Mon, 29 May 2023
Did you expect to hear this about Black people? We have a discussion about equality in housing. First, if you close your eyes and wake up in 10 years, where do you want to find yourself? I explore. For some reason, investors want to time the real estate market, yet they dollar cost average into stocks. 1% down payment mortgages are here. Learn about the latest AI development. The maker of ChatGPT is developing “Worldcoin”. It would verify if you’re human by scanning your eyeballs. Finally, there’s a long history of racial discrimination in both society and housing. The Fair Housing Act—part of the Civil Rights Act of 1968—helped break down discrimination. The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance. Learn the difference between equality of opportunity and equality of outcome. The latter is difficult to administer. Providing equal opportunity in housing is not just the law. It’s the right thing to do. I explain why it actually benefits you. Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: Best Financial Education: Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: Keith’s personal Instagram:
Complete transcript:
Welcome to GRE! I’m your host, Keith Weinhold.
If you close your eyes and wake up in 10 years… where do you REALLY want to be? 1% down payment mortgages are here, profound AI impacts in your life…
Then, some contentious and even volatile discussion about racial discrimination and Black people… in housing. You’ll get my opinion on equality of opportunity. Today, on Get Rich Education. ____________
Welcome to GRE! From Allentown, PA to Glen Allen, VA and across 188 nations worldwide, I’m Keith Weinhold and this is Episode 451 of Get Rich Education… where we don’t live below our means. We grow our means.
If you’re being told that you’re crazy or that things aren’t going to work out… you know… hearing that right there can actually be a prerequisite to you being successful.
Are people raising their eyebrows at what you’re doing?
Yeah that could actually be some positive feedback on your direction, as long as your head tells you that it’s right and your gut backs it up.
Don’t trade away your authenticity for approval.
Look, if you close your eyes and wake up in 10 years, what do you want to see when you open your eyes? Awards for work?
I doubt it. Or is it kids, family and relationship-oriented?
Or is it, invisible footprints that you’ve left behind all over earth because you traveled or explored that much?
You DID raft the Grand Canyon, visit the Taj Mahal, see the Eiffel Tower, or dive the Great Barrier Reef?
Yeah, it’s probably those types of things.
Well then, why are you putting 90% of your effort into career-oriented stuff… if that doesn’t help you achieve that goal 10 years from now?
That’s a better set of questions for you to ask yourself.
That’s why we talk about generating residual income when you’re actually young enough to enjoy it here.
Rich people play the money game to win - that’s what we do here. While most people play the money game not to lose.
Real estate is not always easy. It’s not OVERNIGHT wealth, you’ll have your problems. But it can be amazing when you have a strategy and stick to it.
If you want me to make your financial life better in 30 days, maybe I can in some cases but that’s really not what we’re doing here, probably not even in a few months.
But in a few years… yes, definitely.
And I think it helps to remember something simple. The only place that you get money is from other people.
All your life, the only way that dollars have come into your hands or into your bank account is because it came.. from other people.
For many, that’s just one person - one employer that the money comes from.
With each rental property that you add, that is one more person that is paying you…
… that’s of tangible benefit to you in a world where the only place that you get money is from other people.
Now, as we dip into the mechanics about how to achieve that…
What would be different if you HADN’T taken action in RE?
Now, I don’t know what it is, but for some reason, people are trained to TIME THE MARKET in RE.
Yet people might put 10% of their salary - up to $22,500 is allowed this year - $30K if you’re over 50. They put that in their 401(k) - dollar-cost averaging - which is NOT timing the market.
I don’t know why that is. Why some people are predisposed to time the market in RE but yet they DCA in stocks - which is the opposite of timing the market.
Maybe it’s the cost of the property?
Treat RE the same way - DCA there too. Keep adding 1 or 2 a year or whatever you can.
When you consider 401(k)’s low returns and low liquidity, you might not even be putting money into it anymore.
You’ve got the wherewithal to know that very dollar you lock in a 401(k) is a dollar that can’t use OPM.
And it gets even worse.
Because with a 401(k), you are HOPING TO DIE before the money runs out. What kind of a retirement plan or life plan is that?
Doesn’t sound like diving the Great Barrier Reef to me. Ha!
Rocket Mortgage introduced a new 1% down home loan program. This is a new product for them. But some people to think it’s the first.
It’s not the first. It comes on the heels of rival United Wholesale Mortgage rolling out a similar program.
But this particular program is expected to reach a lot of people.
And here’s the thing. It also eliminates the monthly mortgage insurance fee. It deletes monthly PMI.
Now, even if we’re just talking about primary residences here, this affects you in the rental property market. I’ll tell you why in a moment.
But with this 1% down payment program, a buyer using this program who’s purchasing a single-family home, well, their income can be no more than 80% of their area’s median income…
… they are only required to make a down payment of 1% of the purchase price.
Then the lender covers the remaining 2% needed to reach the required 3% threshold for conventional loans.
So it’s not only going to reduce upfront costs, but that monthly mortgage insurance fee for the borrower is gone, which is typically a few hundred dollars a month… That what they had to pay traditionally, if the buyer puts less than 20% down on their purchase. That’s going to help affordability. So with 3% down being reduced to 1% down, then a homebuyer of a $250,000 home would only need a $2,500 down payment instead of $7,500. Now, strict underwriting guidelines are still in place - you need income and credit and assets. There aren’t really as many mortgage borrowers that put 20% down on a home as you might think. In fact, the average new purchase down payment amount in America is only between 6 and 7%. But this 1% option, which it’s estimated that 90 million Americans will qualify for - over the long-term, that is just going to increase the available pool of buyers, of course, because more people that were on the edge of affordability can now qualify. Now, in a normal market, a few of your tenants that were on the brink of qualification might be able to run off - and buy. But you’ve still got those erstwhile strict underwriting guidelines and there’s still just such a lack of supply of this entry-level housing - like I updated you on last week. You can’t move into what doesn’t exist. So this could create some tenant attrition, but it should be pretty limited for those reasons.
But, yeah, with this larger pool of buyers that now qualify, that puts more upward pressure on property prices.
When you make any good or any commodity MORE affordable in the short-term like this, with more buyers & more bidders, it makes that much LESS affordable long-term because that competition pushes prices up.
It’s just like decades ago, as soon as financial assistance came to the college enrollment world with Stafford loans and Pell grants and all that stuff, what did it do?
More people could afford to PAY MORE with more & better loan types and that made college costs skyrocket.
The same effect is happening here when you lower down payment requirements to just 1%.
Though, that factor alone shouldn’t make home prices skyrocket. They shouldn’t shoot up. But it’s just another tailwind on upward price momentum.
Typically when a tech CEO goes in front of a Senate committee, it gets embarrassing. Like, they end up explaining how to use email. OK, Senate committees are not known for being tech savvy. Not so a couple weeks ago, when Sam Altman, CEO of ChatGPT-maker OpenAI, testified on Capitol Hill on the future of AI and how the field should be regulated. Now Sam Altman has a lot more going on than just ChatGPT. It’s possible that he’s the future wealthiest man in the world. Now, this is where it gets scary. He’s about to secure a $100 million funding round for an eye scan-accessible global cryptocurrency project, Worldcoin. That’s what the Financial Times told us. Worldcoin is not totally unrelated to his signature project. The company’s goal is to verify whether users are human by scanning their irises to disburse universal basic income… to workers displaced by AI. Now, I’ve explained before how technology actually creates jobs, not destroys them. But the hearing continued with a discussion of the dangers of an unpredictable, evolving technology that can generate and spread misleading information without us even realizing it’s fake- like those famous fake images of the Pope in a puffer jacket or Trump running from police. Well, for his cryptocurrency, Worldcoin, Sam Altman has already released a World App crypto wallet that can be downloaded to your mobile phone. And he’s got big plans for Worldcoin as the first-ever cryptocurrency to be held by every person on the planet.
It runs on the Ethereum blockchain. You don’t need to know what that means. In practical terms, Worldcoin will look (and trade) a lot like the cryptocurrencies that you’re already familiar with. So in that regard, Worldcoin isn’t breaking any new ground.
What makes Worldcoin stand out is the fact that it has aspirations to be both a cryptocurrency and a global identification system. With a tag line of "the global economy belongs to everyone," Sam Altman plans to distribute Worldcoin tokens to every single human on planet Earth.
And this is where things get really creepy. To pick up your free Worldcoin crypto token and sign up for a Worldcoin ID, you will need to give Sam Altman a scan of your eyeballs.
Yes, you heard that right -- Worldcoin has created a proprietary iris-scanning tool known as the Orb. Once you've had your eyeballs scanned with the Orb, you're good to go.
Altman says this step is necessary to verify that you are a real human and is not meant to be an invasion of your privacy. He won't even ask you for your name.
Yeah… I don’t know if people are going to go for that, especially Americans. Americans are more suspicious and have more resistance to authority than most places.
We’ll see what develops with WorldCoin but expect to hear more about Sam Altman.
If you want more real estate education, your source is GetRichEducation.com
For actually physical property addresses conducive to financial freedom, create one login one time like thousands of others have. You can get started there at GREmarketplace.com
More straight ahead, including a discussion and some contention about racism. I’m Keith Weinhold. You’re listening to Get Rich Education. ________
Welcome back to GRE. I’m your host, Keith Weinhold. As we’re about to get to racism, now, first…
It's no secret that I prefer investing directly in single-family rental homes and apartment buildings.
But when I look for real estate investments that are even more passive than turnkey...
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The fund invests in real estate projects that make an impact. So consider becoming an insider along with me.
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Let’s discuss racism and discrimination in America.
It’s a topic that I think some people don’t want to discuss. But I will today, because, here we are, Episode 451 and it’s the first time.
This was recently published on our Get Rich Education YouTube Channel, so expect some sound effects as we’re about to play this for you here.
The first voice that you hear is 60 Minutes interviewer Mike Wallace with Morgan Freeman, then Denzel Washington, and finally, Dr. Jordan Peterson.
This is about 10 minutes in length, and then I’ll come back to wrap it up for you.
**PLAY VIDEO**
We’ll end it there. If you’d like to see more, check that out on our Get Rich Education YouTube Channel.
I’ll tell ya. Practicing equanimity, it was kinda difficult for me to discuss a sensitive topic. I’m not sure if you can tell in the video, but my forehead is sweating by the end of it.
The least that you need to know is that 1968's Civil Rights Act includes the Fair Housing Act.
This is a piece of landmark legislation is something that any citizen should know the basics about, and even moreso for a real estate investor.
The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status...
...when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance.
So it’s not just when you’re renting to someone, it’s when you’re lending to someone.
You shouldn't steer your advertising in an exclusionary way. Even terms like "cozy bachelor pad" or "ideal for young couples" should be avoided.
And equal opportunity is simply better for you as a landlord.
Say that you excluded a rental applicant group that comprised 30% of the population.
Then your available renter pool would shrink by that amount, reducing your income potential, reducing your occupancy rate, and reducing your tenant quality. So keep that in mind.
Next week here on the show we are talking about some big problems and really… the toxicity in the apartment market, the commercial real estate market… and how 2022’s sudden spike in interest rates is causing syndications to fail.
Apartment building owners are getting foreclosed on. More of that is coming as their VARIABLE interest rate debt resets to WAY higher levels.
How bad is it going to get? What are you supposed to do as an investor if you’re IN a syndication? What’s it look like if you’re a real estate syndicator yourself?
Who is safe and who is going to go… under?
All that and more will be answered next week when Ken McElroy returns to the show here with us.
I really appreciate you being here this week.
But as always, you weren’t here for me, you were here for you. I’m Keith Weinhold. DQYD!
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Mon, 22 May 2023
Get a 4.75% mortgage rate or 100% financing on new-build Florida income property. Start here. If I gave you $10M, learn why that probably wouldn’t even help you. We revisit how “Real Estate Pays 5 Ways”, a concept that I coined right here on the show in May 2015. Some think real estate pays three, four, or six ways. I revisit why there are exactly five. Real estate has many paradoxical relationships. I explore. Americans are living in homes longer than ever, now a duration of 10 years, 8 months. The active supply of available housing dropped again. Get an update on the gambling industry. A major sports gambling platform has offered to advertise with us. Take my free real estate video course right here. Zillow expects US home values to rise 4.8% from April 2023 to April 2024. Months of available housing supply is currently 2.7 per Redfin. Resources mentioned: Show Notes: Active Supply of Available Homes: https://fred.stlouisfed.org/series/ACTLISCOUUS Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: Best Financial Education: Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: Keith’s personal Instagram:
Complete transcript:
Welcome to GRE! I’m your host, Keith Weinhold. If you were gifted $10M right now, why that very well wouldn’t help you at all.
Learn a fresh take on how Real Estate Pays 5 Ways at the same time. A housing market update with perennially sagging inventory supply amounts and more outlooks for stronger home price appreciation than many expected. Today, on Get Rich Education.
Welcome to GRE!
From Montevideo, Uruguay to Montecito, CA and across 188 nations worldwide, you’re listening to one of the longest-running and most listened-to shows on real estate… the voice of real estate investing since 2014. I’m your host and my name is Keith Weinhold.
How would you like it if I gave you $1M?
You know what? That’s not enough to make my point. Make it $10M. I adjusted for inflation - ha! How much would you like it if I gave you $10M? How would that feel?
But what if it comes with this one condition.
What if I told you that I’ll give you the $10M, but you are not waking up tomorrow?
Not waking up tomorrow? No way!
Now you know that waking up tomorrow is worth more than $10M.
This is how you know that your time and your life are worth infinitely more than any dollar amount.
Hmmm… if your time is so valuable. Then why did you check Instagram 15 times yesterday to see who viewed your Stories? Ha!
Why are you spending time with your AI girlfriend? Ha!
Get Rich Education is ultimately about living a rich LIFE - whatever that means to you.
And we do approach that from the financial perspective here. Money does matter… because leverage, cash flow, and inflation-profiting enable you to BUY time.
We’re really one of the few investing platforms… this show is one of the few places with the audacity to tell you that - sure, a little delayed gratification is good… but the risk of too much delayed gratification is DENIED gratification.
Denied gratification is a terrible investing risk that most people either don’t give enough weight to - or don’t factor in at all.
And getting a $10M windfall is not as great as it sounds either.
History shows that the $25M Lottery winner quickly loses their money. Why does that happen? Because it seemed like it was effortless to get the windfall, and because they don't know how to handle an amount like that. It’s really similar to a capital gains-centric investor that gets a windfall. See, cash flow investors like you & I - we can be more measured because your income stream is metered out over time. That’s why you are less likely to be irrational with your gains.
Now, I touched on some of those ways that you’re paid in real estate investing.
Real Estate Pays you 5 Ways™ simultaneously. That’s a concept that I coined right here on the GRE podcast. We since went on to have it trademarked.
Do you know when I first introduced that concept right here on the show - the month & year?
And I’ve since gone on to do a lot with “Real Estate Pays 5 Ways” to help other audiences understand real estate’s five distinct profit sources.
Well, I had someone on Team GRE here do some digging into some of our legacy shows - our past episodes… because I wanted to know when I first said it… and it was apparently in May of 2015, so 8 years ago that I introduced it.
Since then, many other thought leaders have gone on to cite the phrase. Someone other than me even wrote a book on it. And that doesn’t bother me at all. I’d rather that other people and readers get good ideas. That’s more important than getting the credit.
Of course, c’mon, you can recite these 5 now like they’re the Pledge Of Allegiance or something.
This is as automatic as the Lord’s Prayer is for Christians. The five are:
But now, let’s dissect this frog here a little. Why five ways? Why not another number, like real estate pays four ways or six ways?
It is five. There are no more or less. Each of the five are a distinct benefit.
A common flawed case that Real Estate Pays 4 Ways is that most real estate teachers omit the Inflation-Profiting benefit on the long-term fixed interest rate debt.
Any GRE devotee knows that with 5% inflation on $1M in debt, you only owe the bank $950K of inflation-adjusted debt after year one, $900K after year two, etc. (And in the meantime, the tenant pays all of your mortgage interest.)
Some that make the 4 Ways case question the Tax Benefit. Could the tax benefit really be considered a profit source, or is it just a deal sweetener?
It's a profit source.
Outside the real estate world, to obtain a tax write-off, you must have a real expense backed up with receipts, like building a new computer equipment or buying a new farm tractor.
Instead, the magic of real estate tax depreciation says that you can just write off 3.6% of the improved property value each year just for doing... nothing all year. No improvements necessary.
It's a phantom write-off, yet legitimate to the IRS.
Then the 1031 Exchange means you can endlessly defer all of your federal capital gains tax for your... entire life.
Yes, it's one of the few places in life where procrastination actually pays.
I've even heard some say that they're a fan of GRE's Real Estate Pays 5 Ways™, but they've discovered a sixth.
This often involves an event that's either unlikely or falls into one of the existing 5 Ways.
For example, "My appraisal value exceeded the contract price. I’m buying it for $320K, but the appraisal is $340K. I got $20K in instant equity. See, I was paid a 6th way."
No.
I mean, good for you, $20K of instant equity is a nice sweetener - that’s a $20K credit in your net worth column that you received the moment you opened up that appraisal e-mail from your lender and saw it. Nice!
But an appraised value that exceeds the purchase price is not COMMON enough to be expected… and the 5 Ways are.
Also, you can make the case that "instant equity" is covered in the first way you're paid, Appreciation.
The reason that we invest in real estate is because there's virtually no other vehicle in the world where you can expect to be paid five ways at the same time.
That’s a foundational principle - it’s a core concept here at GRE.
It’s why we do what we do. It answers the compelling “why” for real estate better than any answer there is…
…and that’s why anything less than a 20 to 25% combined return when you add up all five ways is actually disappointing - and that’s done with low risk - which is paradoxical almost anywhere else in the entire investing world.
If you haven’t yet, take my free “Real Estate Pays 5 Ways” course in order to really understand each of your five distinct profit sources, where they come from, and how that all fits together.
It’s at GetRichEducation.com/Course. The free “Real Estate Pays 5 Ways” short course is free at GetRichEducation.com/Course
Let’s talk about real estate trends.
You know, real estate investing has a lot of relationships that you just wouldn’t expect.
Part of that is because it intersects with the economy. Economies are complex and you get these relationships that are counterintuitive.
For example, in a recession, mortgage rates and all interest rates tend to fall, not rise.
Another exhibit is how debt BUILDS wealth with prudent leverage.
Another one that I’ve explained extensively here and the show and elsewhere is that higher mortgage rates correlate with higher home prices - not lower ones. That throws nearly everyone off.
Some physical real estate trends have been counterintuitive.
About 30 years ago in America - the 1990s - a new trend was fueled that everyone wanted to have a big kitchen.
New homes were often built with a big, fancy kitchen in the center of the home. Open floor concept - no galley kitchens anymore. That began back then.
And this was really the advent of - at the time - what we considered luxury amenities like granite and quartz kitchen countertops.
Anymore, that’s become standard. Even our build-to-rent providers at GRE Marketplace often have new granite countertops in rentals.
But the paradox here is the assumption that a big emphasis on kitchens would mean that more people would start cooking at home.
Oh, no. Just the opposite, in the last 30 years, despite the big kitchens, more people eat out at restaurants and fewer people eat at home. Another real estate paradox.
Another counterintuition was the pandemic. Society locked down, people lost their jobs and you think that there are going to be mass foreclosures because with no job, no one can afford their mortgage payment.
People thought the pandemic will cripple the housing market. Oh, it was just the opposite. That created a housing boom. Everyone wanted their space. Another paradox.
Remember here on the show, shortly after Biden was elected, I told you that this administration - for better or for worse - will not let people lose their homes.
Then we had high inflation on the heels of the pandemic. That was bad for consumers and good for real estate.
But high inflation is supposed to mean that bitcoin and gold would surge. Well, another paradox, that brought crypto winter, and gold did nothing in high inflation, until more recently here.
Rather than high delinquency rates we’ve got low delinquency rates. In fact, the mortgage delinquency rate has been steadily falling for almost 3 years now. That’s because of strong borrowers and tough lending standards.
Now, another real estate investing trend, though there’s nothing paradoxical here, is mortgage rate resets.
Here in the US, on 1-4 unit rental properties, you’re in great shape, whether you locked in your interest rate at 3% or 7% - the thing is that you have a steady payment… and on an inflation-adjusted basis, your same monthly payment amount goes DOWN over time - it’s a tailwind to your personal finances.
Inflation cannot touch your steady, locked-in P & I payment.
But many Canadians are up for renewal with their 5-year fixed rate, 25-year amorts.
Yeah, just across the border in Canada, they don’t have these 30-year fixed rate amortizing loans.
Their rate resets every five years.
One Canadian homeowner that I talked to, he doesn’t live in that posh of a home in Ontario, it’s just a little above the median housing price.
His family’s loan terms are about to reset on the primary residence and it’s expected to increase their monthly payment by $1,280 / mo.
How would you feel if that happened to you overnight? It’s a nuisance at best. It might even crimp your quality of life - or worse.
That can’t really happen to you in the US.
Having a 30-year FRM is like you having rent control as a tenant.
In coastal areas, some tenants that have a rent control deal - New York, California, Oregon - they want to live in their home for decades under rent control because there’s a ceiling on their rent. Move out of their unit - lose the deal and they’d have to reset somewhere else.
It’s the same with you as an American homeowner or REI in the 1-to-4 unit space. Your P&I price cannot rise.
And, I’ve talked about the interest rate lock-in effect before, constraining the housing supply.
Get this. Just last week, First American Title Company informed us that the average resident duration in a home hit a record high.
Amongst this lower intrinsic mobility rate, interest rate lock-in effect, and other societal trends, the average resident duration in a primary home in now 10 years, 8 months.
Lower mobility. Studies show that people are holding onto their cars longer than ever, and people aren’t parting with their real estate either.
So, then, with fewer properties coming to market, let's update the available supply of homes.
This is pulling from the same set of stats that I’ve been citing for years, in order to be consistent. Check this out. This is the FRED Housing Inventory - the Active Listing Count of Available US homes.
Remember, historically, it's 1-and-a-half to 2 million units available. In 2016 it was still 1-and-a-half million.
Then in April of 2020 it dipped below 1 million and fell sharply from there - which I’ve famously called this era’s housing crash.
It was a housing SUPPLY crash - which hedges against a price crash.
It fell to as low as 435,000 a year later in mid-2021. Gosh, under a half million.
It’s rebounded as builders know that they need to build more homes. Six months ago it got up to 750,000 available homes - which is still less than half of what America needs.
And now, today, did the supply get up toward at least 1 million yet? No.
It has dropped back the other way to just 563,000. This astounding dearth of housing supply - it’s a condition that we could very well be in for over a decade.
This scarce supply is a long-term American condition. Yes, it’s good for your real estate values - both present and future. But it is a problem too. It’s a contributor to homelessness!
The Covid home improvement boom is officially over. So says Home Depot. They posted a revenue drop in the first quarter and warned that annual sales would decline in 2023 for the first time in 14 years.
Home Depot said that shoppers are now holding off on the big-ticket purchases they made during the pandemic and are choosing to break up larger projects—like remodeling a bathroom—into smaller, bite-sized pieces.
There’s a fascinating new study from a bipartisan think tank shows that everyone wants to LIVE ALONE.
That’s what Business Insider just reported on. Now, of course, the term “everyone” is an exaggeration.
But Statista and Our World In Data tells us that - get this - this is the number of SINGLE-PERSON households in the US - people living alone.
Back in 1960, that figure was just a paltry 13%.
By 1970, 17% of households were people were living alone.
Every ten years, that percent crept up to 23, 25, then 26%. By 2010 it hit 27% and by 2022 it hit 29%.
Now, you can’t think that’s good for society - to have all these single-person households. Almost 3 in 10 living alone. C’mon. Find a good spouse.
But in any case, that’s good for you as a REI, when, say, 10 people live amongst 5 homes rather than 3 homes - absorbing all that housing supply and keeping it scarce.
Even if the US population stayed the same, there’s more home demand - with that trend.
Of course, the US population is growing, though really slowly, probably just a few tenths of 1% this year.
But because of all the Millennials and the embedded “Work From Anywhere” trend, housing demand is pretty strong.
The recent rental housing demand and rent boom came almost entirely due to a surge in household formation -- young adults leaving the nest and roommates decoupling to get their own space... especially in urban areas.
People working from home want more space (without a roommate) AND are willing to pay more for it -- and able -- to pay more for it.
So if you're bullish on work-from-home remaining the norm for at least a chunk of the population (and I am), you should be bullish on the rental demand outlook.
And this has really revitalized America’s SUBURBS - that’s the area where you find that space.
The WFH-fueled rise of the suburbs is a wake-up call to cities, where, in the case of NYC, 26 Empire State Buildings’ worth of office space now sits empty. The typical office worker is spending $2,000–$4,600 less annually in city centers. Because even if they GO to the city to work, they might only do that 2 days a week now - not 5. I’ve got more for you straight ahead, including a new forecast on how much home prices are expected to rise this year.
Again, check out my free video course if you haven’t “Real Estate Pays 5 Ways”. Get it at GetRichEducation.com/Course
I’m Keith Weinhold. You’re listening to Get Rich Education.
Yeah, big thanks to this week’s show sponsors. I’m only bringing you those places that will bring real value to your life.
Now, here at GRE, I recently read an offer that one of these major sports gambling platforms sent us. They want to advertise on the show here.
Do you want to hear sports gambling ads on GRE? I’ve got an opinion about that, that I’ll share with you shortly. Gambling is not the same as investing.
If you’re wondering why you’re hearing more about gambling, especially sports gambling than you had just a few years ago, well…
Now, just last week, it was FIVE years ago that the Supreme Court lifted a federal ban on sports gambling in the US.
That spawned a multibillion-dollar industry that’s transformed how Americans watch, talk about, and experience sports.
Americans bet $95B on sports in legal jurisdictions with consumer protections last year. That’s more money than the amount spent on ride sharing, coffee, or streaming… and you can bet that the off-the-books gambling number, if added in, would make that WAY higher. Two sports betting companies, DraftKings and FanDuel, control 71% of the US market, per gambling analytics firm Eilers & Krejcik. Gosh, that’s almost a duopoly right there. But despite that, these companies have struggled to turn a profit. FanDuel recorded its first quarterly profit just last year, and DraftKings has YET to report a profitable quarter. Well, I’ll just tell ya, it’s one of those two big companies that inquired about advertising on GRE. Of the 50 states, the number is 33 that allow it. That’s 2/3rd of the nation that has legal sports betting (Washington, DC, has it too). Another four states have legalized sports wagering, but don’t have any sportsbooks operating yet. Interestingly, the three most-populous US states—California, Texas, and Florida—have not legalized sports gambling. And they account for 26% of all teams in the major North American pro leagues. The number of women joining sportsbook apps jumped 45% last year, marking the third straight year that new women users exceeded men. Hmmm. I guess that’s the growth market there. My inclination to have gambling advertising and associating with these companies is NOT to do it… not to accept that advertising income. I don’t see how that’s serving you. This feels like a conflict in my gut and in my heart. Gambling is sort of the opposite of investing for a stable rental income stream. I mean, either way, I guess you’re putting your money at stake. But that’s about the closest common ground I can find. At least at this time… and probably all-time, it’s a “no” for gambling content here. That’s not any sort of moral judgment on the activity at all. I mean, gosh, as a teenager, I was really into sports gambling, but it was the informal kind. My friend & I each lay a $10 bill next to the TV - Phillies vs. Mets. Winner gets the $20 bucks. So, my inclination is a pretty easy “no”. Hook up with our sponsors - they support GRE. That’s Ridge Lending Group, offering income property loans nationwide. JWB Real Estate Capital - if you want performing income property, JWB really has Jacksonville, FL sewn up & locked down. They do one thing and do it well. Then, Freedom Family Investments. Get started with them for real estate funds that are ultra-low hassle. Text “FAMILY” to 66866. Where will the next ten years take you & I on the show here? I would love to be along for the ride with you. I hope that you’ll be here with me.
Let me just take a moment to remind you that I’m grateful to have such a large, loyal audience to… well, listen to the words that I say every week. Thank you for your support.
This show has almost reached the 5 million download mark. I’ve been shown that it’s between 4.8 and 4.9 million downloads now. I’m genuinely honored and a little humbled about that even.
Let’s listen in to this 3+ minute CNBC clip. This is Lawrence Yun, Chief Economist at the NAR - the National Association of Realtors talking about the housing market just last week.
Now, a little context here - historically, the NAR has tended to give these dominantly sunny side-up, glowing, everything is always good & getting better kind of remarks on the housing market.
But I’ve been listening to the NAR’s Lawrence Yun for quite a while and think he’s been rather balanced.
Here, he discusses how real estate sales volume is down - which has a lot to do with low supply, that mortgage rates are steady, and that prices are slowly rising in most parts of the nation.
[OK, Vedran. Here’s where we play the insert.]
0:09-3:42 First words to keep are: “Lawrence Yun…” Last words to keep are: “... half of the country.”
Now, Lawrence Yun did go on to say that he thinks that the Fed should lower interest rates by a half point, and more.
Let us know if you’d like us to invite Lawrence Yun onto the show. As always, you can leave your suggestions, questions, or any comments about the Get Rich Education podcast or any of our other platforms at our Contact center at: GetRichEducation.com/Contact
When it comes to national HPA, just last week, we learned that Zillow revised its home price outlook upward.
Between April 2023 and April 2024, Zillow expects home US home values to rise 4.8%.
You’ve got more signs that more & more American markets are being considered a seller’s market rather than a buyer’s market, which tilts toward price appreciation, though I still think pretty moderate price appreciation this year.
CNN recently published an article where they even posited the question: “Are Bidding Wars Back?” Yes, they are in a few markets.
Another measure of housing supply is the MONTHS of available supply. I think you know that 6 to 7 months of inventory is considered a balanced supply & demand market.
If it gets up to 10 months of supply, you tend to see little or no HPA.
Well, indicative of the low housing supply, we hit a winter high of 4-and-a-half months of supply.
And today, it’s down to just 2.7 months per Redfin. 2.7 months. That’s just another sign that demand is outpacing supply.
Then, among those entry-level homes, like the NAR’s Lawrence Yun eluded to, they’re even harder to find… and they’re the ones that make the best rentals.
How hard are these to find? I mean, in some markets this can be even more rare than finding a true friend? Ha!
Is it as rare as the Hope Diamond? Or perhaps a Honus Wagner baseball card? Ha!
Well, the good news is that we actually have the inventory that you want at GRE Marketplace.
Besides that, we actually have something that you really like and that is - mortgage rate relief to help you with your cash flow.
Purchase rates have been hovering around 6 1/2% lately. That’s the OO rate, so for rentals, it could be 7%+.
Well, how about rolling back the hands of time? Through our great relationships here and our free investment coaching, you have access to 4.75% interest rates on investment property - and many of these are new-builds in path-of-progress Florida.
Yes, our free coaching will get you the 4.75% mortgage interest rate, they’ll even help write the sales contract for you if you’re new to this, walk you through the property inspection, the property condition, the appraisal.
Yes, a 4.75% interest rate… today, from these homebuilder buydowns. I don’t know how much longer that can last.
To be clear, you’re not buying an income property FROM us. You’re buying it with our help and our connections. It is all free to you. This is educational support for you.
In fact, our coaching support like this through our sole investment coach, Naresh is becoming so popular, that I can announce that we soon plan to add a second investment coach. Yes! A new one.
And interestingly, you have heard of this soon-to-be second investment coach because they’ve been a guest on the show here a number of times. Yeah, we’ll make that introduction on a future show. You’ll find THAT interesting.
But, our Investment Coach, Naresh, does have some slots open to talk with you and help you out. A lot of the best deals currently with these 4.75% rates are with new-build Florida duplexes and fourplexes.
You can use them for rental SFHs too. Last I checked, the deals were a little better on the duplexes and fourplexes.
You probably thought that Sub-6 and sub-5 mortgage rates are about as unlikely to make a sudden comeback as AOL or Myspace, but we’ve got them here now.
Now, that 4.75% is just one of two options that we have with some Build-To-Rent builders that are fairly motivated. So to review the first one fully… you can get a
That’s one. Or, option 2 is:
They are the two options. It’s rarely more attractive than this. If you hear this in a few weeks, or perhaps months, I doubt that these options will be there any longer.
So I’ll close with something actionable that can really help you now.
If you want to do it yourself, that’s fine, like thousands of others have, get a selection of income property - despite this national dearth of supply at GREmarketplace.com
Or, like I said, right now, it’s really helpful to connect with an experienced GRE Investment Coach - it’s free - our coach’s name is Naresh - for those 4.75% interest rates or zero down program - whatever’s best for you… you can do all that at once at GREmarketplace.com/Coach
Until next week, I’m your host, Keith Weinhold. DQYD!
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Mon, 15 May 2023
Are you living the life that you were created to live? I explore. People have harbored unfounded real estate fears for years. Here they were: 2012: Shadow inventory 2013: Boomers downsizing 2014: Rates spike 2015: PMI recession 2016: Vacant units 2017: Home prices above pre-GFC peak 2018: 5% mortgage rates 2019: Recession? 2020: Pandemic 2021: Forbearance crisis 2022: Rising rates 2023: Recession US houses prices are heading up this spring. The latest FHFA’s Monthly Housing Report shows 4% national home price appreciation. We explore apartment reputation scores. This is a great proxy for what’s happened in housing the past three years. As an investor, you have a low “loss to purchase” with your tenants. It’s difficult for them to buy their first home. I discuss 12 Ways that you can raise the rent and increase the value of your property. Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: Best Financial Education: Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: Keith’s personal Instagram: Credit to BiggerPockets.com
Welcome to GRE! I’m your host, Keith Weinhold. We get clear together - Are you truly living the life that you were created to live?
A housing market update with some perspective that can totally shift your real estate thought paradigm.
Then, 12 Actionable Ways that you can raise the rent and add value to your property. Today, on Get Rich Education.
Welcome to GRE! From Johannesburg, South Africa to Harrisburg, Pennsylvania and across 188 nations worldwide, I’m Keith Weinhold and this is Get Rich Education.
Last night, people were losing sleep over money. At the same time, last night, you made money… as you slept.
Are you living the life that you were created to live?
Your big ideas, your grandiose hopes and ambitions that you promised yourself that you would follow through on someday… have they turned into fears?
Even ones that you had as a child - like to be an astronaut or a firefighter. Today, it might simply be that you would have quit your soul-sucking job by now.
Maslow’s Hierarchy of Needs - how many are you fulfilling? All five? There are five levels. The base level are your… What are you doing to be the most that you can be?
With financial freedom, you can control your time and have a chance at living the life that you were created to live.
How do most people think of financial betterment? In a faulty way, like…
Alright, how do you know that all those things right there don’t move the meter in your life? It’s because, ask:
How many times would you have to do that activity - like add an unnecessary flight layover - in order to acquire wealth?
None. It doesn’t apply. You could practically do that an INFINITE number of times and you wouldn’t acquire wealth to create the time to live the life you want.
But how many times would you need to add a flight layover in order to make you MISERABLE? There IS a number. There is a certain number.
Doing those trivial things only helps ensure that you stay at a soul-sucking job.
Because rather than taking your time - a zero-sum game - rather than HAVING your time engaged in expansionary activities, you were focused on contracting.
You were focused on where there’s a low upside rather than activities that have an upside with no ceiling.
Another way to ask if the activity is expansionary and moving you toward financial freedom is: Did you overcome FEAR in fulfilling that task?
Yes, it’s an inconvenient truth that facing & overcoming fear is what makes you grow.
Did you overcome fear when you brewed coffee at home or got some stupid discount on grocery store bacon?
What are the activities you do that move you toward financial freedom - not debt-freedom - but financial freedom & overcome fear & grow.
That’s an activity like:
Making your first home a fourplex with an FHA loan… or repositioning your dead equity, like Caeli Ridge & I discussed here two weeks ago… or buying an income property across state lines… or learning how to become a savvy private lender… or finding out how to become an accredited investor.
Are you living the life that you were created to live?
Now you’ve got some examples, some milestones, and some checkpoints so that you’ll know if you’re either on the right trajectory - or hopefully - if you’ve been listening here long enough… you’re living that life… now.
Why would you live one more day of your life “below your means” than what’s absolutely necessary. That should only be a short-term life mode.
Don’t live below your means, grow your means.
Live the life that you were created to live.
But the major media channels stir up so much fear - and even niche ones - that it can often paralyze, even some clear thinkers.
Despite the fact that today’s real estate appreciation rates are quite normalized and modestly growing, some people still have unfounded fear over real estate.
And non-doers are always trying to time the market… and timing the market doesn’t work.
Here’s what fearful permabears are concerned about. It’s always something in real estate.
In 2012, it was “Shadow inventory”. Remember that? Never came to pass, just like most of this stuff.
In 2013, the fear was Boomers are downsizing
In 2014: Rates spike
In 2015, it was a PMI recession
In 2016, it was vacant units. Ha! A terrible miss.
In 2017, it was, look, nominal home prices are above the pre-GFC peak. Yeah, so what? They should be.
In 2018, it was 5% mortgage rates. That was the fear.
In 2019, I actually don’t remember what the fear was that year. That was a fairly uniform year but people stirred up fear about something in order to get clicks. Call it a recession.
In 2020, it was the pandemic
In 2021, it was fear of a forbearance crisis.
In 2022, the fear was rising mortgage rates will cause a housing price crash and there’s a collapse in sales volume.
In 2023, what’s the fear? Are we back to recession fears again?
Gosh, people have been steadily forecasting that for 12-18 months now, it still isn’t here, and it still isn’t on the horizon either, as job growth numbers keep beating expectations.
If you’re waiting to invest in the most proven investment of all-time - real estate, or even something else like gold or bitcoin or stocks - if you’re waiting until the uncertainty dissipates, then you’ll never be investing again for the rest of your life.
About the only certain thing in the investing world is persistent inflation and the fact that people are going to need a good place to live.
I invest in the certainties, not get paralyzed with uncertainty.
This way, we don’t get too caught up in the latest investing fad, often like stock investors do.
In 2017, it was anything around “blockchain.” In 2021, it was the “metaverse.” In 2023, “AI” is the term that’s instigated a Pavlovian response from investors salivating over the potential hundreds of billions in value that could be unlocked by the new technology… until that gets oversold. There IS some opportunity in some of those things, but as soon as people lose money in them, they revert back to principles. In a lot of ways, we stick to principles here, even if some of them are countercultural principles - like FF beats DF. Keep your debt & get more of it. More debt means you own more RE.
US house prices have stabilized and are heading up. They've gone from modest declines or steady prices… to modest growth in most regions.
That's the summary from my latest "light reading" duty—FHFA's Monthly Housing Report. It’s released every month.
Some highlights from the latest one, all stats through February, and with nominal pricing…
Spring numbers will be factored in soon. Since it's property-buying season, appreciation rates will likely rise.
Like I've stated before and am becoming really somewhat known for talking about in the industry. In fact, just last week, I was in Arizona and shared this on Ken McElroy’s show - the housing crash is a 100% certainty. That's because it already happened.
It was a housing supply crash three years ago, which prevented a price crash.
So then, let’s look at some of the best appreciating markets in the US here, just the quick, Top 10.
And notice how widespread the national HPA is. It really just excludes the western third or western quarter of US states.
The market with the 10th most appreciation - and this is all YOY, through Q1 per the NAR:
Santa Fe, NM up 12% 9th is Hickory-Morganton, NC up 12% 8th is Appleton, WI up 12-and-a-half per cent 7th? Milwaukee-Waukesha-West Allis, WI. Up 14%. I’m doing some rounding here. 6th is Oklahoma City, up 15% Elmira, NY - hey I grew up near there - is up 15%. That’s 5th.
4th is Burlington, NC up 15% YOY 3rd is Warner-Robins, GA, up 16% 2nd is Oshkosh-Neenah, WI at 17% #1 in the nation is… the Kingsport-Bristol area, which spans Virginia & Tennessee. Up 19%
I’m going to discuss apartments in a minute. But they are the 10 US areas with the largest single-family home price increase annually.
In the Information Age, a bad reputation will follow you around like your cat, internet tracking cookies, and a song that you can't get out of your head.
Apartment reputation scores are a broad measure of renter satisfaction.
It's amazing to see how closely they track the macro trends that impact tenants and property managers (PMs).
What I’m referencing here is J Turner Research's Online Reputation Assessment scores from today, and going back to March 2020.
This is a very telling pattern here.
Spring - Summer 2020: COVID descends. Lockdowns are here. Reputation scores plummet. PMs struggle to rapidly adjust to a new era where renters live and work inside their units 24/7. Everyone started using Zoom. Maintenance techs could rarely even go inside units for repairs.
Entropy ran rampant. Parents didn't know what to do with their children. Fear reigned. Common spaces closed. Neither tenants nor PMs were happy.
Then, in the…
Fall 2020 - Summer 2021: This was the boom period for apartments. PMs have solved for the new era, adopting new technologies and new strategies. They also re-open amenity spaces and in-unit maintenance.
Hey, foosball in the clubhouse is back. Apartment demand surges, and reputation scores go back up.
Late 2021: Apartment occupancy rates hit record highs. PMs again wrestle with on-site staffing shortages. Could ultra-low vacancy and still-robust leasing traffic put so much strain on property managers that reputation scores start to drop again?
Nope! Because in…
Early 2022: Reputation scores climb back up to new highs again. PMs once again adjust to the rapidly evolving climate, many leaning on early-to-mid phase adoption of centralization tech and management practices.
Mid - Late 2022: Apartment reputation scores inch back again. That’s when consumers saw peak inflation—including renewal rent increases.
At the same time, demand (for all housing types, not just apartments) slowed down and you didn’t see the high rent growth that you had. This puts more strain on PMs.
Inflation hit everyone, with big price hikes in property insurance, taxes, maintenance, turnover, labor, and utilities.
Early 2023: Apartment reputation scores are on the rise again, hitting new highs. Consumer inflation is cooling, while vacancy rates and leasing traffic return to more normal levels.
Some semblance of normalcy has finally returned.
At the same time, new tech adopted in the pandemic era proves to have long-term benefits to both tenants and managers.
In recent years, PMs have focused on resident satisfaction, so it's no coincidence that reputation scores keep improving.
Now today, as an investor, changes are that you have a low LOSS TO PURCHASE.
What’s a “loss to purchase”. Your tenants are leaving to go buy something very often.
You, as an investor in either single-family rentals or condos or apartments - you can retain residents right now because it’s so hard for them to go off and buy their own starter home.
Why’s that? Well, it’s not just the higher mortgage rates. It’s that fact coupled with the fact that credit availability is still tough.
As you know, you need to have a lot of good documentation & income & assets to get a loan. That keeps your rent-paying tenant in place.
In 2005, we were in the opposite condition. Back then, tenants fled my units. I had a hard time retaining tenants in 2005. Why?
Because it was so easy to get a loan, you could just lie about everything on a mortgage application and no one even checked the accuracy. Bloated appraisal values even came flying in.
That’s why my rental property tenants kept leaving. It seems like it was always to buy a first-time condo back in 2005.
Today, you can retain tenants. That’s your upside of today’s harder housing affordability and stringent lending requirements.
So, in this normalizing housing era where tenants have to live in your rental unit longer - because they have no alternative - you can find the properties most conducive to this strategy where thousands of other have created a quick account - at our marketplace: GREmarketplace.com
It’s not like a big box store. It’s more like an organic farmer’s market. That’s where the good stuff is. So, check back often for new inventory at GREmarketplace.com
You’re listening to Episode 449 of the GRE Podcast… and of those 449, I think that two of them were quite good!
Haha!
Coming up shortly, 12 ways for you to raise rent and add value to your property.
If you get value from the show, please tell a friend about the show. I’d really appreciate it. Share it on your social media.
More straight ahead. I’m Keith Weinhold. You’re listening to Get Rich Education.
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Mon, 8 May 2023
The average millionaire has 7 income streams. We discuss 2 income streams today—ATMs and Car Washes. They’re low touch, more passive than turnkey real estate investing. With ATMs, is cash use on the decline? Not among the demographic they serve. We discuss the future of cash use. Some ATM users pay a $3 surcharge to access a $20 bill. That’s why it's profitable. You can buy a unit of five ATMs. They’ve provided a 26.1% cash-on-cash return and high tax advantages. It’s returned $2,262 per month. Learn more about ATMs at: GREmarketplace.com/ATM Car wash profits are enhanced with a subscription model. Few on-site employees are needed. You can invest alongside a tech-forward car wash franchise, Tommy’s Express Car Wash. The WSJ stated that no business other than car washes can create this much profit on a one acre lot. As society changes, EV, gas-powered, and diesel cars must all go through the car wash. ATMs and car washes demonstrate high operating margins and many tax advantages. You must be an accredited investor. Learn more about car washes at: GREmarketplace.com/CarWash Resources mentioned: Show Notes: Learn more about ATMs: Learn more about Car Wash investing: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: Best Financial Education: Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: Keith’s personal Instagram:
Speaker 0 (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold. It's been said that the average millionaire has seven different income streams. We're going to discuss two distinct income streams that you can add to your life today that lie on the periphery of real estate investing. They are low touch for you because they require little or no management. Today on Episode 448 of Get Rich Education.
Speaker 2 (00:00:29) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
Speaker 0 (00:00:52) - Welcome to G R E from Altoona, PA to Saskatoon, Saskatchewan, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education. Well, you can't have just one income stream because that's entirely too close to zero. We're talking about two distinct income streams today. People really like the operator and his track record. In fact, he's a longtime friend of mine. We'll talk with him shortly next week. Here on the show, I'm gonna talk about the ways that you can raise the rent and add value to your property. But for today, besides the upside that gets many interested in these two income streams, most investments usually have pros and cons. So I'm gonna ask about the downside. In both, we're talking about the ability to add a couple thousand dollars to your residual income each month with the first of two income streams.
Speaker 0 (00:01:51) - ATMs, yes, automated teller machines. Remarkably, the operator has never missed the monthly distribution or the pro forma return target. What about the future use patterns of cash? Yes. Green dollar bills. We will discuss that. It seems as though ATMs just don't care when there's disruption and chaos in the marketplace. They just sit there, do their business and provide you with consistent monthly cash flow. We'll discuss exactly how much inflation, not a big deal to ATMs recession, they can deal with that. Pandemic ATMs breezed right through it. Is the use of cash in decline? Well, not with the demographic that ATMs serve. How about the political party in power? That just doesn't matter in fact, and perhaps is a little sad. The demographic that ATMs serve is one of the fastest growing in the United States to this group, cash is still the currency of choice. Some of them are unbanked or underbanked. First, we'll talk about ATMs then after that, another diverse income stream for you.
Speaker 0 (00:03:07) - What's it like to invest in ATMs and car washes and what's the direction of their future use patterns, for example, wouldn't cash use with ATMs B declining perhaps? Well, today's guest expert recently spoke about ATM and carwash investing at the Best Ever conference as alternative asset classes that can perform well over the next decade. And when he was finished speaking, there was a line formed at the back door waiting for him so that people could learn more. So settle in. Let's learn about what's happening. I'd like to welcome back onto the show, g r e, regular and super syndicator, Dave Zuck.
Speaker 3 (00:03:43) - Keith, thanks for having me back on your show. It's good to be back and I'm looking forward to having this discussion. I love it.
Speaker 0 (00:03:50) - Well, Dave, you know you've been here to discuss ATMs and car washes before, so we wanna get updates today, including what investor returns are like starting with ATMs. Really, that is a predominant thought about ATM investing today. It's that the use of this new technology like Apple Pay or coming cbd, CS, or even cryptocurrencies, are gonna cause cash use to decline. And I know that when you were here previously, we talked about year over year cash use and how that looks. So is that a question that you often get about just the use of cash that an at m spits out?
Speaker 3 (00:04:24) - Yeah, so one of the challenges to the ATM space in investor's minds in accredited investor's minds is, well, I don't use cash anymore. I'm guessing you don't use much cash anymore. I don't hardly ever use cash, right? And so that must mean that other people aren't using cash. That is the same as an investor thinking, well, I don't live in a C-class apartment building, so I guess nobody invests in C-class apartment buildings, right? So one of the things yes, is cash use in decline. The answer is yes to our peer group. But when you consider the fact that our demographic, who we serve, what I'm saying, saying our peer group, I'm talking about you and I, Keith and probably everybody who's listening to this show, we use last cash and we did three years, five years, 10 years, 20 years ago. Sure. Okay. But that demographic of people that we serve is one of the largest, one of the fastest growing groups in this country.
Speaker 3 (00:05:22) - It's when you really look at the facts. Look back in the early nineties, the Wall Street Journal, there's already a Wall Street Journal that talk about the death of cash. By the end of the nineties, cash wasn't gonna be around anymore. When I started, when I got in the ATM space 12 years ago, the kind of the talk on the street was, yeah, but you got Apple Pay and the Google Wallet and you got all these, this stuff coming on, cash is gonna be dead in two to three years from now. And the fact is, there's more than doubled the amount of currency and circulation today than there was 12 years ago. There's more currency in circulation today than any time in human history. And the peer group who we serve, the demographic who we serve, uses cash and almost transacts entirely in cash. And that's not going away. We've seen that increase. We've done a lot of market research, we see what's going on, but then we also see what's going on inside our own funds and how people are behaving. It's still a vibrant market.
Speaker 0 (00:06:14) - Yes. And you and I have discussed before how some businesses and jurisdictions have tried to ban cash use, but those bans were repealed and it was brought back that you're able to use cash. And you brought up such a brilliant analogy. You as an investor out there, you might be interested in investing in a C-class apartment building, even though if you would do that, you'd probably be less likely to live in one. So yes, a lot of times you're with your circle of friends, you're in your peer group and you tend to think like they do and everyone lives just like you do. But when we talk about different demographic groups from people that you usually hang out with, one reason I've learned through dealing with you over the years, Dave, is that ATMs are so lucrative for ATM investors because this is going to seem incomprehensible to you, the educated listener, but many ATM users pay two to $3 just to get access to a $20 bill. Imagine paying $3 to get access to a $20 bill. And you're thinking, well, who would do that? No one that I hang out with would do that. That's 15% of 15% surcharge to go ahead and access your own money. But yeah, I mean that's one reason why these people are financially disadvantaged, but that's why it's lucrative.
Speaker 3 (00:07:29) - Yeah. And for those people it's a way of life. And when you look at how a person's wage or ACH today, somebody works at a factory, their paycheck gets ACH right into their account. They transact in a lot of cash. You know, it saves them for two or $3. It saves them from getting in a car. Some of 'em don't even have a car or getting in into public transit and going down the road to a, the neighborhood bank where they bank at and then stand in line at a in front of a teller on a Friday night and to try and get, you know, 20, $5,000 in cash. You know that two or $3 to go down to the corner of convenience store. That's pretty inexpensive. But you're right. I mean, there's people who will pay two or $3 to get a $10 bill or $20 bill. It's just crazy.
Speaker 0 (00:08:18) - Now Dave just gave an excellent example because some people might think, are you taking advantage of these people? You're actually helping serve these people and give them an option? And one thing that I know that you really prioritize doing, Dave, with these a t m investments you've been helping people with for years where they can come invest alongside of you, is that for your physical at m locations, you choose high foot traffic areas.
Speaker 3 (00:08:44) - You've heard the saying, what's the three most important things about real estate and its location, location, location. Even more so in this investment because at its core this is a real estate investment. You're monetizing a two foot by two foot piece of real estate and you may be taken at two foot by two foot piece of real estate to its highest and best use. So you're monetizing that piece of real estate. But no, you're adding real value in a community and and serving a community, but it's a real estate play.
Speaker 0 (00:09:15) - Now if you are the listener and the viewer out there, if you think cash is going to disappear completely in say seven years, well then you probably wouldn't be interested in investing in something like this. But the more you read and the more you learn, the more you're gonna be informed on that. So talk to us a little bit more about the future of payments. Dave,
Speaker 3 (00:09:35) - You mentioned a seven year contract and that's what this is. It's a seven year deal. But when you consider the tax impact plus the first 12 months of cash flow and that first 12 months, you're getting about 60 to 70% of your principle back in that first 12 months from the time your cash flow starts, you're getting that first year's tax deduction, 80% right on the front end. You're getting about 60 to 70% of your principal back in that first 12 months. And then you've got an extra six years of cash flow behind that. So although it's a seven year deal, it's not like you have your money at risk for seven years. You get your money at risk count, the tax impact, you got your money at address for less than three years. It becomes a, not only is it a a really good cashflow and income stream play and you can start really beefing up your monthly cash flow, but it's also a tax plan. It's one of the ways that I keep myself tax efficient. You know, it's, you use that big chunk of depreciation in year one and you start getting yourself to the point where you're living the tax efficient life you start gaining on your wealth building journey. You can get momentum quick when you start applying some of those principles and using that depreciation offset, the tax liability and some other income.
Speaker 0 (00:10:52) - We're talking about how investors get 80% bonus depreciation right there at the beginning of a seven year hold time. And Dave, is there a specific number of ATMs that a specific investor owns?
Speaker 3 (00:11:08) - One unit is considered five or six ATMs and it matter, you know, it depends on what kind and sort of location. There's some ATMs that have dual monitors and there's two people using 'em at the same time. So it really depends on, on what ATM that is. But you're talking five or six ATMs for one unit. One unit is $104,000. We do sell half units now. So you can come in as low as $52,000, but that's how it works. You buy a unit of ATMs, you put 'em in our fund, we manage the fund for you, and you get a portion of that surcharge revenue. This is sort of a three-way split. You got the investor getting about a third of the income or 30% of the income. You get the store owner or the the location owner about roughly 30% of the income. And then you got the management company, which is where all the costs flow through. You get the management company getting about 40% of that income. So it's sort of a three-way split, but you're getting as close to the asset as you possibly can get without owning at yourself. And so you're just buying the units, you're paying us to manage them for you and making it totally passive.
Speaker 0 (00:12:18) - As Dave and I have talked about on a previous show, people use ATMs for more than just accessing cash. There are more use cases than just accessing cash. But Dave, when we get back to the numbers and we talk about why you have so many repeat investors that have invested in a lot of ATMs with you years ago and wanna come back and do this more. And that is because this is a cash flow centric investment besides being tax advantaged. However, you as an investor, you shouldn't expect much appreciation on your six or so ATMs that you hold for this seven year or so hold period. Those things are almost fully depreciated in value by the end of your hold period. But this is a tax efficient, cash flow centric investment. So Dave, tell us more about how that looks for the investor, because I know this is actually a highly predictable income stream for investors.
Speaker 3 (00:13:08) - It is highly predictable. We've never missed our monthly distribution payments. Yeah. And we've never missed our proforma and so highly predictable. And the depreciation, the way the depreciation works is it, it really you invest, you get that depreciation, you can use it to offset some other income and you got two choices. You can keep your income stream coming from your ATMs. You can keep that tax free for the first couple years or you can use that even more aggressively. You can use that depreciation, go off and and use it to offset the tax liability on some other income. At the end of the day, it's about living the tax efficient life down and getting out of those high tax brackets, getting out of that 37% tax bracket, moving yourself down into the twenties and the teen
Speaker 0 (00:13:58) - Reducing your marginal income tax bracket with offsets from this investment. People really celebrate your track record. Tell us about those cash on cash returns and just about that income stream that one has historically gotten.
Speaker 3 (00:14:14) - The cash on cash return is uh, right around 26. I think it's 26.1% cash on cash return. Yeah, the IRR is a bit lower. It's uh, right around a 20% i r r. And so you mentioned it earlier about how an at t m machine really actually does depreciate, like, and I'll give you sort of the analogy when you do, when you take depreciation against, let's say a multi-family apartment building and let's say 10 years down the road, you sell that multi-family apartment building for a gain, you not only pay tax on the gain, you also recapture all of that depreciation that you've used and, and now you get taxed on that as well. So it's very different in an at t m investment. In an at m investment, you don't recapture the depreciation, you get a tax break and that depreciation, you never recapture that. So you really need to almost count that into your total return because that affects your bottom line, that affects your tax impact and you never recapture it. And so you'll notice unlike brick and mortar where normally your cash and cash return is lower and your IRR is higher because you get that residue from sale here, it's flip flopped just totally different. And then you get a higher cash on cash return, a lower i r, but it's because of the loss of value of your equipment over that seven year period
Speaker 0 (00:15:36) - In real estate, when you relinquish a property and sell it, unless you do a 10 31 tax deferred exchange, yes you have to pay back the depreciation that you were writing off all of those years. You don't have that obstacle, you don't have that problem with ATMs. And yes, you typically hear about IRRs, which all call synonymously total rate of returns in your real estate as being higher than what your cash on cash return is. But here, this is inverted. This is a cash flow centric investment. And part of the reason why is because your machines, they do go down in value over time. Why your cash flow stays at a steady high rate, 26.1% in this case,
Speaker 3 (00:16:16) - It's been a fun asset class. And it's interesting, you know, you talk about how the depreciation works and you try to introduce somebody who's not real savvy on the tax side. You talk about how it works and how it will affect them, and then they see it on their tax return. It's like, oh my goodness, yeah that works. Like you said, I'm like, oh, well yeah, it becomes part of many of my investors' tax planning on an annual basis. It is part of my annual tax planning. And so it becomes one of those things where it's just easy to start kind of collecting 'em and, and making it sort of an annual thing where you just collect more at t ATM machines, keep yourself tax efficient and and really start building those massive income streams.
Speaker 0 (00:16:57) - Well, you can learn more and get ahold of the proforma and learn more about ATM performance and the projected future use patterns and how to get started as investor if this interests you at gre marketplace.com/atm. Dave, thanks for the great update on ATMs.
Speaker 3 (00:17:15) - All right, thanks Keith.
Speaker 0 (00:17:17) - You listening to get rich education. We've got more with Dave when we come back on car washes. Why they're so lucrative, especially when you add a subscription model. I'm your host Keith Wein. Hold with JWB real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor. Since 2013, JWB is ready to help your money make money, and to make it easy for everyday investors, get started@jwbrealestate.com slash g rre. That's JWB real estate.com/g rre GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 40 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally though even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.
Speaker 4 (00:18:44) - This is the Real Wealth Networks Kathy, Becky, and you are listening to the Always Valuable Get Rich Education with Keith Wine Hole.
Speaker 1 (00:19:04) - Welcome
Speaker 0 (00:19:04) - Back to Get Risk Education. Car washers are a remarkably lucrative real estate business. It's enhanced with a franchise model and selling subscriptions to car wash customers. That's how you get that recurring revenue. So a rainy week doesn't wash out your profits. In fact, in the Wall Street Journal it recently said, and I quote what they wrote here, there is no other operation on a one acre site that can do one to two and a half million dollars in sales and pocket half of that. So our guest expert, Dave, is back because he helps you get investment returns without having to actually operate the car wash yourself. So Dave, tell us more. I know for example, much like other real estate location of a car wash is vital
Speaker 3 (00:19:53) - Even more so with this type of car wash because the whole system is set up to get you a quality wash in two to three minutes. It's designed to get you off the road and back on the road in less than three minutes. So if you can put a really good product like this carwash, everybody that I've ever talked to, whether it's a franchisee, an owner, a a subscription customer or a one-time user, everybody gives Tommy's express carwash a giant thumbs up. It's about volume and you put that on a busy street corner or you know, there's all kinds of metrics that we like and you know, it's, you gotta be where people are already going. You're not creating a an environment where you're drawing people to somewhere you want to. It's all about creating habits. On a Monday morning, my wife gets in her car and she, about eight 15 in the morning, she goes down to Wegmans about a 15 minute drive.
Speaker 3 (00:20:50) - And I promise you if you would introduce her to Tommy's and she would get a car wash when she goes to Wegmans on that Monday morning, she would do that two or three times. She'd be a customer for life. Like she now created a habit kind of like a Starbucks creating a habit. So what we're doing is we're putting this asset in a really good location. Recreating an environment where you don't have to wait in line for 10, 15 minutes, five minutes, get your car wash. It's not one of those white glove people wiping your, it's automated. You get a really good quality wash in two to three minutes. You can get in and out quick.
Speaker 0 (00:21:26) - You help partner investor money with a model that's proving itself with the Tommy's Carwash Express franchise like you just mentioned. So technology really adds the efficiency of getting cars through the carwash quickly in order to make this more lucrative. And Tommy's is very tech forward. For example, I know that customers buy subscriptions and they typically use a phone app
Speaker 3 (00:21:52) - To the point of technology and efficiency. You know, you're talking, especially over the last three years now, what was one of the top concerns or one of the top challenges for employers was getting good quality people. I mean look no further when you go to busy restaurant and you know, I mean there there was some real challenges in finding good employees. One of the things, you know, and then this is due to some of the technology that you just mentioned. You know, we got, because of the systems and technology, we can run two to 300 cars per hour through the scar wash to get washed and maybe even better you can do that with two to three people on site. So very limited overhead in terms of wages employees, you can pay those employees much better because you don't have like 30 of 'em, you got three of 'em. And so really the whole business model, and it also comes back to what you shared earlier about the operating margins. You got 45 to 50% operating margins in this business. It's in terms of percentage, it's one of the most lucrative businesses that I know of and it's just fun business to be involved in.
Speaker 0 (00:23:00) - Yeah. Now when you talk about moving two to 300 cars per hour through a car wash, are you talking about, you know, physically we think of a car wash Now are we talking about one long tunnel with the rate like that? Or are we talking about multiple bays?
Speaker 3 (00:23:16) - Normally it's one long tunnel and the longer the tunnel, the more you can, you know, there's different speeds that you know the track will take you through. And there's different things inside the carwash you can activate depending on how busy, I mean it, it really is. They're real car wash nerves. I mean they're techies and it, they really did perfect this product to the point where let's say you have a 100 car wash hour where you're putting a hundred cars through in an hour and now now you get into the busy time where it's, you know, people are getting off of work where it, now you're ramping up to two to 300 cars per hour. The speed varies on the track and it's, you know, different features of inside the tunnel kind of kick in because of the volume. So there's a lot of automation, a lot of technology going on inside the wash
Speaker 0 (00:24:02) - As society changes, you know, whether it's a gasoline powered car or it's an EV or it's diesel, they all need to go through the car wash. We're talking about that rate at which cars get washed, which is actually pretty important because if I'm a car wash customer, you're talking about your wife's habits earlier with washing her car. If I think about getting my car washed, but I see a long line over there, why might not even go in and use that car wash. And then I'll start to think, oh well what good is my subscription? So keeping that wash tunnel moving also keeps the line short besides increasing your rate of income.
Speaker 3 (00:24:37) - Yeah, for sure. And there is, you know, talking about subscriptions, we're not all about subscriptions, but there's kind of a sweet spot and we figured out that sweet spot's somewhere into 55, somewhere between 50 and 60%. It's where you really want your subscription numbers to be. You don't want 100% subscription model. If you were at 90%, that means your subscription model, you're not priced right. Almost like charging $500 a month for your apartment building and you're always a hundred percent occupancy. It's not good.
Speaker 0 (00:25:09) - It's a problem. Not
Speaker 3 (00:25:10) - Joking. Yeah, that is a problem. Yeah. So that's sort of the things we're watching. We do want a nice mix of retail customers. We think kind of that sweet spots in that 50 to 60% subscription model range.
Speaker 0 (00:25:22) - Oh that's a great point. And that's really interesting when you think about business models and a lot like apartment buildings, car washes are based on their income stream amount, but you're gonna have a different set of expenses with a car wash than you will. And apartment building of course, like you're going to have expenses for example, for water and detergent. Dave spoke a bit about how they keep the labor costs down by having fewer people on site, largely through the use of technology. So we're talking about an innovative car wash type here that's proven itself. Tommy's expressed car wash, their footprint geographically just keeps expanding and expanding and expanding. And in fact Dave, I know when we talked about this last year at least, that that time only Panera Bread in Chick-fil-A, they were the only two franchises that had higher sales revenue per location. Wow.
Speaker 3 (00:26:11) - We're at number three and we're hoping to get to number two here in short order. But, uh, chick-fil-A, that's a hard one to beat , but uh, yeah, no, it's uh, one of the top performing franchises in the anti our country,
Speaker 0 (00:26:24) - Chick-fil-A. Those two crucial pickles on that chicken sandwich. You know, it's, it's really hard to, to compete with there. You need a really efficient car wash to outdo that as far as it is on the investment end and how that actually looks like for one that wants to come alongside you and participate. Before we talk about what the returns look like, talk a a bit about how that is looking for current investors that are already in this investment. Since we first discussed this last year,
Speaker 3 (00:26:52) - We launched this fund as a debt fund. We got into it fairly slowly. We were building a couple washes and we knew that it was gonna ramp up, but we had a lot of work to do on the front end. We were, we had lots that were under contract that we were working on permitting. So we started as a debt fund. We launched phase two as sort of a semi equity, I mean it was an equity fund but it, it sort of captain investor 1.75. You got all the depreciation. The depreciation was not, you didn't have to recapture the depreciation cuz you're dealing with a lot of equipment. In fact, car washes are very unique in that you can take bonus depreciation on the building as if it were equipment. Like you don't need cost sake studies, you don't need you just bonus depreciation the thing out like, you know, the entire building, like it was a piece of equipment right up front.
Speaker 3 (00:27:39) - First year, that's rare. Yeah. And then we sort of ran through that model and we have eight operational sites today. We have seven more coming outta the ground right now. We expect to be somewhere around 20, uh, fully operational by the end of the year. And here's the exciting part, here's the fun part. We're we're looking to build a hundred of these in five years. Wow. And so to really ramp up and take us, get us into phase three and phase two worked great. Investors got all the depreciation, they got all of the cash flow. I'm working free by the way. They got all of the cash flow until they get to their 1.75 and then they exit, then the GP partners start making money. But that model why it worked very good and it's gonna get us to about 30 ish car washes. We're ramping up.
Speaker 3 (00:28:33) - We wanna go under and we're retooling our model. Now that we've uh, got a little bit of experience under our belt, we see how our operations team is operating and see how these car washes are really taken off and really how our team has made these things perform. We want to go to a hundred and to get to a hundred, we're retooling the model. Our investors have spoken. They said, man, we really wanna be, you know, a little bit, kind of give some of that backside you talked about the Wall Street Journal article on Wall Street Journal came out and said that there's PE firms paying 18 to 20 x multiples on EBITDAs and it's just super aggressive. So our investors like to hear that, but they wanted a piece of the upsides. We listened to our investors, okay, we're rolling out an equity model.
Speaker 0 (00:29:19) - And just to back up to jump in. So Dave had been talking about the debt side about how previously this was a raise on the debt side and now in the future going forward, this is how you can get in on the equity side investment of car washes.
Speaker 3 (00:29:32) - It is an equity model and it's gonna allow the investors, it's gonna allow all of our investors to not only be a part of the backend, but there's gonna be a 10% preferred return. There's gonna be aggressive cash flow throughout the hold and the exit. Um, investors gonna be with us all the way through and be a part of that upside, be a part of the exit.
Speaker 0 (00:29:54) - Talk to us about any of the threats that might be out there, whether that's threats to just the overall model of car washes five, 10 or 20 years down the road, and then what the competition is like Tommy's expressed car wash versus other car washes. What are some of the threats
Speaker 3 (00:30:10) - We've seen, much like our investors have spoken and expressed their desires to be a part of the upside and we're getting ready to rule that out to 'em. The general public has given their opinion, uh, with their wallets. And so when you get to understand this model and, and how it works, and then you start paying attention to a lot of the other car washes out there and the look and appearance and how they work. And it takes longer and there's lines and you know, some of 'em are full service and you know, it's pretty inconsistent, but consumers have spoken and they want this product and Tommy's kind of the innovative leader in the car space. And so they're really all about just listening to the consumer and get them what they want. Consumers want a good quality wash for a fair price and they want to get it quickly and efficiently. And that's what we're delivering. So there's competition in the space. There's only one or two competitors of ours who we would say, okay, they are there so we're not building across the street. There's not really a need for us to be there if there's that competitor is there. But most of our competitors, if we were to put a Tommy's Express in a neighborhood, we would steal the show and we have what consumers want and they'll come to us.
Speaker 0 (00:31:30) - When I think about long-term use patterns, Dave, just anecdotally I think of my own lifespan, I only seem to notice more car washes in cities as time goes on per capita. Not fewer. In fact, growing up my dad used to wash his car by hand in or right next to the garage or old Subaru legacy station wagon. Sometimes I would help him out. Well, he doesn't wash it anymore. It's more efficient to go drive through a car wash. That almost seems to be a vestige of yester year where you would regularly wash your own car in your driveway.
Speaker 3 (00:32:02) - Well there's two things there. One is there's a lot more people live in an apartment buildings and, and less out in the country in suburbia. So the, even having the ability to wash your car in some places doesn't make sense. But there's another thing too. You know that by the time I started regularly using a car wash where I actually had to pay some organization to wash my car, I could have bought the car wash . Now, I mean you see it all the time. You got teenagers who's got a nice vehicle and they don't even think twice. They're going through and spending eight or 10 or 15 bucks to wash their car. And I was like, oh my goodness. Okay. But times are changing and it's becoming a standard thing to get your car wash, your car wash and forget the garden hose and the bucket and the soap,
Speaker 0 (00:32:43) - The carwash I use most regularly, the highest tier one now costs $18. That's where they use, you know, rain X on the windshield and everything else. But as far as when it comes to the investor perspective, this is one of those investments, Dave, where you recently spoke at the conference that people are lining up at the back of the room to want to learn more because they're so interested in this investment. I know oftentimes car washes have high cash flow and high tax efficiency for the investors. So tell us about how that's expected to look here On the equity side,
Speaker 3 (00:33:13) - You get a hundred percent bonus appreciation over five years. You get a big chunk of that in the first year because of the amount of development that we have in the fund, you're getting less than half of it the first year, around half of it, maybe just a little bit less than half of it the first year. So you get a big chunk of your depreciation in year one and then you get the rest of the depreciation and it's four years following that. It's a pretty aggressive on the depreciation side. But then on the cash flow side, 10% preferred returns. You've got multiples that are in the two and a half to three x in five to seven years, you're talking aggressive returns and you're talking aggressive, uh, bonus depreciation for tax impact,
Speaker 0 (00:33:57) - You need to be an accredited investor. And what's the minimum investment?
Speaker 3 (00:34:02) - So minimum investment is a hundred thousand dollars and you do need to be an accredited investor.
Speaker 0 (00:34:07) - Tell us about the expected hold time.
Speaker 3 (00:34:09) - We're modeling it five to seven years. So while a private equity firm and with Sam some pretty lucrative offers already, but we've seen, let me back up a second. So this industry is so fragmented that the biggest player in the room has accounts for about 5% of the global revenue. Wow. So that's how fragmented this space is. So there's real opportunity and institutions are desperately trying to get their foot in the door because they see that it's a recession resistant business. They see that it's a, it's got strong operating margin. The Wall Street Journal talked about that where, you know, just crazy operating margin. So they're desperately trying to get their foot in the door and get a foothold in the space and get a little traction in the space. They're not hardly any people who they can write a hundred million checks to. We're building a portfolio that somebody would be able to write a billion dollar check for in a couple years. And so when that happens, we feel like the more mature this space, the more mature this portfolio is, the more cream we can squeeze out for our investors. And so that's where we're going with it. We don't believe that we exit in two to three years, but it could happen. But we're modeling out for five to seven years
Speaker 0 (00:35:30) - In case it takes that long to Sure. Get returns on the conservative side, five to seven years. And yeah, I, I learned a little something there. Okay. The biggest player in the space only has about a 5% share. Very fractured, much like real estate itself is well day's, one of our G R E marketplace providers, you probably already know that. So if you wanna learn more, I'd encourage it and see what makes this business so lucrative. You could do that at gre marketplace.com/carwash. Dave, it's really been stimulating to think about some of these alternative real estate investments. Thanks so much for coming back onto the show.
Speaker 3 (00:36:07) - Thanks Rob me Keith. It was fun
Speaker 0 (00:36:15) - On the ATMs with 100 4K invested that has recently generated $2,262 per month, 2262. And they've never missed the monthly distribution or their proforma return target. And if you go invest quite a bit more than that amount, there is something new to announce. And that is the existence of financing with ATM investments that has the potential to amplify your return some more. So with ATMs, it's a strong cash on cash returns and the I R R along with the quick return of capital, that's what's making it so popular. They have been delivering them to this group for more than a decade now. Now the operator, Dave, he's really proud of what they're doing and that's why he wants to give the opportunity for you to get on the ground in person and see just what they're doing. In fact, in only 10 days, there's a car wash and self storage investor tour.
Speaker 0 (00:37:19) - Yes, it is a one day investor tour on May 18th in Columbia, South Carolina. And you are invited. You'll see a Tommy's Express carwash and Moore meet the team, ask questions about the business plan. There is no cost to attend. You can meet Dave there as well. You'll learn more about that and with hotel accommodations and everything else after you get the free investor report. At G R E Marketplace, we're talking about world class operators in the car wash space here. When you have multiple diverse income streams in your life, what you've done is you've made your income resilient. So to connect more and learn more and see proformas on adding an income stream to your life in the at m space, if that interests you, start@gremarketplace.com slash atm. For car washes, visit gre marketplace.com/wash. Until next week, I'm your host Keith Wein. Hold. Don't quit your daydream.
Speaker 5 (00:38:27) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L L C exclusively.
Speaker 6 (00:38:55) - The preceding program was brought to you by your home for wealth building. Get rich education.com. |
Mon, 1 May 2023
Learn how to harvest equity without giving up your low, fixed-rate mortgage. Today, I discuss: conventional loans for single-family rentals, DTI, refinancing, accessing equity, student loan debt, and down payment requirements for income properties with Ridge Lending Group President, Caeli Ridge. Learn what’s better for a second mortgage—the pros and cons of a HELOC vs. Home Equity Loan. You also get a mortgage market overview. We discuss changes in cash-out refinance seasoning requirements. Caeli also describes where she believes mortgage rates are headed later this year. Resources mentioned: Show Notes: Ridge Lending Group: info@ridgelendinggroup.com Join us for tomorrow’s free GRE Florida properties webinar: Ridge’s All-In-One Loan Simulator: https://ridgelendinggroup.com/aio-simulator/ Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: Best Financial Education: Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: Keith’s personal Instagram:
Speaker 0 (00:00:00) - Welcome to GRE! I'm your host Keith Weinhold. You can get a conventional loan for a single family rental with less than a 20% down payment. Learn why you might want to refinance today. Even though mortgage rates aren't as low as they were a couple years ago, how do you qualify for loans if you've already got student loan debt? All things mortgages and financing today on Get Rich Education,
Speaker 2 (00:00:29) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
Speaker 0 (00:00:52) - Welcome to GRE from K Patis North Carolina to Hattiesburg, Mississippi and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education, the voice of real estate investing since 2014. Before we get into a great education on all things mortgages today, there is still a little bit of time left for you to join us on tomorrow night's G R E Live event. You can join us from the comfort of your own home. This is for new build single family rentals, opt to four plexes in Jacksonville, Ocala, and elsewhere in Florida. Purchase prices are still below 300 K on the single families. Yes, still in the two hundreds in some cases. I don't know how long that can last. Yeah, these are the property types that are quickly vanishing. Our investment coach Naresh Stars in that event tomorrow, he finds you the good deals with the national providers that are actually giving incentives despite the fact that the product that you're buying is in really short supplies.
Speaker 0 (00:01:59) - You're gonna get a good, solid, fundamental education on what makes a durable income property market and a arrest in the Florida provider are going to share with us just for webinar attendees. Those even better than two and two incentives. Yes, for you, the incentives on the webinar are even better than that 2% of your purchase price paid do you in closing costs cash and 2% of free property management. It is going to be even better than that. That's gonna be rolled out tomorrow night, May 2nd at 8:30 PM Eastern, 5:30 PM Pacific. It is free to attend. You can ask questions live, get your questions answered and get access to the actual properties should you so choose. That is the final reminder. So if that's of any interest to you, be sure to sign up now@grewebinars.com. I'm coming to you from the Mojave Desert today here in metro Las Vegas.
Speaker 0 (00:03:04) - It's Henderson Nevada. To be technical next week I'll bring you the show from Phoenix, Arizona. And you know what? It's kind of funny. Sometimes you hear people refer to this general area of the nation this southwest and they say they are going to the desert if they were doing what I'm doing. Well this unrepentant geography nerd will clarify that it is the deserts plural. Yes, Las Vegas is in the Mojave Desert in Phoenix is in the Sonora Desert. There are differences in vegetation type and others that distinguish the two. And the most obvious difference perhaps is the presence of the big iconic Saguaro cactus down in the Sonora that you don't find up here in the more northerly Mojave and perhaps the Joshua tree is the more distinct plant type here in the Mojave. Yes, we're talking about two gigantic pieces of real estate here. Much of it is baron. Two disparate deserts with their own distinctive flora and fauna. As you're about to learn about financing real estate today, let's remember that there is a cash out refinance and then generally if you're performing a refinance without pulling cash out, that is known as a rate and term refinance. Let's get into it.
Speaker 0 (00:04:30) - Well hey, well how do you qualify for more mortgage loans at the lowest interest rate available, Americans have near record equity levels in their homes. What's the best way to access that equity yet keep your low mortgage rate in place? And what about your student loan debt and how that factors into you getting a mortgage or getting a refinance? We're answering all that today with a GRE regular guest and though it's her first appearance back on the show this year, it's the return of the company president that's created more financial freedom through real estate than any other lender in the entire nation, Ridge Lending Group. It's time for a big welcome back to Caeli Ridge.
Speaker 3 (00:05:08) - Keith Wein. Hold. Thank you. You flatter me sir. I appreciate it. Love being here with you and for your listeners.
Speaker 0 (00:05:14) - Well yes, the president is back and everyone loves this type of president because it's not about being a Democrat or Republican. So hail to the chief, great to have you here. And Jaylee mortgage rates, they have settled down a good bit from their recent highs now they peaked back in the fall of last year. So with that and some of the other things in mind, why don't you talk to us about the big picture first, sort of your mortgage market overview.
Speaker 3 (00:05:40) - Interest rates is always top of mind for everybody. I think they're doing pretty well. I do believe I've been sharing with our listeners and and my clients on a day-to-day. I do believe that rates will continue to kind of increase here and there. There's gonna be some ups and downs. Of course the Fed has been very clear with us. Jerome Powell is gonna continue to raise the Fed fund rate just for anybody that doesn't know the two between a mortgage rate and a Fed fund rate while connected, not the same thing. So when they raise that does not automatically mean that we see the increase on the the 30 year mortgage bonds. I think that that's gonna continue to happen, but I think the pace in which it happens or continues to happen is gonna be a lot less aggressive. So I think that's gonna bode well overall.
Speaker 3 (00:06:21) - For interest rates. I know everybody is very, very interested in in are they going up, are they going down, when are they going up, when are they going down? I think that we'll continue to see a little bit of upward movement. I think it's gonna be sometime next year that we start to see interest rates come back down in any meaningful way. And remember gang rates go up much, much faster than they come back down unfortunately. So I think we've got a little bit of way to go. But I'm always the one saying, Keith, you and I have talked about this, um, many, many times you must be doing the math and that the rate as a function of the return of the investment isn't the most important thing. So I'll leave it there for rates. Otherwise, I think that the industry is doing really, really well.
Speaker 3 (00:06:58) - One big announcement that we had this year was that Fannie and Freddie both have extended the seasoning period of time to where a cash out refinance when leverage was used to acquire is applicable. So now you have to wait 12 months to pull, to pull cash out of a property using the A R V that after repair value if you use leverage to acquire the property. Quick distinction because this has been confused. If you paid cash for the property, your source and season funds, that still falls under what's called the delayed cash out refi and no seasoning is required. It's only when leverage was used to acquire the property and then they're trying to use an after repair value to pull cash out in hand. Is that 12 month seasoning rate and term is different. So that doesn't apply either.
Speaker 0 (00:07:45) - Okay. So if you make a purchase and then say it less than 12 months down the road, you want to do a refi but not pull cash out, is that still all right?
Speaker 3 (00:07:55) - That's absolutely fine. No seasoning is required and we can use the arv. It's only when you want cash in your hand that that 12 months is is applicable.
Speaker 0 (00:08:04) - Got it. Okay. That's really helpful to know. Just big picture before we winnow down, are there any other big substantial mortgage stories out there that some should know about? Um, it was only a couple weeks ago, there was a lot of misinformation going around on TikTok and elsewhere about 40 year loans from F H A without people understanding that's just for loan modifications and really other stories like that. Any other big picture things where you can help us see what's happening?
Speaker 3 (00:08:30) - It seems to be par for for the course? I have not. There's nothing that's come across my desk that I would say was newsworthy or noteworthy to share. I think we've got more to unpack here than any of that.
Speaker 0 (00:08:40) - Yeah and things sure are picking up here around G R e. People wanna buy more properties this year. It really slowed down toward the end of last year, right about when the mortgage rates were at their peak. So when we talk about getting loans, we think about leverage. Leverage is created with debt. Has anything changed with the down payment requirements for an income property? And we're largely here in today's discussion talking about one to four unit income properties. Properties that you don't live in yourself,
Speaker 3 (00:09:08) - Correct down payments have have remained the same. There isn't been anything that has changed there. Just to reiterate, for those that may not be aware on a single family residence, conventionally 85% loan to value is applicable. You can leverage all the way up to 85, you're putting 15% down. Keep in mind everybody that that will have pmi, private mortgage insurance attached to it, I would have you look at them side by side. The PMI factors actually pretty low and depending on the loan size it may only be 20, 30 bucks a month. So if you're able to leverage extra, it may make sense. You're gonna have to look at the numbers so that single family and then two to four unit on a purchase transaction different on a refinance transaction but purchase is 25% down or 75% leverage is required for those duplex, triplex, fourplexes.
Speaker 0 (00:09:54) - Okay, so as little as 15% down on a rental single family home. So you're getting up to six to one, seven to one leverage in that case. Sheila, do you find very many people doing that or would they rather pay the 20% down for a rental single family home and not have the pmi?
Speaker 3 (00:10:10) - I find that right now I think that it's less common than maybe it was because interest rates are up from where they were, uh, a year, year and a half ago. So more often than not we see the 20% down. But I still think it's worth looking at. I mean you're never gonna know unless you run the numbers right side by side.
Speaker 0 (00:10:25) - Okay, so we're thinking about how much cash we have to have put aside for a down payment in closing costs. And one thing that we need to do in order to qualify for that loan in the first place of course is some people get hung up on the dti, their debt to income ratio is too high to qualify for property and chaley. Over the past few months I've had a few listeners write in with questions and I thought, well I'll say that question until we have chale on again. And one of them really has to do with student loan debt. Student loan debt often contributes to one having too high of a debt to income ratio so that they didn't have to repay their loan. I know that Biden said that you wouldn't have to pay back student loan debt for a while, but can you talk to us specifically about student loan debt with D T I?
Speaker 3 (00:11:06) - There's gonna be a few pieces to share with everybody depending on whether we're talking about Fannie Mae or Freddie Mac and we won't know who we're gonna end up selling to after the loan funds. And they have slightly different guidelines between the two of them. Similar. But there are some differences as it relates to student loan debt regardless of whether you're in deferment or you've been told that you don't have to repay. If it shows up on an individual's credit report, the calculation will be as follows. They're going to take the outstanding balance times 1%, that's Fannie Mae's rule or the outstanding balance times half a percent. That's Freddie Mac rule and that will be the payment that we include in the debt to income ratio. Uh, I'll mention that the all-in one, which is a very popular loan right now. First Lean HeLOCK, maybe we'll talk about that here today. They will defer to Fannie rules so it'll be 1% of the outstanding debt pulling on the credit report even if it shows a zero payment listed. Now there is one caveat, if the individual has a letter, this happened maybe in the last six months and I'm trying to think about, there was a title, it's pretty rare. But if they're able to gain access to documentation that specifies that they are not going to have to repay that debt and we can take that documentation, then we can zero out that payment in the D T I.
Speaker 0 (00:12:22) - Alright, there's some strategies for how you can approach D T I with respect to any student loan debt that you have and what is the maximum D T I that a borrower can have?
Speaker 3 (00:12:34) - Conventionally and non qm, you're gonna get to 50% debt to income ratio for the all-in-one since we just touched on it, 43% is the absolute max.
Speaker 0 (00:12:43) - Okay. And on prior shows, Chile and I have discussed specifically with examples just how that D T I is calculated. If you're wondering, you can hear that in some past episodes Chile one one goes ahead and they continue to add income properties to their portfolio. Often I recommend that one does that with high leverage but not over leverage. How does one keep their D T I ratio down over time as they continue to add properties so that they can qualify for more properties in the future? Is there a good strategy for that?
Speaker 3 (00:13:14) - There is, and it's such a good question because as investors, right, our qualification primers are not static. They're going to change over time as we buy and sell and refinance. So it's very, very important, especially with the debt to income ratio that we're keeping an eye on it. And there's a few ways in which you can kind of strategize or optimize that D T I. The first is going to be the Schedule E, okay? The Schedule E is where all the rental properties are going to live once you've filed the annual tax return. The easiest way for the time that we have here today, Keith, is gonna be to tell the listeners, send us your draft returns. So on an ongoing basis we tell our active clients do not file federal tax returns until you send us the draft. We're going to run that draft through the pre-formulated calculation that comes straight from Fannie, Freddie and then we're gonna provide you with some feedback, one of which may be Mr.
Speaker 3 (00:14:03) - Jones, you forgot to include your insurance as a deduction and that's actually an add back that's gonna be to your disadvantage. Make sure that you put that in there. You didn't claim the full number of days of income for the property, you forgot to put depreciation on there. That's also an add back. There's a whole slew of things that we can look at and look for and give the individual that feedback so that they are filing at that optimal way while maintaining what the maximized tax credits are, right? There's a nice balance there. The more aggressive you are with the tax deductions, the more it can impact the D T I. So we wanna have eyes on that and work closely with the client and or their CPA is a very common part of what we do. So schedule E a little more complicated, that would be one of the the ways in which we wanna maximize debt to income ratio.
Speaker 3 (00:14:45) - Obviously not obtaining new debt, new consumer debt is is not gonna be to our advantage, right? We don't want more liability than we have income. Another thing is, is that when we talk about credit and a lot of clients that we talk to, they pay their credit cards off monthly, right? Maybe they charge up five grand, eight grand, 10 grand, they get a miles or whatever it is. It's very important to communicate with us to find out when in the month we wanna strategically pull the credit. Because what will happen is is that the day in which we take that snapshot, if there's a minimum payment due, a balance with a minimum payment, that minimum payment will be used in the individual's debt to income ratio regardless of whether they're gonna pay it off at the end of the month. That doesn't matter to us.
Speaker 3 (00:15:26) - There's a payment here, we gotta hit you for it. So strategizing on the day in which we wanna run credit might be another helpful way for D T I. And then finally, and there's probably a few other things, but I think high use would be, I don't like the shorter term amortizations. I think this is something else you and I have talked about many times, Keith, where people wanna pay off quicker, which is great if that's really what they wanna do, that's perfectly fine. I'm not sure that that would be my strategy, but whatever. Don't get yourself into a 15 year fixed mortgage because it's only gonna jack that payment. It's gonna really increase that payment. It's ultimately going to, for long-term optimization, hurt your D T I. You can do the same thing with a 30 year mortgage and not pay extra interest by accelerating the debt if that's what you chose. So those would be the the few things I'd comment on
Speaker 0 (00:16:10) - 100%. And for you the listener and viewer right now with what you just heard from chaley, you can begin to understand the value of working with a lender that works specific with income property investors rather than those lenders that are more geared toward primary residents, borrowers. Nothing wrong with them but they're in their lane during their thing. And you can understand why Chaley over there at Ridge is really a specialist to help you qualifying for as many income property loans as you possibly can and optimizing those loans as well. Chaley, when we talk about interest rates, oftentimes it's of interest to people to look at what are refinance interest rates like versus new purchase interest rates.
Speaker 3 (00:16:54) - I would say on average there's a variety of of variables that dictate what the rate is gonna be. Okay? I talk about this a lot. They're called LPAs loan level price adjustments. And a loan level price adjustment is a positive or negative number that attaches to the characteristic of the loan transaction. So purchase or refi, hash out refi rate and term refi credit score has its own L L P A loan to value, loan size occupancy. All of these come with a positive or negative number attached to them as it relates to purchase versus refinance. Generally speaking, let's take a rate and term refi where you're not getting cash out, you're just maybe taking an arm and making it affix. You're taking a higher rate and making it lower, whatever, maybe about a half a point difference. So if a purchase was at six and a half, the re rate and term refinance might be at 6 75 or 7%, cash out's gonna be a little bit different. I would add a quarter point to that and then if, if it's a two to four unit, add another quarter point on top of that. So those variables do make a difference.
Speaker 0 (00:17:53) - And maybe the listener might think, well why are you talking about refinancing at a time like this? If I wanted to refinance, I would've been more likely to do that about two years ago when mortgage rates read historic lows. But today Americans are sitting on near record equity, oftentimes it might be tied up in a low mortgage rate loan with that equity chaley. I talked to some people out there just lay people, people that aren't even investors and they have a big equity position with a really low mortgage interest rate loan and they seem to think that to refinance it, they would need to go ahead and refinance their entire mortgage and lose that maybe three or 4% loan, but they don't necessarily have to if they can do a second mortgage. So I guess really what I'm getting at and the question chaley is what is the best way to do a rate and term refi versus a cash out refi? And I know there are a lot of scenarios there.
Speaker 3 (00:18:44) - Yeah, lots of scenarios. So to your point, it is not necessary to give up a very low fixed rate mortgage if you want to harvest some of that equity. The ways in which, and I'm gonna have a plug after this for the all in one, but I'll get to that cuz I'm just such a big fan. But the ways in which you can do that both for your primary residents, a second home and an investment will be through a second lien mortgage, whether it be a heloc, home equity line of credit or a he loan, the HE loan is applicable for the rental properties. I do not believe, I hope somebody can give me alternative information, but I do not believe you're able to find second lean HELOCs for rentals today. I feel like those have really dried up if they're out there, the ones that I know of that used to do them are not doing them anymore.
Speaker 3 (00:19:27) - If they're out there and anyone's listening to this, somebody please let me know. Keylock for rental probably not an option. He loan for rental absolutely is an option. And this is guys a fixed rate mortgage in second lean position, just like your 30 year fixed first, this will be a 30 year fixed second interest rates are gonna be higher. And since we were talking about interest rates, I'm gonna say that they're probably anywhere from 10 to 13%, but they're smaller amounts. C L T V combined loan to value for a he loan on a rental would be 85% is what we have access to. So as quick math guys, if you have a value of a home of a hundred thousand and you owe on your first mortgage 50,000, the CLTV would be 85% of a hundred. So 85,000 minus the 50001st, which stays in place, you'd have access to about 35,000 in that example. And that would be access to rental properties that you just do not want to mess with that first lien mortgage different for owner-occupied. And I'll take your queue on when you want me to get into that.
Speaker 0 (00:20:26) - Yeah. Okay. So we are just talking about income property second mortgages there. Tell us about primary residences.
Speaker 3 (00:20:32) - So primary and secondary should be in the same bucket. You can leverage just 90% C L T B, same math as before but up to 90% And these are gonna be, you have HeLOCK and he loan. I'm gonna assume most people are gonna go for the HeLOCK, right? The open-ended revolving is definitely more attractive than a closed-ended fixed I believe in a second lien. And you know Prime is at eight I believe right now. Gosh, I should have checked before we go on, but I think Prime is sitting, it's an index. An indices like the Fed fund rate, that's an index two prime is at about eight. And then depending on the characteristics, those l LPAs that I mentioned, loan level price adjustments are gonna come up with a margin. Maybe it's 2% over prime or one or whatever it is depending on those things. So I would anticipate a HELOC and second lie position on a primary residence will be anywhere from eight to maybe 10%. More often than not is what you should expect. Interest only open-ended.
Speaker 0 (00:21:24) - And on the second mortgages, whether that takes the form of a HELOC or a HE loan, how long is the initial fixed rate period? Typically
Speaker 3 (00:21:32) - There are hybrids where you can fix in for a year or three years, et cetera. Those are available. I'm not sure that you wanna do that in a high rate environment. You probably wanna avoid any fixed rate right now if you had the option to get into it a couple of years ago, you're looking really good right now because you fixed in at at some ridiculously low rate for a period of two, three, maybe five years. I would tell people listening, fixing in on a HELOC right now is not gonna be your advantage when we believe that rates are gonna start coming down over the next year, et cetera. But for the HE loan, it's fixed for 30 years. Just like a 30 year fixed first lie mortgage, it's fixed, you have it four 30 years, it's amortized, it's closed ended. You're making your regular payments until you pay it off after the 30 year period of time.
Speaker 0 (00:22:13) - We're talking about how you can more efficiently borrow in this environment where people and investors have high equity positions and we have hopefully come off the mortgage rate highs from late last year. You're listening to Get Risk Education. Our guest is Ridge Lending Group President Chaley Ridge Morton, we come back. I'm your host Keith White Hole with JWB Real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor. Since 2013, JWB is ready to help your money make money, and to make it easy for everyday investors, get started at jw b real estate.com/g rre. That's JWB real estate.com/g R E GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 40 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally. They'll even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.
Speaker 4 (00:23:45) - This is Rich Dad sales advisor, Blair Singer, listen to Get Rich Education with Keith Wine Hold and above all don't quit your daydream.
Speaker 1 (00:24:03) - Welcome
Speaker 0 (00:24:04) - Back to Get Rich Education. We're learning about how to be a savvy borrower with President of Ridge Lending Group, Chaley Ridge and Chaley. One product you have there that's really flexible and has helped out so many people and helped save borrowers tens of thousands of dollars in interest or more is what's called your all in one loan. Tell us about it.
Speaker 3 (00:24:25) - This is a first Lean HeLOCK everyone. I'm such a big fan, it's not for everybody, but for the right individual, I don't know that there is a loan product to rival it. It's got all the flexibility in the world and as Keith said, the mechanics of this and the concept of this arbitrage, it's called Velocity Banking, infinity Banking. If anybody's familiar with those terms, that's what this does. It allows you all the open flexibility to sort of become your own bank where you have this line of credit. It is a first lien line of credit. So let's take a a step back and talk about those low interest rates that everybody has secured over the last couple of years. We were very lucky to have to two and a half, 3% interest rates. And I'm constantly having this conversation and I'm really trying hard to dispel the psychology of you can never do better than that when it's just not the truth.
Speaker 3 (00:25:14) - And mathematically you will be able to figure this out. I'm gonna plug our website here. There is an interactive simulator that will take you to the all-in-one simulator where you can compare your existing fixed first lien mortgage to the All in one and and the input data is very, very simple. No vials of blood here guys, but if the input is accurate, the results page will tell you very clearly if the all-in one will save interest and Trump over the 30 year fixed at two and a half or whatever it is, or if you're fixed rate mortgage is more to your advantage, it will be very clear there'll be no mistaking it from that. I think further conversations will be necessary for those that see some real value in the All In One. I won't go too far down that rabbit hole, it's a little bit more complicated than we probably have time for here. But the first Lean All In one is such a fantastic tool. I really encourage your listeners to go ahead and and check out at the very least the simulator and see how it applies to you.
Speaker 0 (00:26:08) - The all-in one loan operates much like a first lien heloc. I don't think we have time to describe it all. Like you said, you do have the simulator there on your website@ridgelendinggroup.com where one could see if their existing mortgage it compares favorably or unfavorably to the all-in one loan. But as we know with the first lien heloc, therefore one feature of the All in one loan is the option, not obligation, but option of making interest-only payments to keep your payment down.
Speaker 3 (00:26:34) - Yeah, this is where it gets a little bit tricky for some people when we start talking about payments FirstLine Open-ended HeLOCK, where it's called the All In one because you're replacing not only your mortgage with this revolving open-ended heloc, but also a checking and savings account and combining those two elements whereby simple depository income is being used at dollar for dollar driving down principle balance to save in daily interest accrual. I'm gonna give a quick example and then we can move on and, and I encourage everybody to do the simulator email us, let's talk through it. We'll take you by the hand. It's the learning curve's a little intense, it was even for me. But here's an example of velocity of money and kind of how the all-in-one works. So take a 30 year fixed mortgage and a 15 year fixed mortgage. Both of them started at $400,000 each.
Speaker 3 (00:27:22) - You lock the 30 year at 4% and the 15 year was locked at 7%. Without exception, everybody runs to the 30 year at 4%. I would've done the same if I didn't know the math when in fact the reality is is that you will pay $40,000 more on that 4% 30 year than you would on the 7% 15 year because the amount of time that you're paying on that mortgage is greatly reduced. And that's, I guess a, an easy concept. It's a, the first step of trying to define this for most people, they can kind of see it in those terms because they understand the amortized mortgage. It's the amount of time that you are paying interest. So if you're utilizing your depository checking savings and your mortgage and all of that money is going in there month after month before it's going back out the door for whatever your living expenses are. And then whatever's left over is, is stays in there. 24 7 access. Nothing changes about your current banking techniques or or strategies. It's all the same. But now you're in control. You've become your own bank. It's amazing. I can't say enough about it
Speaker 0 (00:28:24) - Talking about the all in one loan there. You sure can learn more from Ridge on that. Jaylee, is there really like anything else that I guess is noteworthy specifically in helping a borrower qualify for income property loans, maybe a common problem or a borrower hurdle that you see in there at Ridge?
Speaker 3 (00:28:43) - I would just boil it down to education. Just lack of information. It's not dear Google stuff. The guidelines and what's available. All of these things are changing on a consistent basis that real-time information's not available to them. So if I had to pick one thing, I would just say education. And I'm very proud to say that we really focus on that. If there's a value add about Ridge, I think there's quite a few. But the one that I think sticks out for most people is the education that we provide to our investors and shining a light and giving them a look under the hood and what they need to know, teaching 'em how to optimize their qualifications and all of the stuff that we've been talking about here today.
Speaker 0 (00:29:19) - Well that's a good point because when we talk about real estate investing, you're really, they're in one of the more dynamic and fast-changing parts of the industry as opposed to something like home construction where a lot of the methods haven't changed for 50 or more years, if you will. So yeah, it's really staying up and staying informed on that and engaging with a lot of the educational resources increasingly that Ridge has for you to help you stay on top of that as an income property bar yourself. And Shaley can tell us a bit more about that shortly. But why don't you tell us about all of the loan types, the mortgage products if you will, that you offer in there.
Speaker 3 (00:29:52) - That's another great value add about us. We have a very diverse menu, if you will, of loan products that don't just start and stop with the conventional. We're not a one size fits all. So we've got the Fannie Freddy's, we talk about that a lot. Our all in one, my favorite. We have a very diverse non QM product line and for those that aren't familiar with that term, QM stands for Qualified Mortgage. Fannie Mae and Freddie Mac are the, uh, epitome the definition of what a qualified mortgage is. There's a whole definition we don't need to go into today, but, so everything outside of that QM is now non qm. And within non qm, like I said, extremely diverse. There's things called the debt service coverage ratio product where we're not showing borrower income, we're just looking at the properties income offset by the new mortgage payment. There's bank statement products. If you can't show tax returns, we're gonna take deposits and average them asset depletion. If you've got large self-directed ira, we can come up with an income calculation for that. The list goes on. We've got commercial products for commercial properties, but also for residential properties. Cross collateralization. It's pretty diverse. We have a lot for everybody.
Speaker 0 (00:30:54) - When you excel in there, you've been such industry leaders at originating income property loans for investors were proportion of your businesses income property loans and what proportion is primary residence loans?
Speaker 3 (00:31:06) - A lot of people don't realize we can do both and we do both very well. But I would say that it's probably 70 30 not owner-occupied. To owner-occupied. A large part of what we do is the investor loans. But most of our investor clients come to us for their primary needs too because we already have their life on file and, and can get that done very competitively
Speaker 0 (00:31:24) - Too. , right? And you keep growing. You're in almost all 50 states now.
Speaker 3 (00:31:27) - I know. Can you believe it? We're in 47 states. We're not in North Dakota, New York, or Vermont, otherwise we're everywhere.
Speaker 0 (00:31:34) - Letter audience know how they can learn about your resources.
Speaker 3 (00:31:37) - There's a couple ways to find us our website, ridge lending group.com. They can email us, info ridge linen group.com. Our toll free is 8 5 5 74 Ridge 8 5 5 7 4 7 4 3 4 3. And while you're on our website gang, uh, check us out on our community. I have a live event every Tuesday, one 30 Pacific, uh, four 30 Eastern. Uh, lots of good information register and it's free. Lots of good information and, and education like we've been talking about here. Hope to see you.
Speaker 0 (00:32:05) - Oh, it's been a terrific and crucial mortgage market update. Chaley Ridge, thanks so much for coming back into the
Speaker 3 (00:32:11) - Show. Thank you. Appreciate it.
Speaker 0 (00:32:18) - Oh yeah, lots of good concise information there from Chaley. It's a type of content that can have you hitting the rewind button on your pod catcher at times. All right, so we learned that in a lot of scenarios there. Second, mortgages come with rather high interest rates that is prohibitive. But then on the other side, it's encouraging to learn, learn that on primary residences, for example, you can get up to 90% loaned value. That means you only need to keep 10% equity in your home. And as far as that all in one loan simulator, we'll put a link directly to that in the show notes for you. But like Chaley said, you might wanna reach out to them@ridgegroup.com and then they can help walk you through it. Thank you to Caeli for the generous contribution to your learning today. Until next week, I'm your host, Keith Weinhold. Don't quit your daydream.
Speaker 5 (00:33:15) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests on their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L l C exclusively.
Speaker 6 (00:33:43) - The preceding program was brought to you by your home for Wealth building. Get rich education.com. |
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