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How Does the CARES Act Affect Real Estate Investors?

In Episode 140 of the Solomon Success podcast, Jason Hartman and Evan Moffic discuss the CARES Act and how it affects investors of income properties. See the full interview transcript below.

Introduction 0:12
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:04
Welcome to Episode 1425 1425. Evan is here with me with a question on the cares act. You know, there’s some new tax relief out there, given the current economic craziness that’s going on, Evan, what did you have for this one?

Evan Moffic 1:22
Well, Jason, I was reading an article about this new tax break that says, you can well we know about the power of depreciation, that if you have a W two job, let’s say you’re a doctor, but you wife is a full time real estate investor, you can depreciate, you can balance let’s say you have $100,000 paper loss that can offset $100,000 of income. But I read something in the new cares act that says, not only can you continue to do that, but let’s say someone’s a full time real estate investor and they have capital gains like they sell a stock and make a million dollars. That now, depreciation can be used to offset that gain. Is that accurate?

Jason Hartman 2:06
Okay? I don’t know for sure. So I don’t really want to comment on that what I think this is aimed at. And we’re gonna have a CPA on the show to talk about that. In fact, by the time someone hears this, which we’re recording a few days in advance, we might actually play that CPA interview. That’s so but this is the when you sell a personal residence, if you have more than if you have up to $250,000 in gain as a single person or $500,000. As a married couple, you can shelter that now I always want to make the disclaimer check with your tax advisor taxes are a super complicated subject, just like legal and now I have to say, just like medical, so you know, as we’re talking about all these sort of public health and medical things with what’s going on in the world, I want to say check with a medical professional to As another disclaimer, okay? Because, you know, we’re experts in real estate, and we’ll teach you concepts, but there are tricky little ins and outs to everything. And that’s why there’s whole industries designed to address these things. But when someone sells a property and they’ve got $250,000 in gain or $500,000 in gain, they can take that and transfer it to a new personal residence tax free. Okay, under the old law, okay, but now, I believe that restriction has been lifted for three years, okay. For this year in two retroactive years, okay. And this is huge for couples with more than $500,000 in annual capital gains income, as long as it’s from sources other than their business, okay, which a lot of times is from a luxury home, they sell it and they can avoid paying taxes on it. So that’s huge. But the bad side of it, you know, there’s a flip side everything right? The bad side of it is that I could see is it would really hurt the luxury real estate market which by the way we’ve never recommended any buddy invest in because it could lead to more people using this as an opportunity to unload those properties. So, you know, I instantly think of hotspots for coronavirus, high density areas that people are going to want to escape and are already wanting to escape. New York City, Los Angeles, San Francisco, any of these high density super expensive real estate markets, people could unload their properties now even though they have been collapsing in price, you know, long before coronavirus hit. There’s been a serious softening, but now they could this would be an additional impetus for them to unlock those properties and just cash out. And here, they could they could shelter those larger capital gains. But it would also cause a glut of properties on the market. And that’s why it’s bad for the luxury market. So that’s my take on it. But, you know, we’re going to get more and more on all of this stuff is all the interpretations come out. And we’re still very early on this pack. You know, it’s 170 billion dollars in tax savings for real estate tycoons. That’s what they’re predicting.

Evan Moffic 5:32
Say. Didn’t you say that Trump is our first real estate president? Yeah,

Jason Hartman 5:36
yeah. Yeah, he’s, he’s our richest president we’ve ever had. And the first real estate president, so you can bet that when it comes to being a real estate investor, love him or hate him. Trump has got your back. Okay, so I read

Evan Moffic 5:53
an article of course, you know, critical of Trump there’s there’s so much Trump derangement syndrome, but it says He is fond of quoting a story that he heard about George Washington that George Washington had two desks, one for his business and one for his presidency. Turns out that story is, I think, apocryphal, kind of like the fairy story. But um, you know, it’s, uh, he’s not, he’s our richest president, but there are precedents of people who had serious businesses becoming president. And that’s part of that’s part of our country, you know, business. We’ve seen this right during this coronavirus course we have to be wary of aware of public health. But these are business, destroying our business infrastructure is undermining everything. I mean, we’re a country that depends on businesses that depends on the free market running. Oh, yeah. It’s really, I mean, thank God that our grocery stores and pharmacies and so forth and Amazon are still open because that’s helping us function.

Jason Hartman 6:52
Yeah, it is. And you know, Trump has received a lot of criticism, as he always does, but now the newest latest round is Because, you know, he wants the country to reopen. And you know, he’s received a lot of criticism from the left. And and then from some in the medical community that say it’s too soon, you know, don’t push this. It’s not your timeline, the virus gets to decide you don’t and that’s all true. But it just makes me wonder if Well, no, of course, this is silly statement. If Trump knows something we don’t know, of course, he knows lots of stuff. We don’t he’s the president, he has much more information than we have in the public. Okay. You know, that’s the way it is in the halls of power. Of course, you have much more information. But you know, this concept of herd immunity. And when I was in ninth grade, I went to school in upstate New York. And a lot of my new friends that I had met in going to school in upstate New York were agriculture. You know, they would take agriculture classes, and you know, coming from Los Angeles being a city slicker when someone said, Well, you know, what do you have next period? I would ask them, they said, Ag and I’m like, What is ag entered. And, you know, they said, Oh, agriculture class. Well, you know, my grandparents were farmers, okay. And I would, I would live on a farm many summers growing up and learned all about farm life. And, you know, one of the things that they talk about is herd immunity. And when there’s a disease going around, you effectively end the spread of it, when a certain number of the herd get it. And the thing in the US that we don’t know is how many people have it or have already had it and just were asymptomatic. Okay, and depending on the are not value of the virus meeting, how contagious is it? That’s expressed by the R and the zero they are not. Okay, which you’ve probably all learned about, like I have during this crisis. Trump may know how, you know have some like he doesn’t know of course, but have a much better idea as to who or not who but how many people have already been infected. And he may be operating under the belief that in a few weeks, we’re going to be largely at herd immunity, and that he could be right about that. Maybe it’s just an instinct, I’m not sure. But there’s a lot of consequences. Don’t you know, don’t think this is a debate between money and health. It’s between, it’s between health only, and health and money that are inextricably linked, okay? Because, as this goes on with these quarantines, people are suffering depression, we are going to find that suicide rates have increased, we’re going to find the divorce rates increase, we’re going to find that kids are driving their parents crazy in Greece and vice versa. There’s a lot of problems to keeping the economy shut down, and many of them will linger for years to come. So this is not a small thing. It’s not about capitalism. Greed versus public health. Public Health is totally linked to the economy. Don’t Don’t be fooled. Okay.

Evan Moffic 10:08
It’s incredible. It’s so, so connected. And I do think I obviously am in touch as a parent of a 10 and 12 year old I’m in touch with other parents all the time and people are going nuts. And you know what I mean? We can have a whole separate episode this is getting too political but

Jason Hartman 10:22
well to political into family personal also. But

Evan Moffic 10:26
yeah, it is. But it’s it’s it’s really this has a huge effect not only on the economy is so much more complex than we get before. That’s why planned economies don’t work. You can’t plan for everything. Capitalism is so dynamic. It realizes how many unknown factors there are, how many. So one thing affects everything else and everything is interconnected. So it isn’t just public health versus economy. as you put it, it’s everything.

Jason Hartman 10:49
You know, look at how like Dyson just invented a new type of ventilator. Look at how Israel invented a new makeshift ventilator. Okay. That basically, you know, you just took up a little motor to the manual ventilator that they use in ambulances, right, but you have to keep squeezing. So it really is amazing. If we were under a centrally planned communist economy, this whole response would be dramatically slower. And don’t tell me Okay, well look at China. Well, look at China. Yeah, China responded very slowly lied about their numbers, and a lot more people suffered, that would have had to end. China isn’t really a pure communist country by any stretch of the imagination anyway, so you know, that’s a whole nother debate. So yeah, we’ll go from there. But but good stuff. Let’s get to part two of our show. Thank you for joining me and asking about this. And we’ll have more CPA talk coming up so you can really get into depth about, you know, the new tax and bailout provisions.

Evan Moffic 11:54
Thank you, Jason, for being our guide throughout this

Jason Hartman 11:56
My pleasure. I am happy to be your guide. And if you need us all of our investment counselors can help you one 800 Hartman or Jason Hartman, calm reach out, we’re here for you and let’s go to part two of today’s episode.

Okay, we’re doing this little bit differently today but Part Two you are stuck with me. Usually we have a guest on part two. I guess I am your guest today I am your guest today. So let’s dive into a few important things. First off, I want to make sure you are all following the four steps. Number one, stay calm. Number two, keep good counsel number three, keep your eye on the ball. Number four take action. We are getting so much news nowadays. It is truly overwhelming. And think of it like an artist. Okay. If you were one of the great masters or you were in a museum, looking at their Absolutely stunning artwork, say you’re looking at a Monet piece, one of my personal favorites, you can be up close to that piece of art. And you can look at every little brushstroke. But you’ll never really understand the true beauty of it, or the true significance of it without backing up and seeing the whole thing, seeing the big picture, right? taking it all in, in a larger context. And that’s what it is very important that we do nowadays, right? Because in four weeks, in six weeks, this whole crisis is going to look a lot different than it is today. And think of how small in infinitesimal amount of time that is. That’s nothing. Remember a couple of years ago, when many of you entered our five year plan, contract Just talking about your plans to build your real estate portfolio, your five year plan. And so many of you did these great videos, you did a great job of outlining your plan, really thinking about it and all that stuff. And now, here that the world is in pandemic mode, I hate to call a pandemic mode. We have to laugh a little bit right nowadays, because things are pretty serious out there. And so now that the world is in pandemic mode, you know, some people are forgetting about their plan, what plan what plan well, that’s why you have a plan to keep you focused to help you follow. Step number three, keep your eye on the ball, the big picture, okay? And this big picture doesn’t even have to be a very big picture. All I’m saying is six weeks, in six weeks, by mid May. This is going to look a lot different than done today. And by all the stats, and all of the numbers out there, when you look at the exponential growth of something like this, this is going to be a tough month. Okay? It’s going to be a tough month, we have to prepare ourselves for it. We’re going to get a lot of news this month, that is probably going to be the worst of it that most of the experts seem to agree this is going to be the worst month and then things will start to subside as the social distancing really, really kicks in next month. So part of the research though, that you want to do on this as Be sure you look up and you understand herd immunity, and be sure you understand the exponential growth aspect and what I mean I’m saying that in a positive way, because many of the math projection examples out there are really very wrong, because they don’t count social distancing measures and quarantine, stay at home. They don’t count people who have already been infected and can’t get infected again. Okay, so those people that are now immune, right, and also, they certainly don’t count the general concept of herd immunity. So very important that we understand some of this stuff. So we don’t look at these outlandish projections that simply do exponential math and think, Oh my god, the whole human race is gonna be wiped out. It’s not that’s not the way this stuff works. Okay, we will get through this. There have been many crises throughout history and hey, you know, most of the world gets through, okay, so stay calm. Keep good counsel. Keep your eye on the ball and take action toward your plan. Continue to follow your plan. That’s the important thing. Continue to follow your plan. So yesterday was April Fool’s Day, Happy April Fool’s Day. You know, it It was kind of a big day for landlords. Why? Because Well, our rent is due. And I’m glad to say one of my self managed properties. I was kind of concerned, you know, they pay me electronically, and they have a limit on the electronic payment of $500 per day. So last week, they paid me two payments, but that wouldn’t cover the whole rent. And yesterday, they paid the final payment. So all the rent came in. Okay, now, some of my properties with property managers, I don’t know yet. But you know, by and large, I think you’re gonna see most of your rent come in. Okay. But Bloomberg had an interesting stat that I think would be interesting to you and I posted this on my personal Facebook page and also on the Jason hartman.com Facebook page that any of you can please go like that and in review it you know, we’re trying to be better about this social media stuff and put more money content out there for you. But I said, What could possibly go wrong? snarkily and sarcastically, I’m saying that it’s April Fool’s Day, and $81 billion in rent is due. Some landlords won’t receive rent, then they won’t pay their mortgages. As you know, mortgage companies are doing forbearances that’s easy to get no problem. So if you’d like to skip several months of rent landlords just call up your mortgage company tell them due to economic circumstances, you need a forbearance, they’ll give you 90 days easily, maybe more. Okay, going on with what I posted, then mortgage securities will default, then the Fed slash government will create fiat currency out of thin air to bail everybody out. Hashtag pass the hot potato

and hashtag stay home stay well. So these are extraordinary times we’re in but when you Look at that $81 billion. Now, a lot of that is probably rent on commercial properties. Bloomberg did not make clear what that number meant. But you’ve got about little over 40 million households that rent in the country. Okay. And that consist of about 100 you know, almost 110 million people that are, you know, renting, right? And you look at how big these numbers are, they’re monumental. The rental housing industry is a huge industry. You know what that means? That means the government, the Federal Reserve, the powers that be, they’ve got your back, okay? So don’t worry, because just like everybody else, you’re getting your bailouts too. So don’t worry about it. Okay? Because you’re such a big part of the economy, that they meaning the powers that be want to make sure you are covered and you are taken care of your attention. voting bloc, you’re a giant, very important part of the economy. And compare this to some obscure business or thing that you might be doing right? You know, nobody’s got your back in a lot of endeavors and industries because you’re not part of anything big. You don’t have any automatic lobbying power. You’re not a big voter bloc, you’re not that important to the economy, right. But as landlords, you are very important to the economy. As real estate investors, you are extremely important to the economy, and politicians and the powers that be in general. We’ll take care of all of us. I know that sounds kind of cradle to grave ish, doesn’t it? Yes. cradle to grave. Hey, we’re all socialists. Now, folks. We’re all socialists now. Like it or not, that’s the world we find ourselves in. But you know, it’s interesting too, and how I talk about passing the hot potato. Even you know, when I did those recent episodes on the return policy, For real estate, Cheesecake Factory, you’ve probably heard this story in the news. They basically have like over 300 restaurants. And they told their landlords that they will default on the rent, they will not be paying the rent. And almost instantaneously guess what Wall Street did. They started buying Cheesecake Factory and their stock went up by 5%. So you want to make your stock go up, you know, go to your lender, and get a forbearance on your loan. So you don’t have to pay. Okay, you know, even if your tenant is paying you, they’ll still give you a forbearance. It’s totally illogical, but it’s just the times we live in right? Now, I’m not saying every lender will give you a forbearance. That’s not a sure thing, by the way, but if you don’t ask, you’ll never know. And the likelihood is they will give you a forbearance. You know, in all of this, it’s important that we remember all of those heroes. We have a show called the heroic investing show, as you know, and that’s always been Dedicated toward military and police and fire, first responders, emergency medical people and so forth. But really, that concept of heroic has to expand now, and it really does. And I want to just share with you, we sent out a little request just the other day asking for reviews, we hired a review company to survey us and get reviews from our customers and see what they’d say about us. And some people wrote reviews and some people recorded videos and we just got one from one of these heroic people. I did not know that he was on the frontlines of the healthcare industry helping take care of people. And this is what Andrew said in that survey. So thank you for this Andrew and if you do get an email or a text from us, asking for a survey review, please review us we’d really appreciate it.

Evan Moffic 22:58
Hello there I’d like to show With my review of Jason Hartman and the Platinum properties investor network that I’ve come to, to work with, my name is Andrew and I live in the Pacific Northwest. And I had always thought that investing in real estate would be a good idea and had always kind of thought about investing somewhere near my home. And I was luckily had enough wisdom at a time when I learned about Jason Hartman and his podcast, that I was able to apply that wisdom and change my mindset from local investing to national investing and also to just find markets that made a lot more sense than where I live. I’m not an expert in the field in any way, shape, or form. I’m not an expert in in investing at all but his group of counselors has great expertise and good advice and has helped me along the way as a beginner with not a whole lot of money to work with from the start. And so far, I’ve got those six properties and about three and a half years and I’m pretty happy about it. And it’s all because his team of experts and just his his knowledge and his time that you spent doing it, he can really guide you through it and his podcast is excellent. And I highly recommend it for anybody, whether you’re a beginner or an expert, there’s a ton to learn there, and it’ll help you get to the next level.

Jason Hartman 24:12
Well, thank you, Andrew, I very much appreciate that. And your investment counselor told me that you are on the frontlines of this situation and thank you for your service to there are a lot of heroes, people out there and you’re seeing really some of the best of humanity out there nowadays, you know, people that have to work, right, that have to be in you know, grocery stores and pharmacies, certainly medical people, people in you know, civil service of any sort. They’re in a higher risk and so definitely appreciate them. By the way, you can see this video on the front page at Jason Hartman calm and Andrew one of the things I love about that video, is that right behind you, you have our property performers on the wall, so that’s awesome. Okay, now another one of my predictions. Let’s hope this one doesn’t come true. But I have predicted that there is going to be among many things that are will change out of this generational change in our thinking, as an entire race, the entire human race, the thinking is going to change from this. I’ve predicted this will be a push toward a nationwide Rental Assistance Program like section eight, or maybe just expansion of the section eight program. I don’t know you may be receiving your rent from the government soon investors. So that’s one thing. I’ve also predicted that this will be a big push toward universal basic income, where everybody’s getting a check and think about it, you know, as philosophically as much as I don’t like these things as much as I want to be a libertarian and I don’t like collectivism and socialism, and I don’t, I don’t, but there are some perks. Okay. Think about it as a landlord. You know, your tenant won’t be able to tell you a tall tale, they won’t be able to lie to you anymore. Because they won’t be able to say, Hey, I didn’t I don’t have the money to pay the rent. Because if we have universal basic income, you know, they got their check. Okay, that’s it, right? Everybody got their check. So there’s that as a possibility. Or maybe you’ll be getting a direct check from the government, like those of you who who lease section eight housing and your landlords on the section eight program, and you’re getting your rent checks from the government. So I think there will be a push toward that. But also, I have predicted that this there will also be a push because the currency is a possible transport for the virus for the contagion. And there have been articles I’ve read about China in the us about the currency being dirty, right? It’s dirty money. We need to do some money laundering here, right? And not that kind of money laundering but There will be a push toward cryptocurrency toward a digital currency now, it won’t be Bitcoin it won’t be a theory and it won’t be any of those others. It will be a push toward a government and central bank sponsored cryptocurrency, a digital dollar or a digital euro or a digital yen. Well guess what? The United Nations is proposing a new global currency. Okay. And the United Nations wants 10% of the entire planets annually income to fund coronavirus relief and mitigation efforts. Okay. Yikes, that’s scary based on the united nations history and their oil for food program or, you know, many of their other scandals. I wouldn’t trust the United Nations as far as I could throw them and I don’t want a one world guy. By any means, I think countries need to have sovereign governments. I do believe there is a place for a United Nations and a collective. But certainly they should not be taxing the world 10% of its income. Think about that. That would be, what $8 trillion a year going to the United Nations. And then if they control a global currency, oh my gosh, that’s like, checkmate. There’ll be no cash privacy. That’s really something to even think of that happening. I doubt it will happen. But as the old saying goes, and by the way, this seems to have come from Winston Churchill, not rahm emanuel rahm emanuel just quoted it when it was convenient for his socialistic policies, you know, never let a good crisis go to waste. That seems to be a quote that came from Winston Churchill, which it also sounds like something he would say, you know, they’re using the crisis as an opportunity to intrude more on our lives. And one of the things I want to remind all of you, if you’re American, I want to remind you of I know it’s not Time to think about it too intensely right now we got other stuff going on. And we can afford to just put this in the back of our mind for the moment. But remember something called the constitution and remember, the first 10 amendments, the Bill of Rights, okay? Now, the government is going to use this crisis as an opportunity to trample all over the Bill of Rights. One way, as I mentioned before, is that you’re going to start tracking people through their phones, through their smartphones, to know where they’re located, to know if they’re hanging out in big groups of people. If that’s not legal at the time assemblies and think of it, the First Amendment guarantees the right to peaceably assemble. Okay, so this is an interesting thought experiment, okay. It really is. And the idea of them knowing you know, who is a risky person and who isn’t and who’s infected and who’s not Yeah, there could be some good in that for sure. But there could also be a lot of abuse. So just let’s not forget about the constitution and about the propensity of governments throughout history and throughout every place on earth and every time in history, the propensity of governments to want to intrude on the lives of their citizens. And let’s Always remember, we’ve got to fight that we’ve got to keep that in balance. Okay, we’ve got to keep that in balance. Okay. Anyway, go to Jason Hartman, calm For more on all this. Also, next week, we are going to be holding a webinar. Hey, now that Florida’s under lockdown, too. So we’ve all got time on our hands, right? And we’re going to be doing that we might be doing one of our conferences via webinar. So look for more announcements on that. Keep in touch with your investment counselor, reach out to us through Jason hartman.com or call us at one 800 Hartman and until tomorrow Happy investing.

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