicated and have real Levine said, Why do you have to be so complicated, right? So taxes, the, I’m just gonna suffer like we could almost do a whole show on this and you know who explains it really well as Daniel Ammerman, who I’ve had on the show, I think four times now Danny Ammerman has been on, he’s got some great work that he’s done in this field, inflation’s effect on various things, but taxes, see, the IRS, or any state taxing agency does not compute taxes properly based on inflation. And most of the times, most of the time, this hurts people that and when I say taxes, I’m talking about your tax liability, the taxes you owe, because what they do, and you know, I just don’t have enough time to like, dive into this deeply. Okay, we have talked about it on prior episodes.
But what they do is they don’t calculate for inflation. And most of the times, this hurts people. And I, you know, here’s one simple example that I can just illustrate very quickly. Let’s say for example, you have your money in the bank, and you are, of course, getting screwed with your money in the bank, right? And let’s say just for round numbers sake, let’s say you can earn 1% in the bank. Okay? So you’re earning 1% in the bank, you got a million dollars in the bank, and you think you’re okay, but you’re really not. So your 1% earns $10,000 per year. And then the government comes along and they say, hey, you earned interest on your account, you have to pay us taxes on that interest income. And if your tax bracket combined state and federal states around 40%, okay. If you got a million dollars in the bank, it probably is about 40%. Okay, so you take your $10,000, and the government says give us $4,000. Okay, so you give Uncle Sam $4,000, maybe you give some of that to the Socialist Republic of California and some of that to the feds. Anyway, whatever happens, you give up $4,000 40% of that. And then inflation comes along. And the IRS didn’t let you pay your tax liability, net of inflation, did they? They didn’t, they didn’t allow you to say, okay, you earned your $10,000 on a $1 million principal balance. And before you pay us taxes, you can subtract how inflation has debased that interest income, and it’s also debase the principal balance of the account to which is even worse, but it also debase just the interest income. So say inflation is, you know, for round figures, let’s say inflation is really mild. It’s only 2% so let’s take it before the taxes, right? You got a million dollars 2% of a million dollars is how much? It’s $20,000. And you earned $10,000 in interest. 1%. So, now you’ve got 990,000 real dollars, but nominal dollars, it says 1.1 million with your interest income, 1 million principal 10,000 in interest income, but after inflation, you really got it? No, no, wait, sorry, you’ve got $980,000 It’s worse than I thought it’s worse than I thought. Because inflation is 2%. So it, it took away $20,000 from your principal balance, you follow me? And then the government comes along and says, Well, no, you earned 10,000. But you really didn’t earn 10,000 you really lost 20,000. But the government doesn’t calculate for inflation. So they say pay us $4,000 and lose while they don’t tell you this, but it’s what’s really happening behind the scenes and lose $20,000 in principal balance. And so you got totally burned.
This is the worst deal ever. This is awful. Okay, so you got completely burned because now you think I mean, the uninformed people, the low information investor and the low information voter who votes for you know, these idiots, right and votes for more taxes because we got to have more free stuff. So you’ve really lost you think, you know, the low information person thinks well, I made $10,000 on my million, I got 1% but really, they lost $24,000 because after inflation based their principle, they lost $20,000 on the principal. And then they paid the government, they paid I mean, to add insult to injury, right? You lose $20,000. And the government comes along and says, pay us another frickin $4,000. And now you understand why people view the government as a bunch of crooks, right? Because they’re, they’re making you pay twice. It’s like, you know, okay, they give you the one two punch, you fall down on the floor, and then they start kicking you. I mean, it’s unbelievable, okay, and this is this is how tax liability does not indexed for inflation. However, there is a way around it. Because as an income property investor, you can actually turn the tables on the government, and you can use it to your advantage, so that they, they don’t understand inflation, or they pretend not to with the government, right when they’re taxing you. But when you use leverage in the multi dimensional aspects of income property, you can actually turn the tables around, okay. And most people aren’t doing this, you know, most people just get completely burned. So, of these three slides, believe it or not, I thought I’d cover all of them easily. I only got through one of them. So we’re gonna have to talk about the rest of them. And investment income strength versus deflation, and versus taxes. Okay, so we’ll dive into that tax a little more in a future episode.
So there’s two more slides to go didn’t get a chance to cover them. But if you went to the Orlando property tour, this is in your workbook. Okay. And you know what, next week, we will endeavor to get these slides out to you as well. All of your listeners, okay. So do not worry. You’ll have them, you can see them. And if you come to meet the Masters, of course, I think we should present this again. All right, that’s it. I gotta run, I gotta get to one of my mastermind meetings. Speaking of which, hopefully you’re joining us in January for meet the masters of income property. But also, if you want to real estate mastermind group, the best one in the world, joint venture Alliance, venture Alliance mastermind.com we’re headed to Dubai. In February. It’s going to be phenomenal trip, our first international trip with the venture alliance in beautiful, incredible Dubai. What an amazing place. I can hardly wait to go. I’ve not been there yet. 78 countries so far, but I have not been here. So I can’t wait to go. It’s gonna be fun. Join me. It’ll be fun. Join us venture Alliance mastermind.com. Check that out. And we will look forward to talking with you on the next episode. Happy investing everybody.
I’ve never really thought of Jason as subversive. But I just found out that’s what Wall Street considers him to be.
Really now How is that possible at all? Simple.
Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life.
I know. I mean, how many people do you know not including insiders, who created wealth with stocks, bonds, and mutual funds? those options are for people who only want to pretend they’re getting ahead.
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This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.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.