What is the best way to harvest the wealth from your real estate investments? Refi Till Ya Die!™  

Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Newport Beach, California.  During this weekly program, Jason is going to tell you some really exciting things that you probably haven’t thought of before or a new slant on real estate, 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 to the talk, but walks the walk.  He’s been a successful investor for 20 years and currently owns properties in nine states.  This program will help you follow in Jason’s footsteps on the road to financial freedom through real estate.  You really can do it.  And now, here’s your host, Jason Hartman.

Jason Hartman: Hello.  This is Jason Hartman.  Welcome to Podcast No. 30.  It’s great to have you here with us today, and we would like to talk about harvesting the wealth from your real estate investments today.  As you regular listeners or attendees of our seminars or clients of ours know already, is that we believe in the greatest way to invest in real estate, which is using our deferred down payment technique.

Now, in using this technique, the sensible question to ask and one that you might be thinking of with the deferred down payment is, if No. 1, you want to buy properties that make sense the day you buy them from a cash flow perspective so that you have a sustainable investment.  But when you buy a property, you have a choice.  You can either put the money into the property or you can put it into the bank.  And I say the best way to do it is to put as much money into the bank and as little money into the property as possible.

Reasons which we’ve outlined before in previous podcasts, and of course, in seminars and so forth is that the more money you put into the deal, the greater your risk and the lower your return.  Real estate does not perform well as a bank.  In fact, one of the quotes I always use is that “real estate is the best investment, but it’s the worst bank.”  Let me say that again.  “Real estate is the best investment, but it’s the worst bank.”  The other quote I use a lot is I say that, “Real estate is a great place to invest someone else’s money.”  “Real estate is a great place to invest someone else’s money.”

So you can gather that we like leverage.  Leverage is a very powerful tool when used properly and when used responsibly.  So we need to have the proper amount of reserves in the bank on the sidelines when we put minimum down on our rental properties so that they are sustainable investments and they can sustain themselves.

Now, one of the most exciting parts though, is how do we develop a retirement plan out of this?  And we’ve developed a plan called Refi Til You Die, or Refi Til Ya Die.  If you want to use it that way, a little more slangy, right?

And I have with us here, a new associate with us, that I’ll introduce first, and it is Lynda Mulley.  Lynda, hello.  Welcome.

Lynda Mulley: Hi, Jason.  Thank you.

Jason Hartman: It’s great to have you here.  Lynda’s an investment counselor and soon to be an area manager with our network.  And then we also have someone you’ve heard from many times before, and that is Senior Investment Counselor and Senior Area Manager Karam.  Karam, welcome.

Karam: Hello.  Thank you, Jason.

Jason Hartman: Karam, you usually take this part of the seminars a lot of times and you explain the concept of our clients buying what we sort of jokingly call a six-pack, six properties in diversified markets.  Tell us a little bit more as to what a six-pack is.

Karam: You know this is the part I like best, Jason.  In real estate, when you see the results after a few years of investment in diversified markets, you start seeing the results.  And like you always say during the seminar, real estate sneaks up on you.  It chugs along.  The appreciation is not all that great.  You know, our assumption of appreciation is 6 percent.

Jason Hartman: Which is lower, by the way, than any of the historical national average for long periods of time.

Karam: Correct.

Jason Hartman: And let me just share those with some of our listeners.  From 1968, the nationwide average or median – I can’t remember off the top of my head – appreciation rate is 6.4 percent, 6.4 percent.  The last ten years, 7.29 percent.  And what was interesting, and our podcasts listeners have probably never heard this one before, but I was able to find a very interesting article from the Wall Street Journal dated September 30, 1996, prior to the real estate boom, pretty much is most areas.

Karam: Yes.

Jason Hartman: It quoted real estate appreciation rates for the longest time period of any one report that I could find, which is from, listen to this folks, 1926 to 1992.  Now, that is a long span of time.  And we had a great depression in there in the ’30s.  Of course, we’ve had a lot of economic changes over those many years from 1926 to 1992.  And guess what?  They said that the real estate had appreciated at 11.1 percent.

Karam: Wow.

Jason Hartman: Isn’t that phenomenal.  So it’s really proven itself for tens of millions of Americans and millions and millions more people all around the globe as to what a great investment real estate is.  But we are very conservative when we project appreciation.  Because, you know, appreciation is something that I’ve always said you can’t really hang your hat on.  It’s great when it happens but let’s look at it like the icing on the cake.

And when we look at projections for appreciation, let’s go below and be more conservative than all of those historical numbers that we just shared with you.  And there are many others as well.  So this is a very conservative assumption at only 6 percent.

So at 6 percent, Karam, tell us what happens.  First of all, what is the client in this example buying and how much does it cost to do this investment?

Karam: Right.  Let’s go over six-pack.  How did we arrive to six-pack?  Six-pack is six houses in diversified markets.  A lot of our clients are buying onesies, twosies, and a lot of them came in and said, you know, this one, two properties we have whole bunch of equity sitting in our primary residence and some of our rental properties are in California, and they have appreciated so they want to buy more properties.  So we have to come up with some number and we started with six-pack.

Jason Hartman: It’s a nice round number and it’s a familiar concept if you’ve ever bought a six-pack of Coca Cola, or Pepsi, or beer, whatever it is.

Karam: So right now about half of my clients, they’re going six-pack.  Some of them are buying 9 properties at a time, 12 properties, but a majority of them are in the six-pack.  Six-pack is six houses in diversified markets.  So it depends on how familiar they are with the markets and where they want to be placed at maybe two properties in three markets or two, two, one, one, you know, in four markets, or five markets or six markets.  These are six houses averaging $166,000.00 per house.  So your portfolio value for six properties is $1 million.

Jason Hartman: One million dollars worth of real estate.  And our typical client who comes in has about $300,000.00 or so equity sitting in their home doing nothing.  I know that we have listeners from all over the world and if you are in any of the western European countries, if you are in England, Ireland, if you are in any of the two coasts of the United States, or if you’re in Hawaii, you have probably easily got, if you’re a homeowner, $300,000.00 in equity sitting in your home doing nothing.

And guess what?  You know what the rate of return is on that equity?  It’s exactly zero percent annually.  Nothing.  Your money has fallen asleep on you and what we want to do is wake it up and put it to work.  Make your money work as hard as you do.  And also, for American’s listening, that is not FDIC insured.  So there’s no insurance on this money.

Right now, as we are recording, we have these fires raging through California and unfortunately many, many homes have been destroyed in San Diego County mostly, in Southern California, and the safest thing to do is get the equity out of your home and get control of it so that you are not in the position where the equity is always at risk.  And we’ve discussed more on that.  I don’t want to go into that because it’s sort of a detailed subject in prior podcasts, and it’s in ours, and we’ll discuss it more in the future.

But why do they need to buy a six-pack, Karam, six properties?

Karam: Let’s move on and see how we buy this million dollar properties.  These days, 10 percent down is a norm.  It used to be 5 percent down, zero down, but nowadays, after the mortgage meltdown, most of you are familiar with the mortgage meltdown, tightening the credits, so 10 percent down is a daily thing.  So that 10 percent for a million-dollar portfolio is $100,000.00 down payment.  And approximately, you need about 3.5 percent closing cost, which is $35,000.00.  Then as a net worth we are very conservative we want to make sure that our clients are on right track, we recommend having 4 percent as reserve.

So 4 percent of the purchase price, which is a million dollars, is $40,000.00 in reserve, so $100,000.00, $35,000.00 and $40,000.00, a total of $175,000.00 to acquire these properties.  But at the time of closing all you are putting down is 10 percent plus the closing cost, so $135,000.00 leaves your account and you have $40,000.00 reserve in your own account.

Jason Hartman: So $175,000.00 needed, $135,000.00 actually spent, or invested I should say.  So Karam, as Jerry Maguire says in the movie, “Show me the money.”  So how do we see the money here?

Karam: That’s it, time to show the money.  Six percent, everybody knows our assumption is 6 percent appreciation, rule of 72, it will take 12 years for your property to double in value.  So a million-dollar portfolio, in 12 years time, it will be $2 million.  Right there and then, you see a million dollars in gain.  Your investment, initial investment was only $175,000.00, which is sitting in equity in your houses and your rental properties.  And like Jason says, it’s earning exactly zero percent interest rate.

Jason Hartman: There are two ways we can really look at this.  As a wealth building plan – really a few ways – a wealth building plan, a way to buy more properties and invest in more properties, and also, as a retirement plan.  So let’s take someone today that is – the new standard for middle aged, by the way is 60 years old.  And the problem that most of the people listening to this podcast will fortunately have, but it’s still a problem, is they will outlive their money and we know that governments around the world with entitlement programs and Social Security type of programs are going under.

These are not working and we all know that we cannot rely on them for our future and our financial security.  So we’ve got to plan, and act, and be responsible for our own financial wellbeing.  Now, a person who’s 40 years old today, in this first round, they would be 52 years old.

Karam: That is correct.

Jason Hartman: So still well under retirement age and really, by today’s standard, under middle age.  Go head.

Karam: So that $175,000.00 at the age of 40, which you decide to put it to use, to make it work for you, is producing a million dollars in gain in 12 years.  At that time, you are only 52 years old.

Now, you go to the lender and you do their refinance, which is you take out 80 percent loan and leave 20 percent as equity in your portfolio.  Initially you started with 10 percent only, now you have 20 percent equity in your portfolio and all these houses.

Jason Hartman: So your equity position has actually increased.  Now I would do away with that if I could, but most of the time, when you refinance and do cash‑out refi, you’ve got to keep 20 percent in the property.

Karam: That is correct.

Jason Hartman: So now your cash flow’s improving over the years because you’ve got more equity and less dept on the property as you refinance it in the future.  And of course, over the years, if history is any guide, rents have increased and rents are always having to keep up in a way with the mortgage situation.  So if mortgage rates are much higher when you go to refinance then rents will be higher.  We’re seeing that right now with the mortgage meltdown rates are still pretty low, but qualifying standards are tougher, which has actually improved the rental market and we’ve talked about that a lot in prior podcasts.

Karam: Right there you see your equity, like Jason explains, equity increases.  When you are leaving 20 percent in there, you have an equity of 400,000.  You started with $100,000.00 only, now you have an increase of equity of $300,000.00.  So you have $400,000.00 you are leaving as equity and your new loan amount is $1.6 million.  But you have to pay off the previous loan, existing loan, which is $900,000.00.  So you are going to pay off that 900,000 and you end up with $700,000.00 cash in your hand.

You have a choice to spend it the way you want.  You can reinvest it if you like, or you just spend that money if you decide to spend that money or reinvest any way you decide.  It’s a non‑taxable.  This is your borrowed money.

Jason Hartman: Now, this is great because there is no tax on borrowed money.  So let me just summarize what Karam said because I know when you’re listening and you’re not seeing visual aides, it’s a little bit hard to follow sometimes.

The portfolio you started with was six properties, valued at $1 million.  In this example, you’re 40 years old.  Now, 12 years go by, you have your 52nd birthday, you’ve had a gain with that $135,000.00 has brought you $1 million.  The portfolio value has doubled with a mere very modest 6 percent appreciation.

You go to the bank, refi 80 percent loan to value ration.  You get loans of 1.6 million.  You pay off the loans existing of $900,000.00, which, in reality, will really be lower, right?  Because you’ve paid some principle down.  You’ve had to over 12 years, or your tenants have paid it down for you.  You’ve got equity of $400,000.00 and $700,000.00 cash out.  If you were to divide that by 12 and go another 12‑year cycle, look at what happens.  That’s $58,333.00 a year tax‑free.  There’s no tax on borrowed money.  Isn’t that wonderful?

Karam: That is great.  Folks, this is $700,000.00 you’re talking about in 12 years time.  You are at the age of 52, and if you are like me, I would decide to spend this money.  This is what I invested and I want to enjoy the fruits of it.

Jason Hartman: Oh, yeah.  You’re such a spender, Karam.

Let’s hear what Lynda did with her portfolio in terms of reinvesting the money.  But before we move on, this gets even more exciting, so hang in there.  Go ahead, Lynda.

Lynda Mulley: This is very exciting.  To take $135,000.00 to control $1 million of inventory, that’s a phenomenal way, not only to get started, but to create wealth over the long term.

What I did and my first three properties I bought in high appreciating areas.  In one year, I was able to just take my best property out of those three and take out about $75,000.00 that allowed me to buy four more properties.  I had found out about this concept later in life, shall we say, and I needed a jump-start.  I needed to get some equity built quickly and to build up some reserves, and taking the money out of my property allowed me not only to purchase other properties, but set a little aside for reserves, and I continued to work on that plan.

That is my plan currently, but doing the six-pack is the quickest way to build wealth, and I suggest that is what you go for initially because it really gets you there quickly.  You can do one or two at a time like I have.  That works well too.

Jason Hartman: And just to tell you, within just a few short years, Lynda has turned her very first rental property into 14 rental properties.  So she has 14 rental properties now in diverse markets all around the U.S.  And again, if you are listening form a foreign country right now, you are really in great shape because our dollar, unfortunately for us in the U.S., is so weak right now, and my prediction it could get even a little bit weaker.  You are bargain shopping right now and it’s just really good for you; more on that in the future.

But Karam, what’s the next round of 12 more years?

Karam: Well, let’s go another 12 years.  While you are spending the $700,000.00, which allows you to spend about $58,000.00 a year or almost $5,000.00 a month –

Jason Hartman: And that’s assuming you stick that money under your mattress rather than in the bank.  We’re just dividing it, we’re doing very simple math here.  Assuming you’re earning no interest on the money.  So it’s better than this example, but go ahead.

Karam: So you’re going to spend this over 12 years period.  That’s what it allows you to $58,000.00 a year for 12 years and you’re out of that $700,000.00.  But guess what, folks?  Your portfolio, which valued at $2 million, was working for your all during that 12 years period.  Now, you ran out of that money but your $2 million portfolio is $4 million, assuming the same modest 6 percent appreciation.

Jason Hartman: Karam, this reminds me of that fairy tale about the goose that laid the golden egg.  And here, the great thing is, you get the eggs, you get the money, but you don’t kill the goose.  And so it keeps producing for you indefinitely.  It can just go on.  You can pass it to your heirs.  But you know the problem is most listeners are probably going to live to be about 100, 120 years old.  So we’ve really got to make this work for us.

Karam: That’s correct.  You know what they say, Jason?

Jason Hartman: What’s that?

Karam: Fifty percent of the baby boomers will live to celebrate their 100th birthday.

Jason Hartman: Isn’t that amazing?  Eighty million baby boomers in America and half of them, 40 million people are predicting, will be centurions.  They will be like George Burns’ age.  Did he pass away at about 100?  We’ve got long lives ahead of us improving healthcare, if Hillary doesn’t take over.  Oh!  Pardon the political comment.  Our healthcare will be as good as they service at the Department of Motor Vehicles if the government takes over.  But that’s just my opinion.  I could be wrong.  I doubt it.

Anyway, so we’ve got a real challenge, but a real opportunity here because we can make this work for us all our lives.  So now this example, the person is 64 years old only, still younger than retirement age.

Karam: Yes.

Jason Hartman: The new definition of midlife, what do we get now at 64 years old?

Karam: Well, let’s see what we started with.  We started with our investment of $175,000.00 and we turned that into, at the age of 64, you have a gain of $3 million.  That’s a huge gain.  And you have a portfolio that you’re controlling is $4 million.  You started with a modest $175,000.00 only.

Now you repeat the same process.  You go to the lender, you get 80 percent loan out, leave 20 percent equity in your portfolio.  That 20 percent amounts to $800,000.00 equity sitting in your portfolio and your new loan amount is $3.2 million.  Your old loan amount, as you remember, is 1.6.  You pay off that old loan.  Now, your net gain $1.6 million cash in your hand; that’s proceeds that are non‑taxable, again.

Jason Hartman: So let me just kind of summarize that for you.  We started with this million-dollar portfolio, we invested $135,000.00, we kept $40,000.00 in reserves.  Twenty-four years went by, and now, we have a $4 million portfolio and a $3 million gain.  We have $800,000.00 in equity now and $1.6 million in tax‑free proceeds from the refinance.  We still own the properties.  So if you divide the $1.6 million over the next 12 years, assuming you don’t put it in the bank and you don’t earn any interest, which of course you will, so it will actually be better than this, you will have $133,000.00 a year.  That’s $133, 000.00 a year tax‑free income.

And then you just wait 12 more years, and then you’ve got what, your 76th birthday and now you’ve got an $8 million portfolio.  And Karam, let’s not even worry about how much spending money we have.

Karam: Yeah.  Yeah, that’s huge.

Jason Hartman: I’m getting so excited here.  Is there any way we can do this faster?

Karam: Well, that’s what some of our clients say.  You know, 12 years is a long time to wait, although the time goes fast and we have to come up with some better numbers.  And we say, okay, in that case, instead of buying six-pack, let’s buy 12-packs.  And that’s what a lot of our clients end up with anyway.  They buy the six-packs now.  Six months later, they come back and buy another six-pack.  So right there is your properties, which means you start with, instead of $1 million portfolio, now it’s at $2 million.  At a 6 percent appreciation, to realize a million dollar gain, you only have to wait only 7 years, not 12 years.

Jason Hartman: So now I’ve got the 7‑year itch.  I’ve got a 12 properties, $2 million in value, and in only 7 years, that portfolio increases in value by 50 percent.  So my $2 million portfolio, just 7 years in our example previously, we’re only 47 years old now.  Forty‑seven and we’ve got a $1 million gain from that initial $270,000.00 investment.

Karam: And all you invested in the beginning.  We start out with this $350,000.00.  That’s down payment, closing cost and reserve.

Jason Hartman: So let me just clarify that.  I said 270, that was just the down payment and closing cost that did not include reserves.  So with reserves, it’s $350,000.00.  Okay, go ahead, Karam.

Karam: So now, you repeat the same process.  You go to the lender, you get 80 percent loan, leave 20 percent in equity, that amounts to $600,000.00 in equity.  You started with $200,000.00 down payment on $2 million properties, and now you have $600,000.00.  In seven years time, after paying off your previous loan, you will net $600,000.00 cash, again, non‑taxable, $600,000.00 in seven years’ time only.  Remember, our appreciation assumption is still the same.  It is 6 percent, no more than 6 percent.

Jason Hartman: So if we see appreciation rates tick up, of course the market’s in a bit of a funk now in many areas, where the market’s actually declining in value, but in some areas it’s still appreciating.  In the markets we identify, we think the prospects are very, very good, so what if we have 8 percent appreciation some of these years?  What is it if we have ten?  Just look at what’s happened to people who were investing 10 years ago, 20 years ago, 30 years ago.

Don’t wait to buy real estate.  Buy real estate and wait.  Just get as much of this as you can.  It has got so much force behind it.  Everybody on the planet needs a place to live.  The population of the United States is dramatically increasing.  The population of the whole world is dramatically increasing.  The cost of all these building materials is dramatically increasing.  All of this stuff puts upward pressure on your rents and your rental income and also the prices of your properties.  So don’t let temporary news sidetrack you from the wealth-building plan that is so historically proven.

What happens next?

Karam: Now your $600,000.00; you are going to spend it over seven years’ period only, so that gives you more money to spend $85,000.00 a year spending money, tax‑free spending money.  That’s the same as spending $7,000.00 a month for the next seven years.

Okay, while you’re doing that, $7,000.00 a month spending, you’re spending that money your portfolio is increasing in value.  And this time it went from $3 million to $4.5 million.

Jason Hartman: The 47‑year‑old is now 54, still very young, right?

Karam: Correct.

Jason Hartman: And we took a portfolio that was $2 million and now, it’s worth $4.5 million in 14 years.

Karam: In 14 years’ time.

Jason Hartman: At a modest 6 percent projection.

Karam: That’s correct.  That’s the amazing part about real estate.  Think about it folks, your investment is only $350,000.00 to start out with.  At the age of 54, you have a gain of $2.5 million, assuming you have no other retirement plan.  You’re not counting on the Social Security, you don’t have a retirement plan, no savings, this is it.  This is going to give you a retirement money or college education for your kids.  Or you have the retirement plan in place and everything, then this is just extra money building wealth for you.  And all you did was you stripped your equity from your house or rental properties and decided to invest in 12 properties in a diversified market, which are, right now, under fair market value.

You have very limited downside.  You’re buying in areas that are 5 percent to 10 percent below fair market value.  And if you look in terms of per square foot price, anywhere to $60.00 per square feet to $100.00 per square feet, so your maturity of your purchase price, about 80 to 85 percent is in the house, in the structure value.

Jason Hartman: So go back and see the podcast on eliminating risk when investing.  Because we have a whole podcast about that subject that Karam’s alluding to.

Karam, I just want to make the conversion for any of our non‑American, especially European listeners, because they look at things in per square meter, per prices, and most European cities, especially capital cities, you’re looking at upwards of $260.00 per square foot in a high density flat.  There’s the conversion just very roughly for you.

Karam: Right.

Jason Hartman: So we’re talking about $60.00 to $100.00 per square foot versus $260.00 per square foot because they’re traditionally around 1,800 to 2,000 euros per square meter.  So I’m making the size conversion from metric to imperial, plus I’m making their currency conversion in my head.  Not bad.

Karam: Yeah.

Jason Hartman: But the equation is, if I didn’t make that quite clear, typical European city is looking generally at around $260.00 per square foot in U.S. dollars.  We’re talking about properties in the U.S. in excellent cities, in cities that haven’t had the real estate bubble, in cities that have high upside potential of $60.00 to $100.00 per square foot.  That is really amazing.  Much lower density, single-family detached homes versus high density, high-rise flats, excellent point.

Okay.  What happens?  Now our listener is 54 years old.

Karam: Yes.

Jason Hartman: Portfolio’s gone from $2 million to $4.5 million.

Karam: Uh huh.

Jason Hartman: They’re spending now $171,429.00 per year tax‑free income, assuming they don’t put it in the bank and they don’t earn any interest.  By the way, everybody, this example of Refi Til Ya Die here doesn’t include the tax benefits you’ve received over the years.  It doesn’t include any cash flow that you’ve received over the years.  There are other benefits to this.  It doesn’t include the inflation orientated principal reduction.  Heck, it doesn’t even include real principal reduction from paying down the loans.  So this is a very simplified example.  In real life, it should work out a lot better than this.

Lynda, you look like you have a comment about this.  What do you think over there?  You’ve been awfully quiet.

Lynda Mulley: Again, I just look at the opportunity for people to take dead equity out of their properties and to create a real retirement plan.  I haven’t come cross anything like this, and certainly, the stock market won’t put you in this kind of financial position by the time you’re ready to retire.  This is the only thing that makes sense.

Jason Hartman: Yeah.  You’re not going to do it on Wall Street, I’ll tell you that much, that’s for sure.  And keep in mind, if you’re listening, if you’re not a homeowner, if you don’t own rental properties now, you can use your savings, any stocks you have, bonds, mutual funds, you know, any asset you have, you can buy these properties with it.  It takes a very small amount of money compared to the amount of assets that you control here.  So Karam, what happens on the next round?

Karam: Next round, you’re at 61 years old.

Jason Hartman: Only 61.  You’re still four years before the old-fashioned idea of retirement is, 65.

Karam: And you are walking away with $1.8 million cash while you have about $6.75 million worth of portfolio working for you.

Jason Hartman: And that’s a $4.75 million gain on that original investment and only 21 years have gone by?

Karam: Twenty‑one years only.

Jason Hartman: Wow.

Karam: Can you expect this in any other investment anywhere?  Your investment, you started out with $350,000.00 and you have $4.75 million in gain right there.  And that’s why you are walking away with – when you refinance, you’re walking away with huge amount of money, and again, listeners, this is not taxable.

Jason Hartman: So what is our spending money here, Karam, or non‑taxable spending money now?

Karam: Two‑hundred and fifty-seven thousand dollars a year.

Jason Hartman: Wow!  That’s a nice allowance for the next sever years, huh?

Karam: That’s correct.  The next seven years, you’re secured and your property is still working for you.  It’s still goes up in value, the tenant is paying your debt, and you’re reusing the principal, and you have built a nice little mini empire, real estate empire.

Jason Hartman: So Karam, do you want to sort of summarize these two plans?  One plan you gave was the six‑pack plan.  Of course, this applies to 1 property, it applies to 6, it applies to 12, it applies to 20.  It’s just a multiplier effect either way.  So on the six‑pack plan, in 12 years, just give us a refresher there.

Karam: Six‑pack is you start with $175,000.00 investment.  It takes 12 years, and you have a gain of $1 million.  In the second example, you start with $350,000.00 investment.  It takes only seven years to realize $1 million in gain.

Jason Hartman: So with double the investment, buying twice as many properties, I can shorten this by almost half.  I can shave off five years.

Karam: That’s correct.

Jason Hartman: And in seven years, I could get the same result that I would in 12 years on the other plan.

Karam: That’s correct.  So in first example, after 12 years, you are walking away with $700,000.00 cash.  In the second example, in seven years’ time, you are walking away with $600,000.00 cash.

Jason Hartman: So listeners, the question for the day is where do you want to be in seven years?  Where will you be in seven years?  Think of how old you are now.  If you are 25, my God, the opportunity is phenomenal.  If you’re 20, I mean it’s just beyond incredible.  If you’re 30, it’s phenomenal.  If you’re 40, it is great.  The sooner you start, the better it works.  Let time be on your side.  Make time work for you.  Most people time destroys them, then inflation destroys them financially.  But the prudent real estate investor with sustainable, thoughtful investments, where the property makes sense the day you buy them, on a prudent plan that has been historically proven over and over again, millions of times, there’s just an awesome opportunity ahead, isn’t there.

Lynda Mulley: Um hm.

Jason Hartman: What do you think about that?

Lynda Mulley: This is so exciting just to sit here, and I’ve been exposed to it now for quite a while.  But it’s so exciting to hear that there is a way to benefit yourself and to build wealth because there is no other way that makes sense to any of the things I’ve read or seen.  So I would be asking myself what do I do to take action?  What’s my next step, Karam?  What do I do next if I wanted to take advantage of this?

Karam: Here I would like to point out, Lynda, is age shouldn’t be an issue.  It’s not for the younger folks only.  I have a number of clients in their 70s.

Jason Hartman: Oh, yeah.  The doctor, the one comes right to mind.

Karam: He’s 76 years old.

Jason Hartman: He may live to be 100 or even more, but he’s doing this for his kids and his grandkids.

Karam: Exactly.

Jason Hartman: Yeah.

Karam: Exactly.  So I have several clients in their 60s and 70s.  So if you think –

Jason Hartman: You mean clients in their 60s who are middle-aged?

Karam: Yes.

Jason Hartman: Yeah.  It’s a new paradigm folks.  You’ve got to keep this in mind.  I’m a young kid.

Karam: Well, Jason, you’re midlife crisis doesn’t come until you’re 80.

Jason Hartman: I know.  I don’t get to buy that red sports car until for like 20 more years.

Karam: It’s really interesting.  You can do this only in real estate.  And while you are doing this, it’s so simple to do it.  There’s not too many moving parts involved here.  And excitement is not there, you know, it just chugs along, appreciation is there, and soon, you find out after seven years that your portfolio is appreciated and you have a gain of $1 million.

Jason Hartman: Hey, Karam, you know, you just made me think of something.  I want to address an issue here that isn’t directly related to Refi Til Ya Die, but it’s related to investing.  And that is the issue of some people, I believe, mistakenly think that real estate involves a lot of management, it’ll take a lot of my time, that kind of thing.  Look at, you may or may not have had personally or have known someone who has had a bad experience with a real estate investment.  They are pretty rare but they happen occasionally.

Now, I have only lost money on one tenant ever out of the dozens and dozens, maybe over 100 tenants I’ve had, over the years.  And that was 21 years ago on my very first rental property that I bought when I was, I don’t know, 19, 20 years old.  It was right here in Huntington Beach locally and it was on Coventry Lane.  And I had to evict this first tenant I had.  I have never had an eviction since.  I have never had a loss.  I have been paid every penny of rent I’ve ever been owed.  I’ve had tenants be late sometimes; they pay the late fee.  I kind of like it when they’re late to tell you the truth because I get more money.  It’s kind of worth it, and it’s just not that difficult.  Don’t over-complicate this.

None of my tenants on all these properties all across the nation, they don’t’ know my name.  They don’t know my phone number.  I have professional property managers that manage the tenant for me.  I sort of manage my managers, if you will, which requires very little effort, very little time.

What I always like to kind of say to our clients is that you should allot, on average, and this is the whole management of the property, on average, including buying the property, when you average the time you spend buying the property over the years of your course of ownership, refinancing the property occasionally, making your mortgage payments, doing a little bookwork or accounting work, talking with your property manager occasionally.  I talk with my property managers every couple of months, maybe an email back and forth.  Believe me, it’s not hard.  I would say allot one hour per month per property on average.

So if you own six, six hours a month, if you own 12, 12 hours a month.  And if you own 12, 12 hours a month, you are on the path to most likely some real wealth and you’re going to buy more and quit your day job eventually here.  Any thoughts on the time it takes to manager your portfolio, Lynda?

Lynda Mulley: Actually, I don’t spend that much time at all.

Jason Hartman: So for 14 properties, how much time do you spend?

Lynda Mulley: Very little.  Everything is so automated now.

Jason Hartman: Yeah.  I put all mine on auto pay.

Lynda Mulley: Checks come right into the bank account.

Jason Hartman: Yeah.

Lynda Mulley: The property managers call me if there’s something real extenuating.  It’s pretty nice to own that many properties and not have to deal with the day to day activities that go on.

Jason Hartman: Karam, what do you think?

Karam: Yes.  Time involved is when you automate everything.  It’s like on autopilot and all you do is you watch that your checks are coming in.  Most of the property managers, they have direct deposit into your account.  You can look at your statement over and over on the site and make things very easy these days.

Jason Hartman: The other thing that makes it easy is the software we use to help manage our rental properties, and that’s available on our website at www.jasonhartman.com.  Click on the link that says “property tracker.”  You’ll really like it.  We’re going to have Karen talk to you on the podcast in the future here about organizing your real estate business.  Karen is our operation’s manager, and she organizes my properties for me and just does a great job.  And so we’ll have her as a guest in the future show, and that’ll give you some great tips on organization.

But you know, you guys are both right.  It’s really very easy in the automated world.  Probably an hour a month is a massive over‑estimate on the amount of time it takes.

But you know, I’d also say that there really is no good investment at all in the world that is passive.  A lot of people think, well, I can just put my money into mutual fund and I’ll have a passive investment.  I have news for you, if you are a good investor and you’re investing in stocks, bonds, mutual funds, you better be reading the financial press.  You better be watching for the scandals.  You better be reading Baron’s, Wall Street, Money Magazine, Kiplinger’s Magazine, Kiplinger’s Personal Finance.

You had better be reading those annual reports and those proxy vote summaries that they send you in the mail all the time.  I own stocks, and my mailbox is full of this junk.  Of course, I don’t read it.  I don’t think anybody does.  But that’s like if you’re going to be a good investor you need to read that stuff.  I’m not saying I’m a good investor when it comes to stocks.  I’m not a fan of Wall Street, as you know.

But any good investment that doesn’t eat you alive through inflation, like a savings account, you’ve got to pay attention to it.  You’ve got to do research.  You’ve got to become a smart, prudent investor.  And the real estate is really much easier than a lot of people make it out to be.

Lynda Mulley: Well, Jason, what you’re talking about too is the issue of control, one of your ten commandments of investing, and real estate is the best way to control your destiny.

Jason Hartman: Yeah because you’re a direct investor.  You’re not leaving it to someone’s fund manager, some crooked CEO, or just even if they’re not crooked, a greedy CEO, we’ll say, who’s taking all the money off the top.

I mean, in the seminar, I give the example of Robert Nardelli, and he ran Home Depot for a while, and now I think he’s at Chrysler, a whole different deal.  But their stock went down the tubes and here’s this guy that was being paid a fortune.  I don’t remember the exact amount.  It’s on the prior podcast.  But I think he got like $58 million a year or some ridiculous sum.  And then when he retired, you retire, you’re even asked to resign, and they get these huge what they call golden parachutes of hundreds of millions of dollars.  You know whose money that is?  That’s the shareholders’ money!  So enough of my rant.

But it’s just really ridiculous.  Watch your money, be a direct investor, invest in the asset that is historically proven to create wealth for tens of millions of Americans and millions more around the world.

Any concluding thoughts?  Let’s wrap this up.

Karam: I would say, folks, pay attention to this kind of investment.  Learn more about it.  Go on our site.  Listen to the podcast.  Give us a call.  We are here to help you, to answer your questions and move on with building your financial wealth for your future.

Jason Hartman: We offer the complete solution for real estate investors.  That five‑step process we’ve talked about before will help you from everything from education individual counseling to structuring financing to acquiring the properties to the management, maintenance and monitoring of the portfolio and with the overall goal of wealth accumulation and preservation.  So give us a call at our office and we’ll be happy to help you with any of this.

Lynda, any closing thoughts?

Lynda Mulley: We’re here to help you.  We’re here to help you and handle and go through the process, and you’re one step away.

Jason Hartman: Don’t wait to buy real estate.  Buy real estate, and then wait.  Thanks for listening today and happy investing.

Jason Hartman: I’m here with Senior Area Manager Karam, and we wanted to talk to you quickly about his recent trip.  He just returned yesterday from Jackson, Mississippi.  Karam, what did you find there?

Karam: Well, Jason, it was a very interesting trip.  Unlike other areas, this is a very unique area in the sense that we live here in California and we go to all these markets and every market is different.  Jackson, Mississippi, on the other hand, the way it is different from the other areas is they don’t have the apartment complexes like we have in most of our metro areas.

Jason Hartman: Yeah.  So you don’t have that high-density attached housing, huh?

Karam: That’s correct.  So what happens is all these houses have high demand of rental, and on the rental side, there’s not too many houses available for rentals.  So there’s a quick rental and you get the high rents, so the cash flow is better.  But you have to drill it down to the micro area, the communities that we want to invest in, buy the investment properties.

First thing we look at is the school system.  Now, if you look at any particular city in a suburb, it may have a good school system or it may not be in the good school system.  Now, one particular city may be half in one county and the other half is in a different county.

Jason Hartman: So that was true of Hattiesburg, right?

Karam: That’s correct.

Jason Hartman: So if you look at Hattiesburg, you can’t choose by just Hattiesburg.  Some of the area’s not so good.

Karam: Not so good.

Jason Hartman: And some is a desirable investment area.

Karam: Right.

Jason Hartman: You were telling me about how they gave you a list of 131 properties that the broker thought would be good for our investors, and the process of you narrowing it down, and what you narrowed it down to, well you can tell everybody.

Karam: I just narrowed it down to 21 properties.

Jason Hartman: Out of 131.

Karam: Out of 131.  And that’s all I would sell from, 21 properties, and they are in good school system, the good quality product, looking at the communities, the location of the communities, location of the properties, and that’s all I came up with.

Jason Hartman: Excellent.  So Karam, talk to us about the specific property you’ve got in front of me.  This one is $179,760.00, so we’ll call it $180,000.00.  It’s almost 1,700 square feet, projected rent is $1,500.00 a month, and return on investment, Karam?

Karam: Yes, 42 percent, believe it or not.

Jason Hartman: Forty‑two percent projected ROI, and if you qualify for, all that goes on tax benefits projected first year, ROI is 128 percent.  Don’t try that in the stock market, huh?

Karam: That’s correct.  The reason is, these areas, not only the high rent, but the property tax is very, very low.

Jason Hartman: Only $195.00 a month on that property.  Wow!

Karam: Right.

Jason Hartman: Good stuff.  Okay, Karam, anything else you want to talk to us about?  You’ve got one more property, maybe this one in Indianapolis.  That looks kind of interesting.  There’s some big discounts on this.

Karam: Yes.  Indianapolis really surprised us, that market.

Jason Hartman: Yeah.  We weren’t expecting this one to be so good.

Karam: And we are getting great deals.  Yes.  Great deals, and I’ll give you an example of the property that I saw yesterday, 2,101 square feet, four‑bedroom, two and a half bath, brand new single‑family house, comes with the rent-ready package, meaning washer, dryer, refrigerator, blinds, garage door opener, front and back yard sodded for only $127,000.00.  You know what that means, Jason, per square feet price?

Jason Hartman: Yeah, that’s amazing.  You’re buying very close to the cost of actual construction here.  How much?

Karam: Sixty dollars per square foot, only.

Jason Hartman: Sixty dollars per square foot.  That is unbelievable.  It’s like the downside risk is almost nothing.  Go back and listen to our podcast on risk evaluation.

Karam: And again, return on investment is 41 percent.

Jason Hartman: So 41 percent projected return on investment, and these are some good properties.  Give us a call or check out our website for more properties, and all the details are listed there.  And we will look forward to talking to you on the next podcast.  Thanks.

Jason Hartman: Hey, I just wanted to announce a couple of quick things for you.  If you are able to come to one of our live events, we would love to see you and meet you in person.  We’ve had people fly in from all over the U.S. for them. So hopefully you can join us for some of those events.  Also, remember our rental coordinator is here to help with your rental properties.  If you need assistance with your rentals, your property managers, your advertising, remember, we’re here to help and we stay with you through the life of the investment.  So feel free to call our office any time and ask for the rental coordinator for assistance on your rentals.

I also want to remind you, listen to our old podcasts.  At least go back to Podcast No. 13 forward and listen to all the podcasts after that.  You’re welcome to listen to all of them.  The ones before No. 13 are older, but they’re also good.  But the newer ones are No. 13 and forward, which are really good ones to listen to, so please take advantage of that.

And remember, the overall market commentary right now, due to the mortgage meltdown the sub‑prime issues that are going on out there in the market, is that rents are going up all across the nation.  When people cannot qualify as easily to buy a property, they are forced to rent, so let that work in your favor by accumulating more rental property assets.  And don’t be afraid to ask for more rent and raise your rents.  That’s a good thing to do.

Also, if you are interested in career opportunities with us, our company is growing quickly and we would love to talk with you about career opportunities.  We’re in the process of getting approved for franchising.  If you’re interested in Platinum Properties Investor Network Franchise, I’d be happy to talk with you about that and get you set up there once we are finished with our approval process.

Be sure to see appropriate disclaimers and disclosures on our website at www.jasonhartman.com.  Remember that we are not tax or legal advisors.

So give us a call on any of these issues, and remember, we are here to help, and we will look forward to talking to you on the next podcast.

Announcer: This material is the copyright creative work of either Jason Hartman, The Hartman Media Company, Platinum Properties Investor Network Incorporated or the J. Hartman Company.  All rights reserved.

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Duration:  52 minutes