Heroic Investing
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True Value of Real Estate Investing



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On this episode of Heroic Investing hosts Gary Pinkerton welcomes Aaron to the show. They discuss real estate investing and what you and your family can do for a more secure future. They explain what to look at in investments and breakdown numbers in property deals.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Welcome to the heroic investing show podcast for first responders, members, the military, veterans and anyone looking to improve their financial future and gain some freedom with their time. We teach America’s heroes how to build passive income, build their startup business and safely grow wealth through real estate and other alternative investments. We have current and private First Responders put protections systems and a team in place to help them build a life where they can focus on their passion, that service or product that they’re uniquely gifted to share with others, making the world a better place for all of us. My name is Gary Pinkerton and I co host this show with Jason Hartman. This is Episode 223, Episode 223. So this is part two of the awesome interview video podcast interview, I did have my close friend Erin, and in this episode, we’re talking about somewhat about the mortgage industry about why he does what he does. Also, though, about surrounding yourself with people that are like minded but also that are high integrity that are the absolute best at what they do. And then making sure that the other people in your circles understand that this person is is that expert like that, that you talk up the people who are in your lives. They’re in your circle of confidence or your advisors So that everyone around you understands the quality of that person really is. And if a person, if you can’t talk them up because they don’t have a quality, then you got the wrong person in your circle. And I think as I mentioned on the first half of this, this was a redo of a podcast. We went through the entire video recorded podcasts and then didn’t record it. So this is kind of round two. So if I’m mentioning in here, about halen, our last one, I’m talking about the fact that we had, this was our two, recording this same conversation. This is a really good snippet of an awesome conversation. I hope you enjoy Part Two here with Mr. Aaron, I heard you say a couple times during our week together here while you’re talking to the clients, this is a fascinating and awesome discussion about you’re talking about timing the real estate market. This could be about timing any market trying to cherry pick, I guess so you talk about like the guy and you related to a sports team says talk about

Mr. Aaron 2:52
Oh, yeah, so it’s basically when people ask me what do you think is the biggest mistake people make? Getting into investing in real estate and I Tom timing the market, you’re never going to be able to time the market, the only person who properly times in the market is a person who’s already doing it. And then they get to a certain point that they look back and think, well wait a minute, I actually bought real estate the best time in the market. It just so happened, right? It just happens when you’re already in it. And I equate that to a football player who’s the best on his team. This is awesome. I’m going to sit out on the bench, I’m going to watch and I’m going to preserve my energy for the best play of the game so I can get the gift so I can be on the highlight reel. That’s what I’m gonna do. I’m gonna see I’m gonna wait for that. And then the game is over. And you realize the best play that was made on the game was with the people who are already on the damn field. You can’t sit back in the stand or on the beach or on the bench and expect to be involved in the in the best play when you’re not out there. And jack welch said the one who feels the best team is the one who wins, always. So if you want to win, you want to be able to say I was there and I participate, get your ass out and participate. We’re trying to think that you’re going to be able to time something Nobody ever times anything. You know, the only time that that ever does happen is if you’re already doing it and then it really boils down to the best time is now if you’re interested now you have the wherewithal, you have the capability, step out there and do it right now because it doesn’t matter what the markets doing. Inflation is paying a chorus. Inflation is already eroding the dollar so much, because our cost of living is in excess of five to 7% of where it is the year before all the time it keeps going and going up. That the dollar we have today is we’re so much less tomorrow, you don’t put it to work in the market. Now you’re already losing it already declining, is not making any money in the in in your bank account. In fact, actually, the money I paid here, I know I paid way more than I should have to have this place redone is paid and done. Right. If I had it in my bank account have been worthless anyway. This is only an appreciating asset. And it’s also an app that’s going to generate so stinking much revenue for him because of what we can do here. That Dollar with it and nothing from me sitting in my bank account. Now if I just get my wife convinced that we’re putting you leave your dollar in your bank account is not a good thing. I’d be 1000 ball not thousand but quite a bit times better than I would right now.

Gary Pinkerton 5:13
Yeah. So this is a blooper for you. Did we talk

Mr. Aaron 5:16
about why real estate or Why? You know why mortgages are not dead? I don’t think so. I think that was the previous round.

Gary Pinkerton 5:25
Yeah, it had to be the previous right. It’s funny. It’s all kind of bleeding together. But I think you you were asking me in the previously unrecorded version of this while I was passing about what I do, what keeps me in this business, and because sure as hell isn’t the mortgages themselves. There is people out there and I’ve heard them say, Well, I’m passionate about mortgages. Like No, you’re not really passionate about mortgages, the process sucks. You know, and you know, the people for people the process for the individual, just giving up the paper, you know, you were you are Trying to find 1700 scientists said suck when I say I need this paper newspaper and all you were doing is giving me the paper, right? Yeah, that’s it. You’re just uploading the form. And it’s just inconvenient. I got to read the damn thing. I think I enjoy that. We had a client very famous, a singer songwriter. He was on tour and his his, his business managers. He had two of them. Actually, one of them is absolutely and the other was awesome. They finally reluctantly gave me all the paperwork. This man had five corporations with multiple streams of income. And I had to try and sort through that as fast as I could. So I can say whether or not you qualify, do you want to buy 10 houses in three states closing all at the same time. And these financials just as taxes were over 1700 pages. I have yet to be able to sit down and read the Bible all the way through even stretching out over a couple years. And yet I dissect this in just a few days. It took me 18 hours to dissect his income. Then Ellen had to do that. Then our underwriter had to do that and the underwriter declined the loan. We had to go back And recalculate what he calculated to show he was wrong, and get his boss to do it. And we finally got those loans done. We’re done about probably three to three weeks late. I was catching hell, I’m a guide, you realize what I’m going through here? And nobody cared. Nobody cared. Right? So why would anybody be passionate about a business that puts you into that? It’s not the business that makes me passionate, right? It’s the people. The fact that I can use an instrument like this. To short the dollar, which is what you’re doing, you’re doing a long term, long term leverage on property to take advantage of inflation, or inflation raises, it gives us the opportunity to raise our rents, right? Yeah. Right. What are the national averages? And if you don’t know I’m gonna punch in the head because you heard me all week long, say 3.6 3.6. That’s right. Give give this man. I won’t give you a car, maybe, maybe, you know, chocolate bar. So. So you’ve got 3.6% but let’s say just raising it 3% Well, if you’re buying 100,000 property, you’re doing a 1% rent to value ratio. What is that was that rent? thousand dollars? thousand bucks was 3% of 1030 30 bucks not real sexy, right? Nobody’s jumping up and down for 30 bucks, you now can get a couple of muffins with your latte and I use your toolbox. Right? But is it reasonable to say that you would make maybe $200 a month cash flow on that property? Yeah. So if you had 200 a month cash flow the first year and then you raise your rents 3% you’re getting how much the second year 230 230 in cash flow? How much did your cash flow increase percentage wise?

Mr. Aaron 8:37
Sorry, is 15% 15% increases and starting to get a little sexy?

Gary Pinkerton 8:43
That’s a good return. Right?

Mr. Aaron 8:45
That’s a really good return. And if you’re able to do that, often enough, it’s a compound return, right? Because you’re getting a 15% increase on the last 15% right, and it continues to compound. Now we know the dollar decline. Right? Do we know how fast to seven if you do shadow stats right or you do kind of a more agreeable or more appropriate inflation but now I mean I think this I think the government statistics say like three three and a half something like that they’re saying two which is really cheeping it you add back in food costs energy costs the taxes they’re not factoring the taxes was the last time you paid less per kilowatt hour used on your power bill.

Gary Pinkerton 9:27
Well when I say my paid less like every previous month, now I mean, it’s always going up right? Exactly.

Mr. Aaron 9:34
It has never gone it never went down never went down. Right The only time it went down is when you just didn’t turn the lights on. right but then within your candle and battery bill goes to the roof right so one way or the other using energy. What about when was the last time your dollar per gallon used on your water bill went down? Never. Never right. When’s the last time you paid less per dollar earned in taxes without without tax deduction? Yeah, never. Never right. So well. As a real estate investor now said you open some things up, right? You know, because of inflation, we can raise rents, because of inflation, what we’re paying it back with is losing value. So I was on a podcast where the host stopped me about three quarters of the way through. He says, Let’s go backwards about 10 minutes ago to the inflation thing that you were talking about. He goes in, and I wasn’t even listening to you for the last 10 minutes anyway, because you really caught my attention with the inflation like, well, I guess that’s a thank you. I’m not sure if that’s a good or a bad thing. So I took it as a good thing. Well, he said he was doing some research while I was just sitting there rambling. And the way he could find out the only way you could find the illustrate how $1 had changed was to go back to 1930. We asked, what was the value of $1 1930 versus the value of $1 today, meaning how many dollars today would you need to have to equal one dollars buying power and I know, the frame of reference, he claimed it was $220 have today’s dollars equal $1. And I think so having a difficult time wrapping my head around that I think so well, at listing some recordings from some guys who talked about when they were a kid, one guy who was talking about how he used to drive drive cattle for somebody and his team and mules for $1 a day, back in 19, in the 30s. So let’s say it’s $1 a day was not an uncommon wage. So what’s $220 a day today, when you do the math, it’s 57 and change 57,000 and change per year. Is that an uncommon way today? Definitely not kind of a low wage anymore, right? If you’re in Northern California, if you’re in Jersey, or you already are in poverty, unfortunately. But that’s, that’s, that’s a fairly common wage. So that kind of makes sense now. So if that’s the case, and we can use that as a metric, how long ago was 1930? How many years? It’s almost 90 books. Listen at 8989 years, exactly nine years. So in just a few months, you’ll be nine years to round up the nine years, How many times will a 30 year mortgage period fit in ideal? Three, three times. So if we take 220 and divide by three, what do we have?

Gary Pinkerton 12:09
220 divided by three is seven.

Mr. Aaron 12:13
There’s people that have already beat you on this.

Gary Pinkerton 12:16
I don’t know why isn’t sketchy.

Mr. Aaron 12:18
It’s because it’s like 1030 at night, and we’re on recording to that’s what if it wasn’t for the fact I memorize this crap, I would still be I’d be like, Oh, my God, I know. It’s 73.33. So we in the time it takes for you to close on the loan and then pay it off the dollar loses 73.33 times its buying power. how insane is that? So while you’re raising rents and getting a 15% increase in your cash flow, you are paying back that loan when something is losing its value and accelerated rate, and you get to keep the spread. Yeah, I got one question for you. Who’s screwing who in that equation?

Gary Pinkerton 12:58
Yeah, I feel like that. I’m getting the upper upper side. It’s interesting, as you call it, shorting the dollar. I mean, I’ve heard that before. But when you short something, a stock or anything, right, you’re betting that it’s going to go down in value. I mean, shoot, what are the odds is not going to I mean, it’s a stated policy of the government.

Mr. Aaron 13:18
It’s happened for 100 years. And it’s been happening. It’s Yeah, exactly. We are intending to do this. So like, so if a company came out, right, and said, we’re going to start shorting our own stock, the whole world would jump in on that. Right. Right. Everybody get in on that? Because then it wouldn’t work. If everybody shorting I don’t know how it works. He can’t sell something that nobody’s buying. Right? Here. We know for a fact. We’ve been told it’s being shorted and how many times I get people calling us I don’t want to go into debt, or what’s my interest rate or what’s my this What’s my that like, guys, you’re doing the exact same thing that everybody else to do and you’re jerking off over this whole situation. You’re not focusing your energy. I’m focused on the understanding that what you’re doing When you leverage the property for a long term as high a value as you possibly can, you are literally shorting the US dollar. You’re literally bidding it betting against the economy. And you’re literally making out like a bandit on it. If you watch The Big Short, I don’t know how many people walk away from that movie thing and Damn it if I only understood that time and if I only shorted the US economy back then, right? The only thing that keeps a person wanting to do that is the character of Brad Pitt playing say, hey, you’re betting into other people’s lives as the only thing that makes you feel worse about that. But once you’re doing, you’re doing it, you go and finance a property, right? You finance it for 30 years, you find a renter to pay you more than what you’re paying court. You’re already doing his journey on a smaller scale that you can control. So get in the game, and freakin do it. Quit sitting there staring at it saying I wish too often people are sitting I wish I would have done this or that what they can do it now. Because 20 years from now you’re gonna be singing that about the conversation I’m having with you today. Get off your ass and get it done.

Gary Pinkerton 15:02
Yeah, good. Well said well said I mean shorting is simply taking us dollars giving them away for this piece of brick, this this building, and one day trading it back again, and you get cheaper dollars a lot more.

Mr. Aaron 15:16
And you don’t even get that somebody else is paying it for you.

Gary Pinkerton 15:19
Well, that was the other point. Right? Exactly. So it gets paid back by someone else. And you were able to use other people’s money to do it to begin with,

Mr. Aaron 15:26
because that’s that person and that person is paying you to be the man carrying it. For him. It’s almost like being a straw buyer, right? your only job as a real estate investor is to ensure you got the right people working for you. Right, to make sure that they’re the ones you trust, to get this done right. To make sure also that you buy the right property. Don’t go in there just believing people are just gonna do exactly what they say they’re gonna do. I can prove to you here they don’t do that. Right. And I can prove to you at some other property that they don’t do that. spend the money on the inspections, hold people accountable. They’re willing to say I give you my word they better damn well. Be willing To hold me held to it, right I am. If my team screws something up, that’s my fault. And we’ll make it right. And I will call you at the end of every deal and see if there’s something we did that was wrong. And if you’re not telling me, it’s not my fault anymore, I asked, you need to tell me. I call you leave your voicemail say ever Is everything okay? And you’re not willing to step up and tell me? How do I know that I need to fix it? Help me be better at what I do. You know, and then you also like I said, seek out the right kind of people. I have a real problem with people who like to work with others and then talk about how crappy they were, and then belittle others and say how they really suck at their job, then why are you working with them? I have to question that. You know, I have the belief that I need to work with people that are way better than me. I work with you because one nuclear engineer, right? nuclear sub captain, instructor for crap sake at the Naval Academy won the most prestigious prestigious places on the planet and the graduate from the Naval Academy with a master’s degree also was the chairman We’ll work with the Chairman of the Joint Chiefs of Staff for the for the US government over warfare. I mean, that’s some really really cool things that I keep in my in my ass off to get that’s in high school. And I got to sit with john Abernathy, a PhD in accounting, very brilliant man. And I get to use his resources to figure out ways to benefit real estate investors to show the real benefit of the of the real estate that they’re purchasing in an actual calculation. They’re working on these things for me right now, which is freaking awesome. So of course, I’m going to tell the whole world these are the people I hang with. And by hopefully, by the grace of the individual, I share that with, they might think I’m pretty cool too, because I hang out with those kind of people. But if I’m the kind of asshole the ones say, well, all these people hang around suck. They’re pretty much going to easily conclude that I suck too. Yeah, so here to scream to everybody. If you feel that the person you’re with, you need to talk crap about them and say they suck. Better be walking away from that person because you suck by association.

Gary Pinkerton 17:58
Yeah, and you’re certainly not going to get better and grow in life by hanging around or having that attitude about the people you’re around. But

Mr. Aaron 18:06
what I really found is not so much even the people. It’s the attitude. It’s an attitude. Change your outlook on things.

Gary Pinkerton 18:13
Yeah, yeah, I’m with your menu. You had an awesome last. If you don’t remember anything, remember this at our last night? Can you reproduce that?

Mr. Aaron 18:23
bottom line is you need to build other people up around you. There is an absolute necessity to be sure that the people that you associate with have to be the best kind of people, the people that that you associate need to realize that the best kind of people because you tell them that and you tell others that. What are you saying to other people when they’re not around? Because ultimately what you say about the people you associate with when you’re not around them, is exactly what you’re saying about yourself. And with that, that right there. I can’t do my droplet I will do the air pod drop.

Gary Pinkerton 18:58
Ladies and gentlemen, this Aren’t Iraq that one my friend, that was a good time? That was a good time.

Mr. Aaron 19:03
Thank you, my brother.

Gary Pinkerton 19:05
Thank you, man. Good to hang out with you.

Announcer 19:08
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