Join Jason Hartman and client, Patrick, for a timely discussion about the benefits of real estate investing. Patrick shares his experiences working with Jason Hartman and Platinum Properties Investor Network’s investment counselors. For details, listen at: http://jasonhartman.webimpakt-green.com. Patrick tells younger people, “If you can have ten houses by the time you’re 30, you’ll be set when you’re 60.” Staying power – a buy-and-hold philosophy – is the key to successful real estate investing. Patrick and Jason talk about the importance of having all of the facts about local markets before purchasing a property so that the property makes sense the day you buy it. Due diligence includes such factors as property taxes, employment, location to schools and shopping centers, crime rate, and in- and out-migration from an area, just to name a few. Patrick talks about the downside of speculating on properties, using his own experience with a rental home in California as an example, and encourages due diligence and diversification. The current economy is producing a larger number of tenants as more and more homeowners are forced out of their homes through foreclosures. This is creating a larger market for rental property, but not all markets are viable.

Jason and Patrick also discuss the importance of going where the customers are going to have the easiest time and a good experience, rather than being loyal to a market that is no longer providing a good return. Jason is a firm believer that the investment has to work in real life, not just on paper. In the latter portion of the show, Patrick discusses the pros and cons of a college education and how true learning takes place in the real world. It seems that many young people go to college for the wrong fields and find themselves in massive student loan debt, with a limited number of jobs in their field and with an entitlement attitude, which sets them up for disappointment in the real world. Jason and Patrick encourage entrepreneurship and adopting an attitude of gratitude. Be sure to check out our prior shows with Richard Kiyosaki, G. Edward Griffin, Peter Schiff, Doug Casey, Chris Mayer, T. Harv Ecker, Denis Waitley, John Stapleford, Addison Wiggin, Thomas E. Woods, and many more.

Introduction: Welcome to creating wealth with Jason Hartman. 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 approachesto 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 multi-millionaire, who not only talks the talk but walks the walk. He has 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 is your host, Jason Hartman with the complete solutions for real-estate investors.

Jason: Welcome to the Creating Wealth Show, this is your host, Jason Hartmanand this is episode #244. So, I tell you folks, you sure don’t have to convince anybody to buy good income properties anymore nowadays, do you? It is unbelievable how people are just gobbling up rental housing inventory right now. And I mean from an investor’s perspective, but we don’t want to see rental housing inventory that could easily mean, rental housing inventory as a tenant. Now I guess both are true really and that’s one of the reasons why the opportunity is so good for investors.

I recently interviewed Dan Hammermanon the show, and we will have that show published fairly soon here.

Today, we are going to do a case study, where we have a client of ours here on the show. Any of you listeners, that want to come forward and be on the show, just touch base with us. Contact us through www.jasonhartman.com and go to the contact us section and say that you are interested in being on the show and telling your story and, heck, we may just put you on. We may even record an interview and heck, how about this, if it is terrible, we won’t publish it. Just kidding, well, only half kidding, I guess. My ex-girlfriend Melanie used to say there is a little bit of truth in every joke, right, and she only used to say that because her mom used to say it to her. I guess that’s how old sayings like that get started.

But in our interview with Dan Hammerman on the show, he talked about this really interesting article that he did, about arbitratingpolicies with rental housing cash flows. That’s mainly what we talked to him about in that upcoming show. But you know, I was just kind of looking at this article of his again, it’s kind of a prelude to this show and I want to point out a couple of things that are so telling, and make this opportunity so incredibly, incredibly robust right now, in terms of the opportunity for us as investors.
There is one chart that he has here, there is a 20 year history of financing cost and he looks at the 30 year fixed rate mortgage from 1992 to 2012, for that 20 years. And he looks at the Freddie Mac primary mortgage market survey and you see back in 92 rates were about 8.5% and they have just totally, totally plummeted to where they are now, just above 3.5%.

But what does this really mean for us as investors? Well, of course it has a huge impact on our investment because when you combine that with what he talks about on the next chart, the average price of US single family home, that is inflation adjusted, from 1992 to 2011, and this is in 2011 dollars. You can’t go to 2012, because the year is not closed yet, obviously. And this is the Freddie Mac house price index, which, by the way, I want to make a point, much more accurate to look at that index, which people rarely do, than the, I’m going to just say it folks, the stupid Kay Scheller index. I am really getting upset with the Kay Scheller index nowadays and you know,we should get someone from Kay Scheller on this show, so that they can defend their index, which only represents about 5% of the market. Only 20 out of 400 markets, 14 of those 20 markets I wouldn’t touch with a 10ft pole. I mean, isn’t that crazy that people just revere that? That’s like the most, I mean, I think, I mean, anecdotally, that’s my impression, that’s the most commonly used index. Everywhere I look people look at Kay Scheller, Kay Scheller this, Kay Scheller that. Why the heck are they doing that? It’s so irresponsible.

In this chart what it looks at here is 1992, and this of course, is inflation adjusted, ok? The average home price, and by the way, there is a really good debate on what is a more accurate study is average or median. Well, remember, median is just a middle number. A lot of time when you see these statistics, they are looking at the median price, ok? I think it’s almost more important to look at the average price. Now, probably the most accurate would be to look at a weighted average but I don’t even know how you could do that on a national scale. Certainly, because so many markets and the prices differ so dramatically. You look at overpriced coastal real estate in the socialist republicof California where overpriced real estate in the socialist city of Manhattan, New York. I just don’t know how you could even do that.

This is amazing, 170,000 in 1992 down 2011 about the same price and he’s got a line right through the middle of that that shows it hovering just above $190,000 dollars for the average price for that time period, right? The Average graphs uses single family home prices in the US over the last 20 years, as reported by Freddie Mac and is adjusted for inflation with the CPIU index, the urban CPI, the Consumer Price Index, U, for urban. The two most striking features are the surging prices that was and the plunging prices since that time.

Now, get this, we got one more thing here to talk about and that is this, inflation adjusted mortgage payments. When you look at what has happened to Americans and what has happened to people in this economy, even non-americans, illegal immigrants. Oh, I am sorry, don’t mean to say that, undocumented immigrants, or as Hillary Clinton called it in the last election against Obama, people without papers. That’s a little bit snarky of course, but so is the ridiculous of our political discourse in this country sometimes, ok.

But anyway, you look at that and I was thinking, oh gosh, I had this wonderful, wonderful housekeeper in Southern California for many years. I mean, her name was Goume, she was just a doll, and she must have been my housekeeper for, I don’t know, 12/14 years probably, for a long time, and she was great. And I just couldn’t believe that I was thinking back to that and I was thinking here in Arizona how much I pay.

I paid $65 a week to have my house cleaned and I paid another different party to come through and clean the floors because the place is so big. I paid them 20 bucks, so I paid $85, I guess, you should say, per week, right? But in California, I was paying $65 a week, no, I think I was actually paying $60and I was thinking back to the olden days, I only pay Goume like $50 or $60 and I was thinking, my gosh, isn’t that ridiculously unfair, that the market price for house cleaning has probably not increased in like, two (2) decades? That’s insanity folks, I mean, when you look at Americans, and you look at all these salary surveys, Americans haven’t had a real wage increase in over 20 years now folks. Yet, their cost of living has shot up dramatically. And a lot of it, I say is deceiving again. And I remember when I was taking, back at UCI University, Irvine, I used to take these classes, on what they call light construction development, which, all the classes in this, forgive me I don’t remember what these acronyms were but these were basically all the classes you took when you want to be a real estate developer. And I remember I took these years ago when I got into real estate because I always wanted to be a developer and after taking those classes, I realized what an insanely risky proposition that is and how totally complicated that is. I would much rather be in the business of what I do now or rehabbing properties or something like that than developing them from the ground up from scratch.

So when I was taking the classes at UCI to learn how to become a developer, what amazed me, is the way that they would look at the statistics and especially as they related to inflation, cost of living and life style. I remember in the classes, they were always talking about how the average American home, the square footage has increased so dramatically. I am just giving you the concept here, because I don’t have the exact numbers, but just conceptually, this is the idea.

Now, they would say something to the effect of, after World War II when the baby boomers started their family formation years, the averageamerican home was like 900 sq. ft. Well, you know that’s true and when I think of a place like Lakewood, California, that’s a great example. There are many other places around the country that, of course, became these suburban locations for these small homes. What they didn’t tell you and what they never tell you, is the density. They want a ¼ acre lot at that time. Nowadays though, maybe 8,000 sq. ft., it’s still a nice size lot by the way, in acres, about 42,000 sq. ft., I believe. What they don’t tell you, is nowadays, yes, the house is bigger, which means the building materials, it consumes more building materials of course, but the density is so much higher.

I mean, people are packed into much smaller spaces nowadays, so when you adjust home prices for inflation, you’ve got to really consider what are youreally getting. I mean, in the early 70s when this beautiful area, Newport Beach, California was built called Harbour View homes, maybe in the mid-70s. I think those homes, when they were originally sold, sold for like $45,000 or something like that, in the 70s, and nowadays, they’re easily upwards of a million dollars and much more. Most of them have been remodeled and dramatically improved or knocked down but the neighborhood is like a million plus neighborhood though.

And, so, back then, that was sort of your upper, middle class home, and it was on a big lot in a neighborhood with green belts and a school right in the center of it and so forth. Whereas, nowadays, you have a little row home, yes, the house itself, the structure is larger but the density is much higher, and so people are much more on top of each other nowadays.

So, in looking at this chart, this is interesting, this effect didn’t happen much over the past 20 years, it happened before that but the density dramatically increased and builders got much better at building for higher density too so the quality of density improved. But, I am just pointing out that all things are not equal and they are not as they seem on the surface.

So, inflation has a huge impact on our lives and some people haven’t even had a raise. I mean, have you had a massage lately? It’s spa services, there’s an example, luxury item, right? The price of a massage has not really gone up, in many, many, years and I am thinking, don’t these people get a raise? Don’t they get a cost of living raise.Don’t my housekeeper get a cost of living raise? Actually, no, and if you look at typical corporate jobs, the same is also true.So this has been a huge problem for people and we, on this show, we learn how to fix this problem and how to solve this problem, how to actually make it benefit us as proven income property investors.

So, the next thing I want to talk to youabout is inflation adjusted mortgage payments. And this one is truly telling, because from 1992to 2012 and it’s in 2011 dollars. So what it shows is,back in 1992, your typical mortgage payment in America was about $900 and then it went up and it went down and during the boom times, you know when things were crazy in 2006 era, it went up to over $1,100.

Now, that same payment in 2012, get this, this is amazing, think about what this does for your cash flow, what I am about to tell you. Twenty years ago, the typical mortgage payment, $900, boom times, typical mortgage payment, I’m going to say on this chart, just guessing, it’s about $1,120.Now, it is $570, $570. If you are not jumping out of your chair, to buy good, prudent income property right now, you are completely missing the boat, okay, you are totally missing the boat.

An incredible opportunity we have now, and of course, you can learn a lot more about this by joining us in Meet the Masters of Income Property event, and that is March 24th and 25thin beautiful Irvine, California, at the Hyatt Regency Hotel. And by the way, many of you have registered already, so thank you, we look forward to having you join us. Let me give you the Airport code, you don’t need to run a car, the hotel is literally 5 minutes, if that, from the airport but it is a gorgeous hotel. The airport code is SNA, Orange County Airport, John Wayne Airport, San AnneAirport, that has about three names to it. And it’s a beautiful airport and the transport is super simple, there is a shuttle from the Hyatt Regency. You can take a taxi too, cost you nothing basically.

So join us for that and there’s still early bird pricing, it’s now $597, and that will cover you and a guest. Be sure to join us for that. I increased the size of the room block, and we were able to extend that $99 rate but I can’t say when the hotel will cut us off. It’s sort of illogical how these hotels act. They extend the rate but then, when the room blocks sells out, and they still have rooms, they won’t sell them for $99 anymore, which is quite a bargain price. So, the early bird gets the room or the early bird gets the worm too and so join us for that$597 and $99 room rate, as long as the room block and the early bird prices last. And that price will be going pretty soon, so register at www.jasonhartman.com. Two days, it will be filled with all kinds of great info., so join us for that.

Now, one of our vendors, and this kind of irks me a bit here, one of our local market specialists, our LMS, as we call them. They have set up a fund, a realty fund, a distressed realty fund and they’ve been sending out solicitations to our clients who have purchased from them, in this market, to join this fund.

Now, look folks, you know me, I don’t like pooled assets. I have a quote that I say, pools are for fools. I think we should be direct investors and we should not relinquish our future to anybody else. In my ten commandments of successful investing, what is commandment number 3? You’ve heard me talk about it before, it is “thou shalt maintain control, because when you relinquish control to somebody else in a pooled asset, mutual fund, this distressed asset fund that they’re setting up, stocks, stocks, bonds, whatever, anything else that someone else has control of besides you; where you are not a direct investor, you’ll leave yourself susceptible to those three major problems. And look folks, you can make a lot of mistakes in your investing career, but if you just don’t make this mistake, you’ll stay out of a lot of hot water. Be a direct investor, that is, commandment number 3, is probably the most important commandment. But the others are important too. So, three problems, you might be investing with a crook and you’ll lose your money because they may all just rip you off and they are graft in corruption. Number 2 problem, you might be investing with an idiot and you’ll you’re your money because of the sheer incompetence and stupidity. But assuming honest, assuming they’re competent, they take a huge management fee off the pot from managing the deal, so why would you leave yourself susceptible to that?

Be a direct investor. And speaking of direct investment, boy, business is booming, we got a good case study coming up, not only in this show but in another show. I rarely take on clients of my own, we have investment councilors to do that, but a larger client was referred to me a couple of months ago and I’ve been working with him on this 1031 exchange. And let me tell you something, they are going to profit so handsomely from this.

We are going to do a case study on ashow about this because it’s a great case of highest and best use of any assets you have.

Basically, this particular client had a beach homein the family, an expensive beach home and it was worth about $2.7 million dollars but it’s very little rental income and they turned it around and they’ve been buying property from us all over the country. They just bought 10 properties today in Atlanta, Georgia, last week they signed up for 20 in Dallas, although I don’t think they’re going to do all of those Dallas deals. They purchased some in Phoenix and in St. Louis as well and it is really amazing. I mean, folks, the cash flow will be improved for these people more than tenfold, easily from what they had to what they will get when this exchange is finished. People all over are coming out of the woodwork, buying dozens and dozens and dozens of income properties, because this opportunity is so impressive right now. So take advantage of that, but here is what I don’t want you to take advantage of.This is from a competitor, and you know, I actually like this competitor, some of my competitors I really like and I really do respect, but, I can’t say I agree with him on everything. And this one I definitely do not agree with.

They’re offering properties in Nicaragua and they’re saying that, oh, it’s the next Costa Rica and folks, we have so many people pitching us on this, Belize, Costa Rica, Nicaragua, all of this stuff, and I don’t know the details of this deal. I suppose I could be wrong but I bet I am not.

I am a world traveler. I’ve been to 64 countries. I have not been to Nicaragua, although I have read a lot about it. I subscribe to international living.I’ve met with real estate brokers in numerous countries around the world, in Eastern Europe, in Central America, in South America, and I look at real estate pretty much in everywhere I go. Even if I don’t meet with a real estate broker, I am still checking out the real estate market because its just fascinating to me. In Ukraine, I’m in Russia, I’ve done it everywhere, ok? I am not a novice at this stuff and I have not found one international investment anywhere on planet earth in 64 countries, and some of those countries, I have been to numerous times. It makes anywhere near the kind of sense American real estate makes. I have friends that have purchased property in Costa Rica, I have friends that have purchased property in all different places around the world and clients, I hear about their experience and let me tell you something folks, this doesn’t make sense, in my opinion. You want to purchase property that produces income.

Now, on this sheet from my lovely competitor here, it talks about how you can get oceanfront condos and non-recourse 0% financing for 20 years. Well, why are they offering 0% financing, because they are building it into the price.

The new Costa Rica price started at 70,000 bucks basically. And who is your renter here? Are they American tourists or are European tourists? Are they vacation rentals? I mean, these places don’t have much of an economy at all. And, if they have any, and I tell you something, when I was in Belize, I was just going tojump over to Nicaragua.
I was with one of my investment councilors down there and we were looking at property. And we were looking at banking and thinking of, I had actually opened up a
Belize bank account and I didn’t fund it yet though, I just opened the account, before I left and actually several months before the trip, I went down there, going to the bank and going around the country, I was so completely unimpressed, I couldn’t believe it. Some of these places folks, these are totally, third world countries.

Well, I read the lonely planet guide, which is one of my favorite travel guides, by the way, about Nicaragua and we were going to go over there, instead we went to Guatemala, from Belize, but Nicaragua was right there, we were going to go over to Nicaragua. They talked about the crime, the crime, the crime. I don’t know, the last time I was in Costa Rica, there were bars on every window. Granted, there’s a couple of nice beaches, so what, what are people thinking when they do these investments? These are not even called investments, yes, they can own properties there, sure, but if you want to check out a society and check out a civilization and go lay on the beach somewhere, fine and dandy, that’s one thing, but to consider these investment properties where you have employment and rule of law and good infrastructure, I just think you gotta be out of your mind.

American real estate is a steal right now. People from all over the world are lining up to buy it. I talk to one of our vendors. He said, he’s got a group in Egypt that buys property from him, 30 at a time, 30 single family homes at a time, just in one shot. Every several months they come back and buy another 30. Unbelievable, shouldn’t you be doing that? Yes, you should, so stay away from these distractions, Belize, Costa Rica, Nicaragua. Listen, if I find one of these deals that makes any sense, I will be the first to tell you about it, but I haven’t. I’ll say the closest thing that makes any sense, in my opinion, in Central America is Panama. I did go to Panama, I looked with a broker there and that one was interesting. I’d say it was the closest, but it did not beat anything we have in the United States, that we recommend through my network and on the website at jasonhartman.com.

Join us for meet the masters, let’s get to our case study here. We’ll be back with an actual client, talking to you about life and retirement and college and investing and all of that good stuff here, in just a moment.

My pleasure to welcome Patrick to the show. He is one of our clients and he’s been to many, many of our events, meet the masters, creating wealth etc. He wanted to talk today a little bit about his experience with investing and planning for your own future. None of us is going to retire with a gold watch anymore, unless we are on Wall Street. Insider that’s basically ripping off the middle class, which is what Wall Street seems to be so good at. You know, we just live in a great state of insecurity nowadays, but insecurity breeds opportunity at the same time, so, as long as we plan and act correctly and view the situation correctly, the opportunities really, in many ways have never been greater. But for those living by the old rules, you’regoing to be sadly, sadly surprised at how things do not work out.

So, that’s what we’re going to talk about today.

SoPat, welcome. How are you?

Patrick: Not too bad, how are you doing today?

Jason: Thanks for joining us on the show here today. First of all, let’s get a little background, tell people, you don’t have to be very specific but maybe, what industry you are in and what you do for a living.

Patrick: I am in the aerospace industry, in the engineering field and currently manage people and work on various military type programs.

Jason: Fantastic, I am sure you can give us all the details about this military programs right?

Patrick: No, not today.

Jason: Top secret? How long ago did you, I guess you first found out about us through the podcast, right?

Patrick: Oh, yes. First I want to thank Apple and then I want to thank you for doing the podcast. I have learned a lot. I’m sure I have listened to all your shows. It was probablyback in 2008. The one thing I was thinking of was that I may have kinda listened to them in the wrong order. I was in the middle of purchasing a house locally and in the end, after I closed escrow, and in a few weeks later after finishing the podcast, I wish I would not have bought that property here locally.

Jason: Well, sorry about that, they’re not in any order. And speaking of local here in Southern California, right?

Patrick: Yes, I bought the house in Lancaster, California, which is probably 80 miles North of LA. At the time, I thought it was a good deal but since then, it has probably declined.I began to lose lot of money and could have really used that money to have better cash flow in other areas but I look at it as a learning process and I want to keep pushing through and learning more. Sometimes it costs you money, sometimes it doesn’t.

Jason: Well, yeah, that’s true. You know we all live and learn and I got to tell you, it was interesting because just when I was driving on my way to do this interview with you, I was listening to a real estate show on the Phoenix radio here. And they were talking about doing short sales, and there were two guys hosting the show and one guy says, “call us today because your house is your greatest asset” and then the other guy says, “huh, huh, your house is your greatest liability”. And you know, for a long time I didn’t look at it that way either.

You know Robert Kisaki says that. He says your house is usually your biggest liabilility and, I think we got to just change our mindset, slightly, not completely here. And of course, you have and I have, too. In the past several years, whereas when I moved out my house, living at home with mom, when I moved out. I moved into a brand new condo that I bought and I remember that it was a condo in Irvine, California. It was not my first property but it was my first residence that I actually lived in. I bought that for $102,000 and 11 months later, I sold it to a buddy, well, it wasn’t a friend at the time, but now he has become a very good long term friend and he bought it from me for a $160,000, in 11 months later.

Then Patrick, it gets even better than this because I borrowed the money for the down payment from my grandmother. I wanted to calculate my return at being atabout 600% in 11 months but it was really infinite because it was someone else’s money I used for the down payment. That is the beauty of income property. And I have made some money on the houses I have lived in over the years, and I’ve rarely everbeen a renter all my adult life. Only a couple of times, one time when I was building a house in Newport Coast and had to wait for the construction to finish and I rented then and I am a renter now, as I mentioned on a few shows ago.

It’s great to own property. Income property is far and away the greatest assets class. It’s the best wealth creator there is but owning your own home, not necessarily so. Home doesn’t produce income for you, itjust cost you money. And if you are going to live in it in an upscale area, you can usually rent for so much less as a percentage of value, than owning. So, when you get into a more upscale property, the rent evaluators become so unfavorable to tenants. That’s a reason really, why, as an investor, you shouldn’t invest in these expensive or even median price areas, say Southern California, or New York City or any high priced market. You want to serve the masses and dine with the classes as the old saying goes. Buy low end and medium low rental properties and you can rent your house.

Patrick: Yeah, I mean where I live now, I mean our house, right before it blew up. It went to as high as $600,000. I talked to my wife and said look, we should maybe sell it.I think there is an emotional attachment sometimes and now I think I will be lucky if I get my house sold for $250,000.It’s really been depressing.
In my industry now, we are going though some downturn with the Government. We are notable to spend the money like we used to, and what I’ve seen is the people that can’t move and part of it is they are upside down on their house, so they can’t move. The ones that are getting the jobs, are the ones that are actually mobile and are able to move. Move 50 miles or move 200 miles, and they can get the jobs. The people, some of them are locked in where they have these houses that they have bought but now they are upside down, they can’t short sell them or get rid of them without credit issue. So I think, being a renter gives you that mobility that you’ve talked about before. And I have talked to several people and there are some people, they just like owning houses.

I agree with you, like in the South down byRegatta beach or Manhattan beach, or in Southern California, you can rent a house for $3,000 a month and that same money to buy it you would have to come with a couple thousand dollars to buy it and then you end up having a payment of about $5,000 a month.

Jason: Yes, I know, you are absolutely right and you know what we are going to do on our discussion today is really challenge some of these old ideas that people have and we’re going to talk about college and retirement planning.

Well, certainly with this new homeownership thing, and I have said it on this show, that the best thing that anyone can have on a resume nowadays is mobility and being able to move to where the jobs are, where the business climate or the jobs climate is friendly to those who want to work. That’s a very important factor that you just mentioned. Houses tie people down. The United States is the most mobile society in the world. You go to Europe and you go to South America and these people, they live in their houses forever, they don’t move. And I say that really cost their economy a lot of money because it reduces the efficiency and velocity in the economy, when people can’t move to where the jobs are. Being mobile is a stimulating factor to the economy, and as investors, that’s what we’re here to do, to provide that mobility to our renters who are tenants and, in turn, they’re going to make us wealthy by doing it. So it’s really a win, win deal for everybody concerned.

So, you found the creating wealth show back in 2008, and then what happened.

Patrick: Then Sara worked with me for probably 6 months. I was in the middle of an escrow on that house that I bought here locally and then I kinda decided to go purchase a house in Indianapolis, just because at the time, to be honest, it was the cheapest one and had the least amount of risk. If I lost my money, it would have been less to me buying a Dallas property than that one.

In the end you know, your team really helped out because two weeks before I was supposed to close, the original lender I went with decided he wasn’t going to make enough money on the loan and didn’t want to do it. Sara scrambled and worked with her teamto help get me the mortgage.

That one, it’s been a good house. I’ve had it turned at one point and that cost me about $1600. The people have been in there about 2 years. The numbers you said it would hit, they’ve hit andI’ve put my own little margin in there in case it doesn’t.

Jason: That’s a good point. Assume it doesn’t go as well as the performer or the projection say because life happens. If it goes that way great, you know, assume it won’t, assume it’ll go worst.

Patrick: One of the things that I have seen when I’ve researched these other markets and I like look in and dive in a little deeper than maybe those people is, we make some assumptions here and like California. When I buy a house, I pay taxes based on the price I paid for it but in India you buy a house based on the value that they think it’s worth, not what you paid for it, so you have to kind of factor that in with the taxes, may be a little higher.

The other big thing I think is that I have learned from you is that keeping that reserve. I have money set aside to handle, that I can pay payment on all my mortgages for about 6 months, and I was really tested earlier this year.

We were going on a cruise to Alaska and spent a up a lot of money there and my daughter’s getting ready to go to college and then all of a sudden I had 4 of my houses going all at the same time. I didn’t think it would happen but it literally all within a month and a half. The initial reaction is maybe to go sell everything but I really just kind of said, I put this money aside. I saved this for this reason and started dipping into that money and it eventually got everything taken care of and rented but what I have learnt listening to you, is that I got to do my planning and stick to my plan and not change it just when something bad happens.

Jason: Well, couple comments I want to just say before we go on. First, you said India. I want to make sure the listeners know that means Indianapolis. Then you also refer to turning the house and what you meant is turning the tenants. The tenants turned over, so in between, that cost about $1,600 to do that turn and then the new tenants havebeen there for two straight years, with no vacancy, right?Now, why did it cost you $1600?

Patrick: Well, I guess I didn’t get that correct, because I did get some of that deposit back.

Jason: The security deposit you mean?

Patrick: Yes, it probably totally cost me maybe $600 out of my pocket. I’m just thinking of what I had to pay the contractor. But it was carpet, paint, some tenants are dirtier than others. Once again, in all honesty, I have never been there, have never seen the house. I do have a house in Phoenix that I got on my own, not through your network but I’ve neveractually been to my house in Atlanta. I have a great relationship with the realtor. I have never been to Indianapolis, so I was really relying on your team and their property management. They have really done a good job. They communicate well with us and you are paying a little bit more every time I talk to somebody about this. They always say well, I can fix that faster for this much money, save $50 here but I really don’t have the time. So I think when I look at it when I have my house here locally, in Lancaster, when I have to go change a tenant out or do something, it cost me a lot of my personal time. You know, I have to go over there to get bids and when I do this one in Indianapolis or Atlanta, you are paying a little bit more money but you’re really not doing any work.

Jason: You know what I’d really like to say about that is. If you’ve got a good, honest property manager, they’re great. They’re really not making much money but if you got a dishonest property manager you’ve got to watch out for them. They can cause you some money but not nearly as much as something in a pool or traded Wall Street style investment, where you don’t notice all the costs, they’re just skimming all the profits off the tops, and you don’t even know they are doing it so…

Patrick: I am doing self-management on the place I have in Phoenix and actually I bought that, partnered up with another guy and we purchased, we’re in escrow on one right now in Indianapolis and we have a total of 3 and then the one in Phoenix we’re self-managing. He was nice about it and it saves me about $100 a month. The real challenge is getting in there all the different contractors. We have had a few little issues, we were able to resolve but we are trying to maximize our returns on that. Plus, like you said, when you have a really great property manager, to me, it worth the money but when they don’t do a good job, it makes it more complicated and more work for you anyway, so you might as well do the work yourself, if you can.

Jason: Yes, that’s a good point. One of the things I wanted to mention about that you alluded to earlier was about sticking to the plan. It just reminds me of a great quote that I have always really tried to live by at times when I am indecisive. I try to remember this quote, and here it is “successful people make decisions quickly, as soon as all the facts are available, and change them very slowly, if ever. Unsuccessful people make decisions slowly and change them often”.
So, you see the difference in that, when a successful person, they look at all the facts, they make a decision, they don’t agonize about it and then they stick with the decision, and they stick with their plan. Now, that doesn’t mean being so unaware that your whole environment has changed around you, which is actually one of the things we are going to talk about today.

We talk about the business, college and so forth and you just keep following the old plan. When it comes to doing these properties, I think that quote really applies well, because you are going to feel the bumps in the road here and there. It’s just important because real estate is a game of staying power. It seems that people who always stay in the game, always make very, very nice profits. But the people that are jerky about it, indecisive and get hung up on little issues, that when you look at them in the rearview mirror, they are really very minor. Those are the people that really, they just don’t do well. They don’t do well with business or real estate, or relationship for that matter. They don’t do well in much of anything in life that I can think of.

Patrick: Yes, the people around me too, there are people that are going to support you and people that are going to want you to fail. The funny thing is when I lost some of my tenants this last summer, there were several people who were, oh, you should sell, they were almost happy that it wasn’t working out.

Jason: Yeah, right. Some of those people can be your best friends. Ironically, it’s just sort of an ugly part of human nature .

Patrick: Yes, and I’ve been to many of the masters events you’ve had and I think there should be a frequent flyer program for that. I’ve been to so many of them really, but the reason why I enjoy going back is the networking because you are around people that are passionate about doing this and wanting you to succeed where even the people in your own life they are just too negative and they don’t understand that.

I have invested, I have listened to every one of your podcast and made a lot of investment in you, not just your creating wealth one but the success stories and other things so, there is a huge investment. I have gained a lot of knowledge just by me talking to somebody. I just can’t convey that and when I tell people, hey go check this out and they don’t do it, and then they wonder why things don’t work out for them.

They don’t understand how to do something, it not real hard to understand why they are not being successful. I agree, this is about staying power and it’s important I think, for anybody, to make sure that they have their reserves and have a basic plan. I hear a lot of people saying that they are going to go out and buy 10 houses in a year. I have partnered up with one of your clients that I introduced Sara to and we’ve had our LLC forms now for a year and we are on our 3rd house. It’s hard when you’re working and you have to get the funds together. But to me, if I can buy one house a year, I can tell these younger people that are 25 or 30, that if you can have 10 houses by the time you are 30, you’d be set when you are 60.

Jason: Oh, yes, you’d be very well set when you’re 60.

Patrick: And also where to buy, like I said, I have bought here locally and I think the thing that I wanted to say about that is with California, we have earthquakes, and I know for a fact my house is, Indianapolis is covered for a tornado but yet my rental house here is not covered for an earthquake.

Jason: Yes, and one of those things about earthquake insurance is that a lot of people think that when the big earthquake comes, and it will inevitably come. It has to, nobody knows exactly when, but it will come. And when it comes, they just think that the earthquake insurance will not be able to pay. There just will not be enough money to pay the claims.

Earthquakes are so devastating to a whole area, just a huge, huge area, the claim will be so major that they just don’t think the money will be there, and that’s why I say, as counter intuitive as it sounds and maybe it sounds a little ugly but the best insurance, is the high loan balance.

Patrick: Yes, with folks at work, they keep saying they want to pay their mortgage off, and to me, money is not that important .It’s what can you get from the money you have. To me, it’s about the cash flow and I think on my first house that I bought here when I was listening to your podcast. I don’t lose money on that, I kind of break even but I really bought if for speculation that in the future, it would go up, but now, looking at the economy, you cannot fix the housing market until you fix the job market. I think we are 5 to 10 years away from having recovery, at least where I live. I bought that house based on the fact that one day I can sell it for maybe twice of what it’s worth but, you’ve got a lot of inventory, jobs are moving out of California, so, you know, to get into that one house. It’s a beautiful house and it was really big but I probably spent $64,000 getting that when I could have bought a couple houses on other markets that would maybe give me about $300 a month each.
It’s really just using that cash flow to maintain your lifestyle and I still argue with a lot of people on this. When they say, hey I am going to go out and buy a car, and I go, why don’t you go buy 2 houses in Indianapolis or Atlanta and then use that money to pay for your car payment. They don’t get it.

Jason: Very, very good point, no they don’t get it. They don’t get it. Unsuccessful people, they spend money on things they love, successful people spend money on the things that create wealth and there is a big, big difference. So if you want to buy a liability and you want to enjoy those things in life because material things, little perks like that, a new car or whatever,just buy some assets to counteract it, to pay for it. Have the liabilities paid for by the assets and then you are out of the rat race. That’s the way you want to be. In what cities do you own properties now? You got Phoenix, Indianapolis, Southern California, where else?

Patrick: I have 2 houses in Indianapolis, one I bought with my 401k rollover self-directed IRA. I bought a house in Atlanta,that was a $7,000 down deal. If I look at the return on investment on that, has been really great. I still make $150 a month on that house.

Jason: With only $7,000 down that is an awesome cash return.

Patrick: And so far, the rental market is hard to predict. I am glad I am little diversified because I know if I stick in one area, other areas may be better and I have a condo in Long Beach that I bought for my brothers when my father passed away, and that one is a kind of a break even. Then I have the house in Phoenix. I partnered up with a friend of mine and we have an LLC. We bought that one and we have 2 more in Indianapolis that we bought together.

Jason: Good, good. So, what do you think when you look at the landscape and you talk to the people with whom you work and you got a daughter that’s going to college. What do you think about, retirement planning, what do you think about college, and really, it’s not even new but I want to say the new economy.
Of course the rules have been changing but I would say for purposes of this discussion, a few major shifts or just huge, huge mega shifts in our world is, number 1, back in 1971, we came off the gold standard.

Number 2, we really became a globalized economy, all these free trade agreements, China, etc. Outsourcing to India, China, other countries and then to really, really even magnify that trend, it was NAFTA, when Clinton signed NAFTA. So, lots been going on.I guess the other big mega trend I’d mentioned would be automation in the internet. It’s really causing a lot of job insecurity nowadays and things are changing quickly.

They say we live in a chemicalcomy where things change very quickly. We got to be very nimble. We can’t depend on any company or any job or even any line of work or profession. Sometimes old professions, think about it, imagine if you were a successful travel agent in 1998, where would you be now? You wouldn’t have a career. There are virtually no travel agents, it is a very small industry compared to what it used to be. So, things are changing, as Bob Dillon said.

Patrick: I almost took a picture and sent it to you. I was in Denver last week and I walked by this big shopping center and there is this big blockbuster video. It’s all boarded up and it looks like it was pretty fresh and if we think back maybe 5, 6 years ago, everybody went to blockbuster video and you would have invested money then and thought it was a great deal.

Now, with technology, it’s put blockbuster, at least a segment of it, where you actually go pick up the movies. So with industry, I think it’s changing so fast, that also, all the companies are lining up where they’re not giving the great pension program. To me, that’s a disservice, I’m, no financial planner, I’m not a big stock market person and don’t could give anybody any advise on that but, the issue I have is that companies have shifted people from pensions to 401ks and they tell them to go managetheir own money. It’s going to end up hurting people in the long runbecause they don’t really know how to do it.

Jason: I tell you something, we’re going to do a 401k show and it was inspired by a client that I spoke with just the other day in Atlanta, Mario. I asked him to look up on google, the video. I just said type in 401k jail and you’ll see a video we produced about that. These 401ks and IRAs they aren’t self directed. The ones that are in very liquid, very mobile, things like stocks and Wall Street style investments. I think there is a big fear of them being nationalized. I talked about that on the show especially the interview with Doug Casey, a few shows ago.

I tell you Patrick, I think that’s what’s coming next. That’s going to be a big, big show. It’s the nationalization of retirement plans. And if you either don’t have a retirement plan in the sense of a 401k or an IRA or if you got a plan that is self-directed or the assets are imobile, it’s going to be very difficult for the Government to nationalize those assets in that way. That’s your protection, two ways you can protect yourself against that possibility.

Patrick: Unfortunately, I’ll be 47 in a couple months, and I’d like to retire when I’m 55. Look what’s change, in the previous ten years, what’s going to change in the next 10 years, and you kind of make your financial plans for what’s going to happen 10 years from now. But I don’t know that you can really count on it, so that’s why I’ve chosen to take some money and put it in these investment properties.

The thing I look at sometimes, I wish I would have done it sooner had I understood it better. I don’t think there is any better time. I keep hearing people saying that everything is bad, don’t do it, but interest rates are low, housing is below construction cost. If I look back, on the past 20 years, I don’t think there has been a better time than right now to actually go do it.

Jason: I don’t know if there is either, given the combination of all things. Now, I hate to say it again, because I’m always saying it. The housing market on a national basis, if you are looking at Kay Scheller,is probably still in decline, as far as the price issue. But again, real estates are multi-income properties, multi-dimensional asset class, so you have the cash flow from it, you have the tax benefit from it, etc. And just from a cash flow basis, in the markets that we recommend, who cares if the property goes to 0? I doubt it ever could or would be because you are already buying waybelow the cost of replacement or construction but you are very protected. But the problem is, you look at the stupid Kay Scheller index, and it’s only got 5% of the nation’s market. Only 20 cities and 14 or 15 of those cities, I wouldn’t touch them. Those are overvalued cities that are still going to decline. So, I just can’t stand it when people talk about housing, as though it’s one monolithic thing instead of a bunch of little diverse markets. All real estates are local.

Patrick: Actually, in the market where I live right now, it’s kind of unique where we can get a single family home from probably anywhere from $100,000 to $150,000 and make a return on investment, so, it’s differenteverywhere.

What I’ve seen is how the news media, sometimes I just want to turn it off because it’s just so negative.But there’s so many different areas out there, and a lot of people say well, who would want to live in your rental house. I know you’ve talked about it before, it’s the people that, almost everyone of our rentals, some of the ones I have no idea who the tenant is, becausethe property manager that does it.

People that experience the loss of their own home, and sometimes they get to move into the same size house. They move from their 3,000 sq. ft. house they owned at one time with a $3,500 house payment. Now, they are down to another 3,000 sq. ft. house that only hasa $2,000 rental payment. So, people just kind of shift down to a different class of house and I’m providing a service.

I have argued with a few of my more liberal friends. I’m upset that I don’t get more of a tax break because I am actually putting people to work. When I buy house in Indianapolis, and I put out $1500 in rehab cost, I’m putting people to work. And if you would give me more of my money to play with I would put more people to work. I’m creating jobs, doing what I am doing. A lot of people thought that I am an evil person because I’ve taken advantage of somebody, but everyone of my houses I have, somebody is living in, that needs a house.

Jason: Yes, right. Exactly.

Patrick: There’s no construction going on right now, so you’re going to have a housing shortage and I know sometime ago, the gentleman mentioned that a 1% reduction in the home ownership rate is like a million renters.

You know, my son who graduated from college, who is still at home is looking for a job and he is here. Eventually, he’ll go out and you’re going to have more renters that come online, especially as the economy picks up slowly. I think you are going to have people that are sharing a house or living with their parents. They’ll move out and it creates more demand.

But the thing is, these markets that you’ve recommended, and I will say, working with you since 2008, I’ve seen you do what you say you were. Once the market doesn’t work, or a vendor doesn’t work, you’ll switch to another market. I don’t think you have any favorites. If the market doesn’t work, you switch to another market that does make sense.

Jason: Yes, that’s not exactly great for my business relationships but I think my customers love me for it. I am in business for the customer. I’m really like a, I have a liberatarian view point of things and I really think…well, I don’t know. I have really been in favor of kind of the underdog, the little guy. Rather than support these other businesses or affiliates or vendors or our property managers affiliates, I want to support my customers. That’s who pays us.We can find another vender, customers are hard to find.

Customers are the most valuable thing. The customer is number 1, so the fact that we have no physical presence orwe haven’t really spent any real money of any significance in anyone market, unlike national real estate firms, or even otherreal estate clubs. Like there is one competing podcaster, I won’t mention her name but I know some of you guys listen to her because I hear you tell me that sometimes.

They have groups in 3 different cities and it makes them beholden to those markets and we are just in and out of things. When it makes sense we try to be there and when it doesn’t make sense, heck, we get out. We still have a contract or an agreement, with that local market specialist in that market,we are just not referring business to them because we just don’t think that it makes sense.

At that given time, we want to go where our customers are going to have good experiences and it’s going to be easier for them to invest and do business and the numbers are going to be good and all of that type of stuff.

Patrick: And in the markets, I think there’s maybe two types of investors. What would you do with an Indianapolis home when you have to do the rehab yourself. Well, there is more risk or maybe the rewards are a little better but I know where you have a lot of markets where you can go and buy like the one I did.

In Atlanta, it was fully rehab, it was very simple and it didn’t take a lot of work. The thing I think that people need to understand is, when it doesn’t work, you are going to move out but you still are supportive. I know when I have an issue, I can call Sara and she will do whatever she can.

The nicest thing about working with you that, there is different real estate clubs like you mention. I am buying the house directly from the person the person in that area and I am not relying on, you are not taking a part of my profit, or I am not giving you a fee to do this. So, to me, I know it’s on my own, and if I just take the numbers you’ve given me, and I do a little research, I can validatethose numbers. I would say I am a repeat customer. We are in the process of buying a house. We’re in escrow right now. We’re hoping to close in the next week or so, but if the numbers didn’t work, I wouldn’t come back.

Jason: Well, one of the things is we are attached to the outcome, unlike someone who ison an infomercials of selling an expensive coaching program or something. We actually supply the goods, we supply the inventory, not just directly through our affiliations, as you mentioned, through our local market specialist that we contract with. What we say on the show, it’s got to happen in real life or we are not going to stay in business for very long.

Patrick: It is not always perfect either. The one thing I do say is with all this technology, you know, we have caller ID now, so anytime I see one of my property manager’s number come up on my phone, they are usually calling to ask me if I am having a great day. There’s usually something wrong and you’ve just going to have to deal with it. That’s why you have those reserves, but I’ve had, bought a house that we do inspectionsand then two weeks later the heater goes out and then it’s thousands or 1500 and then you have to account for that and deal with it.

Most of my properties, fortunately, we’ve had them rented within a few weeks. That’s when everything works great, but sometimes you just got to plan for it may take a month or 6 weeks to get them rented.

Jason: Yes, so, that’s why you have at least 4% of the value of each property in cash reserves. That’s very important because you never want to be forced to do anything rash. You always want to be able to stay in the game and that’s why you have cash reserves.

Let’s talk a little about what the original idea of this show was. I appreciate your sharing those experiences. But, you have a daughter going off to college, and I know that you were kind of irked up at some of the remarks I made several episodes ago, about college and about student loans debt not being dischargeable and about bankruptcy, which is something I didn’t know until recently. The world has changed so much around us and planning for retirement, planning for the future, planning for financial success and financial independence. What are your thoughts on some of this stuff?

Patrick: Well, originally, I didn’t want to talk to Sara and why is because I had kind of lived some of the similar experiences, where, in 1986, I finished like an Associates degree in electronics and then when I went into the industry, I got married, I had a job. I was making good money and working overtime and didn’t really want to go back to school. I kind of did but it was expensive and time-consuming and then I got promoted within my organization to the point where… I should have it. I started to be judged that I didn’t have it, so, a few years back…

Jason: You mean you degree, right?

Patrick: Yes, my Bachelors, and a few years back, I was really struggling with this on a, it was more of a maybe you don’t feel good enough, or you should have tried harder, but everybody around me would say, you are doing a great job, don’t worry about it. But, unfortunately, sometimes it does matter.

I went back to school, it was really tough, I gave up probably two years of weekends or spending time with my family or watching their sporting events, because I was doing school work every weekend but I think in the end, you have to ask the question, why are you going to school? What do you want to do? If you want to be a doctor, obviously, you need to go to school. If you wanted to be an engineer where you’ll be designing something, they are going to want you to have certain education. But I think that if you are in business for yourself, there are other ways where you can learn.

I think what happens, what I’ve seen, even with people that I graduatedwith, they get out of school thinking that everything is just going to be handed to them. And really what I think, is the day I graduated from school back in 1986, I really just didn’t know anything. The day you start learning is the day you graduate, school just gives you some basic fundamentals but we should look at life as a continuous process of learning.

I have invested a lot of time learning about the real estate market and I currently took all the tests for my brokers license and I will eventually study and take that, but it’s a continuous learning to understand. But with nowadays, people just go to school for maybe some of the wrong reasons or they get a degree that’s not going to do anything for them and then they’re left with a $100,000 in debt.

Essentially, to go to any average school these days, with room and board, it’s about $20,000 a year, plus the ancillary, money that you have to spend for them to go out and do things. My daughter is going and I want her to have that experience but I want her to also look at fields where she is going to be able to get a job hopefully. I think the one thing that we don’t teach in high school or maybe even colleges, how do you become an entrepreneur or how do you take somebody who is not motivated and make them motivated?

What I see lately with people that are graduating is that they feel everything should just be given to them and that’s not the way life works. What I have seen also is that to me, is not paying your mortgage, is a moral hazard and I have seen a lot of other people, it’s almost like a business where they are just going to not pay and it seems to by ok where…

Jason: Like all the business people that I talked about, all of these real estate gurus. They’ve filed bankruptcy every 7 years. It’s just part of the business plan.

Patrick: Yes, but to me, what I have discovered though, is I know a lot of people that have higher degrees and stuff, and I think my passion for like the real estate or listening to what you are doing, runs deeper and I don’t know why it is but, how do we get people excited about taking care of themselves. What I think we’ve done, we’ve created a society where people feel we’ve have trained them to be factory workers where they can just go in and if you get this job, you will get this retirement and you will get medical. And the whole school union mentality where you don’t really have to reform, you just have to be there the longest.

Jason: That’s an old fashion mentality that doesn’t play anymore in today’s world, does it?

Patrick: Right, when I go to work everyday, I really try to over deliver, do the best job I can because I feel I am not guaranteed my job. If I don’t do a good job, somebody else can do it for me. I think a lot of younger people, my kids included, they have lived in a world where nothing really bad has ever happened, yet when look at other countries, people don’t have enough to eat and here, we have too much of everything. Nowadays a new phone comes out, everybody wants a new phone even though their phone works just fine.

Jason: Oh, that’s an interesting point that you just bring up, because I was talking to one of our clients about this just a few days ago. Everybody is talking about how we are in such bad economic times and everybody is suffering so much and I know there are people out there genuinely suffering. I understand that, for sure. However, by and large, you look around and all these people that have been unemployed for a while, they are still buying the newest style phones, they have got a house full of gadgets, and they live in a decent area and they have got a car that is newer than 10 years old. Their family, they have got 2 maybe 3 cars.

Folks, we have got to just keep this in perspective. You look at the people lining up for soup or sewing pencils on the street corner in the great depression.
Things are better nowadays, there’s no question about it, they are a lot better. But, just keeping it in perspective, being grateful for what we have and never deciding that we’ve done enough, always wanting to earn our keep, every single day. That’s a recipe for success and never feeling complacent. You know Napoleon said the most dangerous moment comes with victory. So, you have a victory, stop for a short celebration and get right back to it and get your nose to the grind stone. That’s what you should be doing, it’s good character, it’sgood character building, it’s good for you.

Patrick: Right, and I think a lot of people they enter a job something and they feel that something’s owed to them and there is this mentality that well, I want a brand new car right now and I don’t want to pay for it. I want all these great things, and if you really think about it, we kind of set ourselves up for failure. Even sometimes with our own kids sometimes you give them everything and when they get out of school what else could they’ve ever wanted. They had nice cars, a nice place to live, plasmatvs, and this goes back to where I knowpeople always beating up on Walmart for eg. butWalmart offers cheap products to a lot of people and I think it’s improved. People who don’t have a lot of money it’simproved their lives. Everybody complains about Walmart but everytime I go there, I will see a lot of people in Walmart.

Jason: Yes, I know. Look, I am not a parent. I would love to be a parent. I thought I would have had kids by now but it hasn’t happened for me yet. Maybe I am working too much, that’s probably part of it. Let your kids have a little hardship, let them work and suffer a little bit. It’s good for them, make them stronger people. When I look back at all the hardships I have had in my life. At the time, they seemed so difficult, but looking back on them, they seemed like nothing and it’s like the world throw something at me now and it’s like, you can hardly faze me because I’ve been through it.

Patrick: I bought my daughter a used car and it wasn’t really great, it was like $4,000 and she was upset at me. She knows I can afford it. I figured at the time, I was thinking of buying another house, versus buying her a better car.

Jason: Well, my first car, I paid for all by myself, cash, it was $700 and it was a piece of junk.

Patrick: Yes, I had a $400 station wagon that I bought for my brother and we used the pull up emergency brake, the brakes didn’t work, so…

Jason: And you know Patrick, I walked to school, and it was uphill both ways .

Patrick: But my daughter, I am not going to be on this planet forever, and if I can leave my kids 10 or 15 houses, and when they are older, when they are 40 or 50 years old, they see what they have. That is what would have really benefitted her if I had bought her one car, it would have get scratched up or it gets wrecked in the parking lot. What good does that do them when they are older?

Jason: Now, you are absolutely right, you are giving something strong, something that’s an asset that will help them for many, many years to come. So, very good point.
On the college note, just so people know where I am coming from on that.

I think college is great but I just think it is massively overpriced. It’s the Government’s fault, largely because the Government has promoted student loans and financial aid programs and the universities in turn, just raised the price because the money is there to pay for it.

The universities don’t have to compete in a free market where, if there were no student loans, college would be priced reasonably. It would have to be. The universities would, figure it out, they would just somehow figure out how to offer college for ½ cost or ¼ of the cost.

When my mom went to school, she went to Berkeley, a great renown school, one of the best colleges in the country, really and she worked her way through college. No one paid for it, she didn’t get student loans, she just paid for it as she went, by having jobs. And kids can’t do that anymore, it’s too expensive.

Patrick: The funny thing is all the schools are protesting that the kids shouldn’t have to pay their student loans but yet they can just lower their rates. They can just say, hey, we are not going to charge you $50,000 a year to go to school andthenthat will help the actual student but they won’t do that.

Jason: The universities are a bloated bureaucracy, they are just like Government. They are just hugely bloated with all sorts of pensions and all kinds of people that they really don’t need to have there and it’s just a bloated system. It’s totally inefficient .

Patrick: Yes, I went to a Devry Institute of Technology, now it’s called Devry University, back in the 80’s. It was like basically in an industrial area. They didn’t have the money, they were there to teach you and they’re a business so they have to be efficient. They have to compete with the universities to get a lot of government subsidies.

Jason: They get it by the way of grants and loans.

Patrick: They get a lot of loans, like these Junior college and stuff, they just suck the money from the community but they don’t even really produce anything because they don’t have to. They can just chose what classes they want to offer without really having any structure. How many people really graduate from Junior Colleges and colleges that are actually going there. The numbers are pretty low.

Jason: Folks, if your kids are going to college, do not let them get a useless liberal Arts degree. Let them actually get a degree that can actually be used in the real world. Something that will pay them, that the world needs, not these sort of airy fairy things. There is no employment for half of these degrees that are out there, it’s ridiculous.

Patrick: Yes, and I think if you are going to work in a corporate setting, you have to go to school and get your degree because that’s the gatekeeper that determines what you are going to get paid and how much advancement you get. I have seen in several different industries, that they say, if you don’t have your bachelors degree you are going to be capped at this much salary. But if you are going to go into business for yourself, you can get your education other ways and it will probably be more successful. I do work with people that have masters degrees and PHDs and they are just not, I don’t want to say it, well, I guess I will say it, sometimes they are lazy, they think it’s owed to them, they don’t produce anything. They said they went to school and I have this degree, so I don’t have to perform and that’s not the way society’s going to work in the It kind of works that way now but I think it is changing.

Jason: It is. It’s changing, it’s changing quickly. Folks, everybody needs housing. Stock up on some rental properties, stock up on some very long, low fixed rate mortgages and you will be a very happy camper. What else do you want to just conclude with, about investments and planning for the future Pat?

Patrick: I just think that it’s never too late to start. I have been talking to a few people, they are 50 years old, 55 and they really don’t have a financial plan. If they ever get early retired, it’s not really planning, it’s more tree hodge at that stage.

I think it’s never too late to get started and I think the call of action is, even myself, I do a lot of things, productive I think, but I also waste a lot of time watching tv. But if people wouldjust take an hour out of the the day to just kind of learn some of the stuff and spend time and develop their investment portfolio, it’s not a big investment, but it’s going to pay off in the future.I think the real thing is taking action.

Too many people out there complain and say what’s wrong with the world but don’t take action in their own personal lives to make it better. To me, the only thing I can do, I can’t control politics and what’s going on. I can only control myself right now and I am trying to use the things that the Government does with the tax strategies to use for my benefit in the future and right now. I don’t agree with what Freddie and Fannie are doing, these ridiculously low interest rate loans but if they are going to do them, I will try to use them to my benefit because I am providing a house for somebody to live in.

Jason: It is not the time to be an optimist,it’s a time to be an opportunist. Exploit the opportunities out there, and there are a lot of them there. They are great. Well, good stuff.

Well, Pat, thank you so much for joining us today, we appreciate it and I guess I will see you at Meet the Master in March, right?

Patrick: Yes, I have already signed up and sent my money in. They’ve run my credit card and I am ready to go. Once again, I enjoyed going and meeting the people and I think it’s a good refresher. When you listen to it againand I will say the first few times I didn’t always get it but now, you have been going for as many times as I have been, I keep learning more and more each time because it sinks in a little different or easier form a different perspective.

Like I used Mark Holler to set up an LLC and use some of the other folks that you have and I think it is great how you get some of these people together and is insignificant for all the knowledge you get, considering what some of these other real estate companies will charge to send you to a similar type education.

Jason: Well, that’s for sure. Well, thanks again for supporting us. I am so glad that you are involved with us and we appreciate your business and appreciate having you on the show today.

Thanks so much Pat.

Patrick: Alright, thank you.

The Jason Hartman Team

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