Welcome to another latest episode! Today, we’re thrilled to bring together a panel of experts who are ready to delve into the dynamic world of real estate investing. Join us as we welcome:
Bob Fraser – A seasoned finance and technology executive with over two decades of experience. Bob is the co-founder of Aspen Funds, where he focuses on managing financial operations and refining investment strategies. Alongside hosting the Invest Like a Billionaire podcast, Bob is dedicated to educating others about alternative investments, empowering them to enhance their portfolios and achieve financial security.
Ken McElroy – A renowned real estate entrepreneur, author, and speaker, Ken’s expertise in leveraging debt and managing cash flow has made him a trailblazer in the industry. With a robust portfolio of properties and a wealth of experience, Ken is here to share insights from his journey and shed light on the current state of the real estate market.
Jason Hartman – CEO of Empowered Investor and Real Estate Tools, Jason’s entrepreneurial spirit and dedication have propelled him to the forefront of the real estate world. From humble beginnings to becoming a multi-millionaire, Jason’s innovative approach to investing and wealth creation has inspired countless individuals worldwide.
In this episode, our esteemed guests will tackle a myriad of pressing topics, including real estate market risks and opportunities, the impact of demographic shifts on investments, and the potential for economic collapse in the US. They’ll also discuss the evolving landscape of single-family home investments, the role of institutional investors in small businesses, and strategies for addressing the affordable housing crisis.
Don’t miss out on this enlightening conversation filled with invaluable insights and actionable advice. Tune in as our experts share their wisdom, helping you navigate the complexities of real estate investing with confidence and clarity. Join us for an engaging discussion that promises to broaden your perspective and elevate your investment endeavors.
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See Full Transcript:
Bronson Hill: This is 2024 Real Estate Risks and Opportunities. And we’re gonna have an awesome time talking through, really, what we’re all here for—right? To learn about how we can protect the investments that we have, how we can get our money to work in ways that really make sense. Because there are some great opportunities that are out there right now, in front of us—or at least coming in the next six to twelve months. We want to be aware of those things!
So, we’re gonna jump in here. I’m gonna give a quick intro, and then we’re just gonna go straight into it and have a great conversation. We’re gonna do some questions at the end, after about 40 minutes. So, if you have questions, you can stick them in the chat or in the Q&A section—we’ll try to get to them toward the end.
You can stick them in either place, but the Q&A section is probably the best. And honestly, it’s probably better to wait until the end. But if you have any questions, feel free to put them in there, and we’ll do our best to get to them.
So again, like I mentioned, my name is Bronson Hill, CEO of Bronson Equity. I host events like these, and we also have investment opportunities for investors. These are all friends of mine, and I’m really excited to have everybody here today!
We have Bob Fraser from Aspen Funds, who also runs the Invest Like a Billionaire podcast. Welcome, Bob! And by the way, that is not a virtual background. He’s actually in Colorado right now, which is great—at his place.
We also have Ken McElroy from MC Companies, who’s involved in a lot of different things. He’s active in real estate, of course, but also in virtual projects, podcasts, and other things. Ken, really excited to have you here today.
Ken McElroy: Thanks, bud.
Awesome. And then we also have Jason Hartman from The Empowered Investor. He’s joining us from his house—and yes, I believe that is a picture of his house, but just to clarify, it is a virtual background, in case you were wondering. Jason, so excited to have you here. Welcome!
And hey, it’s always sunny in Florida, right? That’s just what I’m hearing!
It’s always sunny in Florida—awesome!
Well, let’s jump in. Risks and Opportunities in 2024—what we’re seeing is really interesting. We’ve got an incredible panel of experts here today.
First, we have Ken McElroy, an expert in multifamily, with around $3 billion in multifamily assets under management. Then we have Bob Frazier, who has raised over $200 million for multifamily and other real estate investments a variety of real estate assets, actually. And finally, we have Jason Hartman, who’s done an impressive amount of work in real estate, particularly with single-family properties, helping people get involved in that space.
We’ve got a lot of different views here whether you’re into single-family or multifamily. So maybe stick it in the chat—who you’re here to see, and who you really want to see shine today. And of course, if you have questions, feel free to drop those in as well!
So, let’s go ahead and jump in. Rates are higher, and we’re seeing certain areas—particularly in multifamily where valuations are down 20 to 40 percent in some cases. That obviously creates some challenges.
Ken, can you give us some insight into what’s happening in 2024 and what you’re seeing in the multifamily?
Ken McElroy: Sure, so… well, I think there are kind of three big things that I think people are dealing with right now. Obviously, everything has to do with interest rates, so…
The number one is the cost of debt has jumped a lot. If, of course, you’re building—construction debt went up, bridge debt went up, and then if you have any kind of line of credit, that went up. So, those are all creating cash flow problems, and so you have that.
But then, you know, what a lot of people aren’t really talking about—you also have operating expense issues, which is kind of squeezing the other side. Now, debt is, of course, the biggest issue, but we’re getting clobbered with the higher interest rates, as well as higher insurance, higher property taxes, higher utilities, higher labor costs, and higher supply.
So, all that stuff is creeping into the operating expenses as well. So, you kind of have all those things making their way through the system right now.
It’s just creating an enormous distress, depending on the individual and how well-capitalized they are, what kind of relationship they have with their lender, let’s say. Or, if you know—even if the debt’s not maturing—then there’s no problem, really. It’s just the values are down temporarily.
If the cash flow’s fine, you’re fine. But the ones that are hitting the market right now—and, you know, we looked at four deals today—we’re making an offer on one tomorrow… they’re all in distress, some sort of distress.
Bronson Hill: Yeah, it’s interesting.
You know, it is—different parts of the market or the country are affected differently. One submarket in Atlanta that we follow from a 24-month period—24 months ago to now—the same property, in the same condition, is down 42 percent.
Right. So, if you put 20–30 percent down, your equity is gone, and you’re just trying to figure out… and so then it comes down to, is the lender going to extend?
And so, obviously, there’s a lot of distress in some of these situations.
Bob, let’s talk. I know you’re doing stuff in multifamily, you’re doing stuff in retail, industrial—a lot of different areas.
What are you seeing in the market? What are some of the kind of risks and opportunities that you’re seeing kind of at a high level here?
Bob Fraser: The number one thing we’re seeing is a lot of desire for rescue capital—bridge funding, gap funding, completion loans, that kind of thing. And people are willing to pay pretty high rates for those things. And so, it’s an area we’re actually starting a fund in.
You know, in some of the other areas we’re in, we’ve actually been acquiring a couple of multifamily deals under their Fannie Mae assumptions. So, we’re assuming three percent debt, and we really like some of these deals.
So, it hasn’t affected us too much. We’re also doing some large-scale industrial development, and because it’s back-loaded, so is the debt.
It just is—not. Even though it’s more expensive, it doesn’t impact the pro forma that much, you know?
So, it really hasn’t changed much of our existing operation, and it’s certainly created opportunity for our new debt and pref fund.
Bronson Hill: Absolutely. There’s always, you know, it’s like the side of a crisis becomes an opportunity, and so there’s always opportunities as well.
Jason, I know you’re doing a ton, and we were talking about this—really had one of the oldest real estate podcasts in the history of podcasting as far as real estate in the US. And I was following you like in 2008, 2009. You do a lot in the single-family space. We’ve seen a very different picture, you know. We’ve seen single-family, since the rates have risen a couple years ago, actually real estate in single-family has gone up two or three percent on average in the US.
What are some—kind of talk to us about what’s happening in single-family there?
Jason Hartman: Yeah, you know, the thing that people really got wrong in saying the single-family market was gonna crash, and, you know, there was gonna be this big adjustment, is they were looking at the market from the perspective of new entrants—new buyers entering the market—and saying, “Hey, look, housing affordability is the worst it’s been in four decades.” And that’s true, you know, the rates went up, the cost of money virtually tripled in a very quick time frame, and that pushed affordability way down. But what they didn’t consider is all the people that already owned a house and how they have a very different experience than new buyers coming into the market.
So, you’ve got about a hundred and forty million housing units in the United States. Sales volume went way, way down when the interest rate hikes occurred. And so, we went from where we might see close to six million homes trading in a year to only 3.8 million. So, a massive decline in sales volume, hurting realtors, lenders, mortgage people, escrow people, title people, etc., etc., settlement attorneys—they were all, starving and complaining and so forth. But that wasn’t the important part when you’re trying to predict housing prices and the housing situation. The important part was not the five million people who had transacted since rates went up.
It was the hundred and thirty-five million people that already own a home. And twenty-five percent of those have a mortgage at or below three percent. Sixty-five percent have a mortgage at or below four percent. And forty-two percent of those people have no mortgage at all. So they have an incredibly different life experience than someone trying to buy a house. And that’s why inventory did not flood the market. It’s why inventory will not flood the market. And the housing shortage, I believe, will persist for quite a long time to come.
Because think about it. These people have 27 to 28 years left on those very cheap mortgages. Now, Fannie Mae is predicting interest rates by the end of the year in the mid fives, which will cause some of those people to peel off and sell because the difference between the mortgage they have now and a new mortgage won’t be as bad as it was when mortgage rates approached eight percent. But at the same time, it’ll increase the housing affordability and increase demand for a very low inventory market. So it’s a strange situation. I can see how people got it wrong. Most people got it wrong when they were predicting what was going to happen with the single-family market. But I think that’s the major reason they got it wrong. So hopefully that helps people understand where we are, where we’re going.
Bronson Hill: It’s interesting here, you know, around the world, they have things like two- and five-year resets on mortgages. They really don’t have what we have—these 30-, even 40-year fixed mortgages. It’s really something interesting. And in a lot of investing, I’ve realized… I’d love to hear your thoughts on this.
You know, we’ve raised over 40 million—which, you know, is kind of small compared to some of you guys—something I’d call small, but still, you know, it’s been fascinating. A lot of it comes down to investor sentiment. It’s about that feeling, you know, of the “wealth effect.”
We raised less money last year—considerably less—than we did in 2022. And so, if someone’s been in a deal—a multifamily deal that’s struggled—or maybe some other deal that’s struggled, or maybe they’ve invested in something and it’s changed a little bit…
Have you noticed that? First of all, I imagine you’ve noticed that as well. But what would you say to an investor who’s a little cautious now? Someone saying, “I don’t know if multifamily is still a good deal. I’ve been hurt by multifamily, and so therefore, I’m gonna sit out. I’m gonna kind of wait and see.”
Right? That natural “wait and see” approach. Ken, do you have any thoughts on that?
Ken McElroy: Yeah, I think they need to look in the mirror, you know. I mean, I don’t want to be too harsh, but the reality is, you know, the market’s gone up, but not everyone bought well. And so, you know, when it was in a frenzy and it created the bubble, you know, there were all kinds of people raising capital and investing all over the place.
You know, we—as you know—had a very slow two years. We were, you know, at 10,000 units years ago, but let’s just say the last two years it’s been kind of slow because, you know, there were 20, 30, 40 people bidding on projects. And then you get down to, you know, the three or four best and finals—which we were typically in—and we were getting outbid by two, three, four million dollars per project.
So, you know, I understood the numbers. I watched it all happen. And so, you know, a lot of those folks got into those deals—which is okay. I’m not saying that’s wrong. But that doesn’t mean that multifamily is headed for a disaster.
If you look at the fundamentals—which is, you know, there’s going to be oversupply for the next 18 months because of all the stuff that got permitted in 2020, 2021, 2022, including us—you know, we’re a ground-up builder. So we had six projects going. And, you know, when we started them, we were at 3%, 4% debt. Now I’m still under construction on a couple of them, and it’s 8%, 9%.
Okay, so what does that mean? That means that come 2026, 2027, 2028, there’s no multifamily and not a lot of single-family new construction coming.
So, you have a massive supply problem in two years. And, now is the time to buy when there’s disruption in the next 24 months. And so, when you look at the fundamentals from a 30,000-foot view, they’re very, very, very good.
If you look at them on a, you know, “Did I get my quarterly return?” cash flow-wise, they might not be, because, when you buy something that’s broken, it’s broken. I think you can’t get both, you know? You’re like, you want 7% or 8%, 9% cash on cash, or you want something that’s broken that’s got massive value-add in it.
So, you have to look at that. But the people that are bitching right now got into some of those deals, and they weren’t always necessarily good deals. And then the market just dipped.
And that’s what’s happening.
Bronson Hill: Yeah, I think it’s a lot of it—I think Warren Buffett talks about managing your own temperament, right? The number one skill is being able to manage your own temper when something’s not going well.
You know, the time of maximum pessimism is actually the best time to buy, right? Be greedy when others are fearful. And so, I think that’s a good point.
Bob, what can you add to that? What thoughts do you have?
Bob Fraser: Yeah, I think investors have been way too bearish. And, you know, we actually said two years ago that there was unlikely to be a recession—and if there was, it was likely to be very shallow. And we’re still standing by that. There are reasons for all that, but investors didn’t get the memo, you know?
Hey, I was in the capital markets in 2001 when the dot-com crash happened. I was in the capital markets in 2008–09, and you couldn’t raise a penny, you know? And those turned out to be the best times to buy, right? So, I have no doubt that the deals… I don’t think there’s a lot of deal flow right now.
I mean, sellers are not yet at the “come to Jesus” moment. But I’m sure the deals Kenny’s doing right now are really good deals because he’s taking into account higher costs. He’s taking into account higher insurance costs. He’s taking into account, you know, the new debt markets.
And so, now you’re buying in what’s likely to be a really good opportunity. And as everybody’s pointed out, we are in a housing shortage. So, long term, we’re fine.
The question is, it’s gonna be bumpy for the next two years in the multifamily space. But I’d also say, hey, there’s more real estate than multifamily. And we’ve hardly seen a gap in industrial.
Retail is on freakin’ fire right now, you know? And oil and gas is a whole other animal. We’re getting 20% cash-on-cash returns. So, it’s hard to argue against some of those things.
Bronson Hill: I love the idea of—and I’ve thought the same as well—being able to look at different assets for when they make sense and being able to jump from one thing to another. Because really, at the end of the day, I mean, there are specialists that only do multifamily, only do single-family, or only do this.
But when you can look at everything as an investor and say, “Well, what are my goals? What am I trying to achieve here? Am I trying to achieve cash flow, tax reduction, or whatever?” and then just figure out what does that—that can be really powerful.
Jason, talk to us a little bit about single-family. I mean, obviously, it’s hard to buy a single-family house right now. It’s hard to find things that cash flow. Are you still finding deals?
I know you’ve done quite a bit in the space where you’ve helped people with cash-flowing single-family. What’s your take? Are you kind of telling people to hold on, or are you finding deals currently?
What are some things that you’re looking at right now?
Jason Hartman: Well, inventory is still very constricted. There are only about five hundred thousand homes for sale in the United States. And keep in mind, that’s out of a hundred and forty million housing units. So, that’s a very low number.
Normal inventory would be considered about 1.2 million homes for sale. Most experts would consider that normal. And, by the way, if you sense any difference in the statistics I’m using, I’m referencing Altos stats. Those are only actual available listings, whereas the National Association of Realtors calculates it differently.
Use whichever survey you want, as long as you compare apples to apples over time. The National Association of Realtors includes pending and contingent sales in their stats. I don’t think that’s a very accurate way to do it. These are actual available properties.
But yeah, inventory is tight. Compared to what, though? The tightest point of inventory during the COVID era was only 240,000 homes for sale. So, we have more than double that now—slightly more than double—but still less than half of what we need to be at for normal.
And normal isn’t a bad market; that’s just a normal market. That’s not a crash. It’s not a buyer’s market. It’s just a normal market—1.2 million. So, there’s your comparison.
So, inventory is still constricted. It’s not as bad as it was during the savagely terrible COVID era market, where you just couldn’t get any inventory. But it’s still pretty, pretty tight.
Bronson Hill: Yeah, let’s talk for a minute. I want to shift gears a little bit to economics and inflation, and then we’re gonna get into kind of other opportunities that you’re seeing.
Personally, the number just came out—I think it was 3.1%, the CPI, or the CP Lie, as they would say, right? That’s the official number, which, you know, makes us all smile and laugh. But, you know, ShadowStats says it’s about 7 or 8% still.
Do you see inflation? Because again, this affects costs—materials, labor, and all the things that go into doing value-add or other types of projects of any kind in real estate.
Do you see it persisting? Do you see it moving on?
Anybody can just jump in if they have a comment on that.
Bob Fraser: I’ll jump in on that. You know, we’ve been predicting for two years now—no recession. We’ve also been predicting sticky inflation.
And the reason is, this is not like other inflationary cycles. There are two ingredients to inflation that are not actually components, and that’s labor inputs and energy inputs. They underlie everything. Think about a good or a service that can be delivered without energy and without people—it’s a very small list.
And the problem is, both of those things are under systemic pressure right now. We’re seeing a labor shortage. We’re seeing, still the number of job openings is greater than the number of people seeking work. And so, there’s a huge mismatch in skills.
There’s also a demographic mismatch. We’re seeing a demographic shift, and we’re seeing a lot of skilled people retiring out—you know, the baby boomers. And we’re also seeing systemic problems in the energy space.
Both of these are going to make inflation much stickier than anybody wants to believe. And unfortunately—and sure enough, today— the headline in the Wall Street Journal is, “Inflation Stickier Than Everybody Expected.”
I’m hoping it goes down. But honestly, I think it’s going to be very difficult to get down to 2%.
Jason Hartman: Yeah, I agree with Bob. I think we have fundamental shifts that are going to make inflation the future for a very long time to come. You know, this year, we have more people than ever in human history turning 65. Okay? And the baby boomers didn’t have enough children. My generation, the Gen X-ers, didn’t have enough children. And the Millennials definitely aren’t having enough children.
So, that means there’s a labor shortage, right? And it’s—like Bob said—it’s very hard to deliver any product or service without labor and energy. Right?
And so, you know. Ken, one of our collective members—recommended a book to me called When the Boomers Bail. And I interviewed the guy on my show after reading the book. And one of the lines that just hit me like a ton of bricks in that book is when he said: If you talk to a business owner today, tell them that anybody they will hire in the next quarter of a century—in the next 25 years—anybody they’ll hire has already been born.
Like, just let that sit for a moment. And it just shows you how there is this massive labor shortage. And Ken is a developer. When it comes to construction workers, they are aging out so quickly. You know, in the old days, you used to see 20-year-old guys working on construction sites. Now, they’re 50. Okay? And they’re just not being replaced.
Okay, and so, yeah, inflation is going to be a thing. And one more thought on that—inflation is the winning business plan for governments and central banks. The government is in so much debt and has so many unfunded mandates coming at it for the next 10 to 15 years, it’s insane.
The only way they can get themselves out of this mess is to inflate their way out of the debt. So, they’re going to do that on purpose. It is their business plan. And I say: just ride on their coattails. You know, accumulate mortgage debt, and let inflation pay it down for you.
Bob Fraser: That’s inflation-induced debt destruction. And, yeah, I think we’re gonna have a lot of inflation coming our way. Inflation is a transfer of wealth from borrowers— or front… yeah, from savers to borrowers, right? So, you just want to make sure you’re on the right side of that equation—on both sides, you know?
Ken McElroy: You know, that’s it.I’ll just add a couple things. I think it’s funny when you—when you look at the news media, they’ll say, Oh my gosh, isn’t it great? Unemployment’s low! You know, I mean, that’s their narrative. But they don’t realize—and Bob said this—that creates wage inflation.
And so, when there’s not enough workers, you know, all the things we’re talking about, that actually drives up the cost of labor. That’s inflationary.
The other thing that hasn’t been mentioned yet is the shelter costs. I think last I looked, there were about 40% of the CPI. So, there’s a bunch of things inside of there. But rent, cost of housing—like Jason’s saying, one of the massive factors is going to be a supply problem. So, you know, you have to consider the lack of supply as matched to demand as a price increase.
So, the single-family and multifamily are not in… Well, multifamily is unstable for the next two years probably, with all the news. I think there are 670,000 apartments being added to the market in 2024. But single-family is pretty much stalled. And I think that it’ll show fine for about two years. And maybe not… Single-family’s probably still gonna grow.
So even if it—if they go down to five and a half, the mortgage payment’s not gonna change that much, because the prices are still gonna keep going up on single-family, I think. And about multifamily, it’s gonna get disrupted for a little while. But the point is, is that the rent and mortgage, those are—those are costs. Those are real inflationary issues for most people.
And, you combine that with labor, like Bob said, and energy, you know, I don’t—I think we’re gonna be very inflationary for the next, you know, foreseeable future.
Bob Fraser: I’ll just add this, no one’s really talking—there’s not a lot of narrative on the energy space right now. It’s kind of boring… But it’s not boring. What we’ve seen is a huge disinvestment in the energy space. We’ve seen investment in oil and gas development debt drop 55% in the last seven years.
And so, we’re gonna have an energy crisis, and it’s coming around the corner. The only reason we haven’t is because of China. So, as soon as we see any kind of economic growth recovering across the globe, we will see an energy crisis immediately. That’s—that’s the problem. And it’s not something people are talking about, but it’s gonna be a big deal.
I mean, JP Morgan is just predicting by the end of the decade, a seven million barrel per day shortfall in energy production. Yeah it’s a problem. It’s a manufactured problem, unfortunately, very avoidable. But it’s gonna land on your doorstep.
Jason Hartman: Yeah, the only thing I do want to say and I wonder if you’ll agree with me or disagree, Bob—the energy crisis seems pretty much self-inflicted. But, you know, we don’t have to have an energy crisis. I mean, that’s just self-inflicted stupidity, you know? But, yeah, no, it is.
Bob Fraser: You know, it’s all political. And the environmental movement who doesn’t want a good environment, right? All this has become religion instead of data-driven. The truth is we need energy to make a good transition. We need fossil fuels and…
Jason Hartman: Yeah, I always like to say environmentalism is not a religion. Okay, get over it. It’s a thing. It’s not a religion.
Bronson Hill: There’s a really good book I read on this called The Moral Case for Fossil Fuels. It’s a great book. It’s not a long read, a couple hundred pages, but it just talks about how our lives are better because we use fossil fuels.
And after 100 years, all of the wind and solar—we have 3% of the world’s power after a hundred years of these things being created. It’s just—we’re just not there yet. So hopefully we’ll get there.
We’re just not there.
The other thing, too, I was gonna say about wages in California now. We, of course, find the most common-sense thing and we just do the exact opposite. And everybody says it’s a great idea. But that’s kind of the place I live. The minimum wage now for fast food workers in California is $20. And I think it’s about $20 just in general in LA County. And the challenge is, when you go from—you know, it was $7.75 to $15 to now—just in a very short period of time, you’re just causing inflation, right? You’re actually causing more inflation.
There’s a book, I can’t remember then—it wasn’t Dying of Money. There was some other classic book on inflation back in Germany and it was talking about how they do this. They raised prices to keep up with inflation, which caused more inflation. They’ve raised—or they raised wages, excuse me—to keep up with prices. They kind of kept doing that and it was a vicious spiral.
Ken, do anything else you want to add to you here?
Ken McElroy: No, I just like George Gammon’s quote: “The cure for high prices is high prices.”
Bronson Hill: Yeah. Yeah, that’s the cure for sure.
We got a few more minutes. I want to talk about opportunities, right? We can talk about a lot of things, about the Fed lowering rates. We can talk about this as an election year.
Maybe we can—in your answers—you can kind of bring that up into that. But besides—if you can talk about the asset that you generally work with—I know Bob, you’re doing multiple things—but just maybe on a personal level, if we’re having a drink at the bar, you know, what are some things that you are like?
These are a couple of things that I’m kind of interested in just personally that, I think that’s something I should look more into or I’m actually getting invested into right now.
Bob Fraser: I mean, you know, I think the big overlooked asset class is energy, and we’re buying producing oil fields at—at 19 percent cash-on-cash return. No drilling risk. I mean, explain that to me. Explain why should I be buying any real estate right now when you can buy energy real estate and, you know?
So, there’s always something working, and if oil price stays low, if oil price goes nuclear—well, like I think it’s gonna do—it’s lights out. So, the world is just awash in opportunity, you know?
Bronson Hill: Yeah, that’s good we’re doing a lot of energy as well for sure, Ken, Jason?
Ken McElroy: Sure, as Jason knows, one of the things that we’re—two things, additionally, outside of multifamily that we’re doing. One is billboards, oddly enough, but I started buying them years ago and it’s quite simple.
You just take a two-sided billboard. That’s called a static billboard, and you convert it to digital and you’ve got, you know, 16 ads, eight per side. That’s been a good one for us. And now we’re looking at buying complete digital media companies. So, I’ve got one in escrow, that 22-year-old business, that owns a number of them along highways, you know? These are 25, 50-year leases, that’s something, you know, everything’s moving to digital as you—as you know. And, you know, most of the cities and states, counties don’t like them, so if you can, you know, find them. So, that’s one of the things that—that we’ve been focusing on as well.
Jason Hartman: And what you mean by they don’t like them is that that’ll constrict the supply so if you own them?
Ken McElroy: Yeah, good point. I didn’t round that out. But yeah kind of like the city of Scottsdale, which is where I live Has to yeah.
Wow. They don’t want they don’t want any and they’re both in South Scottsdale and they’re not digital And I’m just saying that most of those towns don’t want them.
Jason Hartman: Yeah, very interesting. So, I guess my answer to your question is, I think that Ken kind of alluded to it with these retiring baby boomers. You know, that’s— that’s 76 million people, and a whole bunch of them are turning 65 this year. There’s a lot of businesses going up for sale. I mean, this is not my market. It’s not what I really do, but I think there’s some really good acquisition opportunities in the business world.
And I think inflation is the future, and you just ought to have long-term fixed rate debt, because that is the ultimate asset in inflationary environments. Some would say Bitcoin, some would say Precious Metals, whatever. But the debt is debased by inflation, and that is just an incredible hidden wealth creator.
Bronson Hill: Yeah, it’s huge. Yeah, we see it as well. Just really trends. I mean, somebody mentioned the idea of the boomers aging. I mean, it’s one of the fastest, over the next five years, that we’re gonna see it all. You know, just tons of people turning 65 or getting older than that. So, senior housing, assisted living, all this stuff—we love those opportunities. And then really anything real, assets, precious metals, and the things you can do. Energy is also a great as Bob was sharing too. That’s good.
Let’s ask this question again: we’re not giving out or dispensing any specific advice to anyone, but some people are curious. Should I save money for kind of what’s to come? Should I invest at all right now? What sort of mix in general are you doing? Are you saving some cash? Trying to deploy it all to try to, you know, watch out for inflation? Waiting until there’s opportunities?
I’d love to just know, kind of, cash percentage-wise, how much you guys are holding on to or what you would recommend?
Bob Fraser: I’ll jump in there. You know, it’s— for me, I broke the piggy bank and my piggy bank is empty right now. I’m backed up the truck and investing. But it is hard to argue against, you know, a five percent Treasury. That’s not nothing. So, I don’t fault the people that are— don’t see the opportunities that I’m seeing. Yeah, absolutely.
Bronson Hill: Yeah, I do this. I’m the same, Ken.
Ken McElroy: I had a— I did a podcast with you guys— don’t know if you know Brent Johnson. He talks about that milkshake theory, you know? And he had a really interesting analogy about the Central Banks and how it all works, mostly around the US dollar.
He said what’s gonna happen initially his belief, because I had that same question. He thinks that there’ll be a lot of money that’s gonna come to the US initially, while all this disruption’s happening. Because we can print, oddly enough, you know? And so, we’re devaluing currencies from other places.
And he said, what happens is, if somebody doesn’t have a central bank, they can’t print and they’re using US dollars or trading US dollars, the US dollars are actually getting devalued there. They don’t have a mechanism, like a drain, he said, like on a pool.
So they’re gonna come in for— initially. So he thinks the dollar’s gonna get stronger for a little while, and then it’s gonna go full at some point. I said, “When?” He said, “I don’t know when,” but that did make sense to me initially.
Yeah, with all this disruption, because I asked him about BRICS, too, you know? And he was like, “Don’t worry about it. Nobody trusts any of those countries to, you know, to move to a world currency anyway.” So I think in the short term, the dollar will be fine. But I think, Jason and Bob said too, it’s— over time, it’s just gonna, it’s gonna get devalued more and more and more.
Bronson Hill: Yeah, that’s good. Jason. Did you want anything you want to add?
Jason Hartman: Well, no, I agree with Ken and Bob. I mean, I think the BRICS are one of the most overrated things in the world. I just don’t think it’s that big a deal. They can’t get along with each other; they don’t trust each other. The creator of the BRICS acronym said he added South Africa because it sounded good to put an S on the end. I mean, it’s just the stupidest thing I ever heard, right?
The BRICS— they do represent a large share of the global GDP, but— the putting this odd bunch of odd folks together is just not going to happen. Most of these countries have giant corruption problems. I mean, the BRICS are just not the thing.
The U.S. is the thing. I think with as many problems as the U.S. has, it’s like the old saying: it’s the best dirty shirt in the laundry. It’s the prettiest girl at the ugly dance. Whatever you want to say— the U.S. I do not bet against the United States, okay?
Bob Fraser: I’ll just dissent here because I am very bullish on the U.S. dollar for the next 10, 20 years. And, you know, 83 percent of global trade is in the U.S. dollar. I think 87 percent of currency trade. We have rule of law. It’s certainly the largest economy in the world.
It’s the best investment destination on the planet. And, you know, if you’re gonna bang on the U.S. dollar, you’ve gotta figure out what else— what are you going to trade instead? What are you going to trade your dollars for? Is it gonna be the Chinese Yuan? Anybody ready to put their billion dollars into the Chinese yuan?
Yeah, how about the Swiss franc? There’s not enough of the Swiss franc. How about the euro? The euro—it’s a Frankenstein!
Jason Hartman: I mean, the EU is probably going to collapse.
Bob Fraser: They’ve been managing it, but it’s a huge problem. It’s just, there’s got two Europes: Northern… so which currency is going to benefit from the dollar’s collapse?
There really isn’t any. And so I’m very bullish on the U.S. dollar. At the same time people are worried about a U.S. collapse. I’m not. And for the reasons Jason mentioned.
What people don’t realize is— a little bit of inflation wipes out debt. Well, who’s the biggest debt holder around? It’s the United States. In fact, the same guys that wrote the book— the two Harvard economists, Ken Rogoff and Carmen Reinhart, who wrote This Time is Different— they did a study on the countries that had over a hundred percent debt-to-GDP ratio.
How many times did they default on their currency? Do you know how many times?
Zero.
And the reason is, it’s very easy to get rid of debt. You just have a little bit of inflation. At eight percent inflation— and I’m not saying we’re going to have eight percent inflation— but your debt is wiped out, halved, every 10 years. Halved. Yeah, at eight percent. So at four percent, it takes 20 years to halve the debt.
So, so I think people are too afraid, and, and it’s really, you know— look, it’s just the other thing is that people talk about the U.S. economy and its fragility. But the economy is me. It’s you making your decisions. It’s incredibly adaptive and resilient. And so people that bet against these things just really shouldn’t.
You know, Buffett is the most successful investor of all time and also one of the most bullish. He said, “Don’t bet against America.” Don’t bet against people making good decisions.
Bronson Hill: That’s good. Some great thoughts there.
I’d love to open it up for questions now. I know we’ve got some opinions here Greg says the New Zealand dollar would be a replacement. So thanks for that, Greg.
Bob Fraser: For a few sheep farmers.
Bronson Hill: Yeah, exactly. I was out there.
Bob Fraser: You’re talking about a teeny tiny currency.
Bronson Hill: I know, I was out there in November, December, had a nice time.
Okay, so let’s kind of jump— I’m just going to go through some of these questions.
Oh, let’s talk about this, accelerated depreciation. There’s some talk of accelerated depreciation returning in 2024, right? There’s a bill out there that’s saying it may or may not return. I think this year we’re at 60, and then the rest kind of— is there any thoughts on that, particularly maybe Ken and Bob, on that?
Ken McElroy: Yeah, well, I think it’s more than just talk, right? Isn’t it sitting in the House right now? I sure hope so. You know, obviously for us, that’s a big deal. For obviously a lot of people, it’s a big deal.
Just to give you an example with a jet or a billboard, let’s say, which we do both—you can finance. Yeah, you can buy a jet for 10 million bucks and finance, seven of it, and then you still get a 10-million-dollar write-off.
I mean, with bonus depreciation. And same thing with all our billboards, believe it or not. The billboard is literally all equipment. It falls in that same category. So, we’re following this pretty quick, pretty, pretty closely. And, it looks to me like it’s gonna pass.
Bronson Hill: It looks like it passed somebody said it passed in the house. But it’s sitting in the senate currently. So yeah, we’re on the way.
Ken McElroy: So yeah, that’s pretty good traction.
Bob Fraser: Definitely pass that’d be great for the the real estate markets, you know, which benefit tremendously. So I think that’s a good backstop.
Bronson Hill: Yeah, that’s good. What areas, states areas, are you seeing best to invest? I guess there’s a question about single-family housing.
Somebody’s asking in Canada, but I’m thinking more the U.S. is the question—to invest in single-family. Are you seeing areas that you like, Jason, as far as investment?
Jason Hartman: Yeah, it’s just sort of the same answer for quite a while now. And in fact, Ken put out—I saw, Ken, you did like a map on this or something? I think I saw it on one of your YouTube thumbnails. And I mean, we just like the southeastern United States.
I personally live in Palm Beach, Florida. And the linear, not-so-expensive markets, in Florida, Alabama, Tennessee, Arkansas—these are just our favorites.
Also, two exceptions to that are some markets in Indiana and some of the Texas markets. Texas has gotten a little bit expensive, and the property taxes are high. But, you know, Texas is a great economy.
Bronson Hill: Anybody have any insight to the accredited investor requirements? I mean, I’ve heard—and Mauricio, of course, a friend of ours, keeps talking about it all the time—but just any…
It sounds like they’re in the process of maybe changing that, maybe possibly doing a test that you have to take so that you can become accredited, or you have a super high net worth, and then you’re just automatically accredited.
Ken, any thoughts? Or Bob?
Ken McElroy: No, they’ve been poking at it for a while. I mean, I think there’s nothing wrong with getting people that are investing that kind of money more educated, personally.I don’t know, I think it’s actually needed, you know, because one of the earlier questions was, “Is multifamily going to be good?”
I think a lot of people made a lot of money, and they were throwing money into these business plans. And when I ask our investors, it is surprising, oftentimes, how little they understand about the deal, and how it works, and the waterfalls, and all—even the tax side of it, you know? And so, I don’t know where it’ll go, but it can’t be bad. Better than crowdfunding.
Bronson Hill: Yeah, for sure. For sure. It’s good.
Liked the idea. I was a registered investment advisor for years, and doing some sort of education in the space, just to understand what’s high-risk investing is, what’s suitable for you as an investor—I think that’s good. I think that generally is a good thing.
But obviously, you make it more—a little more hurdle for people to get involved in investing. Bob, there’s a question here about, you say there’s no drilling risk in energy. What do you mean? Can you just touch base on the deal you were referring to and kind of the type of deals you guys are doing there?
Bob Fraser: Well, we bought an existing producing oil field. 170 producing oil wells that literally produce. So we don’t have to drill to make 19% cash on cash. I’m not saying there’s no risk in drilling. I’m saying we’re not you know—we will be drilling in that field because we’ve bought in addition, for free, we actually got all these drill sites as well. So we will drill, but we don’t have to, and we can make 19% cash on cash returns without drilling.
Bronson Hill: Thanks for that. Do you guys see any opportunities in building affordable housing? Do you prefer buy or so is I guess the question is by existing or is it build new?
Ken McElroy: Yeah, I’ll tackle that. So, I did a piece: The Six Real Estate Opportunities You’re Probably Missing. We can stick it in the chat if you like—I did it. But the, affordable housing is going to be a massive issue, obviously, but so is senior housing.
So self-storage, all that stuff, in my opinion, is going to be—as kind of what Jason said—all of those things. You know, if you just point to all the folks that are retiring and you just try to stay in front of all of that stuff.
We’re pretty active in the senior housing. So, you know, we’ve got the many, many projects that we’ve built, bought, own. That 55—that I call the active senior. We’ve done those as well.
Those are really, really, really, really great. Very low turnover. People don’t move in and out. They might take six to eight times to look. But once they’re there, they’re there.
So there’s a lot of really good opportunities, in my opinion, in the real estate market in the next foreseeable future.
Bronson Hill: Okay, great. Question about buying businesses, and Jason mentioned this—Ken, you said you’re buying some businesses? What other types of businesses are you buying, Ken or Jason or Bob—or anybody buying businesses now?
That’s stationary. We’re really interested, and we’re preparing to start a fund with a private equity partner to buy small businesses that generate, at cash flow of $300,000 to a million per year. So just small businesses that are profitable and things like that. And just usuall everything from hospitality to just local businesses. I don’t like restaurants for a lot of reasons, but some people love them.
What about you guys? Any other business—kind of buying business ideas that are interesting to you?
Jason Hartman:I thought buying any businesses, I just mentioned it because I think it’s an interesting opportunity with the baby boomers aging out. That’s all. But I’m personally, I’m looking for less things to do, not more things to do.
I think one of the things that we all have to realize is, how much is enough? You know? And, so that’s it. But I—but I do think it’s a great opportunity, you know. It just depends what life stage you’re in, you know, and so that’s all.
Ken McElroy: Yeah, I’ll just add the whole reason I fell under the media stuff was because of exactly what you’re saying. You know, people in one particular case, the guy wanted to retire. In another one, it was a father-son, and the father wanted to retire and, and the son wanted to stay in.
So, you know, this is happening. You can step into very successful companies or buy them, either, that are profitable and their mom-and-pop run. And when you can take an overlay— we’ve grown our companies. We’re now about 300 people, and it was painful. I gotta be honest—it took 20 years of just getting the heck beat out of me to figure it out. And I probably still haven’t.
But the point is I’ve learned a lot. And I’ve learned there’s a lot of systems and operations you could do to mom-and-pop businesses. So we’re seeing that. Not only are they for sale, but there’s incredible—in a lot of cases, incredible opportunities to be able to scale some of these, you know, really interesting businesses.
Bronson Hill: I’ve been really impressed with the private equity model where you have one car wash or one dental practice or gas station—it trades for five to ten times earnings. But if you’ve got 20 of them or 50 of them, that goes for twice as much. It’s really just amazing how private equity can do that, and obviously that’s an interesting model.
There’s a question here, I guess anybody can comment on this. Do you see any large institutional investors so maybe hedge funds or other sorts of big investors—winding down their single-family property ownership? Or, if so, like which markets? Or is this something you’re seeing? Are you seeing them ramping up, or just kind of hold? Or—I’d be curious to know as well.
Ken McElroy: I think there’s a case for it to get worse.
Bronson Hill: Meaning more, more large institutional buyers coming.
Ken McElroy: Well, in my space particularly, build-to-rent, they’re buying neighborhoods. They’re buying, they just bought—I can’t remember the name of the company.
Yes, it was out of Canada, I think Toronto. Thirty-some thousand units just in the last few months. Yeah, as we all know, this is one of the last things that Wall Street hasn’t really gotten involved in, and now they’re there.
I think we’re at the very beginning. If you look, Amazon even has gotten involved. So, you know, Bezos has gotten involved, Elon Musk has gotten involved. These are folks that are in the single-family housing business.
Bronson Hill: Yeah, that’s good. And we saw that again—what? In the Great Recession, right?
There was a lot of big groups coming in just buying these homes for nothing packages from, banks and all that. It changed a lot for sure. Is that like you said it’s going to get worse. Is that is all a bad thing? Do you think there’s like pros and cons of that?
Ken McElroy: I’ll tell you why. Well, if you take a look at what’s happened—imagine you’re just to kind of go back to Jason’s—I mean, this is Jason’s strike zone for sure. I’d love to hear what he has to say, but can you imagine trying to buy a home and bidding against somebody like some of these big companies that are just gobbling these things up?
So, there are many scenarios where a lot of what? Fifty percent of the inventory for single-family was bought up by Wall Street in many cases. And obviously, not in the bigger markets where there’s more inventory, but in a lot of them.
So, if you’re competing against that—whether you’re maybe just a flipper or maybe you’re just trying to buy something for yourself to live there that’s gotta take inventory out of the market. It can’t be good.
I think I saw that there was some legislation by, I’m trying to recall who, that said they had to put them back into the market. I don’t know if that’s gonna go anywhere, but there’s a lot of people looking at this issue.
Bronson Hill: Yeah, it is for younger home buyers. It’s sure a tough situation right now to try to buy something because of just affordability. It’s just not there.
Jason Hartman: But the thing, the comment on that I think we all really need to think of and Ken’s a developer, right? So, they need to make it easier to build more homes. That’s the problem, okay? Like, all of this, the government has the wrong solution to almost every problem, right?
They just make it worse! You know, “Oh, let’s make college less expensive, so let’s make more student loans.” So all the universities just raise their damn prices! It’s so stupid. It’s just pathetically stupid. When you throw more money at something, it just gets more expensive!
So, you look at literally the stated goal of Fannie Mae is to promote homeownership, right? Government-sponsored entity. Anything you promote is going to become more expensive. So stop making, like, loans easier to get, raising the FHA loan limit—that just exacerbates the problem and makes housing more unaffordable!
The only solution is to build more houses. End of discussion. Period. That’s it. Build more houses. Make it easier to build houses. Incentivize builders to build. That’s—if you want to make housing affordable, you gotta have more supply.
It’s just idiotic. Everything else is just an absolute—it’s like raising the minimum wage to 20, and then everything just gets more expensive! It’s so stupid, I can’t even believe it! Like I mean, I’m sure you guys agree, right?
Bob Fraser: Yeah, a hundred percent.
Ken McElroy: I completely agree.
Bronson Hill: Absolutely. One more question here, I think, and then we’re gonna share a couple things here at the end. But, Ken, a question is: Why are some towns against putting up digital billboards? Is it the NIMBY—not-in-my-backyard? “We don’t want to see that as they drive by”?
I’d imagine…
Ken McElroy: Yeah, all of that. Yes. I think, first of all, they are sitting in the sky as you’re driving by, and not everybody likes that. But also, the digital component adds a whole other issue with the lighting and, and all of that. So, I just know that from having been through a couple zoning issues, from converting from static to digital, we had a tough time.
We bought one across from Bank One Ballpark in Phoenix, which is one of the main stadiums, and we had a heck of a time, and it wasn’t anywhere near residential.
So, I think they’re just reluctant to put permits out for these kinds of things. So, that’s been my experience so far. And in some markets, like Vegas, it’s no man’s land—you can do all kinds of stuff there.
On the Indian reservations also, believe it or not. And a lot of the state highways in between cities, you’re fine. But when you get closer which is where the money is, obviously because it’s all based on car count. It’s much, much more difficult.
Bronson Hill: Maybe eventually we’ll be doing like virtual billboards or, like, holograms or something. Or while you’re wearing your Google goggles or your Apple—Apple whatever it’s called, the new Apple goggles—you’ll be able to do that. Exactly.
I wanted to give everybody a chance again, thank you, everybody, for being here. I want to give each of you a chance to share something that you’re working on as well.
This is something that’s opening up for us we have a debt fund we’re actually launching next week. It’s our first one. We’re partnered with a group, 90 days up to three years, at seven percent up to it’s asset-backed, low-leveraged, you know, 50% loan-to-value. I’ll go ahead and put something in the chat on that if you want to sign up for that webinar. It’ll be, I think, this time next week.
And so, just wanted to give a brief plug for that. And then I wanted to give each of you a chance to just share how people can follow what you’re doing, if you have any resource, a deal, or anything you wanted to share. Let’s start with Jason, and just maybe how people can follow what you’re doing, and talk about your cruise. Man, I wish I could go on that.
Jason Hartman: Yeah, thanks. So we’ve got an investor cruise coming up. You can just go to—I’ll put the link in the chat—just go to jasonhartman.com. It’s right at the top of the page.
And if you’d like to cruise with us, we’d love to have you. That’s on the beautiful, brand-new Celebrity Apex ship out of Fort Lauderdale.
And, you can follow my YouTube channel—just look up Jason Hartman on YouTube or any podcast platform. If you want to follow the podcast, just type in my name.
Bronson Hill: Awesome. Thanks. Jason. Appreciate it.
Jason Hartman: Thanks for having me.
Bronson Hill: Right? Bob
Bob Fraser: Yeah, encourage listeners to go to our website aspenfunds.us and sign up for the investor club, and then you get our deal flow. But we’re going to be doing, like I said, a large debt fund, and we’re super excited about that. It’s an open-ended fund with liquidity that we’re going to be adding here this quarter.
Also, we’re going to do another energy fund. Our energy fund is closed, but there’s still tons of opportunity, and we’re just backing up the truck and buying as many of these oil fields as we can. We’ll be doing another one of those probably this summer. So, yeah, jump in with us, get on our list, and talk to our guys. I’d love to have a conversation with you.
Bronson Hill: Love it. Thanks. Bob.
Appreciate you being here today even from the the beautiful paradise of the ski slope there. So, it’s awesome. Ken.
Ken McElroy: Well, probably the biggest thing is, you know, our Limitless Expo that we’ve got coming up in August. It’s in Dallas this year, August 29th to the 31st. We had 40-some speakers last year and, I think, you know, a couple thousand people. So, that’s one of the big things we’re working on.
Obviously, we’ve got a whole bunch of stuff at kenmcelroy.com, and, you know, there’s a number of educational resources there. But the company stuff is at mccompanies.com—that’s M-C-C-O-M-P-A-N-I-E-S dot com—and, you know, that’s where you can go take a look at our deal flow if you’re interested as well.
Bronson Hill: Awesome. Thanks. Ken.
I actually just came out with a book recently. I’ll stick it in the chat, and Ken actually was kind enough to do the forward for it. It’s called Fire Yourself. It’s become an Amazon new release bestseller, so I’ll put that in the chat there as well.
Gentlemen, I just want to really appreciate each of you being here. I have tremendous respect for each of your accomplishments, both in investing and just in life. I feel like you guys are guys I want to emulate, and we’ve hung out a lot and spent time together in different ways. So, thank you for being here.
Thank you to all of our attendees for being here. We hope that this has been a really great presentation for you. We will have this available in a replay, probably later today or tomorrow, so feel free to watch that, share it. And again, for all of us, ourselves included, we do have different deals you can get involved with. So, reach out, go to everybody’s website, and we’ll look forward to seeing everybody.
We do have, actually, a lineup for next month. I don’t have, an image to share yet, but if you’re marking your calendars, um, I believe it’s going to be the 19th of March at this same time. So, it’s Tuesday, March 19th. We’ve got Rod Cliff, and we’ve got a couple of other folks, multifamily just things in real estate and kind of like how to be greedy when others are fearful and kind of going on this topic of investing as well. So, that will come out a little bit later. But again, thank you to everybody who’s here. Really appreciate it, and thanks to our panelists as well.
Hope everybody has a wonderful night. And we’ll look forward to seeing you guys on the next Next panel here. Thanks guys.
Ken McElroy: Bob. Jason Bronson. Good to see you guys, cheers!
Jason Hartman: Thanks Kenny, thanks Bronson.
Bronson Hill: Thanks so much. Appreciate it.
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