Let’s examine the subject of debt, both good and bad. The prudent use of leverage or borrowed money can accelerate wealth creation and reduce risk. We’ll look at many perspectives including a profile of Donald Trump and his “troubles” in the 90’s.

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 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: Welcome to Creating Wealth.  This is your host Jason Hartman and we are here for show No. 42.  Thank you again so much for listening.  We are getting quite popular and we really appreciate your listenership and hope the advice is good for you and we’ll continue to try and bring you the highest quality content, innovative ideas, fresh ideas, and fresh perspectives on the real estate market.

Today, I’d like to talk mostly about debt and we’ll have a little clip here talking about Donald Trump, who I think you will be interested in his philosophy on debt and hearing more about it.  But a couple things before we get into our core content today.  The first one is an interesting thing that Sara, one of our investment counselors and also someone who does some of our rental coordination for us and for our clients, gave me that I thought was kind of a good little thing to start off with.

It has been a wild ride this week with the economy and Wall Street and the financial markets, and it’s just amazing what’s going on.  I think the stock market is really nothing more than a gambling casino for business people.  So glad that I don’t determine my mood like some people do by what’s going on in the financial press and what’s going on with the stock markets around the world on any given day because it is a rollercoaster.  And if you listened to the last podcast, you know how I feel about group investing and investing in pools or investing in anybody else’s deal, or pooling money together.  It’s just a bad deal.

But suffice it to say, there’s a lot of fear out there nowadays and again, it reminds me of that great quote by one of the world’s most renowned investors certainly, and that is Warren Buffett, when he said, “Be greedy when everybody else is fearful and be fearful when everybody else is greedy.”  And I tell you, now, when there is a lot of fear out there in my opinion, is the time to get real, real greedy and start accumulating hard assets, hard assets that are built from commodities.

See, if you think about it, in 2006, in the United States, we broke the 300 million population mark.  Last year in 2007, we added over 3 million people to the U.S. population, 3 million people that are counted; 3 million that we know of, not including various forms of illegal immigration.  So the population of the planet increased.  If you look on the front page of our website at www.jasonhartman.com, you see that World Population clock and it is just incredible.  Go spend an hour on our website listening to podcasts, downloading videos, and watching some of the great educational content, reading articles, whatever it is, and just write down the world population when you visit the website, and then write down the world population when you leave the website.  And you will see that there is good reason to be very, very bullish on packaged commodity investing, which we will talk about in a future podcast in great detail.

But all of these commodities that it takes to build these houses and build the commercial real estate that we’re helping people invest in, they are going up in value.  So be greedy when everybody else is fearful.

So when Sara handed me this little quote yesterday, I thought it was interesting because it’s about fear and it’s from a calendar that she has on her desk that is based on The Secret, which we talked about a few podcasts ago.  And it says that fear is the most debilitating emotion there is, and each and every one of us can live a life without fear.  The key to absolute freedom and joy for each and every one of us is to let go of fear.  When you understand that fear puts you on a frequency of attracting more fearful events and circumstances into your life, you will understand how important it is to shift yourself.

“People are in fear of being late, of losing their job, of paying their bills, of getting sick.  The list goes on and on, but the fear of those things is actually summoning more of them to us.  The law of attraction is impersonal and whatever we focus on with feeling is bringing more of it to us.  When fearful thoughts come, stamp them out immediately.  Send them on their way and replace them with anything that makes you feel good.”

Remember, all of this stuff about the law of attraction and the older philosophies of this, whether it be way back to Biblical times or James Allen, or all the stuff I talked about on Podcast No. 40 about this, is we’re just bringing more of it into our lives.  So we need to focus on the opportunities.  The Chinese, they have that symbol for crisis, which is identical to the symbol for opportunity, and it means crisis is opportunity riding the dangerous wind.  That’s a little translation.

So every fear, every piece of bad news has a flipside of opportunity and there is some market somewhere or some product somewhere, where someone is creating wealth from it.

Okay, also, I think just last Sunday I believe it was, I got my first piece of hate mail and I kind of like it when this happens because it really makes me think.  I like people who challenge my ideas, so I want to thank Jenny Jones, who I think sent me sort of a snide email, which was kind of a little hate mail piece I thought I’d share with you here.  And I guess when you’re getting on someone’s nerves out there, it means that you’re doing a good job, right?  In some way.

Well, she says, “Hey, Jason.  Here’s a good story for you to read to bring you back to reality about real life.  Hope it’s affecting you, too.”  And when you click on the story, the link that sent, it’s about what’s going on in real estate and how to tough it is for most people out there, and certainly, I’m sorry to see this.  The real estate industry is a very dysfunctional industry.  It’s massively overstaffed and now we have a market in many areas around the country that is slowing down.  And so this is a change and it will be painful for some people.  Remember, the key to minimizing this kind of pain in anybody’s life is to adapt quickly and to make changes quickly, and to be nimble and agile when change comes, and to expect change and be prepared for it in advance.  I like to say expect the best, but prepared for the worst.

So anyway, this little sort of snide email that Jenny sent, I replied back to by saying, “Hi, Jenny.  That’s all true in many of the bubble markets like California, Florida, and many others.  We saw this coming years ago and that’s why we never recommended these overvalued places.  As bad as it is in the bubble real estate markets, it’s actually much worse in the mortgage business.

“We are doing business in 36 markets around the U.S.A. and these markets make sense.  We’re getting fantastic returns for our clients very conservatively.  Last year was one of our best years ever” – actually, it wasn’t one of our best years; it was our best year ever – “with a 50 percent in revenue to our company.  So apparently, we seem to be doing something right here.  At least, that’s what our clients are telling us.

“It goes to show how there is no such thing as a national housing market, but whether hundreds of local markets in a country as large and diverse as the United States.  Talking about real estate nationally is like talking about the weather as if it is the same in L.A., New York, Miami, and Chicago all at the same time.  Real estate, like weather, is local.

“Are you listening to my podcasts?”  I asked her.  I don’t know.  I didn’t get a reply back to this email and it’s been a week now.  “There’s a lot of great, free info there and if you’re a listener check it out at www.jasonhartman.com.  We have listeners in 26 countries and we’re getting lots of great feedback and much appreciation for our honest outlook on the financial markets.  Let me know what you think and happy investing.”  So we’ll see if I hear back from my little piece on the snide hate mail there.

Okay, last show, we talked about how these overpaid greedy people on Wall Street are just taking all the money off the top and leaving very little for us investors to share.  And there was an article here in the May 21, 2000 issue of Forbes Magazine.  I love Forbes Magazine.  It’s a great magazine, but you know, it’s largely all about the lousy stock market.  And it just talks about “great while nobody’s watching.”  And it talks about how people are just taking money off the top and it talks about overpaid bosses.  This is unbelievable.  This one CEO, his tenure as chief was 39 years.  Average total return was 6.4 percent to investors.  The last 6-year return was 4.5 percent.  But the average compensation over the 6 years was $10.9 million and paid $12.6 million in 2006, including $1.3 million in annual bonuses while the stock was down 17 percent in the past year.

Isn’t that ridiculous?  And then it talks about the next one, the CEO of Wal-Mart, Lee Scott, Jr., was paid $9 million in 2006.  The retailers stock has been even more money in 2001, but here are the stats, right?  Seven years as chief.  During his tenure, the stock was down 3.4 percent.  In the last 6 years, it was up 0.1 percent only, and the average compensation over this tenure was $9.1 million.

Next one, Amgen, Kevin Sharer, stock of the drug company firm slumped 18 percent in the past year, but Sharer earned $7 million, including $250,000.00 for a company jet.  It’s just on and on.  Eli Lilly, same deal, and by the way, they’re based in Indianapolis, one of our markets, which we think is a great market.  But again, I wouldn’t want to be investing in their stock because the people making all the money are the insiders, the people in executive suite.

Okay, let’s talk about debt a little bit here and let’s hear how Donald Trump views debt and how we should, too.  In my seminars, I talk about a Wall Street Journal article that is quite interesting to me and this is an article in the Wall Street Journal and it is entitled “Stocks versus Other Investments.”  And the date of the article so that you can reference it is September 30, 1996, so it’s a pretty old article, and it is prior to the major real estate booms.

And the article says, “Stocks versus Other Investments.  Average annual rates of return from 1926 to 1992.”  It says, “Dow industrials have been a wise investment decision.”  Now, the reason I like this article so much, everybody, is because it is a very long sample.  A lot of the people that argue the merits of investing in stocks or bonds versus real estate will argue that I am only picking a favorable time period to take the sample.  Well, first of all, I didn’t pick this time period.  The Wall Street Journal did.  And certainly, the people that advertise in the Wall Street Journal are largely companies that recommend Wall Street investments, whether it be Merrill Lynch or Fidelity or T. Rowe Price or Janus or any of these mutual fund companies or bond companies, whatever they are; Ameriprise, all the rest, right?  Largely, very few, very little of the Wall Street Journal’s revenue comes from real estate advertising, okay?

So in this article, it says, “Dow industrials wise investment decision.”  But really, are they wise, because what they are is that from 1926 to 1992, a very long sample, what did we have in this timeframe?  We had a Great Depression, we had several wars; we had a lot of things happen in the U.S. economy and the global economy during that very long time period.

And it says, “Over this long time period, small cap stocks performed at an average of 12.5 percent, while real estate nationwide performed at an average of 11.1 percent.  And the Dow Jones Industrial Average was an even 10 percent.”  Now, by the way, just for comparison, bonds averaged 5.2 percent, Treasury bills 3.7 percent, and inflation 3.1 percent over this very long period.  Now I won’t get into the inflation subject because we’ve talked about it on many past shows, but you know my feelings about how the inflation numbers are manipulated.

Here’s the problem everybody.  Even if you take what the Wall Street Journal says, it says, “Dow Jones have been a wise investment decision,” you would’ve done better in real estate.  But the reality is that nobody who is investing the right way in real estate ever pays cash for real estate.  So if you put 20 percent down to acquire a property, that means you’re financing 80 percent of it and you have a 5:1 leverage ratio.  The real estate massively outperforms all the other investments because what happens?  You take that 11.1 percent that is the Wall Street Journal’s number and you multiply it times five.  Twenty percent down, 80 percent financing gives you a 5:1 leverage ratio.

That means that the comparison now looks like this:  those small cap stocks that were No. 1 before, are still giving you 12.5 percent over this very long time period, but real estate is now giving you 55.5 percent.  That’s an annualized return on investment.

Now, you need to understand that is simplified because it doesn’t include buying the property and the closing costs on the way in.  It doesn’t include selling the property and the closing costs on the way out, and it doesn’t include the cash flow or the tax benefits.  Now, closing costs in and out, you have commissions when you trade stocks, too, and bonds, same deal, but on real estate, the closing costs are a little bit high.  So, of course, if you flip properties, you’re going to eat up your profits with closing costs, so don’t flip properties.  We’ve talked about that on past shows.

But the tax benefits, real estate is the most tax-favored asset in America, bar none, so the tax benefits will make you a whole lot more money as long as you qualify for all of them and there are ways to do that.  Listen to that on prior shows.

But the real estate just dramatically outperforms, so assuming you have a slight negative cash flow on the real estate, you might chip away at your 55.5 percent return and bring it own to 40 percent.  So what?  Okay.  And if you sell the property, you might chip away at your return as well, but if you sell the stock, you’re going to have to pay capital gains.  There’s no 1031 tax-deferred exchange on stocks.  Real estate has that benefit, but stocks don’t.  So you are going to have another benefit there.  Real estate is a much more favored asset.

Okay, 55.5 percent with real estate; you’ve got a 5:1 leverage ratio.  What about the Dow Jones?  Still at 10 percent.  Okay, you could buy the stocks on margin; you could get a 50 percent margin on your stocks, but guess who pays the interest?  You do.  On real estate, your tenant pays the interest for you because so far, I have never, and I don’t know anyone else who has rented out their stocks so that the renter will pay the cost of the debt.  All right?  And then the other investments, same performance.  You get the idea.  Real estate blows it away.

Okay, here’s the return with 10 percent down and a 90 percent mortgage.  Same numbers quoted in the Wall Street Journal, September 30, 1996.  Now you have small cap stocks at 12.5 percent, Dow Jones at 10 percent, bonds at 5.2, Treasury bills at 3.7, inflation at 3.1 over this very long period.  Real estate, which was 11.1 percent, 10 percent down gives you a 10:1 leverage ratio.  Now you have a simplified annual return on investment of a whopping 111 percent.  You multiply times ten.

But if you use more leverage, you will have more negative cash flow.  Fine and dandy.  Chip away a little bit at that, so fine.  Listen to our show on deferred down payment and you will see in detail how we calculate this.  But what if that negative cash flow or that deferred down payment brings your return down to 70 percent, 80 percent?  I don’t know, 40 percent.  So what?  You still have tax benefits.  The real estate just massively outperforms any other investment.

Remember when you buy a property, you have a choice.  You either put the money into the property or you put it in the bank.  I say that the property is the worst bank.  Real estate is a lousy bank.  It does not perform well as a savings vehicle or as a cash flow vehicle.  It performs well as a lien, highly leveraged vehicle for so many reasons.

Now, many of you are probably readers of Robert Kiyosaki’s books.  He’s the author who wrote the Rich Dad, Poor Dad series, and you know what?  He’s a terrific educator.  I like his material a lot.  The last one of his books that I read is called, Who Took My Money?  And in many parts of it, he’s kind of bashing the financial services industry.  I agree with him.  And he compares real estate over ten years, $10,000.00 invested in a single-family home versus $10,000.00 invested in S&P 500 index fund.

Well, if you put $10,000.00 in 1992 in the S&P 500, by 2002, you would have back $17,400.00 approximately.  But if you put that $10,000.00 into a piece of property, you could buy $100,000.00 property, rent it out, let your tenant pay most of the carrying costs of the debt, the property taxes, the insurance, everything, all right?  And over the years, you’re going to raise your rent every year.  So this is a simplified example again like the other example was, but at the end of that ten years, on the average single-family home, it would be worth over $158,000.00.  So your gain on your $10,000.00 investment, very roughly here, is over 5$58,000.00 versus your gain in the S&P 500 of only $7,000.00 and change, and this is not including the incredible tax benefits real estate offers as America’s most tax-favored asset.

Now, I have talked a lot about the virtue of debt.  Real estate, because we put the real estate label on it, the entire U.S. banking system, and nowadays, many banks around the world in different countries, see how favorable real estate is as an asset class and they will offer much more financing on real estate because they know it is a much safer investment than stocks.  Why do you think it is banks will loan you 90 – 95 percent of the value on a piece of property, yet they will only loan 50 percent margin on stocks?  Because real estate is a safer, better asset class.

Okay, so what if you get into trouble?  Leverage or debt needs to be treated with respect.  It is a powerful tool for wealth creation.  You can accelerate your wealth creation must faster by using leverage in a smart, conservative, prudent manner.  But if you’re not careful and you don’t respect leverage, you could also get yourself into trouble with it.  So we have to respect it properly.

Now, I ask a lot of you and I have before, how many of you have ever loaned money to a friend or a family member?  Guess who was in control of that transaction?  Was it you the lender?  Or was it your friend or family member, the borrower?  It’s the borrower.  The borrower has the position of strength whenever they borrow money.  So I say borrow money.  Shakespeare was only half right when he said neither a borrower nor a lender be.  Being a borrower is a good position to be in.  As long as you are borrowing money on assets that create wealth and not assets that decline in value and do not create wealth, like consumer goods.  Bad borrowing, good borrowing; constructive debt, destructive debt.

But the other thing that happens is that the lender when you get into trouble, if you ever do, is to a large degree, you’re partner and your advocate, and the party that can help you these troubled waters.  So let’s listen in to a clip from a great book entitled All the Money in the World, where the author profiles the Forbes 400 richest people in America.  And here’s what he says in this short clip about Donald Trump.  When Donald Trump, the big real estate investor, the big real estate guru, got into trouble in the ’90s, what did his bankers do?  Well, his bankers became his ally, his partner, and his advocate.  If he was not leverage, if he was not in debt, he would have had nobody to turn to except himself.

So, listen in to this clip and I will be back with you in a few minutes and we will talk more about the virtue of debt.

Clip: Donald Trump, he has learned the hard way that in the casino and the real estate industry, it’s best to share the burden among as wide a group of people as possible.  One of the highest profiled victims of 1980’s over-leveraging and one of the few who lived to fight another day, Trump still emblazons his name on many projects springing up around the country.  But it is often other people’s money that bears the brunt of the risk.

Trump began building his empire in the early 1970’s by buying the railroad yards along the Hudson River of the failed Penn Central Railroad.  Then he began investing in land in Atlantic City, eventually buying two hotels, the Trump Plaza and the Trump Castle.  Both were described as deteriorating and problematic.

In 1987, Trump added to his Atlantic City gamble by borrowing $80 million to buy a controlling interest in Resorts International, a company that included the Atlantic City Taj Mahal among its properties.  The purchase was a first step in wresting control of the company.

In addition to wrangling with shareholders, Trump also faced competition from Merv Griffin, the TV tycoon, who had recently pocketed $250 million from the sale of his television production company, which had created Jeopardy and Wheel of Fortune.  Griffin outbid Trump for control of the company and the two ended up in court.

In hindsight, being outbid by Griffin was a godsend, as Trump later admitted to Forbes.  Resorts was in bad shape.  Griffin’s company financed the deal using $325 million of junk bonds and went bankrupt a year later when it couldn’t handle interest payments.  Trump, who had retained only the unfinished Taj Mahal Hotel/Casino, along with a $12 million cash settlement, survived.

But then he further added to his debt burden in 1988 when he bought the Plaza Hotel in New York City for $390 million and the Eastern Airline Shuttle, which he renamed the Trump Shuttle for $305 million.  By 1990, Trump was more than $3 billion in debt.  As Mark Singer wrote in the New Yorker in 1997, Trump’s excessively friendly bankers, infected with the promiscuous optimism that made the ’80s so memorable and so forgettable, had financed Trump’s acquisitive impulses to the tune of $3, 750,000,000.00.

Through the early 1990’s, Trump and his organization went through a debt restructuring.  He lost the Plaza Hotel, his Boeing 727, his yacht, and the Trump Shuttle.  Worse still, Trump was personally liable for $900 million of the debt and was forced to agree to a personal spending cap of $450,000.00 a month.

In the opening pages of his 1997 book, Trump: the Art of the Comeback, Trump recalls walking down Fifth Avenue one December evening with the holiday lights aglow, seeing a homeless bum on a corner and thinking that this unfortunate man was richer than Trump.  It would take years for Trump to work his way back.

In the mid-1990’s, Trump took two of his heavily debt-laden casinos public.  The resulting company, Trump Entertainment Resorts, filed for bankruptcy in November 2004 and reemerged the following May with Trump’s stake in the company reduced from 47 percent to 31 percent, and with James B. Perry replacing Trump as chief executive.

But the Trump organization survived.  Nowadays, Trump and his eldest children, Don, Jr. and Ivanka, make their fortune overseeing other people’s projects and bestowing upon them the Trump name and brand.  Trump gets 8 – 15 percent of other developers’ condo sales, usually puts up no money, and gets upfront payments of several million dollars.  According to Forbes, the Trump name can command a premium of 20 – 30 percent in added revenue for any project, and in 2006, the magazine reported no fewer than 33 Trump franchise projects underway.

Yet, when asked what was the biggest risk he ever took, Trump didn’t talk about his brushes with bankruptcy.  Instead, he replied, “I took a big risk when I decided to star in and co-produce The Apprentice.  The statistics show that 95 percent of all new shows fail.  Those were not great odds, but I had a feeling the show would work.  I wasn’t expecting the show to become the No. 1 show on television.  That was a nice surprise.  But I did think the concept had merit and knew we’d encounter some level of success with it.”

So how could a man whose businesses were once mired in billions of dollars worth of debt, with $900 million of that owed personally, see his biggest career risk as The Apprentice?  As weird as it seems, it also speaks to the supreme self-confidence shared by Trump and many others on the Forbes 400.  When asked about that time in his life, Trump says, “Pressure can bring out the best and worst in people, and in my case, it made me stronger and more determined than ever.  I also employed my blip versus catastrophe theory.  Yes, I had some financial problems, but it wasn’t a war, an earthquake, or something truly horrific.  That allowed me to keep my equilibrium and perspective in tact and make my company bigger and better than ever.”

Then he adds, “I was already planning for the future and what I would be doing, and I just knew that I’d pull through and continue working at what I love doing.”  In case after case, self-confidence and fearlessness saved the day for members of the Forbes 400, but it also helps if they are obsessed with their vision.

Take for example, the case of shipping magnet, Daniel Ludwig.  Born in 1897, Ludwig started out at age 19 with a $5,000.00 loan that he used to buy and convert a paddle steamer into a barge.  Later, he moved on to chartering and eventually building tankers, becoming the owner of the fifth largest tanker fleet in the United States by the end of World War II.

Ludwig leveraged his tankers to build a fleet that peaked at 60 ships, which he then used as collateral for loans that financed business ventures throughout the world, including real estate and mining.

Jason Hartman: Wasn’t that interesting?  By the way, there’s a lot of interesting stuff in that book or on the audio CD, which is what I played a clip of, and I’d encourage you to get it.  It’s called All the Money in the World and it’s about the Forbes 400, so it’s really quite interesting.

Here’s the thing.  Now, you may think after listening to that, gee, what if Donald Trump didn’t have that debt?  The debt is what got him into trouble.  It does not make the opposite point.  You’re wrong about that if you think that because the debt is what allowed Trump to create so much wealth.  And remember the debt is what gives us the inflation hedge, the main part of it.  You’re paying the debt back in cheaper dollars.  I mean it’s kind of funny how they say that Trump said, well, I was in so much trouble, I was under so much pressure, yet he was getting – his bankers put him on an allowance of what?  $400,000.00 per month?  Gee, it must be tough to live on that kind of money.

And just remember, you can grow a lot faster with the prudent use of leverage.  But I want to make something clear, that anything that does not create income does not qualify in my eyes as an investment, but rather a speculation.  I’ve given the example on prior shows about when I bought those gold coins from the Monex dealer and I said I’ll pay cash for them because I have to.  You won’t finance them over 30 years at the lowest interest rates in four decades.  I don’t get tax deductible interest and I can’t rent them out to anybody.  Remember, we don’t recommend vacant land because it doesn’t produce income.  Your house is not an asset, the house you live in, because it doesn’t produce income.

Anything that is a consumer item, a new car, a new plasma TV, a vacation, new clothing, that is not something you should use debt for because it does not produce income.  Only use debt for income-producing assets like rental properties because someone else pays the debt back for you.  That is the key to creating wealth with debt.  Otherwise, you’re a speculator.  You’re just planning to buy low and sell high.  If you buy stocks, you are a speculator; buy low, sell high, maybe get some dividends along the way.  If you buy precious metals, you are a speculator.

Now, granted, I’ve made some good money in precious metals recently and you might have, too, and a lot of people have, but did you know it was gonna happen for sure?  No.  No one is ever sure.  Predicting the price of gold or platinum or palladium or silver is nearly impossible.  Ask all the gold bugs in 1980 who thought the price was going to go up forever.  For 18 years, it sat there and did absolutely nothing but decline.  So speculative.

Buy something that has universal need.  Everybody needs food, clothing, and shelter, and when it comes to shelter, the only choice they have is they either buy it or they rent it from you.  Someone else pays for it, the bank pays for it; your risk is very low because you’ve only put a small amount of money into the deal.

And by the way, let me mention something else about risk and debt.  When talking with people in some of my seminars and so forth, I’ve said before that the best insurance is a high loan balance, and you know what?  I hate to say this, but it seems to be true, at least in past experience.  Look at what’s happened after natural disasters, like the Northridge earthquakes here in the ’90s in California.  Hurricane Katrina, Hurricane Rita.  The people that got hurt the most were the people that owned their properties free and clear because they were the ones that had to go fight with their insurance companies to get them to pay the claim, whereas the people that were highly leveraged, their lender became their advocate.  Their lender was the one that helped them battle with their insurance companies to go recover the money and pay the claim.

After Hurricane Katrina, the states of Louisiana and Mississippi I believe it was, the Attorney General there sued all of the big insurance companies because of their unwillingness to pay the insurance claims.  You don’t want to go down that path.  You don’t want to be arguing with your insurance company.  You don’t want to have to go hire the attorney to bicker with the insurance company for you.  Let your lender do it.  Your lender becomes your friend, your advocate, your partner, who is in there with you just like with Donald Trump.  But the thing about it is that your lender doesn’t get any of the profits.  They just collect a small interest rate paid for by somebody else.  Your tenant pays your lender’s interest rate.  You don’t pay it.

And then the value of that debt goes down over time with inflation, so you keep paying it back in depreciating dollars.  Listen to the podcast where I talk about inflation, especially the Great Inflation Payoff.  So I hope this was helpful to you to keep the concept of debt in perspective.  Again, a powerful tool for good, but it needs to be used prudently, conservatively, and with respect.  And you need to follow all the other rules for this to work.  You need to make sure you’re not a speculator.  You’re only buying properties that make sense the day you buy them.  That’s commandment No. 5, all right?

So there are ten other things you need to do right to make sure this works.  Go see my show on the Ten Commandments of Successful Investing for more details on that, and in the meantime, we’re getting a little long here so I want to say happy investing to you and tune in next week.  We have another great show coming up for you on a whole bunch of different interesting topics in the future.  So this is Jason Hartman over and out.  Happy investing.

Hey, I just wanted to announce a couple of quick things for you.  I’m here with Area Manager, Karam and if you’re looking for positive cash flow – yes, you can actually do that with only 10 percent down.  Quite an amazing deal to do in today’s market and remember, the interest rates are getting a lot lower right now, so it’s a good time to be locking them in so that you lock in your cost of borrowing for the next three decades.  Karam, tell us about positive cash flow and rent guarantees in Columbus, Ohio.

Karam: Well, Columbus, Ohio, we have a builder who is very, very creative.  What he did was he went ahead on all these brand new single-family houses, townhouses, and condos.  He’s guaranteeing six-month rent.  Not only that, he is going to pay our investors the homeowners association fee and the management fee for two years.  And what that does is, with 10 percent down, you get anywhere from $100.00 – $200.00 positive income before even the tax benefit is considered.

Jason Hartman: Wow, that is really phenomenal.  That’s gotta be one of our very best markets in terms of cash flow, so excellent.  Anything else you wanna say about Columbus, in general?

Karam: Well, the economy is booming there.  There are several major corporations headquartered there.  University is big, so a smart workforce, low cost of living.  That attracts a lot of investors there.

Jason Hartman: Okay, Karam thanks for updating us on Columbus, Ohio.  Great market.

Karam: You’re welcome, Jason.

Jason Hartman: If you are interested in a Platinum Properties Investor Network franchise in your area, we are now approved for franchising in 18 states.  Please visit www.jasonhartman.com and click on the franchise link and fill out the short application.

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 anytime and ask for the rental coordinator for assistance on your rentals.

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.

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.

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.

This material is the copyrighted 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:  42 minutes