Current radio interview with Jason on 790AM KABC-LA to talk about the current state of economic affairs and answer listener questions, followed by another segment of Ask Jason.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman: This is Jason Hartman. Thank you for listening to another edition of Creating Wealth. We’ve got an exciting show for you today, but before we get into it, I wanted to just mention a few things. No. 1, be sure to join us for some of our live events. We’ve got tremendous live events and also, our conference calls, if you’re not located nearby. Tune into our conference calls. These are all posted at www.jasonhartman.com. Conference calls are no charge; nominal fee for live events just to cover costs, food and meals and so forth. We’ve got a conference call coming up very soon, so check the website for that and join us.
Also, our financial planning seminar, “Fatten Your Golden Goose,” is coming up on June 4 and then we’ve got our GoZone seminar on June 10. Our Poker Tournament, which is a charity fundraiser for the Leukemia and Lymphoma Society. By the way, we would very much appreciate your support and we do appreciate your support. Several of our clients have donated. Thank you very much for doing that and anyone who hasn’t yet, just go to the website. You can do it right online. It just takes a couple of minutes. It’s of course, tax deductible.
But our charity Poker Tournament for that is Saturday, June 14. It’s almost full. And then we’ve got, of course, Creating Wealth the same day and that’s on June 14 as well, Saturday during the day. The Poker Tournament is in the evening.
All right, I wanted to share with you a radio interview from Friday because it is timely what is being discussed on here, so wanted to share that with you right away. And also, thank you all so much for sharing your questions. We really love to answer your questions, so go to www.jasonhartman.com, click on the Ask Jason button, and you can ask your questions in great detail there and we will be answering a few of those questions on this show. So let’s listen in.
Al Rantel:Hey, I almost forgot about our Friday music. There it is. Wow. That’s how long I’ve been gone. I forgot about the Friday music. Thank you, guys, for remembering it there. I’m glad somebody remembers what’s going on around here. And this is a very, very important day because money, money, money has been a huge issue, right next to the political news. It’s been issue No. 1. In fact, CNN came up with a brand new program over the last few months called Issue No. 1, all about the economy because everybody is concerned about the economy, about gas prices, about inflation, about food prices, about the value of their homes, and where it’s all headed and all the economic stuff that’s been in the news; and are we in a recession or are we going to be in a recession.
And as you may know if you’ve been listening to the Al Rantel show over the years, Jason Hartman is our financial maven, as they say in China.
Jason Hartman: We have had $446 billion in adjustable rate loan resets.
Al Rantel:Wow.
Jason Hartman: I mean wow. A lot has been going on.
Al Rantel:And I remember one of the things you said on the show was, on the last show we did together, was that inflation was a lot worse – do you remember that – than anybody could tell by the government figures.
Jason Hartman: And now, suddenly, it’s all you hear about in the news.
Al Rantel:Right. Right, exactly, and even I knew it because I told you I was going to the grocery store and just buying things, and I kept saying to myself, especially with things like food and now, of course, with gasoline at $4.00 a gallon, I kept saying to myself what in the world is going on with prices? I mean a loaf of bread is like $3.00 or $4.00. Something is going on here.
Jason Hartman: It really is, Al. You know in the past year, sugar prices are up 27 percent. A lot of this is the ethanol issue. It’s not just monetary inflation, but a big part of it is monetary inflation as well as the ethanol issue. Corn prices are up 67 percent, wheat is up 73 percent. I mean it’s like the same house of cards that the subprime mortgage debacle has been about. You can hide it for a while, but eventually, the truth must come out and it must show and that’s what we’re seeing in the inflation numbers right now.
Al Rantel:Now, you told me that you believe that lots more inflation is on the way. Can you elaborate on that?
Jason Hartman: I definitely do think a lot more inflation is on the way. There are many reasons for it. No. 1 reason is the way that the Federal Reserve System operates in this country. It is to some extent a big Ponzi scheme, frankly, and that can’t go on forever. You can’t just keep making money to pay for government programs for our politicians to buy votes from people, which we’ll talk about politics hopefully during this call. And you can’t keep printing money and have the value stay the same of a dollar. So the value of the dollar is declining. You’ve got massive increased tectonic shift in global consumption and global prosperity forces.
Al Rantel:Now, explain what you mean by that.
Jason Hartman: Well, never before in human history have we had this India and China effect, and it’s not just India and China. That’s who gets sort of all the P.R., but there are a lot of other countries, most notably Brazil. Brazil is a country that is going to build something like nine million new homes or something. Don’t quote me on the number, Al, but it’s a lot.
Al Rantel:Yeah, yeah, I heard about that. They’re having a boom.
Jason Hartman: It is a massive boom, massive boom going on there.
Al Rantel:Right, yeah. And what does that mean for us since we’re thousands of miles away?
Jason Hartman: What it means is consumption. I mean you look at these horrific earthquakes in China, too. That just means more consumption of all the raw materials to rebuild. Yesterday was the beginning of hurricane season. When Katrina happened a few years ago, that was massive, additional consumption of all these raw ingredients, all of the commodities to build houses, to build office buildings and to rebuild things, and it’s just going up and up. There may be short-term downturns in these building material costs, but the overall trend, Al, is way up in my opinion.
Al Rantel:All right, now, you’re going to stay with me because eventually, we’re going to get to questions from the audience and eventually, we’re going to get to how the investor protects themselves given the cards that are on the table right now. We’re going to get to that, but I just want to ask you. In the last six months, you’ve witnessed what’s gone on in this – well, I think you were the one that called them on my show “liar loans,” where people were given –
Jason Hartman: Yeah.
Al Rantel:Remember that? People were given loans for homes that they obviously could not afford and with no documents and all this kind of stuff. And where are we now because there is no national real estate market, as you’ve taught me before. Every market is different. But where are we now in this whole subprime mortgage mess and is there more to come?
Jason Hartman: Well, there is more to come, but we are largely through a lot of it. Last month, Al – or I’m sorry; in April, which was the last tabulated month, foreclosures in California were just over 64,000 new foreclosure filings and in Florida, about 35,000, and those are the two leading states and then you go down from there.
But what’s happening here is you’ve got this sort of hidden foreclosure issue and here’s what it is. Banks really don’t want to foreclose on properties because of the way their accounting works. And what we’re seeing banks do, which is seldom talked about in the media, is actually, intentionally postpone foreclosure or approach the foreclosure process from a different angle, known as a judicial foreclosure, rather than a statutory foreclosure, which is a slower process, so that they don’t have to put these properties back on their books so quickly.
So there are a lot more foreclosures coming. I mean we are going to see huge additional waves of it, but it seems to me – and this is just sort of an impression rather than a data oriented opinion – but it seems to me that now, everybody has become skeptical of the credit markets. Everybody has become skeptical of these crooks on Wall Street that are doing this bogus accounting methodology to cook the books essentially. And people are cautious now and they’re aware.
And so I think the best analogy I heard, which I do agree with, was some commentator somewhere said, if this were a baseball game, we’re in the 5th inning. And I kind of agree with that. I think we’re largely through this. There’s a lot more affect to come from it, but it seems that it’s somewhat known now as to what we’re really in here.
Al Rantel:Is there going to be a recession?
Jason Hartman: I think we’re in a recession.
Al Rantel:Well, because you know, the fourth quarter economic growth came out and it was .9 percent increase yesterday, so I assumed that means we’re technically not in a recession.
Jason Hartman: You know those numbers are manipulated, frankly, and I don’t trust them. I just know that in my life, our business is a little bit slower. It’s still pretty good, but it’s a little bit slower.
Al Rantel:Well, everybody I talk to says that. Everybody’s cutting back.
Jason Hartman: Everybody I’ve talked to is complaining like crazy, so if you ask me, we’re in a recession.
Al Rantel:Well, I’ll tell you what. When we come back, I want to get more into your thoughts on what does the average person do, the investor, do in a situation that we find ourselves in now, given the way we just set the table here just now, and also, maybe you can give people some input on what the real estate market is like and where it’s headed right here in Southern California because, like I said, there is no national real estate market. They’re all different.
Jason Hartman: Right.
Al Rantel:Jason Hartman is our guest. He has always been our financial guru here. The real estate market situation, people have seen the value of their homes, depending on what country you live in – what part of the country you live in, drop dramatically, so people don’t know whether to buy, whether to sell, whether to wait, whether to hold, whether they’re going to be under water. What’s the story and can you zoom in on Southern California, too?
Jason Hartman: Yeah, good question. In terms of Southern California, I was criticized a lot for the last three years or so about being too pessimistic about the California market, or the Southern California market in particular, saying that I thought that when this all ended, we would be about 25 percent off the peak in terms of our prices. Prices would drop by that much. I’m kind of updating my predictions as we go along and I’m actually getting a little more pessimistic. I hate to say that. I think we know what’s coming at us now, as I mentioned before the commercial break, but I really think, Al, we’re going to see another 10, maybe 15 percent of a decline and I wish it weren’t true, but I just don’t think there’s real good news on the horizon.
Al Rantel:You mean over the next year?
Jason Hartman: Yeah, about the next year, maybe even year and a half. I think things could start to get better by next summer, a year away, but there’s just a lot of foreclosures in the pipe that haven’t hit the market yet. And in terms of the adjustable rate resets, though, there is some good news about that. We’re largely through the worst of that. March was really the worst month with about $110 billion of adjustable rate loans resetting and that number is declining. This month in June, we’re only going to see about $75 billion, next month, about $50 billion. So it’s healing, but there’s a lot of pain still in that pipeline that needs to be dealt with.
Al Rantel:But when there’s pain for some, there’s pleasure for others and you still believe that real estate can be where it’s at if you know what you’re doing.
Jason Hartman: Yeah, you know, Al, I almost don’t even want to call it real estate because our investment philosophy here at Platinum Properties Investor Network is one of really not investing in real estate, and I know that may sound funny because we are a real estate investment firm, but we really invest in areas around the countries, in 37 markets around the U.S. with very low, low land values. So you call them real estate, but only a small percentage of what we buy is actually real estate. The rest is building materials and as we talked before the break, building materials are what we’re really buying. That’s really the investment.
Al Rantel:So that would be like concrete and copper and glass and steel and lumber, right, all that stuff?
Jason Hartman: You got it, you got it, and those prices are headed nowhere but up over the long haul in our opinion. I mean I just don’t think there’s any other case against that. So we invest in those and what we do is by putting the real estate label on it, we get really, really desirable financing and we get really, really desirable tax benefits. And we get another really, really desirable thing called a tenant, who pays the financing for us.
So it’s just the perfect equation and right now, in the markets around the country, it’s the perfect storm because of all the negative media news about real estate. It’s an imperfect market and there are little pockets of opportunity in so many places. If you look in the Southeastern United States or the Mid-Atlantic portion of the U.S., I mean there are just some phenomenal markets. And you know, Al, just a few days ago, that Case-Shiller Index came out that showed all of this appreciation in the 20 major metro areas.
Al Rantel:Yeah, right, I saw that. I think it was 19 of the top 20 on down.
Jason Hartman: Right and I largely agree with that, but what it doesn’t tell you is it didn’t talk about the 360 other markets. It’s a total snapshot and the country is so large and diverse.
Al Rantel:Right. So in other words, if you’re in Alabama or Mississippi or North Carolina, it could be totally different than if you’re in Las Vegas.
Jason Hartman: Yes, absolutely. And then you know what? I’ll even say Las Vegas is starting to look a little more attractive. It’s not at the bottom yet, but it’s getting attractive. We’re starting to pay attention to some of these old markets we’ve been ignoring for the past few years.
Al Rantel:And how does inflation help an investor?
Jason Hartman: Well, I think inflation is really one of the most wonderful assets to an investor because what it does is it inflates your rental prices. It devalues the dollar. It devalues the loans you owe on your properties, and this is the big hidden wealth creator, is that so many people that bought real estate and rented it out in the ‘70s and the ’80 and the ‘90s, where we had much higher inflation rates than the government will ever admit, but even at low inflation rates, it still helps you. What really happened, what really created their wealth, was the decline in the value of the mortgages they owed on those properties. So it behooves an investor to use as much financing as possible because when you pay it back, you pay it back in cheaper dollars.
I remember when I was a kid; I used to watch this cartoon, Popeye, and Popeye’s buddy –
Al Rantel:Yeah, me, too.
Jason Hartman: Yeah, Popeye’s buddy –
Al Rantel:I can’t wait to hear what Popeye has to do with inflation, but go ahead.
Jason Hartman: Well, Wimpy – Wimpy’s famous line – that was Popeye’s buddy and he used to say, “I’ll gladly pay you Tuesday for a hamburger today.”
Al Rantel:Right, because the money is worth less tomorrow than it is now.
Jason Hartman: Wimpy can teach us a lot about inflation. That’s really the rule right there.
Al Rantel:So the rule is when you buy something, you buy it with as much borrowed money as you can? Is that what I’m getting?
Jason Hartman: Absolutely, yes, and you buy a set of commodities, those building materials, that have a lot of appreciation coming to them, while the debt against the asset is depreciating. So you’re winning two ways and in real estate, we don’t pay our own debts. Our tenants do. So it’s just a perfect storm. It’s a perfect equation and no other investment has those types of characteristics.
Al Rantel:Well, I’ll tell you what we’ll do. There’s a lot of questions about the economic situation that we find ourselves in. We’ve talked about a lot of it in the last couple of segments, but I want to leave the very last segment, which is only to the quarter hour here, as you know, to our listeners, Jason. Would you be willing to answer their questions?
Jason Hartman: Absolute, love to talk to them.
Al Rantel:I would just ask that they keep the question as brief as you can so we can get to as many people as possible. We’re talking about all the economic news with Jason Hartman. Glad to have him back. Jason, I gotta get a couple of callers in because I promised and we’re going to run out of time. Gary, you’re on KABC with Al.
Gary: Hi, Al, welcome back. Glad you’re doing well.
Al Rantel:I am; thank you.
Gary: Jason, I was at a meeting yesterday and a mortgage woman told me that big institutions like WaMu and Wells Fargo are so backed up with their foreclosures that people have been living in their houses virtually rent-free for about a year and she said she thought it would take them another year to even getting around to serving them. So is that why you base your figures on another 10 to 15 percent drop in value because it’s going to take so long to clear up this mess?
Jason Hartman: Yeah, it is, Gary, and that’s a great question. We eluded to that earlier in the talk today and there are just a ton of foreclosures sitting in the pipeline. I mean I couldn’t even give you the numbers because really, it’s kind of like the subprime collateralized debt obligation issue. Nobody knows exactly. And the banks are slow to foreclose and people that are living in homes they could never really afford in the first place are really getting the benefit of it, frankly, because I saw this happen in the ‘90s where people were sitting in their house for nine months, 13 months, no payment. Even worse sometimes for the banks is occasionally, they would be renting their property out; they’d be collecting rent without paying the mortgage. It was a really good deal.
Al Rantel:Oh, my God. Talk about double dipping, not paying the mortgage and collecting rent. Where do I sign up for that deal?
Jason Hartman: I know, but remember these are all the “victims,” right? They’re getting a free ride. It’s pretty nice really.
Al Rantel:Gary, that was a great question. Thank you. Kathleen, you’re on KABC with Al and Jason Hartman.
Kathleen: Al, it’s so good to hear your voice.
Al Rantel:Oh, thank you.
Kathleen: So I have a quick question. I have a home loan, my primary residence, $1, 750,000.00 is the outstanding balance. We had a teaser rate that’s set to reset in February. Right now, it’s 4.25 percent. I know those are crazy rates, but we’re wondering if we should pay down to a million dollars, get all the tax benefits possible, pay down a million dollars and get a better rate also for a fixed rate, whatever’s available at the time we do it before the February change.
Jason Hartman: Well, we do recommend getting fixed-rate loans on the properties. Are you going to stay and live in that home indefinitely?
Kathleen: We are, yes.
Jason Hartman: You’re going to stay there. Okay. I would recommend getting a fixed-rate mortgage. I just think it’s a prudent idea. I don’t like the idea of paying down your mortgage. If you can refinance without having to pay it down, I would keep as much debt on the property as possible and as much money in the bank as possible, or use that money to invest elsewhere, but putting equity into a property is never a good deal.
Kathleen: So basically, free up the money so I can buy some of the things people are getting foreclosed on.
Jason Hartman: Yes, there are some good opportunities, but don’t buy them in California yet.
Kathleen: Okay.
Al Rantel:Kathleen, great question. Suzie, you’re on KABC with Al.
Suzie: Yes, hi, thank you. First of all, I’d like to say, being a cancer survivor, I’m especially excited to know that you feel so well and that you’re back. So we’re so happy to have you back.
Al Rantel:Thank you and God bless you. Thank you, thank you.
Suzie: Now, my question is just a brief one, but I’ve not heard it addressed before. I’m curious how the depreciation and devalue of real estate in Southern California relates to income property. I happen to have a property with three homes on it and I’m curious what the impact is on that type of real estate.
Jason Hartman: Well, now, there are two depreciations to talk about when it comes to real estate. There’s an actual decline in value going on. That’s the bad kind. And there’s a tax depreciation on investment properties. That’s the good kind of depreciation. It’s actually a tax benefit. So I assume you’re talking about a decline in value. Is that correct?
Suzie: Yes, exactly.
Jason Hartman: Okay, generally speaking, and I’ve got to really paint with a very broad brush here, the income properties in Southern California are in largely the same boat as the residential housing in Southern California, with a little bit of a time lag. So this is just a tri-plex essentially, three homes on it and my assumption would be that that would be in the same type of situation that any other single-family home is in. Commercial properties, larger commercial properties locally, just have been starting, but they started to feel it later, the effect of the decline in the market, and generally speaking, it’s about an 18-month lag time between the residential and the larger commercial-type investment properties, larger apartment buildings, shopping centers, that kind of stuff.
Al Rantel:Suzie, thank you so much, and wow, Jason, that time went by. I just love how smart Jason is. I could listen to smart people talk all day long and Jason is one of them on the top of the list. So Jason, thank you for your time, and thank you for everything else you’ve done and people can find you at www.jasonhartman.com and we’ll talk again soon. And again, my thanks to you.
Jason Hartman: I appreciate all of you going to the www.jasonhartman.com website and filling out the Ask Jason portion of the website. Ask all your questions. We love to hear from you listeners and answer all of your questions on the Creating Wealth show on the air, on the next show, most of the time. So Laura, we have two questions this week, right?
Laura:
Yes, we do. Let’s start with Ben Smithers, who is referring to our show, No. 55. He comments, “In this podcast, you stated that equity in properties are constantly eroded by inflation. I don’t believe that’s true. Inflation is actually a key part of what creates equity. Mortgage pay-down, inflation, and demand growth are all key components to equity creation. Property and other hard assets are hedges against inflation, mainly because they hold stable value as currency devalues. So I actually see inflation as my friend. As the value of the dollar is eroded by inflation, my houses appreciate, the dollars I’ve borrowed decrease in value, and my equity position goes up.
“I fully agree, though, that we need to harvest the equity periodically to put it to productive use and to keep the multiplier effect maximized. I love your podcast, and I particularly enjoyed this one. It gave me some ideas for maximizing my long-term profits. Thanks. Ben.”
Jason Hartman: Okay, Ben, that’s a great question. Thank you so much for asking and you know, we just appreciate these questions because as one person asks, like Ben did, so many of you are probably thinking the same thing. Ben, your question is mostly correct. There’s just one minor distinction that you’re missing, so I want to bring that to your attention. You are right that assets, including real estate, and the commodities that build the properties, the building materials, are a great hedge against inflation. And the debt declines in value due to inflation. Here is the distinction that we’re not seeing, though, so let’s make sure we see it.
Equity in the property is being attacked by inflation. This is one of the reasons, Ben, that we want you to pull as much equity out of the property as possible. Always, constantly strip equity from the property because think about it. If you sold a property today and you had $1 million worth of equity in it, and you sold it today and spent that million dollars, that million dollars today will have much more purchasing power than the million dollars will in five years or ten years, right, due to inflation. But if you had no equity in the property, then the value of the debt on the property, because you fully encumbered the property with debt, meaning you would have no equity, actually depreciated in value just like your equity would have, right? So that makes sense, hopefully.
Now, if you spend that million dollars today, you’ve got a lot more purchasing power than you will later, so why not pull the equity out of the property now and use it to invest, to live better, and that’s the point of refi till you die. Do not let equity occur in your properties because it is being attacked by inflation. Equity continues to decline in purchasing power as time goes by, so we want to always pull equity out of the properties. Thank you for asking that great question, Ben. Laura, what’s the next question?
Laura:
This is from Keith Schulls and his comment is, “I’ve been a long-time listener to your podcasts. I agree with 90 percent of what you say. That is, invest long-term, carry a loan, take advantage of inflation, and let renters make you wealthy. However, I don’t agree with the fact that almost all the properties you recommend have negative cash flow. Yes, I can clearly see that you do come out ahead in the long run with negative cash flow. However, this type of investing is geared towards people who are already well off.”
Jason Hartman: Wow, that’s a great question, Keith. Thank you for asking it. Actually, this is not geared to people who are well off at all and you can have all the positive cash flow you want investing with us. Here’s the distinction. All that I’m trying to point out is the property performs better with maximum leverage because remember that question I just answered for Ben? Well, if you have equity in the property, it’s being attacked by inflation. If you have equity in the property, you have more skin in the game, so to speak. So that means that you have more risk. We want you to have as little risk as possible.
So think about this. If you bought a little single-family home, $150,000.00 property, and you put 10 percent down, that would be $15,000.00. If you put 20 percent down, that would $30,000.00, 20 percent of the $150,000.00 purchase price. So if you put 10 percent down, your mortgage is higher and your payments on that mortgage are higher. Say for example, that the difference is $100.00 per month, just to keep it a simple round number. It will actually be different than that, but just for purposes of the example. If the difference in the payment is $100.00 a month and assuming that you would break even, given your rental income, with 20 percent down, but with 10 percent down, you have a $100.00 a month negative.
Well, let’s multiply that $100.00 a month times 12 months in a year. That’s $1200.00 per year in negative cash flow. Now, we actually like negative cash flow so much, we gave it a new name. We call it deferred-down payment because think about it. The cash flow can be as positive as you want if you just put more money into the deal. But I say that the best thing to do is to put a minimum amount of money in the deal and keep that money that you would have invested in the property as the down payment, keep it in the bank.
Now, the bank is certainly not any place to invest money. It’s a terrible investment, but it’s actually better than equity in the house because at least the bank pays you interest and your risk is lower if you have less money in the property. So you’ve got this extra $15,000.00 that you did not spend on the property, right? It’s in the bank. It’s earning interest. That’s good.
Now, you take $100.00 per month or $1200.00 per year that you have in negative cash flow that’s intentional because you did not put that extra $15,000.00 down and every month, you just pay $100.00 out of that $15,000.00 slush fund that’s in your bank account, and you raise your rent every year, hopefully. Hopefully you’re raising your rents about a rate of about 4 percent annually. As you do that, you can see that it will take an awful long time to deplete the $15,000.00 you did not spend on the property. So I’m not encouraging negative cash flow really. I’m just saying it depends. It takes the same amount of money. It just depends on where do you want to allocate that money. Do you want to put it into the property or put it in the bank? I say that the bank is a much better place to put it.
The other side of this is as you put less money into the property, Keith, you have less down, so you have lower risk, and your property performs better. The leverage benefit is higher if you have a 10:1 leverage ratio, in other words, 10 percent down versus a 5:1 leverage ratio with 20 percent down. Think about it. Property appreciates at 6 percent annually and let’s just for round figures use $100,000.00 property now. Six percent annually, if you put 20 percent down, is a lower amount of return. It’s 30 percent per year ROI, as a simplified ROI, versus 10 percent down it would be 60 percent ROI. So the more leverage you get, the better your return and you get interest on that money and lower your risk by putting it into the bank rather than the property.
Here’s the trick. Most people overbuy properties. They spend every last dollar they’ve got investing in real estate and that is not a good idea. You should have a minimum 4 percent of the value of your portfolio in cash reserves in the bank. So if you have $100,000.00 property, $4,000.00 in the bank; a million dollars worth of property, $40,000.00 in the bank. You really don’t need that whole extra 10 percent, but have at least 4 percent or whatever makes you feel comfortable. That was a great question, Keith, and thanks so much for asking. A lot of our listeners are asking the same question, I’m sure.
Keep your questions coming. Go to www.jasonhartman.com and click on the Ask Jason button.
Jason Hartman: Attention agents, brokers, and mortgage people. Do you know that we cooperate? Do you know that our network is an open system that you can refer clients and outsource your investor clients to us and receive passive income? It’s a really great opportunity. All you have to do is register your clients at www.jasonhartman.com and tell them to attend one of our live events, our live educational seminars.
Listen to our podcast, go to the website, and request our free CD at www.jasonhartman.com. And if they invest with us per the terms listed on the website, you will get a referral fee. We have lots of agents, brokers, and mortgage people that receive surprise referral fees that they weren’t even expecting. They get a check in the mail and they are just happily, happily surprised. It’s a nice extra supplement to your income. So be sure to take advantage of our broker cooperation. Agents are welcome. We cooperate with outside people and we’d love to help you with your investor clients.
I’m here with Nancy and wanted to talk to you about two of our fantastic markets. One is our tried and true market that we’ll talk about in a moment that is strengthening and has gotten better. And one is a newer market. Nancy, welcome.
Nancy:Thank you.
Jason Hartman: Tell us about Gulfport/Biloxi area and Long Beach area. That’s Long Beach, Mississippi, not California. We were there a few weeks ago. What’s the scoop?
Nancy:Yeah, we had a great trip. Jason always talks about out of a disaster comes an opportunity and I really believe that’s what’s happening in Biloxi. The economy there via the casinos and the major boom on the ocean, they are now allowed to build on land. Biloxi is now the third largest gaming revenue area in the country, behind Atlantic City and Las Vegas.
Jason Hartman: So what you’re saying is that before, the casinos had to be built on barges.
Nancy:That’s right.
Jason Hartman: And when Katrina came along and wiped them out, the city said, hey, let’s let them build on land. Let’s change the law. And that made the casinos so much more substantial. They’re huge now. They’re like 50 – 60 percent the size of a big glamorous Vegas casino.
Nancy:Right and there are 11 casinos currently up and running and they’re employing about 17,000 people. That’s about 2,000 more than all the casinos that were open pre-Katrina.
Jason Hartman: Tell us some of the big corporate names in the gaming business who are in Biloxi. I mean it’s amazing.
Nancy:Yeah, Harrah’s is there right now with the Grand Casino in Biloxi and they’re also building a $700 million resort with Jimmy Buffet, the new Margaritaville Casino that will be open in 2010. MGM Mirage is there with the Beau Rivage, which is the sister casino to the Bellagio in Las Vegas.
Jason Hartman: These are all big corporate names and those casinos, we were there on that trip, and they are unbelievable how swanky and glamorous they are.
Nancy:The Hard Rock is there. Interesting tidbit about the Hard Rock: it was there before Katrina. The whole casino got destroyed. The guitar remained standing. It was the only thing on the beach that remained standing.
Jason Hartman: Long live rock and roll.
Nancy:And they are – they have rebuilt the Hard Rock and it’s just amazing inside there.
Jason Hartman: I mean that Hard Rock Casino is gigantic, five, six levels of parking outside. I remember going through that parking garage. It was packed. I mean it’s just huge inside. It’s amazing how much money they have dumped into this area.
Nancy:Right. They have actually inked about $1.3 billion in casino revenues last year. Prior to Katrina, the gaming revenues were about $800 million. So they’ve just almost doubled the revenues in just a couple years. They’re also, because of the casinos and the tourism, they do $100 million in golf each year. There’s 20 golf courses there. This industry is just spurring all kinds of job growth, not just from the casino workers, but also construction workers to build these places. There is a major military installation there with Keesler Air Force Base, the CB naval base, a couple Army and Navy National Guard installations and also the Stennis Space Center, which is NASA’s backup space shuttle installation. So there’s just a ton of activity there that we really think is going to make this one of our booming higher appreciation areas, and we’re very excited about that.
Jason Hartman: And a shortage of housing because we had to look around a lot for that, Nancy. That’s excellent. Tell us real quickly about one of our tried and true markets, the market where I own and the market where many, many of our clients have invested, and it’s actually improving in terms of the rental market being very, very strong. Stronger than before, and this has just been a real dependable market. What’s the name of it? Everybody’s wondering.
Nancy:This is Kansas City, Missouri, and Kansas City is the 13th largest metro in the U.S. The statistics in Kansas City are just excellent. This is a strong, stable rental market. We talk a lot about our rent-to-value ratios and it’s .7 percent being ideal. All of the properties that we have in Kansas City, we get at least a .8 percent RV ratio.
Jason Hartman: On my property, my four-plex in Kansas City, I’m getting about a .82 percent RV ratio, so it’s phenomenal. It’s just a great property.
Nancy:There are some positive cash flow opportunities in Kansas City, which we haven’t seen for a few years. So if you’re looking for a market with some positive cash each month and a .8 rent-to-value ratio, Kansas City is your market.
Jason Hartman: Excellent. Thank you, Nancy.
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.
I wanted to mention to you that we have a new offering, a free CD, a free audio CD, that you will really, really like. We’ve had so many people that have given us really good comments about them, and you can go to our website at www.jasonhartman.com and just fill out a little quick web form and you can either download it or you can have the physical CD mailed to you in the postal mail. But get the free CD, especially if you are a new listener. You need this. And if you are a regular listener and you’ve listened to all the other old shows, you don’t need the CD so much, but it will be a nice review for you either way. But if you’re a new listener, you definitely want to go to www.jasonhartman.com and request the free CD.
Remember that Platinum Properties Investor Network has moved. We are in our beautiful new office in Costa Mesa, California, 555 Anton, Suite 150, in Costa Mesa, California, 92626, and we’re right by world-famous South Coast Plazas. So come in for a visit and a little shopping.
Also, we just uploaded another video podcast and I’d highly recommend that you subscribe to that. There’s some stuff that just lends itself better to video than audio. If you want to see what’s on that, subscribe to it, you can go to www.jasonhartman.com. If you use iTunes or an iPod and you’re an Apple person, then you can go to the iTunes Store, type in Jason Hartman, and two podcasts will come up, the video podcast and the audio podcast. And you’re probably already, if you’re listening, a subscriber to the audio podcast, so make sure you get yourself a free subscription to the video podcast as well.
And this particular one that we just loaded in the video podcast is about Naked Short Sales and what goes on with this short sale and manipulation of the stock market. It’s a very interesting report from Bloomberg News and I think you’ll really learn a lot from that. So be sure to tune in and watch 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.
Anyway, we’ll talk to you next week. Thanks for listening.
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: 41 minutes
