Jason Hartman

You know?

Person to person.

But we have so many guys who do virtual, you know, in other markets. They also do well. But when you start getting into virtual, when you start getting into the larger companies, it's all the systems. It's all the follow-ups. And that's what makes them successful. They want to talk to a person originally, and then they just want to go through and follow up their sequence.

Everybody's trying to get the deals faster. You're spending the money on your ads. You want a quick return. But if you can convert a few later on, it changes everything. Everything.

So we can't provide our investors enough leads. We send out about 500 leads a day, and we're asked for probably about double that. What makes us different? We use the entire Google platform. Our leads start at $150 per lead right now. We just started a national promo for leads just across the country that are $30. That'll probably go up to $50 pretty soon. But we do that.

Absolutely. I'll tell you something too, though. It's not discount. A lot of people do put it in for an urgent need. Yeah. Right? And for those, you know, you want to get on those right away. So we talk about the nurture sequence. It's obviously super important. The other thing is speed to lead. So if you're getting a lead in... you should be calling.

You're eating dinner, excuse yourself, make the initial phone call.

You know, you're in the car, pull over to the side of the road, don't kill anybody, make that phone call.

We have exceptional customer service. I'm proud to be a part of that as well. You know, I'm going to toot my own horn there a little bit, but we try to be super helpful for investors. Whether it's, hey, you know, I need help with the lead. I don't, you know, maybe it's give me a credit from a dispute policy or, hey, I got this lead and the person is motivated. I have no idea what to do.

Six or seven, depending on the.

But think about it. If it's keeping a person up at night, if they're worried about it. Now, I'm not saying call somebody at 2 a.m. if they do that, but maybe a text if they fill out a form. But be on top of it. Let them know you care. Hey, let's chat tomorrow. You want to talk now? I can. Most of it doesn't come in at that time. It's more normal hours. But if somebody's doing it late at night,

Give them a call. They obviously have a concern. That's why they're filling it out.

So we have a very wide spectrum. We have, you know, big, big time acquisition companies and a couple of funds. And then we have, you know, one man shops where I'm telling the guy, hey, man, you need a VA.

You've got to be talking to people. You're a great person, but stop doing paperwork.

So our average cost per lead is about $175. Our minimum now is $150. But I'll tell you one more part about that. You can turn off the system anytime you want. So if it's your daughter's birthday,

You can just put pause for a couple hours. I have a guy in California who always turns off when he's in traffic. I'm thinking it's the best time to call, but probably better he's not talking on the phone. But you can turn it on and off whenever you want. You have full control of that.

Yeah, I just had my daughter's birthday, and if I was on the phone there, I would have got a lot. I agree. Listen. Not only from the kids. You want to stay married. Parents, too, you know? Yeah, so... You could turn it off, turn it back on. But if you're on and you get that lead, like you're saying, you just got to get on that.

And I'd be like, hey, you know what? I have the perfect guy for short sale, for subject to, for just give them a call and work the deal together, work something out.

And so what you're saying is right. Once you get to the second part, once you have you start building your company, you have a second person who can do the calls.

Think of it like doctorships. Right. You're not you're not going to get 50 leads from us a day.

Right. If you think about accounting. Right. So we're in Miami here. We might get one or two or three leads a day max. And that's going to all the investors.

Maybe it's a few more if it's a busy day or whatever, but you're not getting that many. So when they come in, you got to treat them like gold.

Listen, do you like this life? The real estate lifestyle to me is my background is a CPA.

And what I saw is the people who had wealth. Longer than just, you know, you have your doctors, you have your business owners, you have your whatever talents, you know, NBA player. But the people who had wealth long term in the kids and after something happened, I had a magazine executive, for example, you know, went the way the dinosaurs in magazines, I feel like.

But she owned real estate in New York City. So she was fine. All of a sudden, she's not making the same living, but she's okay as opposed to it. So real estate gives you that lifestyle. It's not a quick thing.

but it gives you that easier lifestyle, more time to be with the family. But that being said, when you have to take a call, you have to do it.

Obviously you.

I don't have any data like that. I haven't tracked it. But I do believe in lead flow. Some people say, listen, let me own my market.

Others are like, hey, listen, I'll take any market in the Sun Belt or any market in upstate New York or northern California or take 92 cities or counties that have a population over, I think it's 100,000 or 200,000, and they'll do anything in there because there's enough demand. So I like the wider thing. For me, we do a bidding system, so some leads can get expensive.

San Diego gets expensive from time to time. But for me, I'd rather spread it out, get leads at 150, and have, like you said, more shots. That's right. And then to further on that, you want to have more ways to do a deal. So if you're just doing a wholesale, everybody would know equity you can't work with anymore, right?

If you're just doing subject to, you're not going to be able to do all the deals. We have a lot of guys in Texas who do subject to. They love our leads. but it doesn't work if that's all they're doing. If they can wholesale a few, if they can buy a few and flip them, now all of a sudden the numbers just back out so much better and they're getting those three, four X returns. That's right.

As opposed to creating a note and just breaking even. Yeah. People who want a higher number, novations. You know, it's phenomenal doing those because now all of a sudden you can get them a higher number and still make a fee and everybody's happy. Yeah. So the more flexibility you have and the more things you can do in the wider range, the more success you're going to have to be.

And listen, it takes more training. You have to learn more, right? You need a good coach. You need a good mentor. You need to read. A little bit of YouTube university probably doesn't help. Sure. You know, but if you're willing to expand and improve yourself, the opportunities are there. And this is not that hard.

To me, that's like amazing mentorship, right? You've been there, you've done that. You know, they're going to learn from doing to me, like no, no good deal goes unfunded. Maybe that's not true, but maybe it's no great deal. But when you have coaches, when you have people in your corner, when you have mentors, right.

And whether it's 200 bucks or 10, it doesn't matter how much they're spending on it. When they have people who've been there and done that, it's just another fresh set of eyes. And then plus they're learning from you. So, you know, I've, I've learned real estate from a lot of people, right.

Every single person, there's a lot of things I disagree with, but every single person I'm extremely grateful for. Sure. Because I've learned so much. And then when I talk to investors, I'm like, hey, you should do this or talk to this guy. Now, all of a sudden, it's coming full circle because I'm able to pay it forward. Yeah.

And that lead that they spent money on that they're not happy with, all of a sudden, hey, this is an opportunity for you. This isn't just a waste of money. And now that seller's like, oh, man, you solved my problem. So the whole idea is that just everybody's going to win from it.

We see about one out of 15 leads will come to a deal.

Yeah. So but but that's not it's not full and everything, because if you look at your burr guys, I was just talking to one of the guys yesterday. I like, listen, you're not going to get one out of 15. I'll tell you, you're not going to do that good. And he's like, all right, let's work some numbers. And we ended up saying, let's let's be conservative is one out of 40.

We just figured out for the burr model for the to get a deal.

And it would cost him six grand for the deal. And we started looking at it. We're like, wow, how much equity did you get out of that? Oh, you got seller financing for it too. Oh, you have cash flow for it. So that might take you a little bit of time to recoup your money in terms of cash flow. But his whole thing is building wealth and having rentals long term.

Yeah. And that's exactly it. And, you know, for the big time investors, we have a lot of big guys. They can teach me way more than I can ever teach them.

And I'm like, you're not going to buy that.

That's it.

And you compare it to MLS. Listen, realtors are super important, help me get into my house with my wife and my kids. Sure. You know, they screw up a lot of deals. Sure. You know, and it annoys the seller and the buyer because you have more people in the way, right? You want to have it kind of shake out a deal, figure it out. And here you're talking directly. Hey, what do you really need?

You know, I might give them a little hint like, hey, you should organize this in Dropbox or use, you know, talk to this guy. But by and large, they're going to teach me way more.

What do you really want? You know, realtor's pitch is, hey, I'm going to sell it for the most money, the fastest. But is that always what the client needs? You know, do they want to wait for the listing, the pictures and all that? Here you're talking directly. Hey, do you really need the most money or do you need a way out of your situation?

You know, do you need, okay, you want to get the most money, but do you need it right away? Well, no, I just need to live off of it. So maybe I can give you more over time and- When you're talking directly to a person, you just get rid of that whole telephone game of mixed messages and everything. Absolutely.

Here's what I'll tell you about the best sales guys. The best sales guys are not the best sales guys. Right? And I don't know if I'm contradicting myself, but I was just at the car dealership a few months ago. And those are true and true sales guys.

If I had a car dealership, I'd just go in there and hire everybody. They're phenomenal. In our space, it's different. Be a problem solver. Be empathetic. Understand the person. I'm very big on seven habits with Stephen Covey, right? Seek to understand, then be understood, right? So if you're understanding a person, the numbers will work themselves out. The deal will either work or it won't.

But some of the smaller guys, I can give them a lot of tips and put them in the right place. It's just when you talk about differentiation, we're just going out of our way to help people.

Right? You do the best you can. They're going to try to do the best you can. You can work out a deal if there's a deal to be made.

But if you understand a person, and this is what we're seeing with investors, is you understand a person, you understand what they want, then you negotiate, you can figure something out. But to me, the ones who are the most successful are the ones who take to understand the client's situation.

There's two ways. I give two messages here. We have 1,800 active investors. A quarter of them are those big guys, right? Right. But the other 75% are five or less people. And a lot of them are one and two man shops or a guy who's doing it after work. Right. Right. If you're new in the industry, we just started the nationwide leads, use that, use those as practice.

It's 30 bucks now, it's going to go up. Take advantage of that. Get some practice. Hey, Justin, help me underwrite this deal in, you know, a thousand miles away from me.

But now all of a sudden you're practicing, you're learning the industry, you're learning the numbers for a lot less cost.

Right? If you're in an area and you want to get leads, set a monthly budget. Maybe it's a thousand, maybe it's 5,000, maybe it's 12, whatever it is, go and try and see a bunch of leads. Mm-hmm. If you're one of the bigger guys, dude, buy into us for a couple of months.

Go in and put an effort in.

So last year I saw there was 200 investors who bought one lead. And it drove me crazy. We had, you know, 2,000-something, I don't remember the number, bought leads from us. But 200, so 10% bought one lead. I'm like, dude, don't waste your money on that. You know, I'm sure maybe one or two of them got a deal.

Yeah, I don't know. But the ones that are buying a lot, it works. I'd say... To me, I would say buy 30 leads. That would be my number.

I bet on your 90 days, if people can stick out 90 days, even if they're at the minimum, because leads can be more than 150, but if they go 90 days, way more than not, and this is my bet, would be really happy with it. Now, they might not go full-time with a huge budget, but they're going to be like, hey, I want these leads. I'm talking to people. I'm getting deals.

That's it. I'll tell you, I'll, I want to see people making money in the first 90 days. That's it. I want more gravy after the first 90, but in that first month, I want to see some deals.

Definitely, definitely.

Thank you so much for having me. If anybody wants to reach out, I'm Jason at MotivatedSellers.com. Yeah. Happy to talk to everybody. And, you know, it's so much fun, this industry. And I appreciate being here.

Justin, first off, thanks for having me. Excited to be here. But yeah, motivated sellers, that's all we do. Motivated single family or, you know, four and under real estate people looking to sell. We target the top five categories as our main thing. You know, everything from divorce to probate, pre-foreclosure, tired landlords, and health and safety issues. People need to move.

Oh, absolutely. You know, one of the things I said right away is we don't want a machine answering the phone. We want a real person, you know, and then you talk about longevity. I mean, there's got, there's, I've been working with motivated sellers since 2019. There's guys, a lot of guys I know who I met when I started who are still buying with us. And then it's also cool.

I'll see guys, hey, I took off for a year or two or I changed my strategy. Now I want to get back in or I left the company I came. So it's a lot of new people coming in. It's a lot of the same people just year after year. Yeah. And it's fun because I'll go to an event and I'll see, oh, this guy I know. I haven't seen him in a little while.

Or, you know, sometimes, you know, Sarah was just at an event in Orlando. I mean, in Phoenix, actually, your neighborhood.

And a guy sends me a selfie of me and her. He's like, hey, look who I found. You know, so it's cool that over time you start seeing a lot of the same guys and you build relationships and, oh, how's everything going? Oh, you know, I had a little bit of a rough streak, but then I just bought this house. Check this out. I just sent you pictures.

I can't believe like how we were able to make this deal work.

It's super exciting.

So super easy, um, industry wide and with, with the Google thing, at the end of the day, the most important thing is lead quality.

So I can be super nice to you. You could like me, but if, if, if I'm not giving you the results, you know, it's gotta be a win-win.

Right. And win-win with the sell, win-win win with the seller too. So we really have to deliver. Right. Um, we spend almost $2 million a month in marketing with Google.

Which to me is insane. I always tell the investors, we're all helping the Google stack prices.

But Google sends reps to us every quarter. They go through, they look at our numbers. We're actually pushing data back to them now of what leads are actually converting. Because they're saying, we're using a large chunk of what they can fulfill, but they can fulfill more. So they'd rather target the right stuff to help us grow. So we just started putting that in place.

That's what we're targeting. And it's so exciting to see how our investors are converting. But all we do is leads. It's mostly from the Google platform, whether it's pay-per-click, YouTube, some display ads. But everything's going through our Google platform for the most part. And we bring the leads in for the investors.

What I'm seeing is, you know, I thought people would be selling the houses right away and a lot of motivation. But what I ended up seeing, I did a sample last week of just a couple days from last year. I said, how many of these leads are actually selling a year later? What I found is 27% of the leads sell within one year.

Which is a lot more than I thought. I think that's awesome. You know, you'd think you'd have more tire kickers being that you're doing Google platform.

27% is a lot. But what I also found is 64% of those... don't sign a contract till 90 days after they filled out the lead.

And that blew me away.

Blew me away. Because now you have the opportunity You get a lead in, you're like, oh man, this person's unmotivated, they want retail. Of course they want retail, wouldn't you? But then reality strikes them in the face. That hole in the roof's not going to fix itself. That kitchen, you haven't updated it for 50 years, you're not going to get the price your neighbor got.

So let's try and find a deal. And if the investors follow up, and I think more phone calls every so often, don't blow up their phones, but check back every month or two. That month, three, four, five, six, you're going to see a huge advantage.

Yes, I have some suggestions. I'll give you a couple more numbers, though.

Number one, it takes over 30 contacts on average to get a contract between text, emails, and phone calls.

You know, a lot of it's a couple of texts in the beginning, but then, you know, we're tracking all the text messages, all the emails. Some of them might be a threat, but the average is over 30 times you've talked to a person before you get a deal. The other thing we found going back to the 27%, another 28% list and don't sell. Hmm.

And you think that there's opportunities in there, especially the listings that don't sell. You get back to them, hey, listen, how'd the listing go? It didn't work. I understand you tried to go with a realtor. Hey, let's revisit this. And I think you talk so much about having the personal relationships. Obviously, if you're buying a lot of leads, you can't have a...

you know, real tight relationship with people, but having a system, maybe follow up Fridays. I used to say in one of my old companies, I was like, I don't want you guys doing new work on Fridays. Just follow up with your people. Hey, how's everything going? Make a few phone calls. Casual. How's everything? If they need your help, they do. If not, you're checking in on them. That's right.

You know, one of our clients, This guy named Luis, he used to send out Christmas cards and New Year's cards to everybody, Earth Day cards to people. Anybody could find a birthday, he'd send them a birthday message.

He'd get a lot of deals from that, but he'd probably get about one or two a year.

That's it.

Yeah, absolutely. I mean, you're so right on that. And, you know, I'd use a very small sample size. Let's just clear that out. I wasn't going through, you know, a year's worth of data. This was me and Elizabeth going through PropStream, going through Zillow and just doing our own research. You know, so we're trying to do it quickly.

We didn't sign a contract until after 90 days after.

And from 90 days to 160, it was about 20-something, you know, from six months to nine months, again, 20-something. And then it trailed off a little bit at the end.

And then you'll still get them over. 40-some-odd percent.

The first 30 days, the first 90 days, only about a third of the leads go under contract. Oh, I thought you said... Those 64 is all from the follow-up.

I thought it was a curve that's going down this way.

But it actually kind of like curves up and it curves up and it's even, but two-thirds of it is after 90 days.

And... I never knew that before. I wasn't expecting that. But I figured, how are we going to figure out how lead quality is? And when I called investors, I'm like, oh, how's the lead quality? Oh, I didn't get any deals. And I'm asking, how's your last 10 deals, your 10 leads you got? And now I'm thinking to myself, that's okay. There's deals in those. You just got to do the follow-up.

You need to contact them. But some of it's just text back and forth. Some of it's follow up. Some of it's just.

I'll give you a little example on this with the competitors, right? A lot of our competitors, I know them. They're good guys. I look at it as you go to a street. And if you're going out for a drink, you can go to a place where there's a lot of bars. And everybody wants to drink. There's more people who want to sell, and there's more opportunity in real estate and investors than there is.

That's what I'm talking about. We sent out or the investor sent us. I would go through the CRM and I'd be counting.

But for example, if I go, hey, Jay, how are you? And then you go, oh, I'm good. I go, oh, good to hear. What's going on? I would count each time I send a message in that number.

Yeah. Okay. I get it. I'm saying that's what we're seeing on average. Some of them, it's one call. Hey, I'll be in the neighborhood later and I'm going.

You know, other ones are, you know, you have your follow-up emails that are going out every month. You've got a text message chain back and forth. You know, you do an appointment, you call them back three months later, you do another appointment. So all of it's going to be different. Depends on the seller and what they need.

On average, we're seeing over 30 contacts get those contracts.

Oh, no doubt about it.

That's, yeah, that's exactly it. You know, we just, once you get the data and you have your systems, it changes everything. And what we see is a lot of the investors who go on the appointments do really well.

This year is the hardest year ever to predict the real estate market. Why? Because there are so many wild cards. Trump is the wild card of wild cards. The average construction worker now is almost 50 years old. In the past, you know, it was guys in their early 20s. Nowadays, these guys have aged. They're all 50. And there is a giant shortage of construction workers.

If it's just a simple commodity, it's very hard to demonetize that. OK. So anyway, back to I don't know what inflation now.

Oh, sure.

Yeah.

Yeah.

Right.

I call that refi till you die, those last two things. That's right.

But, you know, they are a cost to the government. And it costs generally about $8,000 per year per illegal in the country. So that is a weight on the government that's causing more inflation. But that inflation is delayed from the benefit. The benefit is immediate and the cost is delayed. Hmm.

Yeah, no, you got it. Look, income property is the most historically proven asset class in the entire world. There simply isn't an asset class like it because it has special multidimensional characteristics. You alluded to a few of them. You're absolutely right about that. And the other thing is it's the most tax-favored asset class in America.

And taxes, you were talking about that, are the largest expense in most people's lives. It's funny and silly the way we are as humans. We will shop around for the best price on a vacation, the best price on a piece of clothing, the best price on a car or a TV set or a computer or whatever, but the single largest expense we have is taxes. Yet we won't

Right, that's true, too.

As long as you can earn more than you're paying in interest, then you're arbitraging that.

Yeah, there are. You know, there's one more upside that you didn't mention, and I'm sure everybody watching or listening has friends like this, or maybe you are this type of person, and you do too. You know, the other thing about your real estate portfolio is it's not easy to spend it. So if you have a spending problem or a gambling problem or something, it's not that easy to access the money.

That's right. Which is a good thing because it sort of works in the background and it's just kind of chugging away 24-7, 365. And, you know, you kind of don't think about it being there. But when there is an emergency, like you were saying, you can tap it. Right.

Oh, no question. Yeah. No, you got it. You got to own properties. You got to have assets. I mean, every wealthy person is a real estate investor.

Yeah. It may not be their thing. I mean, you know, it may be, you know, Mark Zuckerberg, for example, he owns all sorts of real estate. He's an investor, too. Right. But that's not the way he really made his money. It's just you've got to put money into real estate because of the tax benefit, if for nothing else.

And so that's why the Democrats and really the Republicans, too, over the years have not controlled the borders because the benefit to their time in office is obvious. But the cost comes later. So it's benefit now, pay later. And so Trump is, you know, he's going to make us take a little bit of medicine here with these deportations. But overall, I think that's, you know, it has to happen.

Okay. So inflation-induced debt destruction. This is, I know it's a couple. I actually trademarked that term about, I don't know, 12, 15 years ago.

Right. It's a mouthful. Say it 10 times fast. I can't. So basically what this is, Justin, is it's the hidden wealth creator with real estate. Because most people think they're getting rich in real estate because the property appreciates. I bought it for this. I sold it for that. Or now it's worth that. Even if I haven't sold it, I refinanced it, pulled money out.

But what's happening in the background is really important. Inflation, well, let's just back up a minute. You know, to understand what's going on in terms of money and the value, we need to distinguish between price and value and real and nominal. So the real value of something, that's what you can trade it for, right? The nominal value of something is the name of it.

So if I held up a $100 bill and said, Justin, what's that? You'd say, $100 bill. Well, you'd say that today, but would you have said that in 1990, right? Yes, it had the same name, but the value was different, right? It was worth much more back then. A lot more.

And so inflation that is the ever-present thing destroys the value of our savings, our stocks, our bonds, these investments that we own, even our equity in real estate.

But it thankfully also destroys the value of debt.

So debt is my favorite four-letter word for this reason. Because if you have a mortgage on a property, and hopefully you're leveraging your properties always, because that mortgage is an asset. And now, with what we've got going on, where so many people have these cheap mortgages that they got during the COVID era, now everybody realizes the mortgage is an asset. In fact...

Before COVID, I couldn't convince people of this very easily. They really had to buy into what I was saying. But now people have these, I mean, 25% of the country has a mortgage adder below 3%.

Or investment properties. Who own any property has a mortgage adder below 3%. 65% of the country has a mortgage adder below 4%. It's insane.

So you know what they realized? they realize their mortgage is not a liability. It's an asset.

Okay. Mostly the traditional idea is, okay, the house is the asset and the mortgage is the liability. If you had a balance sheet, that's the way you draw that. That's right. Okay. But a cheap mortgage is a mega huge asset. And now we have proof because we have what's called the lock-in effect.

Where people will not relinquish their houses. That's why the inventory is so low. Nobody wants to sell because they have these cheap mortgages.

You're never selling that house.

We can't, we can't duplicate that cheap mortgage.

Right. Actually, that's a really good point you made too. The lock-in effect has created a lot more real estate investors because they'll keep their old house, turn it into a rental because they've got such a good asset, that cheap mortgage. Okay. And this is why we're unlikely to have any major increase in housing inventory anytime soon. And I know we keep jumping off the topic, okay?

Because this lock-in effect is so serious. The only way you cure the lock-in effect is with much lower interest rates. That's right. And the way you get much lower interest rates is a crisis. Without a crisis... we're not going to see those rates again. That's right.

Countries can't be lawless. They have to have borders. OK, every country on Earth has borders. The other thing is the tariffs. And so when you look at the cost of housing and the cost of construction, think of the ingredients of a house, an apartment building, or any kind of building for that matter. You know, concrete, lumber...

You're right.

I would say five and a half. And five and a half, think of the rationale between all these millions of homeowners. If their mortgage, if they can get a new mortgage at five and a half and they're currently paying maybe four and a half, they can rationalize that decision. And they'll put their house on the market. When that delta gets smaller, they'll sell.

But when the delta is, you know, from 4.5% to 7%, They're just not willing to deal.

Right.

Yeah, no. Buyers can't afford it. The affordability is strong.

Right. Absolutely. OK, so so here's what happened. Just so I can tell you, this is not a theory. It's a fact because it happened historically and it keeps happening every day. So in 1972, a typical house was eighteen thousand dollars. In 1972, if you bought that house, you would typically put 20% down and you'd get a mortgage that was 7.3%. Okay. That was the rate.

That's a year after Nixon took us off the gold standard. Okay. So then if you got a 30-year mortgage, basically you would have paid $101 a month for three decades. But just fast forward 12 years, and let's go to—it's a famous year, and that's why I'll use it. George Orwell wrote this great book called 1984, okay? Which everyone needs to read because it's come true, okay? Sadly.

Government surveillance, etc. So in 1984, that 1972 dollar is now only worth 40 cents. Mm-hmm. Because of inflation. Because of inflation, right? There was a lot of inflation in the 70s. And every month for that 12-year period, that homeowner kept writing a check for $101 every single month. But guess what? That $101 felt really burdensome in 1972, but by 1984, it only felt like $40. Right.

Right. Their income went up.

And the value of the dollar declined. And when the dollar's value declines, the value of the debt that's denominated in dollars also declines. Mm-hmm. Debt is my favorite four-dollar word.

Absolutely. That's exactly what happens. That is inflation-induced debt destruction.

sheetrock, copper wire in the walls, petroleum products all over the place, you know, glass, steel. And then think of the products that are assembled, but the small products in a house that are massively imported. Doorknobs, hinges, cabinet doors, you know, all these things, the faucets, you know, all of these things. If we see tariffs happen, the price of those will skyrocket. Mm-hmm.

Literally, there is a wealth, you know, we hear the word a lot lately, this phrase wealth transfer, okay, which means the wealth is being transferred from, you know, the little people to the global elites, right? And that's certainly true, sadly. But there's also this wealth transfer going on all the time, transferring wealth from lenders to borrowers.

See, if you listen to someone like Dave Ramsey, you're not getting this advantage. And listen, I don't want to bash Dave Ramsey too much because he's good for the market he serves. There's a lot of people that have stupid credit card debt and they got to stop overspending. And that's great. But Dave Ramsey will take you to sixth grade.

Once you're going into seventh grade and eighth grade and ninth grade, you've got to graduate from Dave Ramsey. Okay. He's good for his market.

I don't love him for where we're at. He can't teach you how to invest. That's right. He can teach you how to get out of debt. That's right. And that's good. You know, people need to do that. And that means consumer debt, not mortgage debt, which is an asset. Okay.

Yeah. Yeah. So this wealth transfer is happening from lenders to borrowers all the time. Because think about it. Just like you said, you know, if you take out this loan, you pay it back in cheaper and cheaper and cheaper dollars. And that benefits you as the borrower. It also, there's this wealth transfer going on from old people to young people all the time.

I mean, look, you're probably a millennial, I'm guessing, right? I'm a Gen Xer, okay? I'm a little older. And so millennials like to complain, right? Right. And, you know, they have some legitimate complaints. Sure. But not all of them are totally legit. And, you know, one reason, by the way, let's take a little tangent. One reason the millennials maybe have less room to complain is this.

Millennials are on the slow life plan. And so what they do is they make these comparisons and they say, well, when my parents were 30 years old. They could afford a house and, you know, it was a nice house, right? And I can't afford anything and I'm 30. But that's not an accurate comparison because the millennials are doing everything about six years later than their parents.

So you got to compare a 36-year-old millennial to a 30-year-old baby boomer parent.

And then it'll be more accurate. But then the millennials will say, well, you know, my baby boomer parents didn't have all this college debt. And they're right. The college debt is a scam. It's a complete scam, okay? You know, I call it the student loan debt enslavement industrial complex. It's terrible. But guess what your baby boomer parents did have in terms of an obligation?

They had children. And they were expensive, too.

Right. Yeah, you got kids. And so, you know, it's complicated, right? But there's this transfer going on from old people to young people every day. Why? Because old people hopefully have assets. They have savings accounts. They have stocks. and bonds. Those are their major assets. Now, of course, they have real estate too. They probably have equity in real estate.

Guess what that's all denominated in? Dollars. So if the value of the dollar goes down, the value of those things goes down. So your stocks are worth less, your bonds are worth less, your equity in your real estate's worth less, your savings account is worth less. But young people tend to have debt. And even if it's bad debt, it still is getting debased all the time through inflation.

So the parents don't have to die to transfer wealth in an inheritance to their children. It's just happening all the time. Because of inflation. So this happens between borrowers and lenders and between old people and young people. And it's just an incredible, incredible thing. So let's finish the story. We talked about what happened 12 years later in our example. We went from 1972 to 1984.

Dollars only worth 40 cents. The $101 a month mortgage payment is now only 40 bucks. Great. What happened by the end of that? 30 years after 1972, when the person made the last payment on that mortgage, that payment was now, the dollar was worth 24 cents.

And ultimately, that's good for the country too, though, because it'll bring manufacturing back to the U.S. and make more high-paying American jobs. But initially, there's going to be a little pain.

Yeah. Well, maybe not ouch if you have debt.

Yeah. Ouch to the lender. Yeah. Yeah. Not to the borrower.

And so now that $101 a month mortgage is only $24. Yeah. So what happened there? Like, if we really do the math on this, here's what happened. They got their loan, their mortgage, it's 7.3%, okay? They thought they were paying 7.3% and probably had several conversations over the years. Can you hear it now?

The husband and the wife are saying, well, you know, hey, honey, do you think we should pay off this mortgage? Because we're paying 7.3%. Like, why should we be paying all this interest to the bank? The bank is getting rich. No, you're getting rich because the inflation is making your debt cheaper. So hopefully they didn't pay the mortgage off, OK?

But then, if you analyze it, after inflation debased the value of the loan balance and the monthly payment on the loan, both of them, right? They really were only paying 1.06%.

Yes.

That's all they paid in interest, yes. That was their true interest rate.

Nope. Not the value, just the mortgage being debased by inflation. Inflation. That's it. Right? Assume the value just kept up with inflation. And by the way, you know, if you think real estate appreciation is going to make you rich, that's not as true as most people think.

Because historically, real estate only outperforms the consumer price index, the major, you know, determinant of inflation, which is bullshit, by the way. I call it, you know, it's the CPI. It's a made-up number. Yeah, I call it the CP lie, okay? Right. And we can talk about how the government manipulates that if you want.

But, you know, the real inflation rates probably double the consumer price index or at least 50% more at any point. Okay. If we just go, by the way, my example is just based on the CPI, which is understated, okay? So what was I saying there? So their payment and their balance got debased by inflation.

The appreciation does not really make you rich because it only outperforms inflation by a little bit historically over time.

Well, about 6%.

Yeah, that's a good conservative number, right? And there will be times where it does way better. But those are the stories everybody remembers. Most of the time, if you just average it out, it's going to be about 6% is what we use. You use 5, okay?

So 6% would go with, so that million dollars in portfolio value of your real estate is worth $1,060,000 after the first year, and then it compounds on that. But that beats inflation only by a little bit. It's not going to make you rich. What makes you rich is leveraging the real estate because then you have a multiplier effect. So now let's assume you break even, right?

And if you put 10% down, the 6% is now 60%. Okay? Because of leverage, but also there's that inflation-induced debt destruction nobody's calculating behind the scenes. That's right. Back to the example to finish it. So you're just paying over 1% interest when you thought you're paying 7.37% in the example. But guess what?

There's one, but wait, there's more, as they say on the late night infomercial. The mortgage interest is tax deductible. That's right. So the government is actually paying part of it for us. So after inflation debases the interest rate, and after tax benefits debase the interest rate, you're actually getting paid 1.16% to borrow the money.

Plus, the people got to live in the house for free for three decades. Wow. That's why people who own real estate are so much richer than people who don't. Because they can just run so much faster in the financial race. You literally get paid to borrow money. It's incredible.

Yeah, we'll rehash it. Sure.

It's 1972. Yeah. We borrow just over $14,000 to buy the median price house for $18,000. Okay. Put 20% down. Yeah. We pay 7.37% interest when we sign the loan docs. In 1972, we take that all the way to the end of the loan. And we thought we were paying 7.37%. But after inflation, we were only paying just over 1%.

And after tax benefits, meaning the interest on the mortgage being deductible, we actually got paid to borrow money, just over 1%, getting paid negative interest rate. And we got a free house for 30 years.

You're getting paid. It's not free. It's getting paid.

Well, there's so many other things, too.

But that's the most hidden thing that people don't see.

You're going to be better off than most people.

You multiply it. It's incredible.

It's incredible.

And listen, I love Bitcoin. I think, I hope Bitcoin takes over the world, but I'm not sure it will. It might go to zero. I mean, I own a bunch of them.

It's very speculative. It's just super speculative.

Right, no. Real estate's a very,

It's not going to happen.

unique asset class I think it's just the it's only the best asset class that anyone could be in yeah no question I just and I know you support that so dude you and I you know what here's a comparison you know all these corporate raiders right that we've all heard about T. Boone Pickens Carl Icahn all these billionaires okay they have a strategy Justin and their main strategy that became really popular in the late 80s is called the LBO the leveraged buyout

As real estate investors, we're doing LBOs. That's exactly what we're doing. The LBO strategy is this. They identify a company and hopefully this company, the sum of its parts are worth more than it's trading for.

Okay. They go in and they try to buy the company and they just pile debt on the company. And then they make the company, once they acquire it, pay the debt back with its own earnings. That's exactly what we do with rental properties. We pile debt on it, and then we make the tenant pay the debt.

Okay? And then we get inflation-induced debt destruction and all these other things. There's just no other asset except doing LBOs. Yeah. If you're in that game, which would probably be better because I'd be bigger. Yeah. It has the same characteristics as a leveraged buyout. BLBO.

Yeah, thanks. So the Creating Wealth Show is my main podcast. I've been podcasting for 21 years now, and we've got over 2,000 episodes on the Creating Wealth Show. So just look up Jason Hartman on any podcast platform. YouTube, look up Jason Hartman, and you'll find my channel there. We've got, I think, over 1,000 videos on YouTube now. And my main website is just my name, jasonhartman.com.

And we've got an event coming up, by the way, which we might see you at. I don't know if you're going to make the trip, but it's in Southern California in April. And it's called Empowered Investor Live. My main company is called Empowered Investor.

Well, it would, I mean, it's a double-sided coin, right? You know, you lower interest rates, you ease the supply of money. There's more money coming into, flowing into the economy, chasing a limited supply of goods and services, and you're going to have inflation. It's simple supply and demand. So the Fed is a private organization.

And that's going to make the supply demand equation out of balance. That's going to push the price of housing up. These tariffs will push the price up. There's a lot of upward pressure on prices and just general inflation.

The Federal Reserve, our central bank, is about as federal as Federal Express. It's a company, although it's a special company. And I am very much against having a Fed. I don't think we should have one. But back in 1913, they created it. We have what we have. So what I think doesn't really matter. Trump does not control the Fed.

And you saw probably you caught on the news or some people did his little war, his spat with Jerome Powell. And he had that his first term, too, saying, you know, if a reporter asked Jerome Powell, the Federal Reserve chair, you know, if if Trump were to ask you to step down, would you do it? And he said, no, no. Right.

Right. You're right. So Trump does not control the Fed. However, Trump could potentially run around the Fed. And there is an interesting way to do that that is a little bit above my pay grade. But I had a guest on my show, Richard Duncan, talking about it. You can look at that episode on my YouTube or podcast for more on that. We talked for about an hour and a half.

And basically, there is a way to end run around the Fed that the president could do. So we'll see if that happens. But regardless, the price of money, which is an interest rate, is set now by the Federal Reserve. The Federal Reserve does not directly control mortgage rates, but it controls rates and it influences mortgage rates.

So even if we didn't have a Fed, we'd still have a free market for money. I think that's the way we should have it. But it would still be subject to market pressures and supply and demand. It doesn't mean rates will drop if the Fed goes away because everybody will just be acting as market participants.

No, the market. Okay. So it's super complicated. Of course. And I mean, this is a rabbit hole that, you know, I used to go down a lot about 22 years ago when I got really into this stuff and got really into, you know, sound money and gold and... And then, you know, the cryptocurrency trend came along and that's been a really good trend, regardless of whether you invest in it or not.

And, you know, certainly I own some Bitcoin and a few others, you know, but it has taught people about money. Yeah. You know, back in 2005, when I was talking about some of this stuff, nobody was aware of the Fed. I mean, that was a very small group of people or, you know, fiat money. And fiat just means by authority, by decree, right? The dollar has value because the government says it has value.

That's right. People weren't aware of the way that worked. And now they are.

And that, you know, Bitcoin brought that to the forefront. People get it now. And that's a really good.

Oh, very important.

Right.

Right. One comment on that, though. One mistake that a lot of people make, you know, where they're bashing the dollar and they're bashing, you know, fiat money, right, government money, is they say, well, the government's not backed by anything. And that's not true. You know, Nixon cut the last tie with gold standard on August 15th of 1971. And so it's not backed by gold.

But it is backed by aircraft carriers, missiles, standing armies. And interestingly, the American brand backs the dollar. Think of the biggest brands in the world, Coca-Cola, McDonald's, whatever, right? America is the world's biggest brand. And I think a lot of people don't understand that that brand has incredible value. Now, It's been diminished and it's on the decline.

Hopefully now it'll turn around, but it's still the world's biggest brand.

I've done north of 3,000. Yeah, but that's, you know, through my different companies over the years and all.

Hey, Justin, it's good to be here.

Well, you know, a big part of it is inflation. And how much inflation will we have? We're not going to have deflation in any significant way. There's just nothing to support that idea. You know, there may be little bouts of it or declining inflation. But overall, the macro trend is inflation. And with inflation, real estate benefits huge amounts. I mean, bigly, as Trump would say.

Yeah, yeah, yeah. Benefits bigly. And inflation is the hidden wealth crater for real estate investors. And we can talk about that more. But in terms of the forecast, you know, the last 21 years I've been forecasting the market, and my predictions have pretty much all come true except one major prediction, interest rates. I have been wrong about interest rates. Those are very hard to forecast.

Of course. Of course. I'm not going to try and do it anymore. Okay. Fair enough. But in terms of the market, this year is the hardest year ever to predict the real estate market. Why? Because there are so many wild cards. Trump is the wild card of wild cards. You know, the tariff issue, the construction workers, your prior guest was talking about that. That's right.

The average construction worker now is almost 50 years old. In the past, you know, it was guys in their early 20s, you know, framing houses. Nowadays, these guys have aged. They're all 50. And there is a giant shortage of construction workers. And that's going to make the supply-demand equation out of balance. That's going to push the price of housing up. These tariffs will push the price up.

There's a lot of upward pressure on prices and just general inflation and housing shortage. Right now, we have less than 700,000 homes on the market in the United States.

It's terrible. Yeah. There is a massive housing shortage. We should have about double to be just normal.

Yeah. Yeah. Well, you know, what you're going at is it depends what survey you're looking at. So let me let me just dice that a little bit. So National Association of Realtors is probably what you're looking at. And their survey of inventory includes pending home sales and contingent home sales and actively listed homes. So I don't like their survey, although they have been doing it the longest.

What I like is the Altos data. And what that does is only active. They don't count pending or contingent sales. So when they count them, you could really buy that house today. So that's why I follow that one. So it depends what you follow. But it doesn't really matter which survey you follow as long as you just compare it to the same survey five years ago, ten years ago. That's right.

Then you know.

Yeah, that's funny. Well, I think half the people don't think he's the savior. Yes. Well, less than a little less than half. And yeah, it's a it's a really interesting time. I think Trump is going to be incredible. I think the second term is going to be phenomenal. I think he's matured. I think he knows what he's doing. He's an executive. He's a winner.

It's the same percentage. Yeah. Okay.

Yeah.

Yeah. Yeah. It's a mouthful. It's an inflation-induced debt destruction-

Right.

Yeah, so the concept is, and let's just circle back to that inventory thing for a minute because I kind of wanted to say one more thing. We have about 140 million housing units in the U.S. Less than half a percent are for sale. Right. That's insane. No, it's insane.

For NAR data. For Altos data, it's about a million five. That's right. So, yeah.

Oh yeah, made it worse.

You're absolutely right. You know, there is this really silly idea that a lot of humans have that because something was more affordable before, it has to revert to that trend line. That's just not fucking true.

It does not have to become affordable again. It could be expensive forever. I mean, this is not technology. Technology is easy to disrupt.

Yeah. And it can be scaled infinitely. You know, a new software can come out and change the world. Look at what OpenAI did with ChatGPT. That's right. Right. That's just changed the world. It's disrupted everything. And then DeepSync, if you believe that's a real thing that just came out, you know, the Chinese AI, you know, might have disrupted them. Okay, great. Houses are simple, low-tech items.

They're made from commodities that everybody on Earth needs. All those ingredients we mentioned earlier, every human on Earth needs those things because they need shelter. And you just can't disrupt it. Yeah. Your prior guest, you kind of alluded to it, but he didn't really expand on it too much. 3D printed houses.

Unlike the previous administration, that was just a complete disaster. But it's not going to be without some pain. There will be some bumps in the road. These changes that Trump is making, I believe, are very good for the country long term. But, you know, if you take millions of illegals out of the market, you know, they rent from somebody. They work for somebody. Not all of them, of course.

So a few years ago, I was going to start a 3D printed house construction company of my own because I thought that was an opportunity. I hired a consultant. He's been on my show a few times. Really interesting guy. It's all he does is study that. It's not the solution. Okay. There's a lot of false advertising around 3D printed housing, at least today. Sure. Because...

You know, they'll say, well, we built these houses in Austin, Texas for $10,000 apiece. Well, they didn't include the land cost. They didn't include plumbing, electrical, HVAC. They didn't include cabinets, interior finishes of any kind. It's just the thing that went around and wrapped up. It's stupid. It's just false advertising.

Remember, a 3D printed house, even though the construction is more efficient, it's still made of material. That's right. And those materials are low-tech items that have to be produced, and they cannot be disrupted easily. You know, you're not going to invent some new type of concrete that solves... It's still material. That's right. And if it's digitized, it can be demonetized.

This year is the hardest year ever to predict the real estate market.

If it's just a simple commodity, it's very hard to demonetize that. OK. So anyway, back to I don't know what inflation now.

Oh, sure.

Yeah.

I call that refi till you die, those last two things. That's right. Yeah.

But, you know, they are a cost to the government. And it costs generally about $8,000 per year per illegal in the country. So that is a weight on the government that's causing more inflation. But that inflation is delayed from the benefit. The benefit is immediate and the cost is delayed. Hmm.

Yeah, no, you got it. Look, income property is the most historically proven asset class in the entire world. There simply isn't an asset class like it because it has special multidimensional characteristics. You alluded to a few of them. You're absolutely right about that. And the other thing is it's the most tax-favored asset class in America.

And taxes, you were talking about that, are the largest expense in most people's lives. You know, it's funny and silly the way we are as humans. We will shop around for the best price on a vacation, the best price on a piece of clothing, the best price on a car or a TV set or a computer or whatever. But the single largest expense we have is taxes. Yet we won't Oh, cut the check.

As long as you can earn more than you're paying in interest, then you're arbitraging that.

Yeah, there are. You know, there's one more upside that you didn't mention, and I'm sure everybody watching or listening has friends like this, or maybe you are this type of person, and you do too. You know, the other thing about your real estate portfolio is it's not easy to spend it.

So if you have a spending problem or a gambling problem or something, it's not that easy to access the money, which is a good thing because it sort of works in the background and it's just kind of chugging away 24-7, 365. And, you know, you kind of don't think about it being there. But when there is an emergency, like you were saying, you can tap it. Right.

Oh, there's going to be some.

Oh, no question. Yeah. No, you got it. You got to own properties. You got to have assets. I mean, every wealthy person is a real estate investor.

Yeah, it may not be their thing. I mean, you know, it may be, you know, Mark Zuckerberg, for example, he owns all sorts of real estate. He's an investor, too. Right. But that's not the way he really made his money. It's just you've got to put money into real estate because of the tax benefit, if for nothing else.

And so that's why the Democrats and really the Republicans, too, over the years have not controlled the borders because the benefit to their time in office is obvious. But the cost comes later. So it's benefit now, pay later. And so Trump is, you know, he's going to make us take a little bit of medicine here with these deportations. But overall, I think that's, you know, it has to happen.

OK, so inflation induced debt destruction. This is I know it's a couple. I actually trademarked that term about, I don't know, 12, 15 years ago.

Right. It's a mouthful. Say it 10 times fast. I can't. So basically what this is, Justin, is it's the hidden wealth creator with real estate because most people think they're getting rich in real estate because the property appreciates. I bought it for this. I sold it for that. Or now it's worth that. Even if I haven't sold it, I refinanced it, pulled money out.

But what's happening in the background is really important. Inflation, well, let's just back up a minute. You know, to understand what's going on in terms of money and the value, we need to distinguish between price and value and real and nominal. So the real value of something, that's what you can trade it for, right? The nominal value of something is the name of it.

So if I held up a $100 bill and said, Justin, what's that? You'd say, $100 bill. Well, you'd say that today, but would you have said that in 1990, right? Yes, it had the same name, but the value was different, right? It was worth much more back then. A lot more.

And so inflation that is the ever-present thing destroys the value of our savings, our stocks, our bonds, these investments that we own, even our equity in real estate.

But it thankfully also destroys the value of debt.

So debt is my favorite four-letter word for this reason. Because if you have a mortgage on a property, and hopefully you're leveraging your properties always. Because that mortgage is an asset. And now, with what we've got going on, where so many people have these cheap mortgages that they got during the COVID era, now everybody realizes the mortgage is an asset. In fact...

Before COVID, I couldn't convince people of this very easily. They really had to buy into what I was saying. But now people have these, I mean, 25% of the country has a mortgage adder below 3%. 25% of the country? Who own homes.

Or investment properties. Who own any property has a mortgage adder below 3%. 65% of the country has a mortgage adder below 4%. It's insane.

So you know what they realized? they realize their mortgage is not a liability. It's an asset.

Okay. Mostly the traditional idea is, okay, the house is the asset and the mortgage is the liability. If you had a balance sheet, that's the way you draw that. That's right. Okay. But a cheap mortgage is a mega huge asset. And now we have proof because we have what's called the lock-in effect.

Where people will not relinquish their houses. That's why the inventory is so low. Nobody wants to sell because they have these cheap mortgages.

You're never selling that house.

We can't duplicate that cheap mortgage.

Right. Actually, that's a really good point you made too. The lock-in effect has created a lot more real estate investors because they'll keep their old house, turn it into a rental because they've got such a good asset, that cheap mortgage. Okay. And this is why we're unlikely to have any major increase in housing inventory anytime soon. And I know we keep jumping off the topic, okay?

Because this lock-in effect is so serious. The only way you cure the lock-in effect is with much lower interest rates. And the way you get much lower interest rates is a crisis. Without a crisis... we're not going to see those rates again. That's right.

Countries can't be lawless. They have to have borders. OK, every country on Earth has borders. The other thing is the tariffs. And so when you look at the cost of housing and the cost of construction, think of the ingredients of a house, an apartment building, or any kind of building for that matter. You know, concrete, lumber...

You're right.

I would say five and a half. And five and a half, think of the rationale between all these millions of homeowners. If they can get a new mortgage at five and a half and they're currently paying maybe four and a half, they can rationalize that decision. and they'll put their house on the market. When that delta gets smaller, they'll sell. But when the delta is, you know, from 4.5% to 7%,

They're just not willing to do it all.

Right.

Yeah, no. Buyers can't afford it. The affordability is too low.

Right. Absolutely. OK, so so here's what happened. Just so I can tell you, this is not a theory. It's a fact because it happened historically and it keeps happening every day. So in 1972, a typical house was eighteen thousand dollars. In 1972, if you bought that house, you would typically put 20% down and you'd get a mortgage that was 7.3%. Okay. That was the rate.

1972.

That's a year after Nixon took us off the gold standard. Okay. So then if you got a 30-year mortgage, basically you would have paid $101 a month for three decades. But just fast forward 12 years and let's go to, it's a famous year and that's why I'll use it. George Orwell wrote this great book called 1984. Okay. Which everyone needs to read because it's come true. Okay.

Sadly, government surveillance, et cetera. So in 1984, that 1972 dollar is now only worth 40 cents. Hmm. Because of inflation. Because of inflation, right? There was a lot of inflation in the 70s. And every month for that 12-year period, that homeowner kept writing a check for $101 every single month. But guess what? That $101 felt really burdensome in 1972, but by 1984, it only felt like $40.

Right.

Right.

And the value of the dollar declined. And when the dollar's value declines, the value of the debt that's denominated in dollars also declines. Debt is my favorite four-day word.

Absolutely. That's exactly what happens. That is inflation-induced debt destruction.

Sheet rock, copper wire in the walls, petroleum products all over the place, you know, glass, steel. And then think of the products that are assembled, but the small products in a house that are massively imported. Doorknobs, hinges, cabinet doors, you know, all these things, the faucets, you know, all of these things. If we see tariffs happen, the price of those will skyrocket. Right.

Literally, there is a wealth, you know, we hear the word a lot lately, this phrase wealth transfer, okay, which means the wealth is being transferred from, you know, the little people to the global elites, right? And that's certainly true, sadly. But there's also this wealth transfer going on all the time, transferring wealth from lenders to borrowers.

See, if you listen to someone like Dave Ramsey, you're not getting this advantage. And listen, I don't want to bash Dave Ramsey too much because he's good for the market he serves. There's a lot of people that have stupid credit card debt and they got to stop overspending. And that's great. But Dave Ramsey will take you to sixth grade.

Once you're going into seventh grade and eighth grade and ninth grade, you've got to graduate from Dave Ramsey, okay? He's good for his market.

I don't love him for where we're at. He can't teach you how to invest. That's right. He can teach you how to get out of debt. That's right. And that's good. People need to do that. And that means consumer debt, not mortgage debt, which is an asset, okay?

Yeah, yeah. So this wealth transfer is happening from lenders to borrowers all the time. Because think about it. Just like you said, you know, if you take out this loan, you pay it back in cheaper and cheaper and cheaper dollars. And that benefits you as the borrower. It also, there's this wealth transfer going on from old people to young people all the time.

I mean, look, you're probably a millennial, I'm guessing, right? I'm a Gen Xer, okay? I'm a little older. And so millennials like to complain, right? Right. And, you know, they have some legitimate complaints. Sure. But not all of them are totally legit. And, you know, one reason, by the way, let's take a little tangent. One reason the millennials maybe have less room to complain is this.

Millennials are on the slow life plan. Hmm. And so what they do is they make these comparisons and they say, well, when my parents were 30 years old, they could afford a house. And, you know, it was a nice house. Right. And I can't afford anything. And I'm 30. But that's not an accurate comparison because the millennials are doing everything about six years later than their parents.

So you've got to compare a 36-year-old millennial to a 30-year-old baby boomer parent, and then it'll be more accurate. But then the millennials will say, well, you know, my baby boomer parents didn't have all this college debt. And they're right. The college debt is a scam. It's a complete scam, okay? You know, I call it the student loan debt enslavement industrial complex. It's terrible.

But guess what your baby boomer parents did have in terms of an obligation? They had children. And they were expensive, too.

Right. Yeah, you got kids. And so, you know, it's complicated, right? But there's this transfer going on from old people to young people every day. Why? Because old people hopefully have assets. They have savings accounts. They have stocks. and bonds. Those are their major assets. Now, of course, they have real estate too. They probably have equity in real estate.

Guess what that's all denominated in? Dollars. So if the value of the dollar goes down, the value of those things goes down. So your stocks are worth less, your bonds are worth less, your equity in your real estate's worth less, your savings account is worth less. But young people tend to have debt. And even if it's bad debt, it still is getting debased all the time through inflation.

So the parents don't have to die to transfer wealth in an inheritance to their children. It's just happening all the time. Because of inflation. So this happens between borrowers and lenders and between old people and young people. And it's just an incredible, incredible thing. So let's finish the story. We talked about what happened 12 years later in our example. We went from 1972 to 1984.

Dollars only worth 40 cents. The $101 a month mortgage payment is now only 40 bucks. Great. What happened by the end of that? 30 years after 1972, when the person made the last payment on that mortgage, that payment was now, the dollar was worth 24 cents.

And ultimately, that's good for the country too, though, because it'll bring manufacturing back to the U.S. and make more high-paying American jobs. But initially, there's going to be a little pain.

Yeah. Well, maybe not ouch if you have debt.

Yeah. Ouch to the lender. Yeah. Yeah. Not to the borrower.

And so now that $101 a month mortgage is only $24. Yeah. So what happened there? Like, if we really do the math on this, here's what happened. They got their loan, their mortgage, it's 7.3%, okay? They thought they were paying 7.3% and probably had several conversations over the years. Can you hear it now?

The husband and the wife are saying, well, you know, hey, honey, do you think we should pay off this mortgage? Because we're paying 7.3%. Like, why should we be paying all this interest to the bank? The bank is getting rich. No, you're getting rich because the inflation is making your debt cheaper. So hopefully they didn't pay the mortgage off. Okay.

But then, if you analyze it, after inflation debased the value of the loan balance and the monthly payment on the loan, both of them, right? They really were only paying 1.06%.

Yes.

That's all they paid in interest. Yes. That was their true interest rate.

Nope. Not the value, just the mortgage being debased by inflation. Inflation. That's it. Right? Assume the value just kept up with inflation. And by the way, you know, if you think real estate appreciation is going to make you rich, that's not as true as most people think.

Because historically, real estate only outperforms the consumer price index, the major, you know, determinant of inflation, which is bullshit, by the way. I call it, you know, it's the CPI. It's a made-up number. Yeah, I call it the CP lie, okay? Right. And we can talk about how the government manipulates that if you want.

But, you know, the real inflation rates probably double the consumer price index or at least 50% more at any point. Okay. If we just go, by the way, my example is just based on the CPI, which is understated, okay? So what was I saying there? So their payment and their balance got debased by inflation.

The appreciation does not really make you rich because it only outperforms inflation by a little bit historically over time.

Well, about 6%.

Yeah, that's a good conservative number, right? And there will be times where it does way better. But those are the stories everybody remembers. Most of the time, if you just average it out, it's going to be about 6% is what we use. You use 5, okay?

So 6% would go with, so that million dollars in portfolio value of your real estate is worth $1,060,000 after the first year, and then it compounds on that. But that beats inflation only by a little bit. It's not going to make you rich. What makes you rich is leveraging the real estate because then you have a multiplier effect. So now let's assume you break even, right?

And if you put 10% down, the 6% is now 60%. Okay? Because of leverage. But also there's that inflation-induced debt destruction nobody's calculating behind the scenes. That's right. Back to the example to finish it. So you're just paying over 1% interest when you thought you're paying 7.37% in the example. But guess what?

There's one, but wait, there's more, as they say on the late night infomercial. The mortgage interest is tax deductible. That's right. So the government is actually paying part of it for us. So after inflation debases the interest rate and after tax benefits debase the interest rate, you're actually getting paid 1.16% to borrow the money.

Plus, the people got to live in the house for free for three decades. Wow. That's why people who own real estate are so much richer than people who don't because they can just run so much faster in the financial race. You literally get paid to borrow money. It's incredible.

Yeah, we'll rehash it. Sure.

It's 1972. Yeah. We borrow just over $14,000 to buy the median price house for $18,000. Okay. But 20% down. Yeah. We pay 7.37% interest when we sign the loan docs. In 1972, we take that all the way to the end of the loan. And we thought we were paying 7.37%. But after inflation, we were only paying just over 1%.

And after tax benefits, meaning the interest on the mortgage being deductible, we actually got paid to borrow money, just over 1%, getting paid negative interest rate. And we got a free house for 30 years.

You're getting paid. It's not free. It's getting paid.

But that's the most hidden thing that people don't see.

Yeah.

You're going to be better off than most people.

You multiply it. It's incredible.

Yeah.

It's incredible. Like, I,

And listen, I love Bitcoin. I think, I hope Bitcoin takes over the world, but I'm not sure it will. It might go to zero. I mean, I own a bunch of them.

It's very speculative. It's just super speculative.

Right, no. Real estate's a very,

It's not going to happen.

unique asset class I think it's just the it's only the best asset class that anyone could be in yeah no question I just and I know you support that so dude you and I you know what here's a comparison you know all these corporate raiders right that we've all heard about T. Boone Pickens Carl Icahn all these billionaires okay they have a strategy Justin and their main strategy that became really popular in the late 80s is called the LBO the leveraged buyout

As real estate investors, we're doing LBOs. That's exactly what we're doing. The LBO strategy is this. They identify a company and hopefully this company, the sum of its parts are worth more than it's trading for.

Okay. They go in and they try to buy the company and they just pile debt on the company. Okay. And then they make the company, once they acquire it, pay the debt back with its own earnings. That's exactly what we do with rental properties. We pile debt on it, and then we make the tenant pay the debt.

Okay? And then we get inflation-induced debt destruction and all these other things. There's just no other asset except doing LBOs. Yeah. If you're in that game, which would probably be better because I'd be bigger. Yeah. It has the same characteristics as a leveraged buyout. BLBO.

Yeah, thanks. So the Creating Wealth Show is my main podcast. I've been podcasting for 21 years now, and we've got over 2,000 episodes on the Creating Wealth Show. So just look up Jason Hartman on any podcast platform. YouTube, look up Jason Hartman, and you'll find my channel there. We've got, I think, over 1,000 videos on YouTube now. And my main website is just my name, jasonhartman.com.

And we've got an event coming up, by the way, which we might see you at. Yeah. I don't know if you're going to make the trip, but it's in Southern California in April. Yeah. And it's called Empowered Investor Live. My main company is called Empowered Investor. Very cool.

Well, it would. I mean, it's a double sided coin, right? You know, you lower interest rates, you ease the supply of money. There's more money coming into flowing into the economy, chasing a limited supply of goods and services, and you're going to have inflation. It's simple supply and demand. So the Fed is a private organization. It's the Federal Reserve.

Our central bank is about as federal as Federal Express. Right. Okay. It's a company, okay, although it's a special company. And I am, you know, very much against having a Fed. I don't think we should have one. But back in 1913, they created it. We have what we have. So what I think doesn't really matter. So Trump does not control the Fed.

That's going to push the price of housing up. These tariffs will push the price up. There's a lot of upward pressure on prices and just general inflation.

And you saw probably you caught on the news or some people did his little war, his spat with Jerome Powell that and he had that his first term to saying, you know, if a reporter asked Jerome Powell, the Federal Reserve chair, you know, if if Trump were to ask you to step down, would you do it? And he said, no. Right.

Right. You're right. So Trump does not control the Fed. However, Trump could potentially run around the Fed. And there is an interesting way to do that that is a little bit above my pay grade. But I had a guest on my show, Richard Duncan, talking about it. You can look at that episode on my YouTube or podcast for more on that. We talked for about an hour and a half.

And basically, there is a way to end run around the Fed that the president could do. So we'll see if that happens. But regardless, the price of money, which is an interest rate, is set now by the Federal Reserve. The Federal Reserve does not directly control mortgage rates, but it controls rates and it influences mortgage rates.

So even if we didn't have a Fed, we'd still have a free market for money. I think that's the way we should have it. But it would still be subject to market pressures and supply and demand. It doesn't mean rates will drop if the Fed goes away because everybody will just be acting as market participants.

No, but the market. Okay. So it's super complicated. Of course. And I mean, this is a rabbit hole that, you know, I used to go down a lot about 22 years ago when I got really into this stuff and got really into, you know, sound money and gold and... And then, you know, the cryptocurrency trend came along, and that's been a really good trend, regardless of whether you invest in it or not.

And, you know, certainly I own some Bitcoin and a few others, you know, but it has taught people about money. You know, back in 2005, when I was talking about some of this stuff, nobody was aware of the Fed. I mean, that was a very small group of people or, you know, fiat money. And fiat just means by authority, by decree, right? The dollar has value because the government says it has value.

That's right. People weren't aware of the way that worked. And now they are. And, you know, Bitcoin brought that to the forefront. People get it now. And that's a really good.

Oh, very important.

Right.

Right. Right. One comment on that, though. One mistake that a lot of people make, you know, where they're bashing the dollar and they're bashing, you know, fiat money, right, government money, is they say, well, the government's not backed by anything. And that's not true. You know, Nixon cut the last tie with gold standard on August 15th of 1971. And so it's not backed by gold.

But it is backed by aircraft carriers, missiles, standing armies. Okay. And interestingly, the American brand backs the dollar. You know, think of the biggest brands in the world, Coca-Cola, McDonald's, whatever, right? You know, America is the world's biggest brand. And I think a lot of people don't understand that that brand has incredible value. Yeah.

it's been diminished and it's on the decline. Hopefully now it'll turn around, but it's still the world's biggest brand.

I've done north of 3,000. Yeah, but that's, you know, through my different companies over the years and all.

Hey, Justin. It's good to be here.

Well, you know, a big part of it is inflation. And how much inflation will we have? We're not going to have deflation in any significant way. There's just nothing to support that idea. You know, there may be little bouts of it or declining inflation. But overall, the macro trend is inflation. And with inflation, real estate benefits huge amounts. I mean, bigly, as Trump would say.

Why? Because there are so many wild cards. Trump is the wild card of wild cards. The average construction worker now is almost 50 years old. In the past, you know, it was guys in their early 20s. Nowadays, these guys have aged. They're all 50. And there is a giant shortage of construction workers. And that's going to make the supply demand equation out of balance.

Yeah, yeah, yeah. It benefits bigly. And inflation is the hidden wealth crater for real estate investors. And we can talk about that more. But in terms of the forecast, you know, the last 21 years I've been forecasting the market, and my predictions have pretty much all come true except one major prediction, interest rates. I have been wrong about interest rates. Those are very hard to forecast.

Of course. Of course. I'm not going to try and do it anymore. Okay. Fair enough. But in terms of the market, this year is the hardest year ever to predict the real estate market. Why? Because there are so many wild cards. Trump is the wild card of wild cards. You know, the tariff issue, the construction workers, your prior guest was talking about that. That's right.

The average construction worker now is almost 50 years old. In the past, you know, it was guys in their early 20s, you know, framing houses. Nowadays, these guys have aged. They're all 50. And there is a giant shortage of construction workers. And that's going to make the supply-demand equation out of balance. That's going to push the price of housing up. These tariffs will push the price up.

There's a lot of upward pressure on prices and just general inflation and housing shortage. Right now, we have less than 700,000 homes on the market in the United States.

It's terrible. Yeah. There is a massive housing shortage. We should have about double to be just normal.

Yeah, yeah. Well, you know, what you're going at is, it depends what survey you're looking at. So let me just dice that a little bit. So National Association of Realtors is probably what you're looking at. And their survey of inventory includes pending home sales and contingent home sales and actively listed homes. So I don't like their survey, although they have been doing it the longest.

What I like is the Altos data. And what that does is only active. They don't count pending or contingent sales. So when they count them, it's, you could really buy that house today. So that's why I follow that one. Okay. So it depends what you follow, but it doesn't really matter which survey you follow as long as you just compare it to the same survey five years ago, 10 years ago. That's right.

Then, then you know.

Yeah, that's funny. Well, I think half the people don't think he's the savior. Yes. Well, less than a little less than half. And yeah, it's a it's a really interesting time. I think Trump is going to be incredible. I think the second term is going to be phenomenal. I think he's matured. I think he knows what he's doing. He's an executive. He's a winner.

It's the same percentage. Yeah. Okay. So yeah, that's,

Yeah. Yeah. It's a mouthful. It's an inflation induced debt destruction. Right.

Right.

Yeah, so the concept is, and let's just circle back to that inventory thing for a minute because I kind of wanted to say one more thing. We have about 140 million housing units in the U.S. Less than half a percent are for sale. Right. That's insane.

For NAR data. For Altos data, it's about a million five. That's right. So, yeah.

Oh yeah, made it worse.

You're absolutely right. You know, there is this really silly idea that a lot of humans have that because something was more affordable before, it has to revert to that trend line. That's just not fucking true.

It does not have to become affordable again. It could be expensive forever. I mean, this is not technology. Technology is easy to disrupt.

Yeah. And it can be scaled infinitely. You know, a new software can come out and change the world. Look at what OpenAI did with ChatGPT. That's right. Right. That's just changed the world. It's disrupted everything. And then DeepSync, if you believe that's a real thing that just came out, you know, the Chinese AI, you know, might have disrupted them. Okay, great. Houses are simple, low-tech items.

They're made from commodities that everybody on Earth needs. All those ingredients we mentioned earlier, every human on Earth needs those things because they need shelter. And you just can't disrupt it. Yeah. Your prior guest, you kind of alluded to it, but he didn't really expand on it too much. 3D printed houses.

Unlike the previous administration, that was just a complete disaster. But it's not going to be without some pain. There will be some bumps in the road. These changes that Trump is making, I believe, are very good for the country long term. But, you know, if you take millions of illegals out of the market, you know, they rent from somebody. They work for somebody. Not all of them, of course.

So a few years ago, I was going to start a 3D printed house construction company of my own because I thought that was an opportunity. I hired a consultant. He's been on my show a few times. Really interesting guy. It's all he does is study that. It's not the solution. Okay. There's a lot of false advertising around 3D printed housing, at least today. Sure. Because...

You know, they'll say, well, we built these houses in Austin, Texas for $10,000 apiece. Well, they didn't include the land cost. They didn't include plumbing, electrical, HVAC. They didn't include cabinets, interior finishes of any kind. It's just a thing that went around and wrapped up. It's stupid. It's just false advertising.

Remember, a 3D printed house, even though the construction is more efficient, it's still made of material. That's right. And those materials are low-tech items that have to be produced, and they cannot be disrupted easily. You know, you're not going to invent some new type of concrete that solves... It's still material. That's right. And if it's digitized, it can be demonetized.