Defining Purpose in Retirement

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Podcast 182

182: Retirement and Real Estate with Jason Hartman

Jason Hartman is the founder of Platinum Properties Investment Network, Inc., where he helps people achieve their dreams of financial freedom by purchasing income property in prudent markets nationwide. Jason has been involved in several thousand real estate transactions and has personally owned income properties in 11 states and 17 cities.

Jason started his career in real estate at the age of 19, brokering properties for clients while building his own portfolio along the way. He became one of the top Realtors in the U.S., made millions, and earned a number of industry awards. He reaches hundreds of thousands of people worldwide with his Creating Wealth Podcast and is a sought-after speaker and educator.

Today, Jason returns to the podcast to help you understand the role real estate plays in retirement, the difference between “real estate” and property that reliably generates income, and how to use it as a highly efficient part of your portfolio.



In this podcast interview, you’ll learn:
  • Why Jason believes real estate is the most historically proven asset of all time.
  • The one formula guaranteed to help you lose money with real estate - and how to avoid it.
  • Why the population of renters in America is becoming easier and easier to manage - and what kind of properties these stable renters are renting.
  • Why paying off your mortgage is, for most people, a bad idea - and what kind of debt you should be thinking about paying off.
Inspiring Quote
  • "Investment is something that produces income. If it doesn't produce income, it doesn't qualify as an investment in my book. It is purely a speculation or really a gamble." - Jason Hartman
  • "There's really no stigma to being a renter anymore. There used to be. People have realized that if you're renting a higher-end property that's actually a very good deal for the tenant." - Jason Hartman
Interview Resources
Disclosure
Offer valid in the 50 United States and the District of Columbia, to first-time requestors. During the offer period, receive one (1) in-stock book per request. Limit (1) book per week per household. Limit three (3) books total each calendar year, between January 1 and December 31. Offer valid while supplies last. Howard Bailey Financial, Inc. reserves the right to cancel, terminate or modify this offer at any time. Void where restricted or otherwise prohibited.
Read the Transcript


Casey Weade: Jason, welcome to the podcast again.

Jason Hartman: Hey. Thanks, Casey. It's great to be back.

Casey Weade: I'm excited to have you here. Last time you were on, it was right in the middle of the coronavirus pandemic and there was a lot of fear, a lot of panic. I think you're able to bring a lot of sense into the conversation talking about future trends and just what's going on. And so, I truly appreciate that. Today, I'm hoping we get into something just a little bit different. I'm hoping that we get into retirement and real estate, how these two things integrate. We get so many questions about real estate from the families we work with and we have the best resource in the world. We've got Jason Hartman here with us.

Jason Hartman: Yeah. Well, thank you so much. You know, you said in the middle of the pandemic, I would argue that we are only in the third inning even now but when we talked before, that was a few months ago. But in pandemic time, it's like dog years, right? And so, so much has happened since then. The world is changing so quickly. So, I think our talk today also, Casey, per your suggestion, will be a little more perennial too. Of course, we can lean on some of the stuff that's happening. It's obviously just massive changes to the world but this will apply years from now. It won't change very much in terms of the technique used. I think the technique will very much be the same.

Casey Weade: Oh, absolutely. I mean, I've seen real estate and our family be used for generation after generation, much the same way as previous generations. And so, I don't see the strategy changing a whole lot. That's what I'm hoping that we can really focus in on here in our conversation. And so, I'm just going to start with the easiest question. Where does real estate fit in to a comprehensive retirement strategy?

Jason Hartman: Oh, it is the strategy if you ask me. I mean, listen, I'm a fan. So, maybe I'm not the most impartial person to ask but I love income property. I think it's the most historically proven asset class in the entire world. I don't think there's anything better. It's certainly not perfect but I think it was Winston Churchill said about democracy. It's not perfect. It's just better than everything else.

Casey Weade: Well, most of the families that we meet with, the wealthiest of families we meet with, on average, their largest assets throughout their lifetime have been real estate. That's how my parents created their wealth and I'm on the same track. My largest assets tend to be real estate and insurance and business assets. And so, there's definitely something there and people often ask them, just on a side note, people will say, "Well, what's the best inflation hedge? Should I buy gold?” They said, “No, buy real estate.” Historically, real estate's been the best inflation hedge. So, there's a lot of places that real estate could fit. It could fit as a piece of growth. It could be that that's really helping you keep up with inflation. It could be passive income that's supplementing your Social Security or pension. How do you think of it? When we think of our process and our framework, we have liquidity, income, growth, estate, and tax planning. What are your thoughts?

Jason Hartman: Yeah. Well, good question and I certainly own a variety of asset classes outside of income property and I really like to try although I have to keep correcting myself. I really want to distinguish “real estate” from income property, okay, because we're really all about income-producing real estate very specifically. My definition of an investment, Casey, is that an investment is something that produces income. If it doesn't produce income, it doesn't qualify as an investment in my book. It is purely a speculation or really a gamble. Now, I don't mean to say that you can't make money gambling and speculating. I certainly have, and many other people have, but many other people have also lost a lot of money and so have I, gambling and speculating. So, if you're a high net-worth person and you want to take 10%, 15%, maybe even 20% of your net worth and do some speculating and gambling, you can afford to lose that money. So, it's not a big deal and you might hit a home run. But what we're really about and what my company is about is empowering investors.

And as we talk about the empowered investor, the empowered investor is someone who focuses on income-producing assets. They focus on yield. they focus on cash flow. And you know, yield and cash flow are pretty reliable when it comes to income property. So, we'll kind of dig into that and also some massive changes in trends and how people look at housing and renting versus owning and all of that kind of stuff I think will be very interesting to your listeners and viewers. Also, I’ll share my screen and we'll have some charts and graphs and visual aids but I know some of your people are only listening via audio so we'll try and describe those as well.

Casey Weade: Well, I think there's two big things that most of the families we work with. As they transition into retirement, they shift their focus from growth at all costs and now they say, “Hey, I have enough. Now, how do I protect it and create an income?” It's about risk management and income production and that seems to fit very well when it comes to real estate. And so, then we beg that question, how do we protect our downside risk? Because I have seen many people lose a lot of money in real estate. It's not that everything turns to gold. There are real risks there. Anytime there’s real returns, there’s real risks.

Jason Hartman: There's basically one formula for losing money with real estate and we'll talk about that. So, I'm glad you mentioned that. That's a good one.

Casey Weade: Yeah. No, that is a key here because once you get to this point in your life and you want time/freedom, you don't want to be thinking about managing these real estate. So, I want to talk about how we make this a very minimal time commitment, individual. It's investing but probably more important than that is how do we protect our downside. Does that have to do with not just income versus growth? I hear you saying we'll focus on income. That's less risky but there's a lot of different ways we could focus on income. It could be a short-term rental, a long-term rental, it could be commercial, it could be residential. What are your thoughts on risk?

Jason Hartman: You know what, if you look at what has gone on in the world the last 15 years and then the last several months, it has really proven what I have been teaching people for 17 years and that is that the home is the center of the universe. And just simple income-producing properties, bread and butter-type properties, basic income properties are what people always need, they have universal need. If you look at Maslow's hierarchy of needs, right, and it doesn't say it exactly this way but the take we can get from that is that every human has three common needs: food, clothing, and shelter. And let them rent that shelter from you. That's what I say. So, these income-producing properties in the right markets, in the right areas, following my 10 commandments of successful investing, they just work. They work year in. They work year out. They've worked for decades. They will work for decades to come. It's the most historically proven asset class in the entire world.

Casey Weade: So, we’re talking single-family homes?

Jason Hartman: Single-family homes, basic single-family homes, yes, in middle and lower-middle-class areas, not the bottom of the barrel, not the high end, not vacation rentals. Vacation rentals, there are a few opportunities there that kind of makes sense but given what's going on lately with COVID, there are a lot of people that have been very, very hurt. Because what they were really doing was buying a speculative asset class that was propped up by a booming travel industry in a booming economy and that changed radically overnight. And people still needed a place to live. Okay, they still needed basic housing and that is a need that will just never, ever go away. So, I've become pretty conservative as the years have gone by and I just like basic rental housing. That's where it's at. And so, maybe I'll share my screen and show you an interesting visual that I…

Casey Weade: I want to see that, Jason, and as you transition over there, I want to say that sounds so boring.

Jason Hartman: What’s that?

Casey Weade: That safety is boring, right? For me, I love our vacation rental. So, we've got a vacation rental in Northern Michigan and through COVID, our rents have went through the roof.

Jason Hartman: Oh really?

Casey Weade: I think it's the location though. It's easy access from Chicago and Detroit. People are trying to get out of the city and they're flocking to the Upper Peninsula of Michigan where they can be secluded. And it's worked really well and we love it because we get to go up there a couple of months a year and use it and enjoy the property. When I think of it and I've thought about doing these single-family homes and two things come to mind. One, that just doesn't sound like very much fun. I don't get to use it. I don't get to enjoy it. And number two, it sounds like I'm going to be dealing with renters and headaches and fixing things. I don't know how you overcome those two attributes.

Jason Hartman: Yeah. Well, that's what we do. We basically help people make that simple. That's what my business has been for the last 16 plus years is helping people make a really simple task of direct investment in income properties. So, that's our entire business. No problem talking about that. Okay. So, let me see. Let me try this screen share again here and see if I can do it a little bit better. One second here. All right. I think this will work better. Okay. Now, you should be able to see. Do you see…

Casey Weade: For those of you that are listening to the podcast right now, as Jason's getting into this, if you're just listening to the podcast, you could be seeing these visuals if you followed our YouTube page or our Facebook page.

Jason Hartman: Yeah. So, here we go. This is a graph that shows renter households in the past 13 years and then projected for the next 15 years by age. And what's fascinating about this, something that's really never happened before in history is that the renter population is aging dramatically. Okay. And this is quite fascinating. So, let's start back in 2007. We're dividing these renter populations into three demographic cohorts, people 34 and under, people 35 to 59, and then people 60 and over. And what this shows you is that the dramatic expansion in the renter population is age 60 and over, and this is really something that has never happened before in history. So, these renters are getting older. There's really no stigma to being a renter anymore. There used to be. It used to be kind of people looked down their nose at renters and thought, “Oh, well, you're not a homeowner, right?” But people have realized that, number one, if you're renting a higher-end property that's actually a very good deal for the tenant.

You know, it's the ultimate arbitrage. It's a great deal. But, number two, it really gives people a lot more flexibility and a lot more opportunity. Newsweek Magazine published a very big cover story several years ago and this was the first time that people really rethought the way this concept works. They did a huge study that found that areas and neighborhoods with the highest homeownership rates actually had higher unemployment rates. And if you think about that and I hear I'm not talking about the 60 and over age, so I'm kind of jumping around here but if you think about that, it really makes sense. Because as I've said for many years, the best thing anybody can have on a resume is mobility, being able to move to where the jobs are. That's the best thing you can have on your resume. And when you're a homeowner, it actually restricts you. It bogs you down. It weighs you down. It limits your flexibility. Whereas if you're a renter, you can just give notice to your landlord and you can move to where there's a better opportunity.

And America is a very mobile population. So, there's nothing wrong with renting. I think it's a great, great thing. Now, what I really recommend for people watching and listening are, you know, most of your viewers and listeners are probably homeowners and that's fine. There's certainly some psychological benefit to being a homeowner. I'm a homeowner. I've mostly been a homeowner throughout my life but sometimes I've been a renter and renting a high-end property for yourself and owning a lot of low-end properties that you rent to other people is a fantastic deal. That is the best double arbitrage ever. Now, the word arbitrage, most people understand that word. It basically means exploiting the differences in things. That's what arbitrage is in my simplistic definition. If you want to hear my simplistic definition of derivatives, it is the thing about the thing. So, I like these very simplistic definitions of things because we don't get lost in the weeds.

So, it's a double arbitrage where you exploit the differences in things from two sides. You rent the high-end home for yourself or you get the advantage as the tenant of a fantastic rent-to-value ratio then you rent lots of low-end homes to other people and you get the advantage as the landlord, as the investor of a very good rent-to-value ratio that's favorable to you, the landlord. Okay. So, I just thought this was kind of interesting because what it shows is that our rental populations are becoming much more stable and most people think older people are more responsible than younger people. That's just known. Look at insurance rates for car insurance if you don't believe me, and we all know that's true. So, this renter population is becoming easier and easier to manage and that's one of the great things too, that maybe nobody's really talking too much about.

So, now let's talk a little bit about retirement strategy overall. This chart was just interesting and I just wanted to share it with you. Okay. Any questions on it before we leave it?

Casey Weade: I do have a question. I am wondering, do you have any statistics on this? Are these individuals that are transitioning into retirement, are they using this strategy where they say, "You know what, I want more flexibility. I want more opportunity to move around. I'm just going to go ahead and rent,” so they sell their home and they become renters? Are you seeing that people are selling their home becoming renters? Or these individuals that are in this age group 16 and over, they've always been renters. They're just entering that age group.

Jason Hartman: Oh, yeah. Good question. That's a very good distinction. Most people wouldn't see that distinction. Well, the answer is I don't have any exact stats on that for you but what I will tell you anecdotally is that we have definitely seen a very high percentage of baby boomers that have become empty nesters, meaning the kids have moved out. And frankly, they don't want the kids to come back. You know, the millennial generation is known as the boomerang generation. You throw a boomerang and what does it do? It comes back to you. And so, they want to get rid of that big house and downsize and be able to have the freedom to travel and not have a lot of home maintenance and things like that. So, they are renting. They're former homeowners that have just decided to rent by choice in many, many cases.

Casey Weade: Well, I wonder what your thoughts on this piece. Sorry. I've seen some of the research showing that it's actually cheaper to rent. I've seen it the other way too depends on who does the study. Is it cheaper to rent or is it cheaper to own?

Jason Hartman: You can't answer that question with a blanket statement. You have to know the price of a home because it's much cheaper to rent a million-dollar home than it is to own it because the rent-to-value ratio is favorable for the tenant on an expensive home. But it's much cheaper and better to own a $100,000 home because the rent-to-value ratio is in favor of the landlord on the less expensive house. So, it depends on the value of the property to answer that question.

Casey Weade: This demographic, one of the goals is also just to focus on what's most important, right? For a lot of the families we've worked with, a lot of them have managed their own money for years, decades. They've managed their own stock portfolios and say, “You know what, I don't really want to do this anymore. I don't mind paying a little extra cost to have you do it for me. Here, handle this.” And when it comes to owning a home, there's a lot of time commitment that's involved, and you'd rather rent, and maybe even if it cost a little bit more to rent, you free up your time. There's a price to time and for many retirees, it's worth it.

Jason Hartman: Right. There's a lot of hidden costs to homeownership. No question about it. So, again, the strategy being whatever you do with your own home is obviously your decision. It's a partially emotional decision, a psychological decision, not just a money decision. But definitely, definitely, the renter population is increasing dramatically, okay, and the demographics coming at the rental housing market over the next 10 years are nothing short of phenomenal. So, it is a very, very desirable time to be a landlord. Now, let me talk to you about one of our strategies, which is called refi until you die. So, I want to get into that because it is a very good strategy. It's the most tax-efficient way to extract the wealth from a real estate portfolio and it's really just a great, great strategy. So, we'll get into that in a moment.

Casey Weade: Jason, let me interject. I've went through these on your website. I have had so much fun clicking through the different properties and seeing your projections. And if you want to go and figure out how you should be analyzing a property, JasonHartman.com, pretty cool resource.

Jason Hartman: Yeah. Thank you for that, by the way, because we've got a free video. It's just 27 minutes long on the website on the front page of JasonHartman.com and that will go through every single number on this pro forma that every people who are watching can see on the screen right now, and basically help people understand how to be a good investor. It's the shortest investing course on the planet. It's 27 minutes and if you learn how to read a pro forma and standardize your data, you will be a very good investor. There are other things to know certainly but I tell you, this is the foundational thing right here. Standardize your data and learn how to read and analyze these numbers on this pro forma. It's very hard to make a mistake if you just watch that video and learn from it. So, that's there available. This is interesting too, by the way. Higher homeownership rates translated into faster household formation. Okay. Now, the interesting thing here, the comment from the Wall Street Journal is, again, the data is a bit suspect but this is from the Federal Reserve. You got to believe everything the Federal Reserve says, right? I'm joking. I'm being sarcastic but it's just interesting here to see the household formation component.

Casey Weade: Please explain what that means exactly.

Jason Hartman: Well, what this means is when people move out of usually their parent’s house and form a household of their own, that's how household formation, okay? Most of the time, these are couples not as much as before, though. Marriages kind of gone out of style a bit for better or worse. I think it's probably for the worse, societally speaking, but it's what we're seeing. So, as we see the millennials grow up, the oldest millennial now is 40 years old. Okay. So, they're no longer like these kids. Now, we've got Gen Z coming after them. The millennials are known as Gen Y. And so, we've got a few demographic cohorts to think about. Okay. We've got the matures. They're older than the baby boomers. Then we've got the baby boomers who was the biggest demographic cohort in history until the millennials came along and beat them just by a little bit. Baby Boomers are about 76 million Americans and then we've got Gen X, my generation. It’s a very small, lonely generation. There's only about 46 million of us. Then we've got the millennial generation. That's actually the largest and that's about 80 million.

And now they're forming their households. They're finally getting around. They've really delayed household formation. They've delayed marriage. They've delayed kids, all of that stuff. And they're still delaying it but it's starting to finally happen now. And so, that's influencing this. And then we've got Gen Z coming after the millennial generation and we don't know that much about Generation Z yet. So, the jury's still out on how they're going to act, how they're going to spend, what their political beliefs will be. We pretty much know what the millennials are like. So, an interesting thing here, okay.

Casey Weade: So, we now glean from that, that the millennials delayed, now they're starting to own homes. Now they're starting to own…

Jason Hartman: Or rent homes. They're just forming households. That's all that.

Casey Weade: It's not necessarily homeownership.

Jason Hartman: Yeah. Not necessarily homeownership. It does influence the homeownership rate because a lot of them do buy homes but basically, the point here is millennials are growing up and they are finally getting around to things like marriage and kids and household formation. They're not living at their parents’ house as much anymore.

Casey Weade: So, demand is going to be increasing quickly.

Jason Hartman: Demand increases. Yep, absolutely. Okay. So, here is the refi until you die strategy. My core content is called the 10 commandments of successful investing and one of the things that people ask when they learn about this content, you can hear more about that on my podcast, and so forth, the Creating Wealth Show, is they asked, “You know, Jason, your strategy really recommends using leverage and using what you call,” and I'm speaking from their point, “what I call inflation-induced debt destruction, which is basically the hidden wealth creator of income property, showing how inflation essentially pays our mortgages off for us.” And one of the reasons I do like income property debt very much, I jokingly say it's my favorite four-letter word is because as income property investors, we don't pay our own debts. We outsource that obligation to people called tenants. Our tenants pay our debts. And so, that creates what we call self-liquidating debt because the tenant pays the debt.

And it's similar to in the world of corporate raiders and Wall Street bigwigs. They use a strategy called an LBO or a leveraged buyout. And I'm sure, of course, you've heard of that and probably most of your listeners have. And so, when you hear about Carl Icahn, the late T. Boone Pickens, and all of these Wall Street bigwigs, right? They use the LBO or leveraged buyout strategy, which basically involves acquiring a company with a lot of debt and then having the income from the company pay off the debt for you. It's a fantastic strategy. It doesn't always work because businesses are much more volatile than income properties. But with income properties, they're pretty stable and secure. So, the tenant pays the debt off for us and that's just a beautiful thing. We outsource that obligation to the tenant but inflation also repays that debt. Maybe in the future, we can do another episode where I really dive into the inflation-induced debt destruction strategy.

But now let's talk about Refi Till Ya Die. So, let's start with an example here. Now, this is a very simplified example and it basically includes people buying a $1 million portfolio. So, this might be 10 little hundred thousand dollar houses in three diverse markets around the country. Maybe they buy three properties in Atlanta and then three properties in Indianapolis, and three in Memphis or something like that. We've got many markets around the country that we help people buy properties in. They put 20% down and, of course, all this is subject to qualifying and so forth. So, it's a back of a napkin example, okay, which is $200,000. They have about 3.8% give or take in closing costs. That's about another $35,000. And then they need cash reserves, for vacancies, maintenance problems, things like that, of about $40,000 is the minimum we recommend. They could have a little more but they should have at least 4% of the value of the portfolio. So, that's $40,000.

So, they need about $275,000 to execute this strategy and own a $1 million portfolio of maybe 8 or 10 properties. So, as Jerry Maguire said, “Show me the money,” right? We all remember the movie. Well, how do you extract the wealth out of your portfolio? What is the best, most tax-efficient way, the lowest risk way, and the way to give you the highest return on investment? So, here we go. We started with a $1 million portfolio and we had a $235,000 investment. Remember, we have 40,000 in reserves. We're not going to count back because that's not part of the investment. That's just on the sidelines, $800,000 in loans, $200,000 in equity. That's what it looks like when we start. Now, if we take the approximate historical appreciation rate for real estate around the US, it's about 6%. People will vary in their estimates a little bit but most people will settle somewhere around 6%. So, by the rule of 72s at 6% appreciation, we will double our portfolio value every 12 years.

So, we see a doubling every 12 years at 6%. Now, I want to point out that income property is a multi-dimensional asset class, which is a wonderful thing because we earn our return in many ways. Most people think there are five ways. I really think there are maybe seven ways. It's a beautiful, beautiful asset class. The one we're talking about here is only one of those multi-dimensional ways that we earn return on investment from. It's simply appreciation. Nothing else. Okay. So, everything we talked about here, it's better in real life. So, this is just a very simplified example for time and simplicity. So, we wait 12 years. Say we're 40 years old when we start this strategy and now, we are 52 years young. Fifty-two is the new 30. So, what has happened in that 12 years? Well, our portfolio doubled in value. It went from $1 million to $2 million. We have a $1 million gain and now we go to the bank and we say, "Bank, I want to do a cash-out refinance of my portfolio. I'd like to borrow 80% of the value of the portfolio.” So, the bank will say, "Okay. We'll give you $1.6 million in loans against your $2 million portfolio and that means our equity has now doubled from $200,000 to $400,000 and we have $800,000 in cash.”

Now, if we're incredibly dumb and we don't do anything with that cash except stick it under our mattress, which of course we would never do but for simplicity, let's assume we do nothing. We know nothing about investing. We're terrible investors. We just hold it in cash. And we simply divide it by 12 and withdraw 1/12th of it every year for the next 12 years. Let's do one more cycle here. So, now, we let 12 more years go by. How old are we now? We're 64 years young. 64 is the new 40. Okay. And our portfolio has doubled in value. Again, it went from $1 million originally to $2 million to now $4 million portfolio. We've got a gain of $3 million. Remember, we're not including the fact that we've hopefully had some good positive cash flow all these years. We've had good tax benefits all these years. Income property is the most tax-favored asset class in America. We're not counting any of that. We're just doing a super simplistic example here.

We go to the bank. We say, "Bank, I would like to refinance the portfolio for 80% loan-to-value.” And so, the bank says okay, "We'll give you $3.2 million in loans.” That means our equity is now doubled again. We went from $200,000 to $400,000 to $800,000 in equity. So, equity position keeps getting bigger and we have proceeds of $1.6 million. So, if we are terrible investors, we don't know anything about investing, we simply bought these properties, let them appreciate, and refinance them every 12 years. We take our $1.6 million, we stuff it under the mattress, and we withdraw 1/12th of it every year to live on. Now, remember, there's no tax on borrowed money. So, this is tax-free money because there's no tax on borrowed money. So, that $133,000 when you divide by 12, the money you're getting is 0% return on and, of course, you're not going to do this. You're going to invest it with your company and you're going to make a nice return on investment or you're going to go buy more properties and those are going to start working for you but say you did not know that.

So, depending on your tax rate and your tax bracket, this $133,000 is probably worth about $200,000, taxable, somewhere in that ballpark. So, we have $133,000 a year tax-free income to live on. Okay, let's do it one more time. Now, the portfolio has doubled again. It went from $4 million to $8 million. We now have a gain of $7 million. We go to the bank. We say let's refinance 80% LTV or loan-to-value. The bank says, "Okay. We'll give you $6.4 million in loans on your portfolio.” That means our equity doubles again. We now have $1.6 million in equity. We have $3.2 million in cash, cash out in tax-free cash because there's no tax on borrowed money. If we divide that by 12, we have a quarter-million dollars a year, $250,000 a year approximately in tax-free income that we just divide it by 12 for the next 12 years. This is a super simplified example. There's much more to it than this. It should be better than this in real life but it's just an example of the best way to extract the wealth from your portfolio.

Now, a lot of people will say, "Well, Jason, if you keep levering your portfolio up like that, won't your mortgage payment increase?” “Well, yes. Maybe. I mean, depends on the interest rates at the time.” But rents, at least historically have always increased. There's no example of rents not increasing over time. Every example is, yes, they increase. They increase to cover that increased leverage and those increased mortgage payments. Also, you may not be doing this every 12 years. Of course, you're going to judge the mortgage climate, the interest rate climate, and we've helped many clients do this over the years. This is just an example to…

Casey Weade: Yeah. We got 12 years to decide what you're going to do.

Jason Hartman: Yeah.

Casey Weade: I think my main takeaway here is as is quite often some of my biggest takeaways with meeting with families time and time again is there's a lot of ways to make money and there's a lot of different ways to invest your dollars to make you more money. And I'd also say another good takeaway here is that you're having people refinance in their mid-60s or 70s or 80s and that's quite contrary to what many people believe that I shouldn't have debt in retirement. You're showing us how to have debt and I argue, do you have debt if you have the cash to pay it off? I’m not sure if you really have it.

Jason Hartman: Okay. Remember, this is self-liquidating debt. Look, I personally don't have any debt other than mortgage debt and I have a car lease. I do think leasing a car is a better deal than owning it. So, I do lease my cars. Not always, but most of the time. So, the BMW payment is a lease payment. I guess you could call that debt but my business pays for the lease anyway but I don't like debt unless someone else pays it for me. That's the kind of debt I like. So, the idea of paying off your mortgage is a really bad idea. You know, the financial advisor, Ric Edelman, he's been on my show a few times over the years and he has a video you can find on YouTube. It's called 10 great reasons to carry a big long mortgage and never pay it off. Now, he didn't really even touch on all the reasons. There are more than 10. He just gives you 10 but really, this mortgage debt when you can get three-decade-long fixed-rate debt at negative interest rates, frankly, they're negative interest rates, you're getting paid to borrow the money.

And if we do another episode in the future, I'll go through my whole inflation-induced debt destruction strategy and I think that'll really, really be very valuable to your listeners and viewers. But you don't want to pay off good debt. You want to pay off bad debt. And going into retirement, this is the best kind of debt to have. It's fantastic. It works for you.

Casey Weade: I like it. I had this conversation with a member of the Ramsey Solutions Group.

Jason Hartman: They’re lost.

Casey Weade: Well, and they were in agreement. They're just talking to the masses, right? The masses don't have the discipline to use a strategy like this. I think there's many irresponsible people with their finances and debt to be a very dangerous thing. But I said, “Why would I ever pay off my mortgage if I've got it over here at 3% and I'm making 6%.” There's no reason for me to ever pay it off and I don't even think I have debt if I can pay it off.

Jason Hartman: I invited Dave Ramsey onto my show. He didn't come. He sent his number two guy, okay. or his main guy, Chris. Second to him. I don't remember his name. Anyway, he came on the show. He had all kinds of false assumptions about mortgage debt. He said that, "Well, they can call the loans due.” No, they can't. They haven't been able to do that since the Great Depression. That hasn't happened in almost 100 years. They can't call them due early. They have to honor the mortgage contract. So, there's just a lot of misleading info that Dave puts out, but look, I do want to commend Dave on one thing. Dave Ramsey is fantastic for the lower middle of the economic strata. People with a bunch of credit card debt and car loans. I mean, his show starts off saying, "Where we replaced the BMW in the driveway with the junky car that's paid off,” or whatever he says. That's true. Those people need that message. They need that message.

He's right for those people. The problem is you've got to graduate from Dave Ramsey if you're moving up the socioeconomic ladder. This idea of paying off properties, it's a terrible idea. It's an outmoded idea. Listen, before 1971 when we were on the gold standard before Nixon closed the gold window in that historic meeting, when he said, "We would temporarily,” what a lie that was, “make the dollar not convertible to gold.” And we all know the history of Bretton Woods and so forth, right? But the game plan then it didn't make sense to pay off your debts. Now, it doesn't. When you have good quality fixed-rate, incredibly cheap debt, you should keep it. It's an asset. If you don't want to pay it off, it's crazy. It's an outmoded idea. It hasn't been true since 1971.

Casey Weade: Jason, thank you so much for coming on. As always, we schedule these meetings for about half an hour and, well, I want to go for three or four.

Jason Hartman: We could talk forever.

Casey Weade: I know. So much stuff here and I love these concepts. I love your ideas. I love your visuals, your creativity, what you're providing. I think it's just amazing. This is stuff that people want to know and it is a small percentage of Americans that actually get this knowledge. And sadly enough, I think it's usually just passed down from generation to generation. I inherited these kinds of thoughts from my dad and passing them on to my kids but now we're living in this world of information and podcasts. So, I hope we get this out to as many people as possible because this is a way to truly grow wealth and also create a pretty fantastic supplementary retirement income as well. So, Jason, I thank you so much. I hope that we can do this again in the future.

Jason Hartman: Yeah, my pleasure. And there's a lot more detail on these concepts on my Creating Wealth Podcast. So, anybody can find that on iTunes or all the podcast platforms. Just type Jason Hartman and you'll find it and that video on the front page of my website really, really helps people understand investing and how to analyze a good deal versus a bad deal really well and it's totally free at JasonHartman.com.

Casey Weade: Well, we will have a link to that and the tools and the resources, the transcript from our discussion, everything is going to be at RetireWithPurpose.com. Check out the podcast page there.

Jason Hartman: Good stuff. Good talking to you, Casey. Happy investing to you and all your viewers and listeners.

Casey Weade: Thanks, Jason. Until next time.