Podcast Interview—The Practical Wealth Show with Curtis May
Episode: Mortgages and Real Estate Finance for Entrepreneurs and Artists with Alejandro Szita
June 9, 2022
Episode summary:
In this episode, we had a great macroeconomics overview of where lending fits and how it helps to create wealth.
Highlights:
What does the word “capitalism” come from?
Is it true that resources are scarce?
What are the principles of money and exchange of transactions?
How do mortgages help people create wealth?
How can you document your income?
Why is it a good time to buy a property now?
How can you grow wealth for yourself and your community?
Podcast Transcription:
Intro: You're listening to the Practical Wealth Show with Curtis May.
Curtis May: Hey, welcome to another episode of Practical Wealth Show. So today we're going to talk about creating wealth, and I have the author of the upcoming book, Alejandro Szita. Okay. And so he is a, are you in California?
Alejandro Szita: I'm in California.
Curtis May: Okay. He's a mortgage broker from California. And so what's cool about Alejandro is that he's, we were talking, he knows a lot about infinite banking. And so we've probably been talking for 10 minutes before we start recording. We're saying some good stuff. We should be getting this down. But he works with, and he's gonna tell you about his specialty with entrepreneurs, with artists. And what was the third one? Business owners, right? And that is, and at some time it was hard to get money as a self-employed person, so that's why I wanted to have him on. And so he's got a book upcoming that's not quite done, but it'll be done shortly. But I like his thought process. Money: What is it? How it works, and how you can use it to create wealth and prosperity for yourself and your community. Okay. And so what he does is teaches the fundamentals of wealth building, answers questions, and the real question is, what is money? We might just start with that. And what is the value? So welcome to the, first of all, welcome to the Practical Wealth Show.
Alejandro Szita: Thank you, Curtis. Thank you so much for having me here.
Curtis May: Yes, my pleasure. So, tell 'em, give me a little bit about your, your backstory. That was interesting. You came from Chile and let's talk about that. And then let's talk about wherever you want to go. What is money? And then we'll just have a fun conversation.
Alejandro Szita: Okay. So I was born in Chile. I lived in Chile in the period from 1970 to 1973. When we had a, like a socialist government that took over the country. So I saw the transition, even though I was very young, I was like seven years of age. I saw what happened before the socialist government, what happened with the socialist government, how that ended very messily. And I saw a lot of things. I saw that our currency got completely devalued. Thousands of units of the currency became one unit on the new currency. So, a lot of what is happening today, I already saw it and experienced it when I was a boy of seven to eight years of age.
Curtis May: Oh, don't get me started with that. Let's go in the first second. I thought that might have happened with Chile. No, no. Because that's, see, this play has been run before. Okay.
Alejandro Szita: Many times. And many, and even, and even before 1973, I'm a history buff. When you go back in time, you can go way to the Roman Empire, to the Greek Empire. And the same reasons that got rid of big cities like Athens, Sparta, in the Greek period, or Rome, it's the same play. I mean, the actors changed. We have more technology. Things look a little different, but basically it's the same principle at play.
Curtis May: And so there's nothing new under the sun. And so we keep trotting out new ideas that, that we seem new and we've got all these college students, indoctrinated about Socialism, Marxism, and it, it's never worked in the history of mankind. Yet, we still keep trying to fix it. Right. It all ends up in totalitarianism. Right. And so the main thing is guys, if you want freedom and you want to be in control of your money, right? Because capitalism believes money is best spent, you are the best person to make decisions with your money. Right? And then Socialism believes that capital is best in the hands of the state in central planning. So I've shown this, Alejandro, to kids. I was like, which one would you rather have, oh, I want my money. Okay, you're not a socialist then, right? And you just gotta break it down to them, right? I mean, I had friends in Venezuela, right? And I got, this is like 20 years ago, and it was, Chavez was still there, like the early nineties. Like the first thing I started to say, oh, we got free college, we got this, we got that. Now look, so all you hear all this Bernie Sanders stuff, I'm, I'm gonna come off my libertarian reign. I'm sorry. You got me triggered.
Alejandro Szita: Not a problem. Curtis, what I wanted to say is this, one of the things that I detailed in my book is what we call the actual wheel of, how wealth is produced. How come we have all these things around us and we have such a high standard of living because compared to like 50 years ago or 100 years ago, even the poorer person today has a standard of living that was, either is higher than a person that was mediumly rich or mediumly wealthy. Just 50 or 100 years ago. So there is this concept that we call the wheel of wealth. How is the wheel of wealth created? And one of the requisites without which the wheel of wealth does not work is freedom. Freedom to actually transact. I'm not talking about freedom in an actual political sense, but in an economic sense, freedom between, let's say between you and I that we can transact on a service or a product.
Meaning that you alone would decide if what I have to offer is worth it and you alone would decide what is worth it for you. And on my side of the transaction, I have the same rights and the same mindset and frame of mind. So between you and I, we will decide what to transact and you and I will assign a value to it. That process, we do it every day. We do it every day. We do it at home, with our family. We do it when we go to the store. That basic process is the building block of everything. Once you start to interfere with that process, no matter the reason, it could be a good intention or bad intention, it could be because you think it's best. Once you interfere with that, and once you interfere with that at a macro level, is when everything starts to come down.
Because it's against nature. It's against the nature of the participants in the transaction. And like, like, again, I'm not talking in a political sense. I'm talking in a purely economic, transactional sense. And this is regardless of any society, you could go to China. China is a very good example. China, inside China is not a communist system. China is as capitalist as we are today. One more thing very quickly I'm going to say, is like when I was at the University in Chile, we had a course about Karl Marx. Karl Marx was a loser. Karl Marx was a loser, not because he didn't make money. Karl Marx was a journalist who made a lot of money. For the time, he got paid about 100 pounds or 70 pounds for each article. This is in the 1870s.
That was a real fortune. But his money skills were so bad. He managed to squander all of his wealth. About half of the children that he had, died because of malnutrition. Because he wasn't there. He was not a good father. He did not create anything. By the way, he went to the British Library. He read texts from the 1600s and the 1500s from other philosophers, and their names escaped my mind. And that's how he came with the quote-unquote Capitalist Theory. The word capital, under the word capitalism, was invented by him. So that's why I never want to use the word capitalism, because that's a word invented by its enemy. That's right. That's right. That refers to a personal opinion. You see, the whole of Marxist Theory could be explained like this.
Karl Marx says, you work in a factory, you get paid 10. The what he called capitalist sells it for 50. Therefore, he's exploiting the worker and therefore he's pocketing 40 because he's selling it four 50. He's paying 10, he's pocketing 40 that he shouldn't pocket, therefore he's an exploiter and blah, blah, blah. His whole theory, all of his seven books that he could not finish, called in German, Das Kapital, which basically stands for the capital, he could never finish. So the guy that gave him the money, Engels, is the one that finished the book. He's a total failure. His theory is just personal opinion that is not even based on him, is based on some guys from the six 16th or 17th century. And today in the universities and in the hall of learnings, he's been elevated to the rank of philosopher. He's being elevated to the rank of visionary. And he's, he was none of that. Actually, his life was complete, he was a loser. So this is very interesting to see that all of these ideas we have today that we're using come from a guy that spent all of his time on a library just rehashing stuff that was already proven false already in the 1600s. Isn't that incredible?
Curtis May: That is incredible. Wow. All right. Let's talk about mortgages. I wanna, let's talk about, cuz I wanna make sure I talk about your thing. Okay. Because we can have an hour on that.
Alejandro Szita: Yes, I know, I know.
Curtis May: But I might come back and have you do that. Because I like economics.
Alejandro Szita: Yeah. I'm saying this because it pains me that we're taking decisions based on the loser from the 1800s.
Curtis May: See, that's the point. See, so he's coming from that. A lot of people are running from that and they already see the signs of it here. And they're like, America's so stupid. This does not work.
Alejandro Szita: It's not stupid. It's a battle of the mind. One thing that I noticed when I came to America, I don't, I don't know if you read the book 1984,
Curtis May: No. George Orwell.
Alejandro Szita: George Orwell. George Orwell was not his real name. He was a soldier in the Revolutionary War in Spain. In the thirties in Spain, the communists actually tried to take over the country and there was a civil war between 1930 and 1936. George Orwell was a writer that was on the side of the communists. Once he realized what the real plan was, once he saw it with his own eyes, he changed. And he wrote what he believed was a fiction that would happen, if you're in 1930, 1936, 1984, looks like really long ways ahead. So he wrote what the plan in 1930 was if they won the war on the communist side. One of the things he says in the book is that you start changing the words. You started to, you start to say words and attribute the opposite meaning. Like, I give you a quick example, and this is not to frame, and it's not to insult anyone.
When I came to the US years ago, I found that there were these people calling themselves liberals. Liberal comes from the Latin liberal, which means freedom. So I thought, oh, that's great. I'm a liberal. And then when I started to see what their plan was, what they were advocating for, I said, but this has nothing to do with liberal. This is socialist, it's communist. How come they call themselves liberals? Same with the word progressive. There is nothing progressive about progressives. The progressives were already tried in Athens 200 years before Christ. And that failed utterly. So there's nothing progressive about that. And like that, you go on and on about the word capitalism, that really was invented by Karl Marx to describe what he believed was an unfair practice that he saw. And so on and on. So this is the battle of the mind. It has nothing to do with economic concepts. It's the battle of the mind. And the real battle takes place within your ears.
Curtis May: That is fascinating. So one of the things Jim Rohn says, economics is major. And I, it's so important. Because economics is not like this science that they try to make it about. It's from the correct me, the Latin root is, I always say it wrong, economos, which basically means house manager. Right. It's just, scarce resources. And you're managing, here's my income and here's why I need to spend it around my household.
Alejandro Szita: Sorry to interrupt you, but this is very interesting. I studied, again, when I was at the university, I studied business and economics. And one of the first things they teach you in economics is false. They say resources are scarce and therefore you have to allocate it. That is completely false. Resources are plentiful, but, and don't want to go into that cause it would be like two hours. But one thing is this, like you correctly pointed out, economics comes from a Latin word, which ultimately comes from Greek, which basically means house management. How to correctly manage your household. Not because resources are scarce, but simply because a good house requires proper management. That's all economics means.
Curtis May: Wow. See, so it's not complicated. This is kind of what I do. I tell people, look, you can't control the economy at large, but you can manage your, what I call your personal economy, which is your production and consumption as a family. Right. And so one of the things that we're talking about with mortgages, because like ours, this is so interesting to talk about because like our monetary system is based, it's debt based because the dollar is a federal reserve note. And it's based on debt. And so, because it's based on debt, and so I want you, because what happens is, Alejandro's where, because we haven't talked about rates, mortgages, whatever. Because you are starting from a macro position of understanding the world and what's going on and everything. And now you can go, cuz his principles, the way we always teach it, is principles first, then principles drive strategy. Right. And strategy drives tactics. What you do, the products you buy, and so I always approach stuff, that's a framework of how I think about all this stuff. And so what are, talk about, so many questions flowing through my mind. Start talking about something. So talk about money, our debt based stuff. Just share your knowledge with them.
Alejandro Szita: This is the interesting thing. The principles of money and exchange of transactions, they survive and they take precedence over the debt money system. Yes, we're in the debt money system, but that only complicates things a little bit. But the underlying processes are exactly the same. So whenever you're going to transact, you and I agree on a value, and you and I agree on a product. Regardless of what we used to exchange. Could you repeat your question again?
Curtis May: I guess so being that you, how do you see what you do? So you are in mortgages. Right? What do you do? Like what is the, what is it, why do you do it? What do you do? Let's start with that and then we'll, I'll go a little bit deeper because you think about this stuff differently from anybody I've ever heard. And yet you're using this vehicle called a mortgage, but your focus is on creating wealth. How does the mortgage help people create wealth?
Alejandro Szita: In the following manner. Yes, we're in a debt system and yes, we're in a system that is far from optimal, but still like people that are like, I consider myself an example of this. Somebody who is a business owner, somebody who is an entrepreneur. Like a budding entrepreneur or an artist, always has a problem getting a mortgage. They always do. They don't fit the boxes. So basically, what we do is we see what they are, we see what the boxes are and we make them qualify for a mortgage so they can access the fruits of this debt system. Because even though we're in a debt system, it doesn't mean that you cannot be successful. It doesn't mean that you cannot make your dreams come true.
Debt system is something that is beyond my control and it's beyond most of my client's control. So we have two options. We have the option of going into a mountain, doing it all by ourselves, which some people do. And there is nothing wrong with that and I don't want to put those people down. But for the vast majority, that's not a viable option. So since this is not a viable option, how can you still keep your integrity, but at the same time use the debt system in a way that enhances your life. So there is a section, I was reading a survey the other day, that says about 6 million people in the United States belong to this category of the self-employed, the business owner. That is a very small segment when you compare it to the tens of millions of people that work for a company that has a W2.
So that's why the industry, that's why the lending industry doesn't really care about those people. They actually call them the non-QM crowd or the non-qualifying mortgage crowd. Now, when I say non-qualifying, I'm not saying they do not qualify, because they do, this is just a term that was, again, you have to go to the words. This was a wording created by Fannie Mae and Freddie Mac, which are the main agencies that buy mortgages to describe people they would not mortgage. See what that means? But what I see routinely is this, I see that my clients do qualify. They do have money, they do have cash flow, they do have assets. They can pay for the mortgage. However, they cannot get it because they don't fit the boxes. And that to me, irks me very much. So I do this not only because I can make money, I do it because I don't see many people doing this.
Curtis May: Because it's work. Right. Because you got to know how to read 1120. You got to learn how to, and most people, most under lot of, I won't say most, a lot of underwriters don't know how to do that. A lot of loan officers don't allow it. So they want to be like, simple, let me see your W2, blah, blah, blah. And so talk about that because I think that most of my audience are like business owners, like real estate investors. And it's, so when you're looking at that, what's different about how you see them and begin to underwrite them and help them get into debt? Like look, tell me about that and maybe how they need to kind of begin to organize themselves, that's two questions, I'm sorry, to qualify to work with somebody like you.
Alejandro Szita: Okay. Usually what I do is, I look at the whole picture right away. If they come to me and say, Alejandro wanna buy a house so give me the best rate, because that's usually the approach. Yeah. And it's never about the rate. But I don't say that because if I say it at the beginning, they will think that I do not understand them. So I approached this from a financial planner point of view. I said, okay, you wanna buy this house? Cool. What is the house? How much is it going to cost? And then I start from that point, I start from the macro to the particular, rather than saying, send me your tax return, let me run your credit. I, I don't go that way at all. First of all, I spend about an hour just listening to them. I listen and then based on my listening, I start to do my calculations in the background.
Sometimes in my head, the guy says, I'm a business owner, I wanna buy this $2 million home. Automatically in my mind I go, this is gonna be like a $9,000, $10,000 a month payment. And then once I finish listening to him, if everything he says, by word of mouth, fits, then I go to the next step. And my next step is very simple. I just ask for very limited pieces of information just to confirm what the person described to me. If that now fits, then it's when I go, okay, you know what? It looks like you will be qualified to do this, you need to go a little bit deeper. Why don't we proceed with the mortgage application? But the mortgage application comes later, doesn't come at the beginning, comes only when I see that they can really qualify. And I can tell you that for business owners, I had this happen many times when they called me and they said, Alejandro, I don't know if you can help me. I have already been rejected by two or three mortgage brokers. What can you do for me? We will routinely qualify those people. The number one mistake that people assume is that because they have a lower credit score, they won't be able to access a mortgage. The mortgage or a loan is based on income. Income is the foundation of the loan. That's 90% of the loan. If you can demonstrate that you can make a certain income, the loan is 90% done. Then credit, if so, it can be priced because they had, they use what they call a risk based model, which means, I'm not saying that I agree with this, but this is the way it works, if you have a lower credit score, they're going to ask more of you and they're going to charge you more. Which doesn't make any sense.
Because if you make less money and you could default, why give you a loan to begin with? If they charge you more and you are at risk, guess what? You have more chances of defaulting. But they don't think that way. They think, well you're riskier, we're gonna charge you more, we're gonna make life harder for you. So now you can really default. And then they're gonna say, yeah, you were right. You see, you didn't qualify. So 90% is income. I would say 20% is credit. And then the last piece is the collateral. People go, well I have this house, it's worth a million dollars, it's paid off. How come nobody can give me a loan? It's because collateral is the least important piece of the loan. So you have income, number one, 90%, credit, 10% and a little bit, collateral.
So for a business owner listening to me right now, or an artist, this is what I would do. How can you document your income? And you can document it in many ways. For that, you can call me, you can send me an email and we can work around that. Then I will work on the credit. By the way, usually in one to two months we can help people with their credit. Even though we don't do that. That's not what we do. We don't charge for that. But we'll routinely help people with their credit, to get 50, sometimes 100 points increase just by making a few changes. And there is a guy on the internet, his name is Philip Tirone, and he has a website called 720 Credit Score.com.
But he has, we have no affiliation, by the way, with him. He has the best system. If you want to improve your credit, it's the best, bar none, that I have ever seen. So basically the way we help people to answer your question is by listening, seeing how there are like eight ways to document income. So by listening to the person, I already see which of the eight ways, this is in addition to tax returns by the way, which of the eight ways we're going to use. Then when we're going to credit, if we can do something or he or she can do something to increase it, we rather wait a month or two and do that, rather than do the loan right away. And then one thing that I focus my attention on is, okay, once we do all of this, we can make a payment. Many thousand dollars per month. I spend quite a bit of time saying, okay, can you make this payment? Are you able to make it for the next five years? Sustainably? Meaning that you're not like, ugh. Feeling that you're gonna die every time you make this payment. Why five years? Because after five years, inflation alone is gonna make that payment less, even though it's the same number.
Curtis May: Yes, yes. That's because I tell people like, that's why you don't want to pay your house early because inflation is already doing it for you. Because your income goes up, so that payment feels less than it was when you started just because the, you know, purchasing power is going down and so that's one of the ways to use debt to put you on the, how you can benefit from inflation, so to speak.
Alejandro Szita: Yes. And let me say one more thing that I learned a long time ago in the nineties. I went to a financial seminar in England. At the time I lived in England, and that was the best financial seminar even today that I ever went to. There is one, one thing is the theoretical side and one thing is the practical side. So the theory, you could have all these formulas, you could have all these investment strategies, but then it comes to practice. This is what happens in practice. Unless you are forced to pay a bill, you won't pay it. That's why people don't invest in life insurance, which is the best investment there is. That's why people don't save. Although saving doesn't require much explanation or any kind of school degree.
Everybody knows that's what you should do. But pretty much no one does it. Why? Because there are two practical laws. One law says that you will spend every single cent that you think you have, or you make. You think that you have. Example, your boss comes in, says, hey Curtis, I'm gonna give you a race. I'm gonna give you a hundred dollars more per week. Guess what? He hasn't done it yet. You haven't even received a check. You already spent a hundred bucks. I'm guilty of that too, by the way. 'm not saying that. I'm completely new to this by the way. So rule number one, you will always spend all of the money that you think you have. So how can you save, how can you invest in a whole life insurance?
How can you get any money thinking like that? Rule number two, you have to make the saving a necessary expense. This is where the mortgage comes in because many people will attack me, will say, your mortgage is not a good investment. Paying your house down is not a good investment. And to a certain degree they are right. But let's go to the practicality of it. If you give a mortgage coupon every month that you have to pay, you view this as a bill. You don't view this as a saving vehicle, but guess what? Every time you pay that mortgage, some of the money is coming back to you. Some of the money is coming back to you all of the time. I'm not even talking about the tax deduction or other things. Now you might say, yeah, but you know, instead of paying your mortgage, you should do this, you should do that.
And it's true. I'm not saying you shouldn't, but when it comes to what you will do, when it comes to what I have seen over 15 years, this is what I've seen. People have been paying their mortgages. They have been like being completely saddled with bills, worried they don't know what to do. And then after a few years they have all this money. They didn't know where it came from. It came from paying your mortgage cuz you have all this equity build up. This is not even considering the appreciation. Because you also get a little bit of appreciation. Although we are getting into very uncertain times. So I don't know if this appreciation will continue. The rate has been, but paying your mortgage the way it can help you, it makes savings and a necessary expense. And you could argue, well, it's not a good strategy. You don't get a good rate return, you shouldn't do it. All of that is true. But when it comes to practical terms, if you're going to do nothing else, do it. You need a place to live anyhow. In most parts of the country, buying is almost equal or better than renting. Except if you're in southern California where we are, which is a little dicey, but apart from Southern California or northern California, most of the country, it makes sense to do that.
Curtis May: I love that. It's like you should, you know, one of the things like with Richard in Babylon, he says, make up your home a profit investment. But what I take, that to me, is one of the things you said was don't, what is the payment. Like it shouldn't be more than, I remember when I was doing it, it was like 35% of your, a lot of people, I see people and their ratios, like it takes two payments of their job to make them struggling. Right. You should be able to make the payment in one of your first checks in a month. It should be able to cover your mortgage. Like little stuff like that. It needs to be, so that you're not stressed out because the house, if the mortgage is too big, well they don't come with furniture last time I checked. Right. And you got to light them, you got to heat them, you got to landscape them. So you have to, each expense like that has an orbit of other stuff that goes with that. And a lot of times people don't look at the total scope. I was at a meeting last week, I was in San Diego as a matter of fact. And we call it your housing expense. Like it costs money to sleep indoors. So whether you rent or own, you'll always have a housing expense.
Alejandro Szita: Yes.
Curtis May: Right. And as part of your life, because you wanna sleep, you don't wanna sleep under a bridge. Right. And if you pay a house off, you still have to build. You still got a tax, you still got to light it. So you'll always have an expense allocated for housing that will never go away. So that's, and the key is to make, take control of the equity. But I think that, because one of the things that if, for example, we talk about, we talk people out of making big down payments. Do you agree with that before I go here, more than they have to.
Alejandro Szita: I think it depends. I think it depends. Like I said, I approach this scenario from a financial, professional point of view more than a mortgage professional. There are two things at play. I remember this family that I helped buy a house, their monthly income, and the house, and what they could afford to pay on a house. Was a certain ceiling. And it was no more than that because the husband and the wife didn't make any more money. Here in Southern California, that was almost impossible for the kind of money they could afford to pay monthly. There was no house selling for that price. So their family said, you know what, we'll give you the down payment. And they were willing to give them a down payment big enough so the debt became within what they could afford. So in that case, I would say do it because you're gonna spend the money anyway. You need a place to live. Now all you are buying is 30 days to be at the place. That's it. All your, let's say, let's just get a number. Let's say it's $3,000. The $3,000 go and they buy you, let's say for the, you pay $3,000, all you get is the right to live there. After the month is over, you're done.
Curtis May: Right.
Alejandro Szita: If you pay a mortgage, at least a thousand start coming back to you right away. And then eventually half and then eventually all of it comes back to you. So you're getting more and you're getting the possibility of appreciation. Now that's one case. Another case. We are living very interesting times right now where inflation is really skyrocketing. You know, and this is the beauty of this, when you let people free, they don't have to be an economist. They don't have to have a degree. People that have any money lying around, they already sense that their money is at risk. And I'm not talking about, let's say you have a hundred thousand in Wells Fargo, I'm not talking that somebody's going to steal that money. But if you have a hundred thousand dollars in your bank in a savings account, I don't have to tell you anything. You already know that it's just a matter of time. Very short time between those, that those hundred thousand are not gonna be a hundred thousand anymore. The statement still is gonna show a hundred thousand, but you know that you're not gonna be able to have the same purchasing power. People already know this. So this is what I'm seeing. And again, not from a theoretical, from a practical viewpoint. People instinctively know they need to get the money, put it someplace, otherwise it's gonna disappear. It's gonna remain there in terms of numbers. But in terms of purchasing power, it's gonna disappear. So I see a lot of people paying big chunks, big down payments now on homes. Why? One, homes are very expensive. But two, they want that money to be someplace. So even if everything goes bad, there is something that they can say, my money is here. If we were in a perfect economy, if we were like in the 1970s or in the 1980s or in the 1990s or the beginning of the 2000, and you said to me, Alejandro, should we minimize the down payment and maybe with the rest put it on a financial instrument, I would've said yes. Yes. All day long. But when things get tough, like now, and when things get uncertain, then if you say, Alejandro, you know, I have this hundred Gs, I'm not a financial advisor. I don't understand these things, I just want something simple. Buy a house.
Curtis May: So why is it good to own property? So it's your house. It might be an investment property. Maybe in your opinion, as a banker, as a mortgage broker, why do you think it's always a good time to own property, but why is a good time to own property now?
Alejandro Szita: I think it is good to own property at any time. Timing the market never works. I will never forget this article. In 2005 when I started my mortgage career, I read an article in the magazine, there was a couple in LA wondering whether or not they should buy this $300,000 home. Because according to them, it was really worth $250,000. That was the top of the market, or it started to be the top of the market, although the market didn't come until 2007. And that house that they were wondering whether or not they should buy for $300,000 today is probably $1,000,000. And this is what I've seen over and over, not just in Southern California. I've seen this in Chile where I come from, I've seen this in Mexico. But I'm gonna take the Chilean example because people might think, well we're in the United States, we're an exception. I'm gonna take Chile. Chile is a country that even though it did very well, unfortunately, what is happening here already took its whole turn in Chile. So Chile is doing very badly right now. One of my best friends, she's a university professor. So she's sort of okay. She bought an apartment. I'm not talking about a house, I'm not talking about an investment program. I'm just talking about a regular apartment. Few years ago, today, that apartment doubled in value. That's in a country who is now socialist, that's in a country that is now going downhill, that's on a currency that is not the US dollar. So this, I've seen it, I see it over and over. If you have limited funds, if you are not an expert, if you are just a regular person that enjoys your job or you want other things in life, you don't wanna spend all your time looking at charts.
I have a brother who has like three monitors. He plays the market, he's up at six o'clock in the morning. But that requires a certain kind of person. If you're not that person, if you're a normal person, and you want to leverage your income, buy a house. Why? Because you are gonna make this payment. This payment is gonna hurt you at the beginning. But as years go by, the payment is gonna become more and more insignificant due to inflation. And then all of a sudden, 5, 6, 10 years from now, you're gonna see all this money that you don't know where it came from. It came from what you pay on your mortgage and it came from the appreciation on your home. You see the people, the rich people, that's how they make their money. Rich people don't make their money by working for someone else.
They make their money by owning assets. As those assets could be properties, they could be businesses, they could be systems. As those assets increase in value, their portfolio, their value increases a lot more than what they could if they just worked. So it's not that they don't work. Some people say, well rich people don't work. They do work, they do work like crazy by the way. 12 hours a day or more. But their money doesn't really come from that physical work. It comes from the appreciation of the assets that they create. That's, by the way, that's by the way, what Karl Marx did not observe. He thought that the business owner, by taking the $40, I mean to spread between the $10 he paid the worker and the $50 he sold the product for, he saw that he didn't give any value to those $40. He didn't give any value to the entrepreneur. He didn't realize that because the entrepreneur risked his life, his capital and probably his family to create the condition to be able to pay the work at $10 every month, no fail. Because he did that and because he created the system, that's why he could pocket the $50. He didn't realize that it's not just a matter of making a product. You have to make it, you have to sell it. You have to give value to the consumer, otherwise the consumer is not gonna pay anything for it.
Curtis May: Yeah. I mean it's funny because you're like in the niche. You focus on people that are kind of out here making it happen. They really need somebody like you that understands what is going on and the bit of pressure that we have to make payroll, to do all this stuff where we're handling a lot of money. But, you know, so the cashflow is there. But, cuz what I think that teaches people is that planning is different. That's completely opposite for entrepreneurs than it is for employees. And you, a lot of people go into business and they'll do the Suze Orman and Dave Ramsey stuff, but it doesn't work for business owners because it's, they're teaching you to send money away from you. Right. And where you need control, use control of your capital because you can actually make your business make more money than some fund manager you never met.
Alejandro Szita: Exactly. Business people and entrepreneurs work on cash flow. They don't necessarily work on profit and loss. Yes, they do make a profit. But they work on cash flow. For example, they have a thousand dollars, they have two options. They can pay a bill or they can put it in their business. An entrepreneur will immediately put it in the business. And say, you know what, I'm gonna be late on the bill, I'll pay the $30 or whatever late fee, I don't care, I'll pay it. And this is where he comes in juxtaposition with the system. Cuz this is one more thing that I want to tell you, credit scores do not measure your success. Do not measure whether you are responsible. They do not measure whether you are moral. All of those thoughts, in my opinion, are propaganda. The credit system was created by bond holders to be able to spot the people that would make them the most money. Think about this. If you are a bond holder, if you have a hundred bucks and you want the hundred bucks to give you every month a certain return, you want to look for those people that would do that. You don't want a business owner that is gonna say one month, you know what, I'm not gonna pay you now, I'm gonna pay you next month. You're gonna charge me 30 bucks. I don't care. I'm gonna do this other thing. Now you are the bond holder, no, I need that income. So you are gonna immediately create a system that puts those people away. You don't want those. You want the guy that goes to work. You want the guy that comes home. That pays all of their bills first.
And what is left, if any, is what they have. A business owner doesn't think like that at all. A business owner gets all this gross income. Obviously this income is not his because he has to pay employees, he has to pay for the product, he has to pay for taxes, he has to pay for bills. But a business owner doesn't think like that. He thinks, okay, I got all this money coming in, how can I multiply it quickly? Like two times, three times. Yeah. I'm gonna be late here, I'm gonna be late there. No problem. I'll pay the fees. It's not that the business owner doesn't pay. They do. But to them, the late fees are just the cost of doing business. They're the cost of financing. Now that's at the beginning. When you're starting. Once you become more successful, now you can afford to hire a CPA. You can afford to hire a financial planner. So you become quote-unquote, responsible for it later, but not at the beginning.
Curtis May: So you just described my life.
Alejandro Szita: But then the credit system is gonna penalize you. You are a bad boy. You know.
Curtis May: My credit was jacked. And it was bad because I'm in business, I was working with somebody briefly, like 13 months, the longest job I've ever had, right. And I was still, within 13 months, it was as far from a job as you could have. I was still doing financial services, doing the teachers' retirement plans, at the school district. And I still figured out why I hated it. Why was your credit so bad, because I've been in business for the last 15 years. I knew I was totally like that, because I would just make money and do what I had to do. And I didn't even, now I see you got to manage it better. You want to have access to other people's money. So you do need to get control of it. But it's good that they have someone like you that specializes in servicing a self employed borrower, or if you're an artist, I think that you need somebody that can advocate for you to understand your life, your cash flow. And that's really a cool thing. Let me ask you this last question, because but you got so much stuff we can go into, I would definitely get you back on, just allow me to nerd out on economics for 20 minutes. I appreciate that. In and of itself. But how do you, because one thing, this is kind of the premise for your book, and I want to cut you to kind of set this up is how, in your opinion, how do you grow wealth both on your own and that of your community? I'm really interested in your take on your philosophy around it. It's probably a long answer. But, you know.
Alejandro Szita: I'll try to make it simple. Yeah. It's through relationships. You have to cultivate real relationships, when I mean relationships with your community, even this conversation is the relationship because now I know you, I know what you do, you know what I do. We spend a lot of time here on the phone, on the internet, on Facebook, those relationships are ephemeral. Easy come, easy go. Just put an ad on Facebook and say tomorrow is my birthday, I invite you. See how many people show up online? If one person shows up, that will be great, let alone in person. Why do you? In my opinion, what we should do especially now that times become hard. We need to create physical, real relationships with people because the economy and money is a social construct. Money is not really money. Money is just a symbol that we created. So we can exchange things between people. Yes, there are rules of money. Yes, there are certain rules, like you need to sell something for more than it costs you. And there are a bunch of rules like that. But essentially, money is a social construct that allows us to exchange physical things and things that we do for each other. So that tells you right away, we have to have a relationship. If I don't know Joe Blow, and I call him on the phone and say, hey, I want to sell you a mortgage. He's gonna say, if he says anything, I'll be like, yeah, just hear it. Click. But if I meet Joe Blow at a cafe, we exchange, he knows about me a little bit. And then I say, hey, Joe Blow, have you ever considered getting a mortgage? And he says, you know, as a matter of fact, I was thinking about it. Do you do mortgages? Yes. That's how everything begins. Sales people know that. Innately. Sales people, people that are good at relationships, they know innately. Business people by the way, entrepreneurs know that too. They know you cannot sell a product unless you really meet people. Now, you can do it online, you can do it through an ad but the ad and the online and all that only gets you somebody knocking you out the door. Now you need to do the real work. I can put hundreds of ads online, but when they call me that's when the work begins. All those ads, all the marketing, all the phone stuff, all that Facebook, whatever. It's just to have somebody knocking on my door. Now I need to do the real work. So, because money is the result of things we do for people, and this comes back, I can't take the credit for this, this was a German business consultant that said it in a seminar that I went to in the 1990s. He says, When you don't have money, what does one do to begin with, right away? Curtis, if you don't have any money, what is what you do?
Curtis May: I'd try to figure out something I could sell to somebody. Solve problems that I can, I mean, I think that way, now it's like…
Alejandro Szita: Now you think that way. But most people will go, most people, I need a loan. Exactly. When we don't have money, we think, okay, the solution is money. That's wrong. Why? He said, money is the result of having exchanged a service or a product with someone first. And then as a consequence, you get the right to obtain money in return. So if you don't have money, or you're worried about money, the first thing you need to do is find people that you can do something for them. It doesn't have to be a product, it could be a product, it could be a service, it could be whatever. And you might think well, you know, that is too much work, I need to do marketing, I need to talk to a lot of people at the beginning, I'm not going to make a lot of money. But there is no other way. Unless you have a rich uncle. Unless you get an SBA loan from the government, free money, unless you get something like that. That is not, by the way, natural. There is no other way. So you can wait until you drown, or you can start acting now. But it's not going to be any other way. Because even when you're drowning, you still are going to have to go out, talk to people, see what you can do for them. Train yourself, that is not going to happen overnight. Train yourself, you see, this society where we live now where everything is instant, has made us forget what it really takes to survive and to prosper. All of these are tools, the phone and so on are tools. But we still need to do the same legwork. We need to go out. We need to meet people. We need to train ourselves to find a product that people like. And we need to keep at it until we grow or feel bigger and bigger. And then it comes to a point that we can sustain ourselves. And then if you continue to put in energy, now not only can it sustain yourself, you start to become wealthy. But that's not overnight. We read all this young guy bought some crypto and sold it. And now he made, I don't know, 50 G's. Well, yeah, but there are like 2000 people behind him who lost their shares. It's not a business model you want to follow.
Curtis May: That's gambling, he got lucky. He got lucky. But I mean, money follows value. That's the main thing that we, that's why I see, I've been ingrained in that. So I think I always knew that because I come from a self employed family that you know, and I've really, as I worked, I solicit some money. So if you say, I don't have enough money, like when you're a business owner, and your money's tight, I immediately know they have a marketing problem, right? They're not communicating their value to enough people or that kind of stuff. So it's like, they don't get the cause and effect of that. And then, if I talk to an individual or a new person trying to offer something, oh, what problem are you solving for people? Like you gotta have, the bigger the problem, the bigger the check. So you have to look for problems. Entrepreneurs solve problems, right? So you can't run from problems, you need to embrace them, and then look for how your skills, talent can solve that problem. And then money is the reward for that. So I think that yeah, because if we could get that point across, and understand the freedom to transact. It's like Human Action of Ludwig von Mises, is that our economy is you and I making individual decisions about exchange. Right. And it's difficult. It's not difficult, it's impossible for some central planning situation, 12 people in a room, to manage all of that. That's why it's so, I view economics as more philosophy than science, that people want to elevate themselves at the Fed and whatnot. That is the science and I have to do charts and stuff, but they don't understand human action, which tribes, all that stuff.
Alejandro Szita: And the interesting thing is that in all of human history, which depending on who you read, we're talking about 10,000 years if you take the Sumerian civilization, that was the first civilization about 3000 to 6000 years before Christ and now that's about 10,000 years. It has never worked. Never. So why do people insist, or why do universities insist on teaching something that has never worked? If it worked once, you could argue well, if your conditions were right, but it has never worked on any civilization on earth in the last 10,000 years. I mean, talk about a losing model.
Curtis May: That is so funny. That should be shouted from the rooftops. Like what are you doing? This has never worked. And that's kind of what messes up my show, like not every week, what's blowing me is like, listen, learn, there's rules to this game. And it's about, I heard F.A. Hayek says, it's an ever expanding system of cooperation among strangers. Right? And so that's, I feel so, and also what's wrong with that, cooperation among strangers? You know, I feel like, oh, I don't know, I don't like this capitalism. I heard, I got it from a strategic coach, Dan Sullivan. Right. He says, basically would you say, capitalism has a bad name, because it got named by its enemy, Karl Marx. And so that's the problem.
Alejandro Szita: Actually, when people are talking about capitalism, the proper word is free enterprise. Before Karl Marx, in the world, and for hundreds of years, the system was known as free enterprise. And this is the proper name.
Curtis May: Okay. We have time, I'm gonna have to have you back on, we can just talk about this. My god, it's so much fun. Alejandro, they wanna find out more about what you're doing. If you can help people and they're in business, they wanna get a mortgage and just let us know where to, how to follow up when your book comes out, where selling's gonna be. Awesome. Tell them where to go. Where would you like them to come?
Alejandro Szita: Yeah. I will tell you one thing that I discovered about very successful people, who have the honor of helping very successful people, is that very successful people are always reachable. So I try to do the same thing. If you want to get to me, I will answer your email and I will call you. Write to me at info@prosperitylending.us info@prosperitylending, all one word, dot us. My website is the same. It's www.prosperitylending.us. And if you wanna get a free copy of the first few chapters, we're giving away some of the few chapters, go to the website, www.prosperitylending.us/book, I think it's called. And then just fill in your information and you'll get one of the chapters of the book for you to actually review before it's published.
Curtis May: Perfect. Perfect. And then you'll, and then once they're on your list, I'm sure you'll be letting them know that it's finished. They can go get the book. I love that. I'm gonna be the first one on this list. Okay. And this was, so reach out to him. See folks, you got to get, when you're doing business people, you need to get with good people that are experts in that field, that they understand more than the transaction. Right. And so if you heard anything, this is somebody that will guide you to help you understand. Because the mortgage is just a financial tool. It's not about the mortgage. Right. It's about becoming financially free. And so how does a mortgage help you do that? That sounds to me, how to get one and how to manage it right? Because see, here's the thing about this. We're talking about this before we start recording, I'll get back to it. I'm gonna say this, is that there's, if you look at your balance sheet, right? So there's two sides of the balance sheet. There's the asset side and there's the liability side, right? There's really, we used to talk about it in, in the mortgage plan, the three-sided balance sheet, which is like, I'm more on the asset side, the paper side, there's the liability side, which is you, and then there's the realtors. Real estate is both an asset and the liability. So really the three of us should be talking about your portfolio. Right? And together, us, we should be getting together to help you, the listener create financial freedom between the two of us. But he gets that. See, most people just wanna do the next deal.
Alejandro Szita: Right. And one more thing very quickly is that the mortgage has many moving parts. Many of those moving parts are never brought to light by the mortgage broker or the loan officer because they are afraid the borrower or the client is gonna walk away because they don't explain it. For example, you can buy down the rate, you can, you have control over the closing costs. The rate is not one rate. It's a, it's three or four or five rates that make sense for you. Most loan officers never discuss them. Because I don't care about the transactional side. I see all of the options, all of those four or five rates that the borrower or the client qualifies for. We look at them in detail, we have a zoom call and we brainstorm it together because I'm not afraid of giving them the whole range of possibilities. Not just the ones that are the easiest or the most expedient.
Curtis May: Right. Right. I love that. Yeah. We work, we work the same. That's very cool. Okay. So I love that. And look, any closing, I'm gonna let you have the last word. Any closing for the wisdom for my listener?
Alejandro Szita: Yes. I'm going to say this, don't shy away from learning. Don't shy away from really discovering. At the end of the day, you can hear me, you can hear Curtis, you can hear Dave Ramsey or whoever is on television. You are going to have to make the decision. I remember when I was in school and I didn't like going to school, I didn't like doing homework. And my dad told me, you better get used to it because you have to learn. The process of learning never stops for as long as you live. And I remember thinking, oh no man, I have to do this all my life. But I decided to embrace it. So don't be afraid of learning. Don't be afraid of reaching out and don't just assume or get what people see at face value. Do a little bit of research. Today at our fingertips, we have the encyclopedia of the world on the phone. Use it. That will be my only advice.
Curtis May: I love it. I love it. So I echo that 1000%. So Alejandro, listen, thank you so much for your first visit, probably the first of many visits to the Practical Wealth Show. I really enjoyed our conversation today. Guys go out there. I want you to get his book and be ready for when it comes out because you can see there's a lot of stuff. I mean, so if you're self-employed and you're looking to buy a house or a second house or you know what I'm talking about, Time to do it now. I meant to ask you about reverse mortgages.
Alejandro Szita: Oh yeah. Yeah. That is fascinating. But that's for another show.
Curtis May: Yeah. So we'll do that. I'm gonna have a show just on that because I really want to have a conversation about that. Because people have been asking me about it and I don't think they're bad things. It's just a tool, right? Yes. And, so I like the back and forth because it's really a planning tool, and it's a mortgage tool that needs to, the conversations we had together. So we'll come back. That's another topic. So listen, go out there. I want you to follow him, check out his site. If you are, he'll let you know where, because are you, can you, let me ask you this so they know, they should get the book regardless. Right? But are you in two states that I saw or are you in other states? Like where do you do business?
Alejandro Szita: We are licensed in Florida and in California. For now those are the two states that we are licensed. If it's a business loan, commercial, if it's a commercial loan or if it's a one to four doors residence that you're not gonna live in it, but it's an investment property, so if it's an investment property, either a residence or a commercial, we pretty much can do the whole country except for five states. One of them is Oregon. There are five states that even if you do a business loan, you still have to get a license for that state. But one of them is Oregon and, but most of them, if it's business, we can do it nationwide.
Curtis May: Okay. So investors right now, commercial and let's get that out there.
Alejandro Szita: And residential investment.
Curtis May: And residential.
Alejandro Szita: If it's owner occupied, it's in California and Florida only for now.
Curtis May: Okay. For now. Right. We're all expanding our reach, we do this thing. So listen, he's a good guy to know and so make sure you reach out and I would, if you can, I would definitely add him to your team. I'm definitely gonna him to mine. And go out there guys. Thanks for listening and go make it a prosperous day. Have a great day everybody.
Alejandro Szita: Thank you Curtis. It's a pleasure to meet you.
