Ep #471 – Harry Dent – Why Multifamily is the Best Investment for the Coming Crash
Listen to the Best selling author Harry S. Dent Jr. talking with Rod on why multifamily is the best investment and why the coming crash will wipe out Wall Street. The talk may be quite useful for you as it lets you learn about multi unit apartment investing and investing in apartment units. Harry Dent shares his detailed apartment complex investment analysis that will prove helpful to you in knowing apartments to invest in.
- The importance of demographics
- Looking to Japan to see what’s coming
- Cycles of Inflation
- Quantitative Easing
- Why stocks are going up in value
- Now you see it, now you don’t
- Bubble Economics
- Why residential real estate will survive
- Understanding the downside potential
- Why cash and cash flow make you King
- Cash means you can take over properties
- The stock market will lead this downturn
- What you should be looking for right now
- Real Estate is worth what you can _________?
- The “Change” Generation
- Where all the growth will be in the next two decades
- The newest trends in multifamily
To find out more about our guest:
Full Transcript Below
Ep #471 – Why Multifamily is the best investment for the coming crash
Hi my name is Rod Khleif and I’m the host of the “Lifetime Cashflow through Real Estate Investing Podcast” and every week I interview Multifamily Rockstars. We talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the like and subscribe button and get notified every Monday when a new episode comes out. Let’s get to it.
Rod: Welcome to another edition of How to Build Lifetime Cashflow through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here. I am super excited to interview the gentleman that I’m interviewing today. Now his name is Harry Dent. And I will tell you that if you study or stay on top of or track economics in any way shape or form, you have heard that name. Now Harry got his MBA from Harvard Business School and he studied Economics there, kind of got a little disillusioned by what he thought was vague and inconclusive work around that topic. And so threw himself into studying finance and identifying and studying demographic and technological and consumer and other trends that have helped him forecast economic changes. I will tell you, I saw Harry speak and I don’t know if it was 20 years ago or 23 years ago in Vancouver and had I listened to Mr. Dent, I wouldn’t have lost 50 million dollars. So I take what he says very very seriously now. Now Harry’s been featured on Good Morning America, PBS, CNBC, CNN, Fox, been in Entrepreneur magazine, Fortune magazine, Success magazine, US News and World Report. I can go on and on. And so guys listen up he’s written tons of New York Times best-selling books that that have predicted booms and crashes and just super excited to have him on the show. Harry, welcome my friend!
Harry: Yeah nice to be back Rod
Rod: Thank you thank you. Yeah so I also had Harry speak to my multi-family boardroom mastermind as you guys know that’s the group that’s got billions and billions in assets represented by the operators and I was so impressed with the presentation. I wanted to get him on the show so that the rest of you could hear what he had to say. So, harry can you talk a little bit about where you arrive at your conclusions. I know when I first heard you speak, you know one of the biggest factors involved in in any economic predictions as it were or you know trying to get a glimpse in the future are based on population and growth and demographics and spending cycles as associated with that. Can you speak to that a little bit?
Harry: Well you know what I learned really quick when I started studying economics is economists and politicians think that governments drive economies. I’m like, what? Seventy percent of GDP in the united states is consumer spending, ten percent is capital investment of businesses that only invest if consumers are spending more and only twenty percent of its government and they’re the laggards. They don’t lead trends. They don’t start new innovations except occasionally. So people are studying the wrong thing. I studied people. I was a business consultant at Bannon company, Fortune 100 companies and then for new ventures in California in the early 80s when the baby boom was just entering the workforce, I learned two things really quick this is a different generation. It was a change generation and there was a boatload of these people. The biggest generation. It was a 10 foot wave, this generation wave versus a three foot wave of the generation before or the millennial wave afterwards. So I started studying the baby boom everything about him and it just happened at that time in 1981, first year, the US government started doing an annual survey of thousands of consumer households and measured six hundred categories of spending, not only total spending and saving and house buying and potato chip for crying out loud. So I discovered why demographics were important especially with the size of this generation. And I discovered, my gosh, there’s a gold miner information nobody’s looking at. Economists don’t have a clue of this stuff not even a clue even after the baby booms caused the greatest boom in history. I saw Rod, my biggest score, I get credit for forecasting how strong the boom of the 90s than back in the 80s and early 90s when we were in a recession. But my best forecast was the fall of Japan. Japan’s real estate and stock bubble would burst and Japan would go into 12-14 year downturn and never be the same because of demographics. Their baby boom came earlier than ours in Europe and the most rest the world. And that, the baby boom in itself is a bubble generation because there’s so many of them. Everything they do they put pressure on demand versus supply and create bubbles, even in genes or whatever or any fat. And so they had the real estate bubble before us. They had the stock bubble and it crashed and economists never learn from the Japanese. I’m like, why aren’t economists studying the Japan bubble? How it collapsed and why? Of all things, real estate, stocks, came back partially. In bad demographics, real estate never bounced in Japan, 30 years
Harry: How do you explain that? You know what I found? Older people, the larger baby boom dying, in real estate is the only industry of consumer significance where it lasts forever almost. Unlike cars and clothes and food and most of stuff we buy. So when people die, they become sellers. And so I can’t just measure the buyers like I do other categories. I have to subtract the sellers from the buyers in real estate and that explained why even when the millennial generation came in, Japan again ahead of us, they didn’t get a balance in real estate like we would or something. So I learned demographics was important. I also learned Rod only by, I’m like why didn’t anybody discover demographics before? Well I knew first of all, the baby boom was so big it made it more obvious. But I also realized when I went back Rod that, before World War II, everyday people didn’t make much money. They were they called a Malthusian trap. Every day wages were nothing for thousands of years until the industrial revolution came along and then more important the mass production and assembly line. The first generation to be a middle-class generation and be able to afford a house on a 30-year mortgage was the Bob Hope generation entering the workforce after World War II. And they were the first middle class generation and they created a generational boom very obvious on a 44 year lag for peak spending back then. And then the baby boom came behind them much larger on a 46-year lag for peak spending for them and created a bigger boom. So, I was able to document how a 46-year lag for peak spending causes booms and busts in generational cycles. It was just 44 for the Bob Hope it’s 47 for the, I mean, again, these things it’s the simplest indicator ever invented Rod, a 46 year lag for peak spinning on the birth index which I do have to adjust for immigrants which I do, legal and illegal. And economists do all this complex analysis and I predicted the whole boom, how big it would be, the boom of the 90s it would continue to we would have a weak economy and guess what? After 2010, we’ve been living on quantitative easing ever since oh guess how long Japan’s been living on printing money to replace bad spending since 1997. Their generation peaked in 1996 ahead of us. So demographics has become one of the most important cycles. I said added technology, cycles, geopolitical cycles, my number one theme, I was not a demographic expert. I’ve always been a psycho guy. And I first understood cycles and inflation back in the 70s when that was a big deal when I was studying history and stuff and finance and in school and stuff. I was getting all the gold above newsletters because gold, inflation was big and gold is the best way to play inflation and blah blah blah blah blah. So I was the type of guy but demographics became important for the first time in World War II but I also had to realize there were other important cycles. There’s a 45-year technology cycle and a 35 year geopolitical cycle. You put those three cycles together, Rod, I can tell your grandkids when they’re gonna face a downturn as deep as I’m predicting for the next few years, for us. I can tell them decades in advance
Rod: And that’s what we’re talking about here. That’s why I wanted Harry on the show is because he is predicting a massive downturn like right around the corner. I mean
Harry: not because of the virus
Rod: Right, not because of the virus. So when do you anticipate this thing to begin?
Harry: Well you know it did begin in early 2000s and all cycles would have peaked in late 2019. The virus was the perfect trigger. People don’t understand. The virus was the perfect trigger. This crash was going to happen sooner or later. Anyway governments have been pumping up the economy artificially since the crash into early 2009. That crash normally would have lasted another couple of years and then much more devastating cleared out a lot of debt in excess prices and it didn’t. They didn’t allow. So this bubble’s been waiting for a trigger and also my 45-year technology cycle which is actually even more powerful in history than the demographic cycle. That’s the one, that’s the last of my cycles to hit here in late 2019. So we were due 2020 to 22 to go into a deep downturn with the confluence of all my cycles and this bubble that’s so artificial that means it’s going to have to burst more. If we’d have just taken our medicine in 2008 and let the recession like 29 to 32 last in the 2010 or the depression, then we would have been over the worst of this long and been in a whole different position. But no governments decided to take the easy way out. Oh we’ll just print trillions of dollars
Harry: So that’s not, I don’t know why anybody thinks that could possibly be good policy including Warren Buffett and major bankers and major economists. This is the stupidest single thing I’ve seen in all of economic history and everybody’s saying, oh well they just, you know the government’s just trying to prevent recessions. Well they have to print exponentially more every time we go down now like we just did. We just printed as much in eight months as we did in seven years after the last you know
Rod: I want you guys to hear what he just said. We just literally printed in eight months more money than they printed back for seven years after the 2008 crash. That whole quantitative easing thing and so
Harry: Just to deal with a short-term virus
Rod: Right right
Harry: They’re gonna have to print a lot more than they keep doing it. And see you kid, the point is I’ve been telling people that people say well the government will always print more. I said, yeah but they’ll get so far that it’ll be so ridiculous that it’ll, it’s like a typical addiction cycle where it takes more and more of a drug to keep you from coming down or to get you high because of tolerance and then it gets so extreme that you one day you just pass out and either die or go into rehab. We’re going into rehab
Rod: Why is the stock market doing so good Harry?
Harry: Because all this money printed, you got to understand, normally what the central banks do federal reserve to stimulate the economy to slow down, they lower interest rates and make credit more easily available hoping people will borrow more to help stimulate the economy. Well they tried doing that in 2008-2009. It didn’t work. Everybody already so over borrowed, corporations, government, consumers, everybody that that people weren’t borrowing everybody’s too much in debt. Everybody already bought the house twice as big as they could afford refinance it three times. So what they realized by accident, they did the first round of quantitative easing a trillion dollars for the fed, probably three or four trillion globally that first round, that was just to keep the banks from falling down okay just put liquidity in and they were hoping that would stimulate lending. It didn’t. So normally the lower interest rates, banks lend, people borrow they invest that cause the economy grow they pay back those loans and me but that’s the normal monetary cycle. That didn’t happen. What they figured out by accident, they didn’t intend this, it caused the stock market to go up and real estate to rebound. But the stocks go up more than anything, stocks have gone up more than bonds and real estate for this entire printing because what you’re doing in quantitative easing, you’re not getting money into the banking system and into consumers. You’re simply buying from a fixed pool of financial assets, owned by financial institutions largely because they invest for us, you’re buying, you’re injecting new money trillions of dollars into the same pool of assets which just pushes them out for no good reason. How could you explain how stocks would be way higher twice as high today than they were at the beginning of the last downturn when the recovery and the economy we had was only two percent growth the weakest recovery in history. How could stocks go this high? because central bankers found by pushing up asset prices and the more you do it, you create a wealth effect, and by the way demographically I’m the only person on earth that knows this because I study everything about demographics, the top 20% are not 20% to the economy, they’re 50% because they make a lot more money and spend a lot more money. So the top 20% were made more wealthy by this. The average person doesn’t have much financial assets and has 120 grand home in Omaha down the street from Warren Buffett. So they didn’t get a big kick from it. Affluent people did and especially the top 1% and 0.1%. So financial assets got rich people to spend a lot more money and here’s my definition of our 2% growth economy. Zero for the everyday person on main street, 4% for rich people not making more money otherwise having all their financial all their real estate stocks go up like crazy and they’re buying yachts and boats and everything they can get their hands on and they’re reinvesting in stocks so it creates a bubble, it creates artificial wealth and that wealth doesn’t immediately get spent but a good bit of it does and that’s the only thing driving our economy
Harry: So that’s artificial and that, but by doing that, the difference is I think we had about 240 trillion in financial assets globally before the 2008 crisis. And now before this one, we have 477 trillion counting personal real estate on top of commercial real estate and stocks and bonds and gold and silver and all this stuff, 477 trillion in an economy that’s weaker than it was and less strong demographics than in 2007 and that bubble is going to have to burst
Rod: Are you talking about the valuation there? The valuation has effectively doubled since 2008
Harry: Yes same stock, same real estate and corporate profits have not grown since the first bounce from 2009. Companies have been using cheap money to buy back their own stocks and cause that earnings per share to go up twice as fast as their corporate earnings. So that’s artificial too
Rod: And they’re borrowing money as well I guess? And they’re borrowing on top of that?
Harry: They’re borrowing cheap money to buy back their own stocks, leveraging their money taking their cash from full shareholders cash flow or adding debt to buy, to speculate in their own stocks. The only all the net buying of stocks Rod since 2009 has been corporations buying their own stocks. Retail investors, institutional investors, foreign investors, if you net it all out, slightly negative. It’s a lot. Corporations buying down stock and then what are governments doing? Buying their own bonds to push their interest rates down and allow them to float more debt. They would never be able to float all this unprecedented debt especially Japan in a free market.
Rod: So guys, this isn’t like conspiracy stuff here okay. This is not, we’re not off the deep end here. We’re talking about common sense. The printing of trillions of dollars, corporations you know the doubling of asset values in a market period where you know there’s nothing to account for. It’s just, it’s fluff and then you know like I say corporations buying their own assets and this. So how bad is it going to get Harry? What’s going on you know when that was proverbial you know what hits the fan what do you think’s going to happen?
Harry: Well it’s really clear. There’s two things that happen long-term when you get a generation peak like the Bob Hope generation in the late 60s. You tend to get about a 50 a long term 12-14 year downturn where they’re not spending until the next generation comes on and it’s about a 40-year cycle. So think, 26 years up, 14 years down has been the rhythm. You get about 50% or so stop for actually long term. When you get a bubble, like the roaring ‘20s or a bubble like this, stocks crash 80% to 90%, 70% minimum. And so a much bigger crash because things are much more overvalued. These stocks have not no relation to mainstream in fact, my spending wave indicator that 46 year lag when they’re going to spend, when it’s going to correlates with the stock market adjusted for inflation long term. Instead in February of this year when stocks peaked you know at almost 30,000 on the dollar, they were 120 percent overvalued from where the spending wave accurately over time says they should be with natural trends. So you have to have a big crap to get back down to reality. So stocks and I’ve had this this target date all the way back to the 80s when I predicted the boom and the longer term downturn. By late 2022 give or take, I expect the down to be 5,000. That’s about 85 percent down. The NASDAQ is going to go down a little more than that. S&P, similar. You know how much money that destroys, it doesn’t come back. Real estate, I valued it, in 2006 at the last peak, real estate was about 21% overvalued by my demographic model of net demand, peak buyers minus sellers. Now, even though real estate’s only about as high or a little higher than it was in 2006 or the last peak ‘07, it is 42% overvalued because the net demand is much lower. All this buying is same thing as corporate stuff. It’s so easy. It’s so cheap. It’s easy to get a loan. So cheap people just buying more for the help. Oh God I got a six thousand square foot land, why not trade up to seven thousand? My mortgage broker says… what are you doing setting that six thousand square foot house Harry? You should have an 8,000 square foot house. What’s wrong with you? So this is artificial stuff too. So real estate is more overvalued. So we came into the last one and we haven’t had a real estate bubble for almost a century okay. It came in 20% overvalued and went down 34% because it overcompensated. I’m expecting about a 50% drop in real estate. Now, high-end more, everyday homes less, coast and you know New York, San Francisco, L.A., more… Omaha, Chicago, Kansas City, less but that’s the ring. People don’t have any concept that can happen nobody thinks it could happen twice in a row. So this is devastating. Stocks, I go back to that 477 trillion number, that’s the magic number, the important number. In the 30s, the last bubble those financial assets went down all together, real estate, stocks, bonds, everything about fifty percent. So if you lose fifty percent of 477
Harry: You’re talking 232-240 trillion, that is three times global GDP, three times global GDP. That’s the same ratio in the U.S. we got about 125 trillion of financial assets versus 21 trillion GDP and if half of that disappears a little over 60, three times GDP disappears. So here’s my thing, if you create it by magic, now you see it, now you don’t. That’s what bubble economics is. You create an artificial thing to keep from going in a downturn, to keep from having to take your medicine and restructure and rebalance which makes you healthier. The great depression we came screaming out of 1933 bottoms, screaming never to look back again because we got rid of so much private and then business and consumer debt and got businesses healthy and competitive again
Rod: Yeah let’s shift gears because we’ve just scared the shit out of everybody. So now let’s, because it is going to get ugly guys. Now the one thing you indicated previously is you don’t think this is going to last a long time. I think you put through 2023 out there. Why is that? Why do you think we’re going to rebound quickly?
Harry: Okay and this is where economists are saying, we won’t have it, it won’t happen, blah blah blah blah. It’s not a bubble. When it finally crashes you know what they’re gonna tell us? We’re in for a lost decade of 10 or 12 years just because it happened in Japan, it happened in the 30s. What I’m telling people is we already started what I call the winter season. I’ve been predicting a winter season after the baby boom peaked in 2007. It would last from 2008 to 2023 that’s the demographic decline in the very steep one. So we started this in 2008. We had a deep recession. We did not have a depression in a total deleveraging. So in the 1929 to 42 long depression. We had the first crash, that’s what typically happens. It just all falls apart. The biggest crash highest unemployment hits right off then you stimulate then you balance but then you still got weak demographics and you come back and you have a secondary depression which they had from 1937 to 1942 okay. Less unemployment, less thought crash but still a depressed, too depressing. Well we had like a mini depression 2008-2009, cut it short, now we’re gonna have the big depression, the big crash on the back end but then it’s gonna be over because the demographic trends, the millennial generation will drive us up and I can tell you the date, 2036 to 2037 just like I said the date for the baby boomers boom to 2007. It’s not going to last as long as the baby boom boom. It’s not going to be as steep but we will come out of this and most of the world does a lot of the world does as well in the emerging world, Southeast Asia and India are going to dominate the next boom you know who dominated this boom? We got richer. Europe got richer. But we were already rich you know who got rich overnight? All of East Asia. First, Japan then Taiwan, South Korea, Singapore, Hong Kong, and then China was the last and the most massive. They doubled or more their GDP per capita in 20-30 years. They’re the epicenter of this bubble. The US and North America, we were the emerging countries in the early 1900s and roaring 20s creating a bubble and moving and becoming developed countries becoming rich. So that’s the greatest bubble. That’s going to be the greatest birth. We’re going to have a big bubble burst here but I don’t even want to talk about China where real estate is 11 times income tip. I’m not, yeah, 11 times income, 22 in HongKong, their leading city and Chinese have 78 of their net worth in real estate. In the U.S., it’s 30 percent
Rod: Wow. They’re going to get creamed okay. Well which is which may or may not be a bad thing because of their you know their military posturing and all this stuff that’s happening but we won’t go down that rabbit hole. But let’s talk for a minute, my listeners are multi-family investors or aspiring multi-family investors.
Harry: Thank God they are
Rod: Yes that’s what I want them to hear from you okay because again we’ve just scared the shit out of you. I know that. But I want you to hear what Harry’s got to say about the asset class that we are investing in. So please Harry reassure them about where they’re at, if they’ve got cash flowing assets
Harry: Yeah well you have to understand unlike a lot of recessions where some things go down and some things hold up, this in a bubble crash almost all financial assets go down. There’s two things that hold up. What holds up the best are the highest quality bonds the 10 and 30-year treasury bonds which also went up in value in this flash crash on February-March and cash flow positive rental real estate not commercial, residential real estate and medical facilities. So multi-family apartments and in single-family rental hole rents hold up and even sometimes go up because nobody can buy you know buying is not even an option. You couldn’t get a loan if you were a billionaire you know sort of thing and then the world looks bad. So why would anybody buy anyway. So, rents hold up. Now properties will still go down to some degree with the real estate cycle. I look that up. It won’t go down as much as residential and residential will not go down as much as commercial. But the rents will hold up, the cash flow will tend to hold up. If you come into a downturn like this with two things you want, cash from selling over inflated real estate or stocks or businesses or whatever, anything you can do to create cash and you may have some of your properties that are maybe more marginal not as positive cash flow or you think are more overvalued. And I’ll give you a measure for that real quick. Look at your real estate, whatever it is, commercial, apartments, single-family homes, whatever your best case on the downside is the lows back in 2009-2011 depending you know different time. Your worst case is where the bubble started in early 2000. So that’s your downside potential. If you see something a lot of downside potential, you may want to sell it and then re-buy something similar a couple years from now. But there’s also a value to having cash flow. You walk into a downturn especially in real estate there’s going to be a lot of people failing. In real estate, all types of businesses there’s going to be a lot of stuff in foreclosure. Let’s say you’ve got a bunch of apartments or a bunch of single-family homes you have and you’ve got strong cash flow and all these other properties are going under. They can’t pay their bill the bank says what do I do with this? You come and say, me, I’m not going to give you a dime. I’m going to take over 50 or 60 whatever I can, 50% or 60% or some percentage of that more which is better than fire sailing and getting nothing. And I’m not going to put any money down and you’re going to give it to me because I can pay the payment. You’re not, they’re banks aren’t going to find many people that can pay the payment. So cash means you can walk in and steal something and not have to wait to get a loan which is going to be impossible. Cash flow means you can take over properties. So I would look at my properties and look at the whole array, the best strategy from my point of view is have some of both, sell the properties you can pull the most cash out of which means the ones that have the least debt not the most okay. You can pull the most cash out to create a cash chest and then keep the properties the best positive cash flow and the combination of that cash and cash flow makes you king in a deflationary spiral where even if you don’t want to just buy more apartments, you buy stocks, businesses. And I’ll tell you, it wasn’t just Joseph Kennedy who did so well in a great depression. He came in with cash, bought businesses. The mafia made tons of cash flow illegal booze in the roaring 20s and then turned into a loan sharks for failing small businesses in New York and Chicago where they’re in the Great Depression charging 20% loan. Now if you’re thinking about it, if the loan fails, are they going to pay the bank? Or are they going to pay the mafia? You’re going to pay the mafia because they’re going to break your legs if you don’t pay it. High loans, and even if a business failed what do they do they take over the business and then when the economy turns around, they bought and got a business for nothing. So you know they’re passing cash flow and the key to me not only to build as much cash and cash flow coming into this because this is going to happen soon. I think stocks may be peaking next week or at the latest by the election okay
Rod: Wow okay. So guys,
Harry: The leading indicator for everything else, real estate is holding up the best because there’s scarce inventory after the 2008. Bus builders never came back strongly. They’re scarce inventory. People are panic buying. The stock market’s going to lead this downturn. Real estate led the last one. So that’s your lead. You see stocks start to crash and I think you can see it very soon that’s your sign. Okay, I better get my act together. So looking at the portfolio and I would not only be trying to raise as much cash, I would be targeting today. I’d be looking today what apartment buildings or what single family areas do I want to buy in cheap and be able to rent out during the downturn and then in the case of single-family homes, you also have the option of selling it you know when the economy comes back years from now. Rent it in the downturn and rent it for years to follow when people are still shaky and can’t get a loan and think real estate will never come back and it won’t come back by the way. Cash flow, well here’s probably the most important point Rod, real estate temporarily from 2000 to now, switched into a speculation margin make most of your money and speculation not on honest rents. It’s always been rents. The value of a house or anything or office building, what can you rent it for in the next 10-20 years discounted to the present by a 10-year treasury bond risk-free charge about just like stocks. What’s your 10-year earnings forecast discounted to the present okay… or if you’re buying and not renting out, oh how much rent can I save in the next, over this mortgage compared to the mortgage payments of priority that’s what would tell you whether something’s fairly valued or a good deal or not. Not, oh it’s been going up this much so it’s going to go up this much more. That is stupidity. This is going to end. We will not see real estate bubbles for the rest of our lives at least in the developed world, maybe in India. So the whole market for real estate is going to shift. How do you make money in real estate? Like monopoly, on rent. So real estate’s worth what you can rent it for not because it’s going up and
Rod: Value is irrelevant. It’s all about cash flow period. So you know the other thing is, there are other renters coming into this cycle as well like retirees yes? I mean their rental wage companies
Harry: This is a godsend to your industry Rod. I didn’t get this until I spoke at a big apartment conference last year in Dallas. I, you know I’ve been telling people in the multi-family hey the millennials by the way are peaking in 2018-19. The first thing you buy or rent you know first page of real estate is apartments until you can afford you know you get married have a kid and buy a house. So that peaks earlier. So the millennials who peaked births were 1990 already peaking at 27-28 apartment thing coming into this. Now the downturn will keep the rental market buoyant for reasons I said earlier. But there is a new trend and remember what I said earlier? Baby boomers are a changed generation. Every sector they enter, they bring some new change and the new change not by their intelligence, I hate to say it, but because they’re forced to. Baby boomers grew up in good times when they were younger never they’re not like the Bob Hopers that saw, when they were young, they saw the great depression, in World War II. The worst entire period in all of US history. So they were not, they saved for a rainy day. They didn’t overspend and overborrow. Baby boomers just spent, didn’t save, and here they are now moving into retirement at record rates and they don’t have a retirement plan or very little one
Harry: So what they realized, just by happenstance, oh wait a minute, I’m sitting in a McMansion typically. My trade-up home, not my starter home and I’ve almost paid it off now that I’m 60 years old or whatever a lot and it’s worth a lot in this bubble. I don’t know why but it is and what more and more baby boomers are deciding, the only way I’m going to fund my retirement plan because I was a dumbass and didn’t save, is to sell that McMansion and instead of reinvesting in a smaller downsized home which normally people would do if they don’t stay in their home which I say about half stay in their home half of them downsized. No, I can’t even afford to put two thirds of it back into a smaller home. I need that whole profit to fund my retirement comfortably. So they’re renting, increasing percentages of baby boomers 55 and older are renting instead of buying or downsizing in retirement and that is the new boom. And not only is that that’s where all the growth is going to be in the coming next two decades. All the time is baby boomers renting not all of them, but increasingly renting retirement and the best part of that Rod, who would you rather have 22 year old crack addict, parties every weekend, renting your apartment or home and burning it up, trashing it down, and who only stay with you to get out of college 22 and as soon as they get married and get a good job they leave you in five years and go buy a home. These people could stay with you for 20 years if they decide to rent remember
Rod: We’ve got an asset
Harry: They’ve got higher income and they’re more responsible
Rod: Yeah, no, I mean case in point we’ve got an asset here in Sarasota. It’s just under 100 units and it’s age restricted, 55 and older and it is always 100% occupied with a waiting list and they never leave. Why would they? or what’s the point? And so you know I’m looking at one of the slides from your presentation that you did for the for the mastermind and it shows you know in 2025, 30 million renters over 60, and sixty million 35+ to 60 and then really the smallest number is under 34.
Harry: It’s right the normal good market is the smallest number
Rod: Right right right fascinating so
Harry: And that market’s going to be flat at best. Almost all the growth is going to be middle-aged to older people and again this is the new trend. This, first of all people didn’t live so long generation or two ago and second of all, older people are the least likely to rent unless they get sometimes they’ll rent when they’re very old. Maybe their last five years like screw it or they’ll move into assisted living center or something. But this is a new trend and boy it’s a, I tell people, even yes that everybody says this is the biggest misconception Rod, the millennial generation is the largest generation ever. Yes in total numbers because they started a much higher burst and they were born over a longer period of time than the baby boomers. As a wave of people, they’re a four-foot wave. The baby boomers are a ten-foot wave. Anybody that can find a way to keep selling products and services to the aging baby boomers who have way more wealth and often have more income than younger to you know 30s or 40s millennials, you’re going to grow faster. My number one growth segment in consumers is nursing homes and assisted living facilities and you know what, if you can deal with grumpy old people which I don’t know if I’d want to, but there are people that are turning make mansions which will be the greatest part, big mansions will fall the most they’ll be the less needed and the millennials won’t be buying them for another 10 years or something. They will fall the most you can turn those into small peaceful suburban assisted living centers and get in a network of expertise and make two to three times what you would renting them. And imagine if you could buy that house at half the price or less. How much more would your cash flow?
Rod: That’s exciting
Harry: So that’s another thing, anything you can do so more aging boomers are going to just rent their retirement home and they’re going to be moving in an assisted nursing home faster than anything, you want to get in that market you make even more money just you know you have to consider be willing to deal with grumpy old people
Rod: Talk about, give us your opinion about urban versus suburban as it relates to renters
Harry: Well you know I always was told you know the baby boomers when they do, the ones that do downsize they move out of a big mansion in the suburbs into the city closer to restaurants and hospitals and that da da da, no, wrong. Yes some of them do. Nope, the statistics, all these projections I showed in my presentation. Nope, suburb, the growth is all older, higher income, and suburban and no kids. And that’s another good thing no kids to tear up your plum not just the parties no kids to chew on things and puke over everything or whatever they do you know. So it’s a better market and they still prefer the suburbs look. If I’m an older person I’d rather be in a peaceful suburb or actually an expert even farther out the outer suburbs are probably the ideal places for older people to retire
Rod: Interesting interesting. All right, so just to recap, guys, the stuff is about to hit the fan. It’s going to be really ugly and with crisis comes opportunity. You heard me you know I stole Jay Abraham’s phrase, ethical opportunism or compassionate capitalism. There’s going to be tons of opportunity and you know cash will be king and not just your own your ability to raise cash as well. I’m going to be raising cash with partners to take down these assets and joint venture with me for sure I’m going to be doing that and then cash flow as well you know like Harry said. So you know forewarned his forearm guys and so and I’m not trying here to try to scare you. Harry’s not here to try to scare you, it just,
Harry: I’ve been the most bullish economist in history but the great booms also have great downturns. We’re in a short period of time that’s going to be, this has been the greatest economic expanse in all of history since the late ‘80s and ‘90s. We’re living in prosperous times. This is just a big hiccup on the way
Rod: Yeah and guys and crisis is like this, rents maintain. It’s the prices to go down. Rents stayed pretty constant so again we’re in the right business my friends. So again, not something to fear something to be aware of to get excited towards and guys, Harry puts out a newsletter. It’s harrydent.com do you want to talk about your monthly newsletter for a quick second here?
Harry: Yeah we have a paid monthly newsletter which I’d say in these times, I would say go to hsn.com and just get on our paid newsletter because it’s such a critical time but we also have a free weekly newsletter. Every week you get an article from me and my partner and every other week, I do a video rant but kind of like this for maybe 10 or 15 minutes. So that’s for people to get to know us and it’s free. So harrydent.com you put in your web address, you’re on that in the story. I would advise at this time why not just go to you know there or hsdent.com I would advise get on my HSN forecast because I’m telling you, this is going to be a wild ride
Rod: Well listen my friend, I really appreciate you adding value today and guys, again, forewarned is forearmed, get ready. Don’t fear it. Get up to speed. Learn this business as fast as you can so you can capitalize on the incredible opportunities that are coming. If you could you know if you could come spend some time with me and my boot camp, do it. I promise you’ll be glad you did. And Harry, thanks my friend. I appreciate you coming on today
Harry: Thank you Rod. Good luck. Sale of a lifetime coming. It’s been more of an opportunity if you see it coming
Rod: Sale of a lifetime and then this could be, truly this could will likely be the biggest opportunity we see in our lifetimes. Yes. Right. Okay all right thanks buddy. Take care.