Jason Hartman
Appearances
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh, sure.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
I call that refi till you die, those last two things. That's right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right, that's true, too.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
As long as you can earn more than you're paying in interest, then you're arbitraging that.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
But it thankfully also destroys the value of debt.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
So you know what they realized? they realize their mortgage is not a liability. It's an asset.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're never selling that house.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
We can't, we can't duplicate that cheap mortgage.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
But when the delta is, you know, from 4.5% to 7%, They're just not willing to deal.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah, no. Buyers can't afford it. The affordability is strong.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right. Their income went up.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Absolutely. That's exactly what happens. That is inflation-induced debt destruction.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
So you got to compare a 36-year-old millennial to a 30-year-old baby boomer parent.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
They had children. And they were expensive, too.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Well, maybe not ouch if you have debt.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Ouch to the lender. Yeah. Yeah. Not to the borrower.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yes.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
That's all they paid in interest, yes. That was their true interest rate.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
The appreciation does not really make you rich because it only outperforms inflation by a little bit historically over time.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Well, about 6%.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah, we'll rehash it. Sure.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're getting paid. It's not free. It's getting paid.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Well, there's so many other things, too.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
But that's the most hidden thing that people don't see.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're going to be better off than most people.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
You multiply it. It's incredible.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's incredible.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's very speculative. It's just super speculative.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right, no. Real estate's a very,
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's not going to happen.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
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[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
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[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
That's right. People weren't aware of the way that worked. And now they are.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
And that, you know, Bitcoin brought that to the forefront. People get it now. And that's a really good.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh, very important.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
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[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Hopefully now it'll turn around, but it's still the world's biggest brand.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
I've done north of 3,000. Yeah, but that's, you know, through my different companies over the years and all.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Hey, Justin, it's good to be here.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's terrible. Yeah. There is a massive housing shortage. We should have about double to be just normal.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Then you know.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's the same percentage. Yeah. Okay.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Yeah. It's a mouthful. It's an inflation-induced debt destruction-
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
For NAR data. For Altos data, it's about a million five. That's right. So, yeah.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh yeah, made it worse.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
It does not have to become affordable again. It could be expensive forever. I mean, this is not technology. Technology is easy to disrupt.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
[REPOST] Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
This year is the hardest year ever to predict the real estate market.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
I call that refi till you die, those last two things. That's right. Yeah.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
As long as you can earn more than you're paying in interest, then you're arbitraging that.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
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Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh, there's going to be some.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
But it thankfully also destroys the value of debt.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
So you know what they realized? they realize their mortgage is not a liability. It's an asset.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're never selling that house.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
We can't duplicate that cheap mortgage.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're right.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%,
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
They're just not willing to do it all.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah, no. Buyers can't afford it. The affordability is too low.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Absolutely. That's exactly what happens. That is inflation-induced debt destruction.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
But guess what your baby boomer parents did have in terms of an obligation? They had children. And they were expensive, too.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Well, maybe not ouch if you have debt.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Ouch to the lender. Yeah. Yeah. Not to the borrower.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
That's all they paid in interest. Yes. That was their true interest rate.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
The appreciation does not really make you rich because it only outperforms inflation by a little bit historically over time.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Well, about 6%.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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?
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah, we'll rehash it. Sure.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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%.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're getting paid. It's not free. It's getting paid.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
But that's the most hidden thing that people don't see.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
You're going to be better off than most people.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
You multiply it. It's incredible.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's incredible. Like, I,
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's very speculative. It's just super speculative.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Right, no. Real estate's a very,
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's not going to happen.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh, very important.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
I've done north of 3,000. Yeah, but that's, you know, through my different companies over the years and all.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Hey, Justin. It's good to be here.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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 Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's terrible. Yeah. There is a massive housing shortage. We should have about double to be just normal.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Then, then you know.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It's the same percentage. Yeah. Okay. So yeah, that's,
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Yeah. Yeah. It's a mouthful. It's an inflation induced debt destruction. Right.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
For NAR data. For Altos data, it's about a million five. That's right. So, yeah.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
Oh yeah, made it worse.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
It does not have to become affordable again. It could be expensive forever. I mean, this is not technology. Technology is easy to disrupt.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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...
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.
The Science of Flipping
Trump, Inflation, and the Future of Real Estate | Jason Hartman
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.