How to Invest in Real Estate During Uncertain Markets

0:00Hey, Chicagoland, the Wayfair store is in your neighborhood at Edens Plaza and Wilmette. Finally, you can feel the fabric, sit on the sectionals and even open the refrigerators. Plus, our in-store designers will help you bring it all together with free one-on-one design support for any project on any budget. Yep, we said free. Oh, and did we mention the cafe? So what are you waiting for? Come see all that's in store. Visit the Wayfair store today at Edens Plaza and Wilmette. way fair every style every home this is the rich dad radio show the good news and bad news about money here's robert kiyosaki we have a very special show today we've got two great guests one you've seen before tom willwright he is our tax strategist our personal and business tax strategist and cpa and one of the well one of the smartest guys when it comes to taxes because he enjoys reading the tax code.

0:57It like entertains him. It puts all of us to sleep, but it entertains him. And that's who you want on your team. So Tom's been part of our team for many, many, many years and a key player in the whole rich dad world. And Jason Hartman. And Jason is a CEO of Empowered Investor Network. And it is a real estate education and referral network. And of Of course, Robert is here and we are going to be talking about what we always talk about, the power of education, specifically real estate, but beyond that as well. Because today, you know, as we all know, crazy, crazy times. We don't know what's coming tomorrow.

1:37So the more prepared, the more educated we can be, the better we are. So I'm going to stop talking at this point and let our esteemed panel take over. And I'm going to turn it over to you, Robert. Welcome. Well, thank you very much. And there is, especially today in this insane world, it is insane, that you better have more education, not less. And the worst thing to do is do nothing because you're confused. You make up your mind either way, either in or you're out. Well, what I mean by in or out, are you in education or are you out of it? And the reason for that is in every investment, there's the macro and the micro.

2:21You can't have macro without micro. We can have micro without macro. The other reason you need more education, not less, either in or you're out, is because real estate is illiquid. And it's not like a stock or a bond or a mutual fund or a 401k. and this is deja vu all over again. This is 2000 and 2008 all over again. Now, most people will say, oh, good, I'm going to stay out of real estate when it's really the best time to get into real estate, but you better be educated. So we have a lot of stupid people in the market. That's bad news for stupid people, but good news for smart people because in 2008, Kim and I made more money in 2008 as the market crashed.

3:14It crashed, and it gave the best real estate in the world went on sale. But the average person was saying, oh, I don't want to fix toilets. I said, because you're an idiot. I mean, Jesus, they're giving this stuff away. They were like Neiman Marken. Neiman Marken put it in, you know, Gucci on sale, and all the idiots run away from it. But the reason we do this is you need more education, not less, but also who do you take education from? The big reason why real estate is more crucial than stupid 401k investors is because real estate is illiquid. You buy it, you own it. If it's bad, you're going to go down with it.

4:01And if it's good, you look like the second coming of Jesus or something. So I'll say it again. Either you decide to get more educated and get educated by smarter people or get out. But this is not a time to be in or out. You've got to know at least you're committed to education. And we have Tom Wheelwright. He's been with us for 25 years. And he's seen the tsunamis come and go, the waves crash, waves ride. is because we have great tax guys like Tom that we have the courage to go in. What's that song? I go where wise men fear to tread. And so that's why you've got to have smarter people on your team.

4:43And Tom has seen Kim and I go in and out with Ken McElroy. I mean, we've bought, I think, a billion dollars in debt now because debt is real money since 1971. And guys like Dave Ramsey says live debt free. Well, for 99 % of the people, you should live debt-free because you're stupid. You don't know anything about money. But debt is money. That happened in 1971. So welcome, Tom. And I have Jason Hartman, who is a young guy in this thing. He understands it. He's smart enough to be living in Florida.

5:17Anyway, that's my spiel. You either better get dedicated to your education and coaching and all that, or get out. get a 401k, buy, hold, and pray. Tom, what do you want to say about the value of having somebody like you and our team and Kenny and all that stuff? I mean, you know, the good news is if you were to go to Neiman Marcus, use your example, and they said, well, we'll give you a 20 % discount or 30 % discount, you'd be there first thing in the morning, you'd be lined up. And yet that's what the government's offering. You know, they're offering if you invest the right way and you have the right advisors, They're saying, look, we'll give you a 30, 40 percent discount on your investments.

5:57And so even if it's a tough market, even if the prices seem high like they do now, the government's still giving you a 40 percent discount through tax incentives. So that's that's why the tax plays such a big part. So welcome to the program, Jason. Yeah, thank you, Robert. Appreciate it. And Kim, too. You know what you what you said is so true. And this is a scary time, but at the same time, it's a time of opportunity, like you mentioned with what you and Kim did during the Great Recession. And Tom also, you know, mentioning that the government is essentially subsidizing real estate investors, not only through the tax code, as he was referring to, but also through these government sponsored entities like Fannie Mae and Freddie Mac that buy the vast majority of these mortgage loans, the debt, as you were talking about.

6:48And then it gets better because you rent the house out and or the apartment building out and your tenant pays that debt for you. And then you get a tax deduction. You're literally getting paid to borrow money. It's it's an incredible opportunity. One more thing, just be clear. Kim and I are investing more than ever before. And so let me say this again. It's not real estate. It's you've got to be 10 times smarter today. There's more opportunities than there are before today. And you've really got to choose your teachers wisely. So you've got to be smarter today. And Robert, yes, you do. And you mentioned, you know, there's all these opportunities that are coming up.

7:30And I'd like to ask Jason, and you've got this great network, this empowered investor network. What are you seeing? Where are the opportunities that you're seeing specifically when it comes to real estate? And what trends should we be paying attention to? Yeah, Kim, you know, where we're seeing the opportunities are in these good, solid, linear markets, these cash flow oriented markets that aren't expensive and they are business friendly and they are landlord friendly. Uh, so you don't, you don't have this type of environment where, uh, if you have to kick a tenant out, uh, because they're not upholding their contract that you're looked at in, in the courtroom as the big evil landlord that may have one house, right.

8:12That you're trying to use for your retirement. That's, that's not a big evil landlord. Okay. It's ridiculousness. So, uh, you know, in places like New York and California, people can squat in your property for just an amazing amounts of time if they know how to work the system. In Arizona, it's the opposite. In Texas, it's the opposite. In Florida, it's the opposite. Tennessee, you know, even Georgia, you know, these are more landlord friendly, more business friendly places. And these are the places with the growth. And they want their cost of living to be lower. And oddly, their quality of life is higher for less money.

8:49It's just a great deal, you know, and many of them can work remotely. So, yeah. And would you say if, you know, you're talking about the places that are real estate friendly and tax friendly and Tom as well, I could you to chime in on this. You would want people to go to wherever they're investing, right? You want them to get there, to check it out, to learn about the markets, not just blindly turn their money over to somebody who says, oh, I got a great deal in Dallas. I got a great deal in Miami. You want people to go there and check it out and learn for themselves, correct? People that just want to throw their money into a deal somewhere.

9:23Right, right. No, be careful with that. That's a good word of caution. You know, many of our clients go see the properties, some buy them first and then go see them. You know, I would say that the important thing is to do your due diligence. A lot of that can be done online now. There are so many tools, you know, just starting with good old Google Maps and Street View and looking at the neighborhood, looking at the demographics. And we help people research all that stuff. And, and we recommend that people invest in at least three markets, but not more than five. You know, back in 2004, when I started investing nationwide, I made a huge mistake.

10:00And people can learn from my mistake. I was in 17 markets at one point, that was a mistake, right? That's going to the all you can eat buffet and, you know, binging too much, right? So, so three to five markets, and you'll be well diversified, good linear markets, meaning these markets where they don't make the news. These are markets that are somewhat boring, really, but they're good investment markets. And, you know, they're not sensational. They don't have big swings, big ups and downs, necessity oriented housing that people need, you know, housing that's in and around the$200 ,000 mark. I used to say, by the way, $120 ,000 mark, but prices have changed.

10:47And that's another reason to do what you and Robert recommend, which is using debt. And Tom, of course, spoke to the tax benefits of that. So the other thing you can do, if you're looking at, okay, what market, you know, what market is going to be investor friendly, you can actually start, I start by looking at what do their taxes look like, right? I mean, it's not surprising, or shocking that the high tax states are also the low business states. They're also, you know, the low investor states. You have the low tax states. You've got Texas with a zero, almost a zero tax rate. You've got Georgia with low tax rates, Florida with a zero tax rate.

11:29So you've got these states in Nevada, Utah all have low tax rates. Well, guess what? That tells you that that's a business friendly environment that tells you that they're trying to encourage people to come in instead of pushing people away, which is what the high tax states are doing. Absolutely. You know, what gets rewarded gets repeated. And you know, they're rewarding businesses, they're rewarding money, money always goes where it's treated best. And that's what you want to follow that trend, the places that treat money well, are the places that you want to invest in. Yeah. And anybody who supports higher taxes is a Marxist.

12:06And when I tell people we don't pay taxes, they think I'm a criminal. No, I'm a capitalist. You want to be a Marxist? Pay taxes, idiots. I mean, give me a break. Marx was the guy that said, you want to kill capitalism? It's higher income taxes and inflation. And that's what they're doing. Robert, that's part of the dialogue that's going on, right? Is that rich people cheat and that's why they don't pay taxes. And when you get financially educated, What you learn is, no, rich people don't pay taxes because they're using their money in investments. They're putting their money into investments that the government wants to encourage, like housing, for example, like energy, like agriculture, like business.

12:51That's where the government wants you to put your money. You put your money there, you pay no taxes. I mean, it doesn't matter if you're a Tesla and putting your money in technology or Bezos, Amazon is putting their money into business. Or if you are, you know, Jason Hartman putting your money into real estate. It's pretty much the same thing. The government wants you to put your money there. Therefore, you get tax breaks. And really, as long as you're building real assets and hard assets, you should never pay any taxes. Lower taxes are good for capitalists. You know, lower interest rates are good for capitalists.

13:27Only idiots have credit card debt because they went to school. If you understand that macro, then maybe you can get a smell the coffee and wake up and get some education.

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16:06Tom is one of our coaches for wealth. because if you love paying taxes, don't give Tom any money because he'll let the government, he'll make sure the government takes all your tax right. Is that correct, Tom? Oh, my heaven. So I'm glad you brought this up, Robert, because one of the things I tell people is you guys are really the best clients I've ever had. And the reason is because you really want coaching. You really want to know, what do I do next? Kim and I talk on a regular basis. Okay, what needs to happen between now and the end of the year? Robert, you call me. I've got money. What do I need to do with it?

16:40And it's not that you're looking for advice as much as you're looking for coaching. And I think that's a really big deal is that it's not just finding a coach, but it's actually being coachable. And you guys are really literally the most coachable people I've ever met, which is amazing given, you know, your status. And, you know, you don't have to be. And yet that's what's gotten you where you are. Yeah, you've really got, I mean, I'm not kidding you. It's health, wealth, and happiness. Kim and I have coaches for all three. Right, Kim? We do. We've always had coaches. And, you know, I think that's if there is any shortcut to success in business and in investing, it's to get a great coach, to get a great mentor.

17:20And I say this, the idiots out there are saving money. They want to save money. And you're trying to save it? Are you nuts? Are you freaking nuts? Why are you working hard when they're raising taxes on you? On top of that, Robert, so the only people who get taxed are the savers. They're the savers and the consumers. You're only taxed on what you save or consume. Anything that you invest back into hard assets, you get a deduction for it. You don't pay tax on. So, I mean, it's so contrary with the whole message out there where you need to save, put it in the stock market. You don't get a deduction for putting money in the stock market because that's not a hard asset.

17:58That doesn't actually build real wealth. All that does is pump up Wall Street. And that's why I was saying earlier that if there is any shortcut at all, it's to have a mentor or to have a coach. Because, Tom, I'm not going to study the tax code. I'm not going to understand the trends that are coming in your world. And I don't want to, but you're in it every day and you're doing it every day and you're a real true coach and mentor. Same with you, Jason. You're in real estate every single day. So you're a great person to mentor and coach other people because we want to be coached and mentored by people that are doing the real thing.

18:30But that's why you have coaches, like you say, is why would I want to do something myself that I could hire somebody else to do who's going to do it and teach me how to do it 10 times better than I can do it myself? Or learn from somebody who's done it and learn from their mistakes and all their experience. Again, a little bit of a shortcut if there is ever such a thing as a shortcut. So let me explain. One more macro change that's coming in that's going to cause huge problems. Now, huge problems means huge opportunities. I'm afraid we're going into the biggest stock market crash in history. Like when the real estate market crashed in 2008, Kim and I went back in, but most people run.

19:10It's going to affect everything we do. And people are still sitting around saying, oh, real estate always goes up. Oh, my house went up in value. Oh, I'm going to save more money. Oh, I'm going to go back to college, get my master's degree, maybe become a doctor. Who pays the highest taxes? Doctors. Doctors.

19:31So, Jason, you know, the first time I ever played the cash flow game, Kim and Robert, I got to tell you this. I was the doctor. That was my that was my role the first time I ever played it. And I thought I would win because, you know, doctors make money. Right. But they don't keep much of it. So. So, Jason, as a as a coach and mentor right now at this moment, what what are the trends you see coming? what's what's coming down and where should we what should we be thinking so we're just going to see i mean there's a lot of upward pressure on rents now but i think we're going to see a lot more upward pressure on rents uh over the next five to ten years and um i think we're going to see a decline in the standard of living for a lot of people unfortunately for most people they're going to get wiped out because they went to freaking school and they listened to marxists telling them that paying taxes is good, and you should get out of debt because debt is bad.

20:27But at Rich Dad, debt is good because it's tax-free. Right, Tom? Not only is it tax-free, but all those deductions you get from investing in hard assets, you're just compounding your tax benefits because you're using the bank's money. The bank doesn't get the deductions for depreciation or intangible drilling costs or anything else. They don't get any deductions. What they do is they give you the money and you can use their money to get deductions against your income. So you're compounding not just your return on investment, but you're also compounding your tax benefit by borrowing. So I can't imagine going into real estate without borrowing because you lose so much of the tax benefit.

21:18Literally, you lose 80 % of the tax benefit if you use your own money, as opposed to borrowing and using the bank's money. So let me say it again. Anybody that tells you I'm a criminal because I don't pay taxes, they're probably a Marxist. Please understand that. You know, Robert, on top of that, you know, this dialogue about the rich cheating, what's really happening is those people, the communists, the Marxists, these people who have a job, they're the ones who cheat because they don't have any other way to reduce their taxes. They are the cheaters. You know, I, and those are the guys that call me a crook.

21:52I'm going, wait a minute, I'm not paying taxes. Remember what Hillary Clinton and Trump were on the debate in 2016 and Hillary, Hillary said, yeah, Donald Trump doesn't pay taxes. He says, that means I'm smart. And the world went nuts. Well, Trump's an asshole. You know, he doesn't pay taxes. I said, he is smart. One of the reasons the Rich Dad Company was formed is for freedom, is we want people to be free, no doubt about it. And financial freedom is a big part of it. We don't pay taxes, right, Tom? No, you know, the reality is, you know, people say, well, you're being unpatriotic if you don't pay your taxes.

22:30I would say you're being unpatriotic if you cheat, but you're being unpatriotic also if you break any law. I mean, you know, the laws are there. The laws are there to protect our freedom, frankly, and so we want to follow the law. But the reality is that there are so many tax incentives that once you get financially educated, you're just an idiot if you cheat. I mean, why would you ever cheat? You don't need to do that. You can legally reduce your taxes to zero. Why would you ever cheat on your taxes? But doctors and lawyers have to cheat. Well, there aren't much choice. Go ahead, Kim. One of the things that has come out of all this craziness over the last couple of years, and I'm personally curious for both Jason and Tom, you've seen a lot of this, but commercial real estate is not coming back the way it was.

23:21It's not coming back. People are going to be working from home. You've got all this empty commercial space all over the country. What do you see people doing? I mean, if people can crack that code of what to do with commercial real estate, how to reuse it, how to repurpose it, what are you to see? So, Kim, you just brought up a very good point, you see. It's really the valuation of the asset place. Any comments on that, Tom? Yeah, actually, one of the things that we're seeing, to your point, Kim, is we're actually seeing these hotels being converted into condominiums. They're being converted into apartment buildings.

24:00You're actually seeing a lot of conversion going on because smart money will always follow where's the real value. To your point, Robert, is that if you've got something that's low-valued, great, let's turn it into something high-valued. And so you always have to be looking at then what will happen with all these commercial buildings that are empty? Well, they're going to be used. They're not going to be torn down. They're going to be used for something, and if residential is where the value is, that's where they'll go. And the government, by the way, will give you tax benefits for doing that.

24:34Jason, what are you seeing? Yeah, we're definitely seeing the conversion of hotels to small apartments and I guess sometimes condos, but I see apartments more often. And it'll be interesting to see what happens with office space, because that's much harder to convert to housing, although a lot more housing is needed and a lot less office space is needed. And then, you know, we look at the retail apocalypse that was going on long before covid. That's just basically a Marxist, Jeff Bezos, who's just destroying all the mom and pop businesses. and, you know, with retail, it just does not look good.

25:15Unless it's something like, you know, auto parts stores or things that are still people do a lot of that in person, any type of retail like that will probably survive okay. But, you know, the online shopping has just destroyed most retail. A lot of retail going to services. Yes. restaurants, various practices, but not so much retail at all. Even our CPA firms around the country, we're seeing more and more CPA firms that are going completely virtual, or they're going to a much smaller footprint in their office space. So they might have been in 10 ,000 square feet, and now they're going to 5 ,000 square feet, or now they're going 2 ,500 square feet, because you see a lot of the shared, okay, somebody comes in and three people are sharing the same desk because they're only coming in once a week.

26:07Right. Like that. So I think that that the smaller actually that's a that's another point is I actually do think that the smaller office spaces are going to get bit up because that's where they're going. Right. If you're going to smaller spaces, then you want to be in smaller spaces. And that's what you want your building to look like. Well, what Buckminster Fuller said, he said the future was that the big office buildings would be homeless shelters. So what Fuller predicted then was these office buildings would become homeless shelters, and they put some college student at the front gate with a little computer to monitor their needs.