Protect Your Retirement: Why Real Estate Outshines Gold as an Asset

John Harcar (00:01.824)
All right. Hey guys, welcome back to our show. I’m your host, John Harcar, and I’m here today with Jeremy Watson. And besides his journey in real estate and business, we’re going to talk about how single family residential is better than gold as an asset class. Remember guys, at Investor Fuel, we help real estate investors, service providers, I mean, really all real estate entrepreneurs, two to five X their business. We provide tools and resources to grow the business that they want to have to in turn live that life they want to live.

So Jeremy, man, welcome to our show.

Jeremy Watson 833-255-0055 (00:34.828)
Thank you so much. appreciate you guys having me.

John Harcar (00:36.97)
Yeah, I’m excited to talk about, you know, our topic of single family better than gold. I keep hearing a lot of put, you know, buy gold, buy gold, buy gold. You’ll tell me why not to. But before we get into all that, you know, why don’t you tell our audience a little bit more about you, kind of your background in real estate and business and you know, what brought you up to today?

Jeremy Watson 833-255-0055 (00:56.814)
Yeah, so my background’s kind of a long, complicated journey like most people. I’ve started somewhere between 17 to 30 companies over the course of my life. I’m 42. But I effectively started as an orphan. My mother passed away when I was young. My father, know, things just went badly when I was very, very young. And so I started kind of as an orphan, had to figure it out, a lot of it alone.

The long story short is I did that through entrepreneurship. would start a company, I would grow a company, I would sell a company. I would start a company, I would grow a company, I would realize it’s just not profitable enough, I would stop. I would start a company, grow a company, sell another company. And so that’s really my whole history with starting companies, fiddling with them, because I just really was playing without a net. I didn’t have family to really fall back on. so that was the first 20 years of my career.

Now, I had an opportunity pop up where I got to go work with like one of the preeminent financial services houses in the country in Salt Lake. And I went and worked there for 10 years and they just basically sat me down with a ton of clients. I advised them like $300 million for about 10 years, right? Built a big career there. And while I was sitting down with client after client after client after client all day, every day, and it was a cool experience because I got to sit down with people who were in their seventies, right? And who’ve had REITs for the last 30 years. Well, how do you feel about that?

Right? And I got to absorb how people felt about the assets that they had. Hey, you’ve got $500,000 in bonds. How do you feel about that? Right? I got to have these long conversations for a decade with people who had decades of experience with their assets and just really seeing how they felt about them. And in that experience, I realized that I was seeing just hundreds of millions of dollars of underperforming real estate come across my desk, just hundreds of millions like

The 1 % rule is the classic rule in real estate. think anyone worth their salt would kind of agree. If it’s worth $2 million, it should rent for 1 % of that a month. It should rent for $20,000 a month, right? In Northern California, I was seeing all the time people who were at a $2 million valuation on the asset, they would expect a 1 % return, like $20,000 a month. And they’re at $4,000, 3,500 bucks. And if you look at that and just pencil all the expenses out Northern California, landlord, not friendly state, like,

Jeremy Watson 833-255-0055 (03:13.581)
There was a lot of stuff and I was like, man, this is not even cash flowing. This is not even close. And so as I dug into that deeper and deeper over a decade of talking to people over and over, I realized the only reason they were holding these assets is because they were waiting to die. Like they were waiting for those pieces of property to step up in basis to their kids. They weren’t cash flowing for them. They weren’t affecting their retirement positive for them. They were just waiting to die. were balance sheet or like legacy assets just for the kids, right?

John Harcar (03:41.472)
Right, right.

Jeremy Watson 833-255-0055 (03:42.04)
where they bought them to be like a retirement asset. They had bought them to like actually pay some bills in their retirement and they just were not doing that. And so that’s when I ran into single family residential, like the turnkey houses, the rich uncles, the real wealth networks, the done for you real estate. And as I looked at the products that were going across, I said, Hey, I love the model. I love single family by five by vet hold long-term single family residential done for you kind of help you along the way. love that model.

John Harcar (04:12.054)
Mm-hmm.

Jeremy Watson 833-255-0055 (04:12.301)
But what I didn’t love was the vetting that I saw going forward. Like I had a client at that financial services house who bought a property in Detroit for $53,000 cash. And they were like, it’s going to rent for $900 a month. Now as one operator to another, if you get 900 bucks a month for $53,000 cash, you get inducted immediately into the real estate hall of fame. It’s like immediately like my hat’s off to you. You can have my trophy whole nine yards. Like, holy cow. But I knew on first glance in 2000 and

John Harcar (04:32.424)
Yeah, right.

Jeremy Watson 833-255-0055 (04:42.525)
15. I was like, oh, please tell me you haven’t closed. And he’s like, I already own it. Oh my gosh, he already owns it. And I just knew it was going to be disaster. It was in the wrong area. It was too cheap. There’s a there’s such a thing as too cheap in real estate. There’s a reason. Yeah. There’s a reason you don’t buy real estate for like or like sushi for like five cents a pound. There is such a thing as too cheap. And there’s such a thing as wrong market. And so he ended up having to freaking fly out to this Detroit property. He evicted three times in a year.

John Harcar (04:51.51)
Yep. There is, 100%.

Jeremy Watson 833-255-0055 (05:11.563)
He had to put money across every time. It cost him like four or five grand a time to evict. He kept having to spend a month, you know, night or two in Detroit to deal with this, deal with the new property manager. It just was a huge fiasco. Luckily for him, the house burnt to the ground and insurance paid him $88,000. So I asked him after the fact, I said, are you gonna do it again? And he’s like, no, absolutely not, absolutely not. And that’s where I came up with the idea of like, hey, I love single family, residential, find, vet and buy, but whoever helps you do that.

John Harcar (05:25.174)
Mmm.

Jeremy Watson 833-255-0055 (05:41.422)
has to have a long-term interest in the product. They have to have some vested interest in the success. Now in my financial services career, there are mutual fund houses out there that say, if you don’t earn a return, we’ll waive our fee. I always loved those funds where they’re like, hey, if you don’t earn a positive return, we’ll waive our fee. We’ll take some risks with you. Now they usually charge a little bit more to offset that risk.

But I loved the people who were like, we’ll put our skin right on the line. We’ll feed our meat right into the machine, right alongside yours, have a vested interest. And so over time, I started Bedrock and we started doing exactly that. know, find, vet and buy. We help you look at houses. We help you with expertise, find what houses are, how they work. But then our business management contract, which deals with kind of the hassles of single family residential, which it has, like single family residential.

John Harcar (06:13.057)
Mm-hmm.

Jeremy Watson 833-255-0055 (06:34.825)
is a little obnoxious. It’s a great asset, great returns, great long-term prospectus. Every big fund in the world is buying billions of single-family residential for reasons. It’s a good asset class, but it’s a little obnoxious. And so we said, okay, we’ll deal with it. We’ll make it not as obnoxious. We’ll sell the aspirin to the headache. And then if we can’t get you to a 4 % return, we’ll waive our fee. And so when we’re looking at properties, we’re saying, hey, can we get cashflow assets that actually get to a proper return?

And if they don’t get to a proper turn, we’ll feel pain right alongside our owners. Right? And so that was really the journey. I just saw a bunch of assets over a long time. I saw there was an opening in the market, a niche. I had started a lot of companies already. I knew kind of how to start a company, how to get it up and running. And then for the next six years until last year, we were just playing whack-a-mole, figuring out how to deal with all the little headaches that happen in single-family residential. So we’ve never done any marketing until this year. Like January was our first.

John Harcar (07:08.876)
Hmm

Jeremy Watson 833-255-0055 (07:34.409)
every effort outside of just repeat business, referral business, financial advisor, we know.

John Harcar (07:37.748)
Right. As you were getting started and making building this business, what were some of the hardest things? What were some of the things you struggled with up the get go?

Jeremy Watson 833-255-0055 (07:49.483)
There’s a lot in single-family residential that is particular and that’s obnoxious. I’ll give you Can I give you a like a two-minute running example?

John Harcar (07:59.369)
yeah, no go ahead, go ahead.

Jeremy Watson 833-255-0055 (08:01.549)
So I try to help people understand like there’s just a lot that goes into owning real estate anyone who says my property manager will just handle it all his bull crap. It’s just such bull crap because I would

John Harcar (08:11.36)
Yeah, that doesn’t work, man. I wish that did, but that doesn’t work.

Jeremy Watson 833-255-0055 (08:15.051)
Well, and unfortunately, turnkey houses make that pitch like, buy the house with us. We’ll give you a property manager. They’ll take care of everything. Property managers don’t set up an LLC. They don’t keep them in compliance. They don’t handle your bank. They don’t handle your HOA. They don’t handle any legal stuff that pops up. They don’t handle homeowners insurance claims when they happen. And some property managers don’t even do the things they’re supposed to do. They don’t let you know when the property is like it has gone vacant. don’t get repairs scheduled in a timely manner. so

Part of ownership is you gotta watch your property manager. Like we tell our clients, property managers are great as long as they’re watched like a rat in a cage. Like you’ve gotta watch property management because it’s an industry that kind of flourishes off the less work I do and the more doors I have, the more money I make. That’s a horrible conflict of interest, but it’s the way the industry’s developed. And so one example of what we ran into over and over and over is what we call like the HOH trap, right?

John Harcar (09:13.024)
Mmm.

Jeremy Watson 833-255-0055 (09:13.707)
We’re buying houses in all these markets where we don’t live. That’s our business. We’re looking for the best market, best cashflow, best diversified job base we can find. We’re buying a lot of houses where we don’t live. And when you get into that with any of these big companies, you get into the same issue because there’s a little one-off issue that pops up, which is you buy a house and you don’t know there’s an HOA. Okay. And the last hundred houses has happened twice. So let’s say it’s a 2 % HOA like stealth HOA rate, right?

And the reason for that is, and you as an operator would probably be like, well, know, seller disclosure forms are going to tell you if there’s an HOA, right? And that’s true. They should. But what if it was mama? Yeah. What if it was like mama’s house? Right. What if it’s not my house? What if I inherited the house in an area I don’t live? And then when I go through seller disclosures, I’m just going to NA, NA, NA, not available, not available. Right. Or what if the house, we bought a house where the parents had passed away, a six year old girl and inherited.

John Harcar (09:53.043)
Should.

Jeremy Watson 833-255-0055 (10:11.585)
the state sold the house as part of a probate and the state didn’t know if there was an HOA. And so about 2 % of the time we’ve called at least five different appraisers, hey, how do we determine if there’s an HOA? Because we had this problem pop up every once in a while and we said, okay, how do you resolve this systemically? How do you resolve it durably? Because every once in a while we just didn’t know. And what happens when you don’t know there’s an HOA? Well, one step back.

In a world where this makes sense, when in a world where real estate makes sense and where everything works the way it’s supposed to, homeowners associations really should be subject to someone, right? They really should report to someone. For example, I’m just gonna say the division of real estate, right? In the state where I’m shopping, I should be able to go on to the division of real estate and I should be able to type in the address and be like, hey, I wanna buy this house at this address. And it should say, just so you know, this is under this HOA.

John Harcar (10:41.708)
Ha

John Harcar (10:50.013)
Of course.

Jeremy Watson 833-255-0055 (11:08.129)
Here’s a copy of the covenants should be filed with the Division of Real Estate. Here’s the president, the vice president. Here’s the officers for you to get a hold of, right? Doesn’t exist in any state where I’ve ever bought a piece of property doesn’t exist. And the HOA has this nasty little ability to foreclose on the house because of unpaid dues, right? And so what happens in that 2 % of the time when you buy a house out of state that you really like is the, you don’t know there’s an HOA because someone just said N-A-N-A-N-A-N-A, right?

And so you buy this house and the HOA sends a bill to the address, right? And you’ve got a tenant there. The tenant looks at this and says, you know, Watson, LLC, whatever, whatever trash, right? They don’t open it, trash. And so the HOA slaps you with a $50 late fee and then sends the bill again. And then the tenant sees it and says trash, right? $50 late fee sends the bill again. And they’ll do that for 12 to 18 months, okay? Until the HOA fee and late fees.

John Harcar (11:52.204)
trash.

Jeremy Watson 833-255-0055 (12:02.797)
Like the HOA fees and late fees are like $1,500, $2,000, right? And then they’ll send the bill to a law firm, to a collection agency. And all of a sudden the collection agency looks at that and says, okay, like let’s figure out who owns this LLC. And they’ll do a 15 cent skip trace and they’ll find who owns the LLC. And they’ll realize, oh wait, the person who owns the LLC doesn’t live at this address. It’s like a rental, right? The person lives in California.

John Harcar (12:06.708)
Right, crazy amount.

Jeremy Watson 833-255-0055 (12:29.453)
And so they’ll send a big scary letter that says, hey, you’ve got $1,200 in late fees. You’ve got $800 in, you you got $1,200 in HOA fees. You got $800 in late fees. You got $1,000 of attorney fees, $3,000 within 45 days, or we’ll start a foreclosure process on your property. Right? It’s one of these whack-a-mole’s that we dealt with for first seven years. It’s like, well, how do you solve that? If you’re going to buy houses where the markets are best,

And if you’re going to buy houses where the numbers are the best, and if you’re going to go in and out of markets when they heat up and cool off, how do you solve this one random little 2 % of the time, HOA, this random HOA thing that we did, right? So what we did is we looked at that problem as bedrock. We just say, how’s a durable solution, right? And so what we do is we file when we buy the property and anyone could just use this. We file a UPS change of address form for the owner.

John Harcar (13:11.721)
Mm-hmm, mm-hmm.

Jeremy Watson 833-255-0055 (13:28.373)
when we buy the house and we forward all of the mail that was going to the LLC and any mail that was going to the owner to the owner directly. So the first HOA bill hits, it bounces straight to the owner, they scan it to us and they say, hey, I got an HOA bill, bam, Sam’s your uncle. Unfortunately, single family residential is full of all sorts of bull crap like that, right? Where it’s just these weird like,

John Harcar (13:52.716)
Right, right.

Jeremy Watson 833-255-0055 (13:55.022)
One off, York County, Florida has a franchise X size fee that you just, so yeah, absolutely. So single family residential has a lot of those obnoxious little things. We’re fine with it because we eventually find the whack-a-mole and kill it and build a durable system around it. And we have the thing notarized with UPS and we never worry about it again.

John Harcar (14:00.684)
or a special assessment.

Jeremy Watson 833-255-0055 (14:19.073)
But as far as people buying real estate with other firms that are just like, hey, your property manager will handle everything. That’s just like saying, hey, the lions are friendly.

John Harcar (14:29.9)
No, that makes a ton of sense. Well, in our last five and a half minutes here, let’s talk about what our topic was. Nowadays, I see a lot of buy gold, buy gold, buy gold, buy gold, right? It’s something better to place your money in. Why is single family residential for you? Why are you saying it’s better than buying gold?

Jeremy Watson 833-255-0055 (14:52.077)
Yeah, so that goes back again to my decade in financial advice. So I was lucky enough to serve a mission to serve an LDS mission in Venezuela from 2000 to 2003. So I actually lived in an inflationary economy that since then has become a hyper inflationary economy. So I’ve watched inflation kind of eat like a scramble and eat the nest eggs of a bunch of people that I love for the last two and a half decades.

And so I’ve been a lot more aware of inflation than most Americans who are 42, right? It’s just never been an issue for, it’s just never been an issue in my lifetime in America, right? The whole time I was in financial advice, I was looking at, hey, I’m more concerned inside of myself about inflation than most people because most people just aren’t that concerned. But I was always a lot less more internally concerned than most.

And I realized as I was giving financial advice and I was looking at products that the products that people give when people are concerned about inflation is like, hey, stocks go up if there’s inflation, right? Or buy gold. So kind of the US traditional recommendation has just become just buy gold. If you’re concerned about inflation, just hold some gold. And candidly speaking, it’s a terrible retirement asset.

Like gold doesn’t pay you a dime in retirement. Like gold’s only great if the whole economy goes to garbage. It’s really like an end of the world asset, right? But it’s a terrible retirement asset where you’re saying, hey, I’m holding this asset in case the world goes to crap. And I plan on paying some golf green fees and I plan on paying some medical bills in the interim. The reason I like single family residential real estate so much more than gold.

John Harcar (16:34.092)
You

Jeremy Watson 833-255-0055 (16:43.615)
is because they’re both assets, right? And both of them rise with inflation, right? Gold rises with inflation, real estate rises with inflation. But real estate, can leverage 80, 20 and gold, cannot. That means on a single family piece of residential piece of real estate, I can lock in at a 30 year fixed mortgage. Let’s call it 6%, right? 7%, wherever that ends up being. And as inflation happens, my rent will go up.

but my mortgage will stay exactly the same. I can lock in on a 30 year fixed payment and let inflation run away with my cash flow. And that delta, the difference between my fixed payment and the amount of rent I’m charging, because inflation does increase rent. My net spendable income day to day can go through the roof while my debt maintenance stays the same. On top of that, if I buy a house for $300,000 and then we see inflation, my value of the asset will go up over time, just like gold.

but my debt will stay the same and go down because I’ll pay that asset off. so, family residences beats the pants off gold because it has an income, which gold does not. You can buy it leveraged, which gold does not. Your debt position stays the same. Your rent goes up, but your debt maintenance stays the same. Your asset value goes up, but your debt position stays the same.

John Harcar (17:46.998)
makes sense.

Jeremy Watson 833-255-0055 (18:07.449)
None of those exist for gold. Gold’s just sitting under your bed in a box, or your pans on feed is stored at the bank, right? Where residential real estate, the con to it versus gold is it’s obnoxious. It’s an obnoxious asset class. It’s got like a million headaches with it, right? But the truth is, if you’re working with a company like Bedrock who specializes in dealing with it, then it’s a much better retirement asset because you can spend the rent all along the way instead of just having it sit under your bed and doing nothing.

John Harcar (18:13.26)
Right?

John Harcar (18:22.08)
Yeah.

Jeremy Watson 833-255-0055 (18:36.48)
except for waiting for the end of the world.

John Harcar (18:38.954)
Is that why most people, know, a lot of people will buy gold versus real estate just because it’s easier?

Jeremy Watson 833-255-0055 (18:44.523)
Yep, absolutely. And if someone wants to have gold, more power to them. I’m not saying don’t buy gold. I’m just saying as a retirement asset, when you look at what you really want out of retirement asset, what does no one want out of retirement asset to sit there and do nothing and only be valuable if the world ends, right? Everyone out of a retirement asset wants net spendable income to increase under inflationary conditions, right? They want the asset to go up under inflationary conditions.

And single family residential does that as well as anything in the market. It does it better than bonds. It does it better than nudies. It does a better than insurance contracts. It does it better than way better than gold because as at least income. So yeah, I just think a really undersung hero in the world of inflation planning. And now we’re starting to see inflation for the first time in the U.S. since the 70s. So people are really getting a taste of like, man, this couldn’t really change your whole dynamic with your net spendable income in retirement.

Right. And so, yeah, I just think it stops all over gold.

John Harcar (19:45.864)
I appreciate you coming on here Jeremy and sharing all this knowledge. If there’s folks that are out here listening and they want to get in touch with you and talk to you about some turnkey investments and all that, what’s the best way for them to get in touch?

Jeremy Watson 833-255-0055 (19:58.765)
So the website’s just bedrockinvestmentproperty.com. My phone number’s on the screen, 833-255-0055. That’s Bedrock’s main line. If you want to call and have a conversation, I’ll try to get you on the phone with one of our very, very best people. If I’m free, I’ll happily take that call myself. But yeah, just call the number. We’ll feel free to have a conversation. I’m not saying that single-family-based initials is the right fit for everyone. It might not be, but I do.

John Harcar (20:14.794)
Awesome.

Jeremy Watson 833-255-0055 (20:26.817)
definitely think in an inflationary economy where that’s a concern, it should be a consideration, a serious consideration. But to do that, you have to know people that deal with real estate. You can’t be in Northern California. All the numbers suck there. You it’s you’ve you’ve really got to have people you can trust. So yeah, just call us. We’ll have a long conversation. You’ll trust us over time and then we’ll do some business.

John Harcar (20:47.564)
That’s awesome. And we’ll put all your contact information in the show notes. So guys, you have all the way to get in touch. Jeremy, thank you again for dropping some good, good nuggets. Guys, hope you took some notes. I hope you enjoyed the show. And we’ll see you on the next one. Cheers.

Jeremy Watson 833-255-0055 (21:02.862)
All right, thank you so much. a good.