Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California.  During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.

Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk.  He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities.  This program will help you follow in Jason’s footsteps on the road to financial freedom.  You really can do it.  And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.

Jason Hartman: Welcome to another edition of Creating Wealth.  This is your host, Jason Hartman.  It’s great to be with you today.  We have an optimistic forecast today.  Yes, we’ve had a lot of doom and gloom on the show lately and I thought it would be nice for you to hear some good news.

And you know what?  I tend to be a bit on the gloomy side myself.  I just want to clarify that my outlook is not rosy at all.  I think we’ve got a lot of tough times ahead of us, but as I’ve mentioned before, it’s like the Chinese symbol for crisis, which is identical for the symbol for opportunity.  So crisis is an opportunity riding the dangerous wind is the literal translation of that symbol.  There are lots of opportunities in a market like this and we are doing our best to exploit them and to help you, our loyal listeners, exploit them as well.  So it’s great to have you here today.

Before we get into the interview with Bernice Ross, who is a columnist for Inman, one of the major real estate news sources in the United States, I wanted to answer a few listener questions.  We’ve had so many great guests lately that we haven’t had time to take your questions and our next show is with the fantastic, the very gracious, the very knowledgeable and scholarly G. Edward Griffin, who wrote The Creature from Jekyll Island and who is a scholar on many other issues as well.  That interview has already been recorded and I think you’re going to love it.  I sure enjoyed doing it.

So before we get into the interview with Bernice Ross, it’s my pleasure to have our very own Lorene Davis here to ask your questions, and I’ll do my best to answer them for you.  Lorene thanks for coming in today.

Lorene Davis: Oh, pleasure, Jason.  The first question or comment is from Philip from Centerville.

“Hi, Jason.  I really enjoy listening to all of your podcasts, as they’re informative, as well as enjoyable to listen to.  You have a great voice and your enthusiasm really comes across on podcasts, which is great.  All the interviews have been terrific and I’ve noticed many of the interviews are about the economy from people who are never interviewed much in the mainstream media.  That makes good sense because much of the mainstream media information is biased in one way or another.

One gentleman you may look into interviewing talks much about his newsletter that goes right along with what you believe about the economy and investing.”

And to all the listeners, we will be looking into this individual and we will check it out.  If he’s got some information to share, we will definitely talk with him or let you know his website.

“But he has a lot of interesting information about the U.S. monetary system and once again Jason, I appreciate all of your great information.  It was nice meeting you at the December Mini-Creating Wealth seminar as well.”

Jason Hartman: Well, good.  Thank you, Philip.  That was great and it was nice meeting you.  We appreciate you flying out here and coming to our educational event, and we hope to see you at Master’s Weekend, which is in early March as well.  That would be great to have you out again for that.

And remember, everybody listening, if you have to jump on a plane to come to our event, as long as it’s not the Master’s Weekend – this applies to all events except the Master’s Weekend – it is free.  So we will be happy to comp you in to cover your travel costs.  We really appreciate it when people fly out from around the country to come to our events and we know they’re not always near you, so we want to give you your very own bailout or stimulus package there.

And Philip, thank you for your kind words and we will check out this guest you mentioned before we release his name on the air.  We want to do a little background and maybe we’ll even have him on the show.  Who knows?  So we appreciate suggestions for guests and if any of the other listeners have suggestions, send them on over.  Go to and complete the Ask Jason section on our website and we will look into any guest you recommend.  Lorene, what’s the next question?

Lorene Davis: Okay, the next question, his name is Jason from Schaumburg, Illinois.

Jason Hartman: Hey, that’s a good name.

Lorene Davis: Yes.  “Jason, love your work.  I’m ready to make offers on a few properties in the coming weeks.  Should I set up an LLC as a regular LLC or a series LLC?  Thanks in advance for your reply.”

LC articles of organization instructions indicate whether you wish to establish a standard limited liability company or a limited liability company that has the ability to establish series.  A limited liability company with the ability to establish series, commonly referred to as a Series LLC, has the ability to create within itself separate series or cells, which have their own interests, liabilities, and members.  The Department of Business Services cannot give advice as to whether a Series LLC would be beneficial in your circumstances.  If you’d like to learn more about the concept, you must first consult an attorney.

Jason Hartman: Okay, good stuff.  So thank you for the question, Jason.  Appreciate that.  First of all, I don’t know if you’re going to like my answer, but I’ll give you a little insight.  I cannot give you advice either.  I’m not a lawyer.  None of us here at Platinum Properties Investor Network are qualified to advise you on legal or tax concerns, so that’s the first sort of disclaimer we want to mention.  So please consult always the appropriate professional.

However, I do understand this concept and I am pretty familiar with it actually.  I don’t see any downside that I know of from a Series LLC versus a regular LLC.  So what Jason is referring to here for everybody is that there’s sort of a newer form of LLC, Limited Liability Company, that allows you – and I believe they have 16 cells in them or segments in them or in their series – where instead of setting up a separate LLC for each property you own, you can just have one LLC and put say 16 properties in it, if the 16 number is correct and I’m not sure about that, but I think it’s 16 for some of them and it may vary state by state.  Some states, I believe, don’t even offer the Series LLC.

For the states that do offer it, it allows you to segment or put sort of a firewall between your liabilities within the LLC.  So for example, if you have a property in Dallas, Texas, it generates liability for one reason or another.  Then you have another property in the same Series LLC and it is in Mobile, Alabama.  That liability, in theory, would not spill over to the other property, the assets.  You would not be able to attach those assets to the liability generated by the other property.

So that’s the idea for a Series LLC, where you don’t have to have separate checking accounts, separate tax returns, for a bunch of separate LLCs, so it makes your administrative paperwork hassle much, much lower.

So again, I don’t see any downside to the Series LLC, but again, I am not a legal or tax expert, so you need to ask the appropriate professional on that.

One other thing I want to mention on this liability stuff, I see a lot of investors they’re constantly asking us questions like this about asset protection and things like this.  And one of the general things I see is a lot of investors sort of make the mistake of putting the cart before the horse, if you will, where they’re so worried about setting up the right entity, and they delve into all of this asset protection stuff, and the real thing to do, folks, is start investing and get some properties.  The liability created out of rental property ownership – and I can only speak for myself personally – I’ve never been sued over any of my properties in the last 22 years.  I’ve probably had hundreds of tenants.  I’m not sure the exact number.  But none of them have ever sued me.  There’s never even been a threat of a lawsuit.

And I have insurance on all of them.  It’s pretty easy to insure around the liability created out of rental properties.  The two big liability generators I would see that could come out of a rental property, and again, I want to constantly make the disclaimer – I am not an expert; I am not a lawyer.  But one is that you might have an item in a property that you don’t pay attention to, a safety concern, a security concern, where you ignore it, where you have your property manager calling you and they’re telling you and they’re saying, hey, your property on Elm Street has a big crack in the sidewalk.  Someone’s going to trip and fall and hurt themselves, and if you ignore that, you are being negligent, okay?  So that could create liability for you most definitely.

The other big area I would see for liability is that of discrimination.  Remember in the United States of America, we have a very specifically outlined set of Fair Housing Laws and you cannot pick your tenant.  You cannot discriminate against your tenant on the basis of any protected class statuses.  For example, race, familial status, and many, many other things as well.  So don’t discriminate, don’t make your advertising discriminatory, and fix problems as they arise on your properties.

Now, the other thing that insulates you to some extent in this is having a professional property manager.  Remember; how can you discriminate against a tenant if you’re not even talking to your tenant?  So that puts a barrier between you and this potential liability and never, ever ask your property manager a question based on a person’s race or familial status or any other protected class or religious orientation or anything like that obviously.

So be familiar with the Fair Housing laws.  Look them up on the internet.  Abide by them.  They’re very easy to abide by and you should never really run into a problem here.  So that’s my two cents on it.  Again, ask a lawyer for a more detailed explanation.

Lorene, next question.

Lorene Davis: The next question is from Ian, Salt Lake City, Utah.  “Hi, Jason.  First off, I’d like to say I’m a huge fan and appreciate all the great information you provide to your listeners.  Your podcasts and websites are an invaluable resource to anyone involved in real estate investing.  Thank you so much for sharing your knowledge with us.  My question for you is about hard money lending.  I have a family member who works for a company that arranges hard money loans.  Because of this, a few members of my family and I have been investing in hard money loans throughout the company.  We get a 24 percent annual interest rate on that money we loaned.  I wanted to know your opinion comparing hard money lending to buying rental properties.  I’ve heard your options on stocks many times, but I’ve never heard on this subject.  Thanks for taking your time to answer our questions and the knowledge you share with us.  Sincerely, Ian.”

Jason Hartman: Okay, Ian thanks for the great question.  That’s a really excellent question.  Ian, Shakespeare had a famous line and I really like it and I think it’s applicable now.  He said neither a borrower nor a lender be.  I think Shakespeare was half-right and half wrong.  I think that you should definitely be a borrower.  I do not like being a lender at all.  In fact, I did talk about this on a prior show where I bought a note from a friend of mine, who actually Lorene knows, so she’s kind of giving me a funny face here as I say that.

This person was a hard-money lender or a private lender – they’re referred to both ways – and was selling notes, was going and making loans to people, and saying that the property had lots of equity, and you know, at the time, it seemingly did.  I looked at two appraisal reports on the property.  But basically, the situation I find myself in now is I loaned $38,000.00 to these people and now the property has no equity.  In fact, it has negative equity.  The borrower has never paid on time in any decent fashion.  I pray that I’ll get my check every month.  I hope I’ll see my principle balance because I’m getting interest-only payments now.  And yes, I get 19.99 percent when I get paid.

But the reality is I hardly ever get paid.  So what is my real rate of return?  Well, it’s pretty lousy and I sure wish I didn’t buy that note.  So I’m not a fan of being a lender.  I’m definitely a fan of being a borrower, on the other hand, and I do not like lending, even when those rates seem very high.  The equity can disappear very quickly.  The appraisals can be faulty.  There are certainly loads and loads of appraisal fraud out there, so again, Ian, I would just stay away from being a lender.

Now, when you’re a lender, you don’t have any leverage either.  When you’re a borrower, that’s by definition the leverage you get.  So you buy these rental properties, you rent them out, and you get lots of leverage.  The bank puts up 80 percent of the money, in turn taking 80 percent of the risk, and I think that’s a fabulous equation.  Your ROI on some of our worst performing properties will probably exceed 20 percent.  It gives you tax benefits, whereas if you’re a lender, you’re paying tax on that interest income, if you get it, and I sure hope you get it.

Again, I always wonder, so I don’t like being a lender.  I like being a borrower.  I like owning hard assets.  I’ve had a very good track record in getting paid by my tenants and a very lousy track record of getting paid by people who borrow money from me.  So take it for what it’s worth, but that’s my advice.  Thanks for the question, Ian, and the nice words.

Lorene Davis: Next question from Andrew from Southern California.  “Hello.  Hopefully this is a quick question answer.  I recently heard you on your podcast talk about purchasing and holding gold as a different way to diversify part of a portfolio.  You had mentioned gold money as one of the options.  It seems very plausible and an interesting way to spread my assets in different ways.  So my question, since I’m still not fully savvy on everything yet, what are the main differences between gold money and a company like Lear Capital, in regard to the purchase and holding of precious metals?  Cheers, Andrew.”

Jason Hartman: Andrew thanks for that question.  I’m glad you asked and it looks like you are also listening to me on KABC Talk Radio as well.  So that’s a great question.  I am definitely not a gold bug.  I do not like precious metals investing very much.  I agree with the premise of all of the gold bugs and the precious metals investors.  I just don’t agree with their conclusion.  I will say this for gold.  I think it’s better than the U.S. dollar, so maybe if you have money in a savings account and you want to invest that money in a better way, I would say that gold is probably a better investment than cash because you can be certain that ultimately the dollar will decline in value.

And when the dollar declines in value, we will probably see gold increase in value usually.  Now, here’s the problem.  Here’s why you don’t see that happening in my opinion.  Gold has five major, major flaws and the same applies to silver, platinum, palladium, or any other metal for that matter.  The first flaw is that you can’t get any good financing on it.  On rental properties, you can get excellent financing.  So that’s the first problem.  You have no real good leverage on gold, at least not leverage that’s super high risk.

Second problem, you can’t rent it out.  Nobody will rent your gold coins from you, so there’s no rental income and I think any investment that does not produce income or rent is a speculation and a gamble rather than an investment.  To be an investment in my book, it must produce income.  So that’s the second problem.

What’s the third problem with gold?  The third problem is it’s subject to confiscation.  Now, you think, well, this is America.  I have rights.  Don’t be so sure.  Gold was confiscated in 1933 in this country and there’s a lot of talk that gold could be confiscated again.  Remember when a government gets hungry, a government is a very, very powerful, and, when it gets big, I believe a very, very evil machine.  So when the government needs money, it’s going to come looking to its citizens to raise its taxes, to devalue its currency, and to confiscate its gold.

So again, I don’t like gold for that reason and the government could actually make it illegal to use your gold in trade.  Remember there’s a whole series of law called the legal tender laws.  If you opened up a business, Andrew, and you wanted to say to your customers that you would only accept gold or silver and not dollars, you would go to jail.  That’s illegal.  The legal tender laws require you to accept this evermore-worthless dollar, printed on paper, and that’s about what it’s ultimately going to be worth in my opinion.

The next problem with gold, it doesn’t offer any tax benefits at all, so again, rental properties are the most tax-favored asset in America.  Gold, I don’t know of any tax benefits associated with precious metals.

The next and final problem with gold and this is probably the biggest one of all:  it’s subject to manipulation.  There is an organization called GATA.  Go to  That’s the Gold Anti-Trust Action Committee and they are all about filing lawsuits and creating public awareness as to how Federal Reserve and other central banks around the world manipulate the gold price and probably the price of all of the precious metals, frankly, and want to see these prices suppressed.

Now, you ask why do they want to see them suppressed.  Well, if you talk to a central banker, they’ll say gold is a barbarous relic.  It’s just not modern.  Currency is modern.  Fake money printed on paper, that’s what’s modern.  And that’s a contemporary asset.

Well, the fact is that they own lots and lots of gold, so why do you ask would they want to suppress the price of something that they own?  Go back and listen to my interview and I don’t know what podcast number it is, but it’s the interview with Ellen Brown, the author of Web of Debt.  And she talks about this a little bit.  I talk about it with her and look.  If you have $1 trillion – yeah, that’s with a T – $1 trillion in gold, and you’re the Federal Reserve, but you have trillions and trillions of dollars worth of fake, paper, fiat currency that you’re creating in the money supply, look, it’s worth it to suppress the $1 trillion in actual gold that you own to boost because it’s a counter-cyclical type of thing, currency versus gold.  It’s worth it to suppress the price of the gold to inflate the value of your fake fiat currency.

So that, again, is my biggest problem with gold is it’s subject to manipulation.  And you might be thinking, well, eventually, that house of cards and that smoke and mirrors game of manipulation has to end and you are right.  It does have to end one day, but the question is when.  Can they manipulate longer than you can wait?  I say they probably can.  Can they manipulate another 10 years, 20 years, 30 years, 100 years?  Well, we’re probably not going to be alive in 100 years, so I think this manipulation is a huge, huge problem.

So again, that’s why I’m not a gold bug.  I’m not a silver bug.  I’m not a precious metals bug.  The only thing I’d say for it is it’s probably better than cash, but it doesn’t really qualify as an investment in my book.  And Lorene, I see you have one more question.

Lorene Davis: One more question from Elizabeth in Orange County.  “Good morning, Jason.  Just wanted you to know that I was trying to listen to your interviews with Harry Dent and others and none of them were able to play due to an error message.  Perhaps you can fix it at home.  Because I can’t tune in, perhaps others can’t as well.  I’ll be talking to you soon.  I’ve recently acquainted with a woman with 15 properties, looking to invest in more, and gave her your name.  Ended up, she’s already working with you.  Her name is Deanne.  What a small world.  Always thinking of you and if you can help me, I’d appreciate it.  Thanks.”

Jason Hartman: Fantastic.  Elizabeth thanks for the question.  I’m sorry you’ve had some technical problems.  I know some of our other listeners have.  We were using a service to serve up our show that went out of business at the end of the year, so we’re not using them anymore.  Sad to see them go because we kind of liked their system and the way it worked, and so now, we’re using a different system to produce the show and get it out to you.  So keep on listening.  Again, we appreciate any knowledge of technical problems anybody’s having.  Just go to and submit that on the Ask Jason section and we will address those immediately.

So thanks so much for listening everybody.  Let’s go to the interview now with Bernice Ross and I think you’ll like this.  We’re going to talk about what to be optimistic about in terms of the real estate market and also, we’re going to talk a little bit about one of our market areas that I very much like.

By the way, for those of you who may not know it – I don’t think I’ve mentioned this on the show, Lorene, so I should tell them.  I am leaving later this week to go on a big, big road trip through Arizona, New Mexico, and Texas, and time permitting, maybe I’ll even get up to good ole Oklahoma and stop at a bunch of markets.  And I’m bringing the dog, and I’m renting a motor home, and I used to have a motor home, and I really liked driving around in it.  Hey, gas is cheap now, so – actually, this one’s diesel that I’m renting.

So you just gotta get on the ground and see it.  You can’t do this flying around.  I’m going to stop in a bunch of our small markets.  I’ll be videotaping and I’ll be doing live podcast interviews with various property managers, market experts.  Maybe I’ll get some city council members, some Chamber of Commerce spokespeople, and who knows what I’ll encounter on the journey, but you’ll be sure to hear about it on the show.  Anyway, look for more on that and let’s go to the interview with Bernice Ross.

Interview with Bernice Ross

Jason Hartman: Bernice, welcome to the show.

Bernice Ross: Thank you, Jason.  It’s an honor to be here today.

Jason Hartman: It’s great to have you here.  Your article published on Inman News recently, entitled “Get Ready for the Real Estate Rebound,” really intrigued me because there are so many bears out there nowadays, who are really negative on the market and to tell you the truth, I’m pretty bearish on the market.  But if you were to just generalize it and paint it with a broad brush, but of course, there are little pockets of opportunity, which is what our company, Platinum Properties Investor Network, really specializes in finding, and so in every crisis, there is an opportunity for sure.

But tell us why you are optimistic about 2009 and the real estate market in general and getting ready for the rebound.

Bernice Ross: Well, first of all, I have to say that I took a lot of heat for that article and there are people who called for me to be fired.  They said I give real estate a bad name.

Jason Hartman: You give it a good name.  What are they talking about?

Bernice Ross: And the piece that I want to share with the people that are listening today is that there are a lot of signs that are early predictors that the market is getting better.  And that’s what I wanted to share with them and I started writing in my columns back in 2005 that I was seeing signs that the market was going to start to turn down.  And there are two things that I look at.

Jason Hartman: So in 2005, you saw a downturn coming.

Bernice Ross: Well, what I saw was the beginning signs that that could be happening.  And I’ve been in business for 30 years and in Southern California, our market here tends to be ten-year cycles.  And to give you an example, I got in the business in 1978.  We turned down in 1980.  Then we went back up, hit a high in the late ’80s, and started back down in 1990.  Then the market started to come out.  We had a major earthquake in 1994, so it dropped back down for three years.

Jason Hartman: You’re talking California now.

Bernice Ross: This is Southern California.  And then it started back up in 1997 and hit the peak in 2005.  So the cycles, the market is cyclical, and it’s going to depend on the location as to how long the cycle is, but a ten-year cycle is very common in most places in the U.S.

Jason Hartman: Yeah, I’d say that’s been pretty historically accurate.  Like, three years out of the ten, you seem to have a really booming market, and seven years you have sort of a downturn in the market.

Bernice Ross: Well, you have a transition and then there’s a downturn.  This one is – of the three that I’ve seen, this one’s the most intense.  There’s no question about it.  But the thing that made me pause back in 2005 and 2006 is I looked at the inventory numbers and the inventory was starting to increase.  So the two things that I track for any market anywhere in the U.S. is how many days of inventory are on the market and how much actual inventory.  So it stays on market and then how many months of inventory.

So to give you an example, if there is six months of inventory, and it starts to climb to seven or eight months of inventory – and again, you can ask someone from Platinum Properties about what’s going on in any of the markets they recommend because they search this out for your benefit.  So ask them what’s going on with the inventory in the price range that you’re looking in.  If the amount of inventory is increasing, then if it keeps increasing, then you’re going to see downward pressure on the prices.  When the amount of inventory starts to decline, the inventory’s got to get absorbed first if you’ve been in a downturn.  Then it flattens and then it will start up.

What I’m seeing right now and I want to again use California, as an example, and I’ll give a site to go take a look at.  It’s called

Jason Hartman:  Okay.

Bernice Ross: And all they report is on the markets where there have been improvements in real estate.  So you can see your local market and they have a lot of small towns in there, so you can check regardless of where you’re listening, if you’re listening in the U.S.  You can see what’s going on in your local market.

Now, let me give you some numbers that I just checked last night.

Jason Hartman: Okay, so before you do that, I just want to touch on this because I know you’re going to go into some numbers that show inventory numbers and absorption.  Just for our listeners to kind of clarify what Bernice was saying, what we’re looking at is the absorption rate.  In other words, how fast is inventory being absorbed and how much inventory is available to be absorbed?  So when we look at this, we’re always looking at a snapshot in time and of course, that’s a moving target, of course.  So that’s what we’re really looking at when we look at this.

So you’ve got some numbers on California as a sort of a bell-weather state, as you mentioned before we were recording.

Bernice Ross: Absolutely and I have some – there are a number of other states that are seeing changes as well.  But let me share before people go into just kind of what I look at.  If there’s six months or less of inventory, so say you’ve got five months, you’re going to see that tends to be representative of a seller’s market and you can have a seller’s market next to a raging buyer’s market in the same marketplace, depending upon their price location.

Jason Hartman: By the way, that’s a good point you bring up.  I want to mention that for our listeners.  Let’s just parse that out for a moment because when you talk about a market, a market is a geographical market for one thing, and then it’s also a market based on price and product type.  So for example, you could have a market – now, you grew up in Southern California, so you’re a native to my area here and now you live in one of our favorite cities, Austin, Texas, which is a fantastic market and we’ll circle back to that in a moment.

You could have, for example, low-end properties selling really, really well in a market, but the overall market could be bad because when you average in the middle and higher end properties, maybe they’re not selling, or vice versa.  Doesn’t matter, but that’s just an example.  You might have an area where they just don’t do well with condos or townhomes or attached housing.  It’s just not very accepted in that market.

But yet, some builders came in and built a lot of that and the market just doesn’t like it.  And the single-family home market can be doing well at the same time, right?

Bernice Ross: Well, let me give you a good example from Austin.  If you’re looking at a $600,000.00 plus property out at Lake Travis, there are 60 months of inventory, 60.  That’s five years of inventory.  And yet, if you’re in Central Austin, there’s maybe two or three months.  So it’s very important whoever you engage to represent you that they are tracking the inventory.

Let me go back to the numbers now.  So if you have six months or less of inventory, that’s a seller’s market.  If you’re down to two or three, you’re going to start having upward pressure on the prices.  If you have eight months of inventory, that’s usually transitioning or flat.  Nine months or more, then you’re moving into a buyer’s market and you get into a place where you’ve got 10, 11, 12, 15 months of inventory and you’ve got downward pressure on prices.

So I track how many months of inventory.  That’s the first indicator, so as the months of inventory moves from nine maybe to eight, that starts to decline, or if the number of days on market declines, that tells me that inventory is being absorbed.  One of my friends, who works up in Sonoma, told me that what he was seeing in terms of the foreclosure inventory up there is that they were down to two months, which means most of that opportunity is gone in that market.

And some of the numbers I’m seeing let me just share a couple of these.  Los Angeles’ amount of inventory down 13.4 percent last – this is based on November 24 – Santa Anna down 19.2 percent; San Francisco down 11.9 percent.  Units sold, increases in the number of units sold, up in Anaheim by 12.3 percent, Long Beach by 23 percent.  Sacramento, hardest hit city other than Stockton, up by 16 percent, San Francisco up by 16 percent, Reseda up by 20 percent.

Jason Hartman: In terms of sales volume.

Bernice Ross: Those are units sold increasing.

Jason Hartman: But back to the other one, though, before that, so the amount of inventory decline, right?  That’s what you were saying?

Bernice Ross: So if the amount of inventory goes down, days on market goes down, that’s a good sign.  The other sign is that if the number of unit sales goes up.  So that shows that more of the inventory is being absorbed.

Jason Hartman: So do you think, though, that a lot of this issue is really related to the fact that lenders are capitulating less and less and the market is starting to clear in the sense that several months ago, we really saw a situation where the lenders were in trouble.  We all know that.  That’s no secret.  There were people that weren’t making their payments.  No secret there either.  But these properties, they were being foreclosed on and then the lender was just kind of sitting there and not making the deal.  They were holding too tight on the price and the market wasn’t clearing and fixing itself.  Maybe this is really, this pickup in business, is really a sign that lender capitulation has declined, which is good because it needs to clear the market.

Bernice Ross: Well, what we’re seeing is we are seeing some of the workouts are starting to go through the system.  I want to say something, though, that was kind of one of the things I’ve had challenges with, is the way that the foreclosure reporting has been handled in the press.

Jason Hartman: Yeah, and that is so interesting that you bring that up, Bernice, because there are a million ways to manipulate and lie with statistics.  You can have the same number and the same reality, but if it’s reported in a different way, it just leads to a different conclusion, doesn’t it?

Bernice Ross: Well, let me give you some facts here, which are kind of interesting.  So first of all, 35 percent of the properties in the U.S. are owned free and clear.  No problem with them.

Jason Hartman: Thirty-five percent.

Bernice Ross: Thirty-five percent.  No mortgage, no problem.  And then what was happening, the numbers that get reported by most cases are the RealtyTrac numbers and what they do is they count the number of filings.  So let’s say that I have –

Jason Hartman: So notice of default filings, so for all the listeners, that’s the first stage of the foreclosure process.

Bernice Ross: So if you’re in California and this varies from state to state, but say I have a first and a second.  I default on both of them, so there’s a notice of default and there’s a notice of delinquency, and there’s a notice of sale, and then there’s the final foreclosure notice.  That’s eight notices on one property that maybe I bring my property current and then I get behind again in 60 days and all those notices start again.

Jason Hartman: So it’s the same property over and over again.

Bernice Ross: Yes.  That’s one of the issues.

Jason Hartman: So it’s counted twice or counted maybe four times.  It’s a double-dip, quadruple-dip.  Who knows?  So that’s interesting.  That’s kind of true of marriage and divorce statistics as well because they say the divorce rate is 50 percent.  Well, what does that mean?  Is the divorce rate higher for first marriages, second marriages?  When you really delve down into these various statistics of anything, there’s a lot going on there under the surface, isn’t there?

So what you’re saying, just to make the point, is that you’re saying foreclosures are over-reported in that instance when they’re counting the same house, the same borrower, but they go into default, clear the default, then they go back into default.  So it’s like that default recidivism, if you will.

Bernice Ross: Yeah.  And the last numbers I saw, to give you an idea of the national numbers, is one out of 484 properties has a filing on it.  Now, that doesn’t mean that many get foreclosed upon.  But when you look at that number, it’s like that’s one-half of 1 percent that 1 out of 500 families has a problem with their finances.  That’s amazing in today’s environment.

Now, one of the things that I’m optimistic about is I’m hearing stories like this.  “I know a lot of people are having trouble right now, but I’m having my best year ever in terms of sales.”

Jason Hartman: Who is having their best year ever?

Bernice Ross: Lots and lots of agents are telling me that.

Jason Hartman: Real estate agents?

Bernice Ross: Real estate agents or I get managers saying that last year at this time, we only had ten sales on the board.  This month we’ve got 40.

Jason Hartman: Oh, I agree.  I think the market is definitely better now and I think some of that is really attributable to the lender capitulation issue.  It’s ending and that’s a good thing.

Bernice Ross: Well, let me share another thing that I think is really a wonderful story.  I talked to a friend of mine a couple weeks ago and her son had fallen behind on his mortgage, and he paid $300,000.00 for his house that’s now worth $200,000.00.  And he had used up all of his savings, he’d done everything he could to keep his house, and he fell behind.  He got a call from the lender and the lender said this:  “We see that you’ve got good credit, that you’ve been trying.  You’ve been trying to take care of this.  Here’s what we will do.  We will issue a new loan on the property for 80 percent of the current value and that’s what you’ll owe us, in exchange for giving us 50 percent of the equity when you sell.

Jason Hartman: Right, so what they’re doing and you know, Bernice, that’s so interesting you bring that up.  I predicted this years ago that housing would become so unaffordable that there would be new financing models that would develop, similar to that of car leasing.  And if you really look at a car lease, and there aren’t that many car leases available anymore nowadays with the change in the credit market, of course, but if you look at a car lease, what you’re really doing is just paying the down payment at the end, in a way.  It’s called the residual on your lease.

And so now, these are the sort of joint venture real estate loans and so they’ve modified the person’s loan, in other words, drawn down the principle balance to 80 percent of the current value, which is lower than 80 percent of the prior value.  But then the lender wants to joint venture the deal on the end when they sell it and say give me half the equity because the lender has faith the market is coming back, too.

Bernice Ross: Well, that’s what we’re seeing and this is the first one I had heard from someone who actually had firsthand experience with it, so I think that’s a real reason to be optimistic, that more of these are going to get worked out.

Jason Hartman: That is.  That’s very interesting.  Do you know who that lender was by the way?

Bernice Ross: I do not know.

Jason Hartman: That would be interesting to know if you ever find out.

Bernice Ross: Oh, I could find out.

Jason Hartman: Okay.  Tell us more.

Bernice Ross: My main reason for optimism and I’m going to go kind of soft skills on you right now is that the cost to me as an individual about being pessimistic about things is way high.  There is opportunity in every single market.  You’ve got people like Donald Trump right now and others, Warren Buffet.  They’re buying up properties.  They’re buying up opportunities.  This is the market to invest in.  The smart investors are always contrarians.  You buy when everybody else is selling and you sell when other people are buying.

Jason Hartman: J. Paul Getty.

Bernice Ross: Yes.  It goes back, absolutely.  Be a contrarian and I see that works time and time again.  The cost of being negative, though, is this.  The brain research shows – there’s a gentleman named Daniel Amen, who’s done all these brain scans – and when you are thinking negative thoughts, your brainwaves, they resemble people who are schizophrenic.  So the bottom line here is when you surround yourself with people who are negative, then you’re going to take on that negativity and it’s going to influence you to miss the opportunity.  So one of the great things you’re doing here at Platinum Properties and you’re helping people create wealth, you’re surrounding them with people who believe in the market, who are positive about what’s happening, and say here’s the opportunity.

So there is tremendous opportunity here if you’re willing to say you know what, these people that are naysayers, Gary Keller, who founded Keller-Williams Realty, made a wonderful comment.  He said if you argue for your limitations, you get to keep them.  If you think the market’s bad, then you get to keep the bad market.  For me, there is opportunity in this market.  There’s opportunity in any real estate market.  I don’t care how bad it is.  There’s always opportunity.  The question is who is going to ferret it out and take advantage of it.

Jason Hartman: I totally agree.  That’s a very good point.  So what you’re saying there is you’re saying that if you’re thinking negatively, opportunities in your environment will present themselves that are very positive opportunities, but if you have that negative mindset, you won’t see them because you will literally shut them out.

It’s like they call that in psychology, I believe it’s called a scotoma, when you go and you look for something like your keys or your sunglasses and they’re on your head.  Where are my sunglasses?  And you look all over and then someone says to you, well, they’re on your head.  You just tilted them up or something and you can’t see something right in front of you because the context out of which you’re operating is a negative, lacking, scarcity context, and that will cause you to miss opportunities.  That’s a very good point.

Bernice Ross: And let me give people just kind of a tip in terms of changing your mindset.  One of the things I see a lot of people do is they get into “I don’t have.”  As you said, it’s a lack of abundance mindset.  And the thing that really works, if you say I’ve got all these things going wrong, is to shift and say what’s right.  Well, gee; my car got me to work on time.  My health is good.  I’ve got a roof over my head.  My plumbing works at my house.  The electricity is on.

When you start looking at what you have instead of what you don’t have, I find a lot of times, if you’re having trouble doing this, just create a gratitude journal.  Write the five things down a day, five things each day, that work.  And what happens is when you start shifting that and also when you look at people, look them in the eye, and say thank you, whether it’s a person who bags your groceries, or the person who helps you with something in a department store.  Just look them in the eye and say thank you.

Jason Hartman: Yeah, good point.  It’s like the old, little saying, “Once I had the blues because I had no shoes until, upon the street, I saw a man who had no feet.”  And really look at what you have rather than what you don’t have.  Very good point.

Well, in terms of that, you talk – let’s go back and kind of move away from the softer side of it, which is what we just explored, back to the sort of hard side of it.  You talk about pent-up demand.  Gen Y is coming of age.  This is the largest demographic cohort in American history, larger than the Baby Boomers, by about 4 million.  Oh, 6 million?

Bernice Ross: As of six months ago.

Jason Hartman: As of six months ago.  So it’s about 4 million people larger.  This is 80 million Americans and you know what?  They are coming of age, they’re going to go to college, they’re going to need housing, they’re starting to rent their first apartments and buy their first homes.  The younger ones are just coming through high school.  What about pent-up demand and maybe not just as it applies to Gen Y?

Bernice Ross: Let’s define this.  Our Baby Boomers are born between 1946 and 1964; 1965 to 1977 is your Gen X; 1977 to 1994 is Gen Y.  After ’94 is Gen V and there are going to be some big differences between Gen V and Gen Y.

Jason Hartman: Yeah, I don’t know anything about Gen V, so I’d love to hear about that one.  I interviewed Harry Dent, an economic demographer, on a recent show and he talks all about this, but I don’t know who’s after Gen Ys.

Bernice Ross: No, Gen V is –

Jason Hartman: Generation V, okay.

Bernice Ross: V.  They are – I’ll give you an example.  One of my friends was saying they were doing something on the computer and their 4-year-old grandkid says, “Well, Grandpa, you can do that faster if you would just do this.”  And so when the 4-year-olds have – it’s like the internet and computers are in their – they’re in their DNA, as opposed to something that you and I had to learn from doing.

But going back to Gen Y, here’s what the statistics are saying.  First of all, they want to own real estate.  They want to accumulate wealth.  This is very important.  Also, many of them are choosing to have, if they live in a metropolitan area, like Austin or Los Angeles or New York City, they want to be where the action is.  So they might choose to rent a loft downtown, but then invest in an investment property somewhere else where they have real estate, and they’re starting to build real estate wealth.  So that’s an important point.

Jason Hartman: I think one of the other points I want to just bring up and this is just my opinion, of course, but I think that Gen Y and Gen X to an extent has sort of discovered that Wall Street is a scam.  And I don’t think they believe in the financial manipulation and financial engineering that goes on on Wall Street.  They want to invest in tangible things that are real.  Any thoughts on that?

Bernice Ross: I really don’t have a handle on that.  What I do know is that the wave, the next wave of buyers, the Gen Y buyers, what the demographers are saying is that in 2050 the U.S. population, white Caucasian, will be about 202 million, 203 million, about what it is right now.  You’re going to see a tripling of the Hispanic population and a doubling of the Asian population.

Jason Hartman: Four hundred thirty eight million people in America they’re saying by 2050.  And you know, folks, that’s not that far away.  It will come sooner than we know and the freeways will be very crowded and there will be a lot of renters for your rental units.

Bernice Ross: Well, what we’re seeing is the demographers are predicting that what’s the leading edge of Gen Y, the group that’s going to actually lead this, is Latina moms.  And unlike Gen Xs, who are putting off their commitment, they’re commitment phobic.  They’re left alone.  They’re having trouble committing.  They have trouble committing to buy things and they have trouble committing to relationships.

Gen Y, on the other hand, very collaborative.  They want to be in their groups.  They want to have kids.  Kids matter to them.  Having their family is really most important.  The typical Gen Y mom wants to have more than two kids, which is very different from Gen X.  So they’re looking at – they’re calling this new market the Mommy Market and the mommies are going to – over 90 percent of the buying decisions are made by the female in the household.

So what we’re going to see and what they’re looking for is they’re looking for lifestyle.  If you are investing in a property, the thing that these people want to buy is lifestyle.  You want a realtor who understands that you need to market not only what the house is like, but what the whole living in the area, and since you represent Austin, let me say a few things about the lifestyle in Austin.

Jason Hartman: Okay, so I just have to chime in here before you do.  So this is interesting because you know, Bernice, I view Austin, one of our markets – we’ve done lots of business in Austin, we recommend that market, and it has gotten a little bit more expensive since we started recommending it about four years ago – but it’s still a good deal.  I think Austin really is on a par with any of the – and since it’s my favorite word, I’m going to say it – swankiest cities in the country, whether it be New York, L.A., San Francisco.

And the thing that Austin does not have in common with those markets is it’s not very expensive comparatively.  I mean there are the sort of what’s called the creative class.  There’s a book called The Creative Class, and the creative class of people like to live in sort of these first-year cities.  They like to live in San Francisco.  They like to live in L.A.  They like to live in New York, maybe Chicago, and they also like Austin and Denver, and those are inexpensive – they’re more expensive than some of our markets – but comparatively to what we’ll call those sort of first year cities, these markets are a bargain.  And they are creative class cities.  They’ve got natural beauty.  They’ve got booming, creative, innovative business climates.  They’ve got just all sorts of coolness about them and swankiness.

But what about Austin?  What caused you to move there?  I mean you left California where you grew up.

Bernice Ross: I had a $100,000.00 worth of damage from the Northridge quake to my house.  I fought with Allstate for three years to get it fixed and I said I don’t want to do this again.  I want to go somewhere where they don’t have earthquakes.  So I looked around.  My father was from Texas and I met my husband and that was that.

Austin is – I would never use the word “swanky” for Austin because it is a place where you wear your jeans to the fanciest place in town.

Jason Hartman: But that’s swanky.  That’s the point.  It’s cool.  It’s hip.  That is swanky.  That’s the definition.

Bernice Ross: The thing about Austin is it’s an international city.  We have the best live music scene in the world, some of the best hike-and-bike trails anywhere in the world.  It’s just a wonderful, wonderful place to live.  One of the things I like about Austin, though, when you go there you see bumper stickers that say, “Keep Austin Weird.”

Jason Hartman: I know.  That’s sort of part of its coolness.

Bernice Ross: It’s quirky.

Jason Hartman: It’s got that sort of hippy element to it, too.

Bernice Ross: Well, we’ve got all the hippies.  The joke among my friends is that you’ve got the state government there, you’ve got University of Texas there, so football is religion, and so you’ve got all that energy.  It’s a very young and vibrant city, as you said, highly creative.  But my favorite one-liner about Austin is that the city council is militant vegetarian and that kind of sums up the whole Austin vibe.  It’s just we’re fun; it’s a little bit quirky.  It’s just a great place to be, especially if you’re someone who, as you want to say, part of the creative class and you want to be with energy that is fun and exciting.

Jason Hartman: Yeah, good stuff.  That’s very interesting.  Well, in terms of your article here on Inman, you talk about the ten-year real estate cycle.  We covered that.  Pent-up demand, we covered that.  The credit crunch is easing.  You want to touch on that real quickly?

Bernice Ross: I built a new house a year and a half ago and 800 credit score, nine-year history with the lender that we’re applying at, never had a late pay, never had a problem anywhere, and they weren’t going to fund that loan even though I had a written loan commitment because the loan market was drying up.  And what’s happened now is I’m hearing stories like this.  I actually funded a zero percent down loan.  I didn’t think it could be done, but we closed on it.  I’m hearing that I was able to get a jumbo loan.  It’s the first time we’ve been able to do this.

So we’re seeing little pieces where people are beginning to qualify.  They’re starting to make loans.

Jason Hartman: I agree and Bush was on TV the other day and he said that the credit markets are starting to thaw, and I see that happening, too, so I think that’s going to loosen up the flow of money and that’s one reason to be optimistic.

Bernice Ross: The demand is there, absolutely.  The demand is there for property because people still – and to give you an idea, in China, 1 percent of the people own property.  In Mexico, it’s 5 percent.  In the U.S., it’s hovering between 68 and 70 percent.  So this is really one of the great things about this country is that we do have the ability to create wealth through real estate here and we do so.

Jason Hartman: Good.  Good stuff.  Okay, well, we touched on the demographic issue already.  Anything you want to say to our listeners in closing, Bernice?

Bernice Ross: For me, I’ve come to be contrarian.  When the New York Times runs an article that says, “Maybe now it’s time to buy that first-time buyer house,” when the New York Times gets on board with real estate is a good place to be, I gotta scratch my head and say finally they got it.  And I happen to believe in 2009, you have the best buying opportunity in 60 years.  You’ve got the best buying opportunity since the Great Depression.  There’s great financing available.  There’s great inventory available.  This is the time to make the investment in real estate.

Jason Hartman: That’s excellent.  Good having you on the show, Bernice.  I appreciate you coming in.

Bernice Ross: Jason, thank you so much for being here.

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Duration:  54 minutes