Mon, 20 March 2023
You can afford an $8M apartment building. Perhaps you just haven’t really asked: “How?” The answer: syndication. Today’s guests are The Real Estate Guys, Robert Helms and Russell Gray. They’ve had a profound influence on me. If you’re an active real estate investor with some experience, caught the real estate bug, and want to go full-time, Robert and Russ are masters at helping you go bigger, faster with syndication. You can aggregate other investors’ money to buy a deal that you could not afford on your own, like a large apartment building, self-storage unit, or car wash. You must find both deals and investors. Syndicators must follow SEC rules. When you find a deal, the numbers must work for investors. But it helps that your project has a deeper story and meaning. Russell Gray provides an example. The Real Estate Guys Radio Show - Real Estate Investing Education for Effective Action Twice annually, they host the live, in-person Secrets Of Successful Syndication event. Resources mentioned: Show Notes: Join the next Secrets of Successful Syndication seminar: https://ap216.isrefer.com/go/soss/A0011/ Listen to The Real Estate Guys Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Memphis & Little Rock property that cash flows from Day One: 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: |
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Mon, 13 March 2023
Housing intelligence analyst Rick Sharga joins us. Learn about: plummeting home sales, delinquency and foreclosure rates, future home prices, interest rate direction, housing demographics, builder incentives to buyers, lender repossessions, and homeowner equity levels. I ask Rick: “Is a home price crash imminent?” 70% of mortgage borrowers have an interest rate of 4% or lower. They’re rarely motivated sellers. America should have a housing shortage for at least 5 to 10 more years. FHA borrowers are exhibiting financial distress. Overall, delinquency and foreclosure rates are low. We discuss recession prospects, and what will happen when student loans must be repaid. Home prices are stable or should increase modestly in many areas of the Midwest and Southeast. Home price declines should continue in: many western US areas, high-end homes, and Zoomtowns. They could correct 10% in California. Today, you can get mortgage rates in the 5s on new-build income property. How? With builder incentives for buyers, especially in Florida, at GREmarketplace.com. Want free coaching? GREmarketplace.com/Coach Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Memphis & Little Rock property that cash flows from Day One: 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: |
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Mon, 6 March 2023
High inflation has a downside for real estate investors too. Property insurance costs are up 17% year-over-year. Turnover costs have surged 15%. Utility costs up 10%, property taxes up 4%. The obvious way to deal with higher property costs is to raise the rent. I see more lease agreements where tenants must pay for $200 worth of repairs per occurrence. ChatGPT wrote real estate rap lyrics for me and even a podcast script. But I tell you why I won’t use either one. M.C. Laubscher, the Cashflow Ninja joins us. He tells us how to avoid big financial mistakes, earn tax-free returns with liquidity, and the defensive investing strategy mindset. He tells us why future tax rates will probably be higher. High cash value life insurance can help, sometimes known as the “Infinite Banking Strategy”. Learn why liquidity is so important for today’s RE investor. We discuss how much cash you should hold onto. Is 6 months’ worth of expenses enough anymore? Resources mentioned: Show Notes: Be your own bank: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Memphis & Little Rock property that cash flows from Day One: Find cash-flowing Jacksonville property at: Will you 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: |
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Mon, 27 February 2023
Why can’t you do it all yourself? That is, identify, acquire, manage a rehab, place a qualified tenant, and manage a rental property long-term. We talk with the Founder and Investment Coordinator of who may be the oldest turnkey provider in America today, Mid South Home Buyers. They make ugly houses pretty. They only acquire houses that the Founder would be proud to own himself. Mid South Home Buyers’ Terry Kerr and Liz Brody have repeat GRE buyers for their 2nd, 5th, and 9th investment houses in Memphis and Little Rock. They’re passionate about how they’re not snatching away homes from prospective first-time home buyers. They transform and improve neighborhoods. 4 years is the average tenant duration here. MSHB’s rehabs are extensive: new roof, new HVAC, updated electrical and plumbing, all-new flooring and new cabinetry. With national supply chain issues and inflation, they’ve doubled their inventory of supplies. Memphis International Airport is an astounding distribution hub for the types of jobs that make great long-term tenants. It’s often the highest volume cargo airport in the world. They also offer new-build properties in Little Rock. What about prices and rents? Memphis Rehab SFRs: Rent $780-$1,400 | Price $95K-$160K Memphis Rehab Duplexes: Price $180K-$220K Little Rock Rehab SFRs: Rent $850-$1,500 | Price $110K-$170K Little Rock New SFRs: Rent $1,300-$1,400 | Price $190K 80% of their buyers finance. 20% pay all-cash. They’re so proud of what they do that they offer monthly bus tours. Learn more. Get started at: GREmarketplace.com/Memphis Our GRE Instagram Poll results show that 65% of you have your tenants pay you through the legacy banking system. I reveal all the results on today’s show. Resources mentioned: Show Notes: Memphis & Little Rock property that cash flows from Day One: 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 leave a review for the show? I’d be grateful if you search “how to leave an Apple Podcasts review” and help me this way. 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: |
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Mon, 20 February 2023
New York City real estate has distinctions and quirks that you’ll find almost nowhere else in the world. Is it unreal estate? This includes: super skyscrapers, air rights, apartments with doormen, co-ops, pencil buildings, and rent control. Can you actually make money in NYC real estate? Incredibly, the national or world capital of all these are in NYC: banking, finance, communication, advertising, law, accountancy, fashion, arts, architecture, media, and more. 1 in 18 Americans live in the NYC metro area. The population is growing. Guest Beth Clifford joins us. She has an impressive set of experiences, including on Wall Street, with startups, and as an international real estate developer. Beth is a former NYC resident. Beth describes: how “air rights” are really development rights, pencil buildings, which apartments have doormen, and more. There’s a short-term rental arbitrage strategy in NYC where you could make money. But is it legal? Join Thursday, Feb. 23rd’s GRE Live Event for Philadelphia, Pittsburgh and Baltimore properties. Ask me questions live. It’s free. Register now at: GREwebinars.com. Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Memphis property that cash flows from Day 1: Find cash-flowing Jacksonville property at: Book recommendation: Find NYC apartments: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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:
Welcome to GRE! I’m your host, Keith Weinhold. New York City real estate is just absurd. It’s also really interesting and has distinctions and quirks that you’ll find almost nowhere else in the world.
We’re talking about air rights, skyscrapers, apartments with doormen, co-ops, rent control, and how do you actually make money in NYC real estate? Today, on Get Rich Education.
Welcome to GRE! From Jamaica, Queens to Lower Manhattan. Across New York City and 188 world nations, this is Get Rich Education. I’m your host, Keith Weinhold.
As we’re talking about NYC real estate today, I think it can be regarded as exotic and Manhattan is the CENTER of American urban excitement from Times Square to the Statue of Liberty to the address “One World Trade Center” and more.
It wasn’t always this way.
As the story goes, in 1626 - about 400 years ago - Indigenous inhabitants sold off the entire island of Manhattan to the Dutch for a tiny sum: just $24 worth of beads and "trinkets."
At that time, it wasn’t known as New York. It was called “New Amsterdam”.
Today, NYC is the national or the WORLD capital of: banking, finance, communication, advertising, law, accountancy, fashion, arts, architecture, media, and more.
How could so much be in one place? Well, all this attracts a lot of people.
In fact, the NYC metro area population last year was almost 19 million, that’s up just about one-quarter of 1% from the previous year. So COVID hasn’t killed it.
This means that more than 1 in 18 Americans live in the NYC Metro.
Now, of the 5 boroughs, we’re really focusing on Manhattan today, since that’s where space is at a premium, hence that’s why the tall skyscrapers are there.
In fact, I have counted 17 skyscrapers that are all more than 1,000 feet tall - that’s almost one-fifth of a mile tall.
Now, Manhattan is crammed with such high density - and it isn’t just commercial space. Of course, residents live on Manhattan too.
But it is so crammed for space in Manhattan - and even in places of the four outlying boroughs, that it can kind of obscure your vision such that you don’t have the - I guess - wherewithal that you would elsewhere.
Here’s what I mean. Just last month I met a guy that has lived all of his life in NYC - part of his life in Brooklyn and part of his life in the Bronx.
He did not realize that when he lived in Brooklyn, he was living on an island. I don’t know how long he lived in Brooklyn, but I found a gentle way to tell him, without making him feel unintelligent - that yes, Brooklyn and Queens are both on LI.
That’s why you have all those bridges in NYC, like Brooklyn Bridge. They connect the islands.
Now, when it comes to rental property there, New York State has had the longest history of rent control in the United States, since 1943. The majority of those units are in NYC.
I have never seen one piece of evidence that rent control works long-term. If you have, please share that resource with us at GetRichEducation.com/Contact
When you put a ceiling on the amount of rent that can be charged like this, what tends to happen is that landlords have zero incentive to improve the property when they can’t charge more rent… or else soon, LLs would be losing money.
In many cases, soon properties and entire areas can become dilapidated because they haven’t been improved, and in bad cases, tenants don’t want to move out. They’d like to keep the cheap rent even if they need to tolerate increasingly squalid conditions in these neglected properties.
A classic economics book really outlines the rent control problem wonderfully. Though the author isn’t that well-known, Henry Hazlitt’s “Economics in One Lesson” really breaks down the problems with rent control terrifically.
That entire book basically outlines how programs like rent control only benefit a small group of people for a short period of time… like, oh, let’s give these people a break & be nice so that they can afford to pay the rent.
At the same time, you’re NOT playing nice to the property owner. And how benefits to a small group of people in the short-term harms everybody long-term. Many will tell you that’s the case with… rent control.
Shortly, I’ll talk with an experienced developer, knowledgable about NYC development, she also used to live in NYC.
Wait until you discover some of the complexities of getting things build there. I expect her to share that.
She’ll tell us about things that you would never think of, like how… whether or not there are windows on the side of the a building indicates whether or not there’s a development opportunity there.
I’ll have her describe what “Air rights” are. Property “air rights” are not what you think they are. You’ll need to listen closely to that part as I expect explaining “air rights” involves somet math.
You’ll learn about what “skinny skyscrapers” are and why they don’t they build those wider.
NYC has coops - cooperatives. They’re different from a condo. In a co-op, you buy shares in a corporation that gives you certain occupancy rights.
So rather than having fee simple title, you’re the shareholder of a corporation rather than having a title like you do with condos.
And you’ve got to give the co-op board your income & taxes… because the corp wants to be sure you’ll be able to pay. And if the co-op board doesn’t like you dog or like you for whatever other reason, maybe they won’t let you join.
If you’re perusing apartments to rent in NYC - esp. Manhattan - some have a doorman and some don’t have a doorman. Why might it be desirable to have a doorman, when that’s not even offering in a place like, say Minneapolis or Houston?
I’ll ask our guest, “Is there any way you can make some real estate cash flow here.”
So, I’m often the one doing the teaching here on the show. But in just a few minutes, I expect to get some learning myself as we discuss the unique and unusual nuances of NYC real estate.
First, how long have you been listening to the GRE Podcast?
Well, that was a recent question in our Instagram Poll.
Now, the sample size wasn’t that huge and the our average Instagram follower might be a more avid podcast fan that the average.
But with the question asked, “How long have you been listening to the GRE Podcast?” The results were:
Under 1 Year = 11% of respondents have been listening for that length of time. 1-3 Years = 32% of you 3+ Years = 43% of you have been listening for that length of time. And EVERY SINGLE episode since 2014, yes, that is all 437 episodes. That comprises 14% of you.
So that’s about 1 in 7 listeners - at least in this poll - have listened to every single show. I’m really grateful for that. To shout out a sampling of those that have listened to every episode, that includes Kirby, Jacob, and Stacio.
I’m deeply grateful for that. I still of new people that find the show here today & then want to go back and listen to every single episode.
That is humbling indeed.
NYC Real Estate is absurd. That’s next. I’m Keith Weinhold. This is Get Rich Education. ______________
Yeah, great stuff from Beth there… and hey, a good investment to the global elite might be different than what you perceive as a good investment.
If you’ve got $250M to place and you don’t need the cash flow, you just want RE for the proven inflation hedge that it is, then drop it all into a Manhattan skinny skyscraper and leave it vacant. Some people can afford to do that. It was good to learn that the term “air rights” is misleading. It’s really about “development rights”. That’s probably a better way to remember it. Now, when it comes to real estate in the northeast, Boston, NYC, and Washington DC real estate and their outlying areas really aren’t known as what we’d call “cash flow” markets. But three other cities in the region are - Philadelphia, Pittsburgh, and Baltimore. Our Mid-Atlantic provider even sees properties where the price is around 100 months' rent. Yes, the property price is just 100X the monthly rent amount. That is impressive. That means that with just a 20% down payment, you can expect your monthly rent income to often exceed all the monthly expenses, even your mortgage payment. Well, I’m going to discuss this at a live event on Thursday night, just 3 days from now. That is Thursday, February 23rd at 9 PM Eastern, 5 PM Pacific. Yes, this live event is your opportunity to ask us questions live, and that it will be the first time ever that our in-house Investment Coach, Naresh, & I are both there, together, to help you, along with the provider in these mid-Atlantic markets. Again, it will be in just three days, Thursday, February 23rd at 9:00 PM Eastern. It is completely free. Sign up now at GREwebinars.com
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Mon, 13 February 2023
I get political today. But first, I discuss jobs. How far will home prices fall? Innovation creates jobs. It does not destroy jobs. American innovation is one reason that we added over a half million new jobs just last month. All this new job growth and a robust GDP reading will keep us out of a recession for the next few months, maybe much longer. Both the US median home price (Case-Shiller) and inflation peaked last June. The US median home price fell 2.5% from its peak. Where are they falling? Where are the rising? We explore experts’ outlook for home prices. Five expert opinions all range from 2023 home prices rising 5% to falling 4%. Volatile, coastal markets are correcting down a little. Many stable markets in the Midwest and South are stable or rising a little. Beware of those that say, “It’s never been a better time to buy real estate.” That’s wrong. 2012 was better. 2021 was the worst time to buy real estate recently. Even these past few years, and today, it’s hard to find a better place to put your investment dollar than carefully-bought income property. This won’t last long. At GREmarketplace.com now, providers are often giving buyers 2% of the purchase price as cash at the closing table and free Property Management for two years. Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Memphis property that cash flows from Day 1: Find cash-flowing Jacksonville property at: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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:
Welcome to GRE! From ANNapolis, MD to Santa ANA, CA and across 188 nations worldwide. I’m Keith Weinhold, Forbes REC member and founder of this very platform here… and this is Episode 436 of the Get Rich Education audio podcast.
If you’d like to watch me on video, check out the Get Rich Education YouTube Channel.
But our audio show, right here, is our most popular platform.
Is the world trying to tell me that my voice is better than my face, then? That’s what I’m starting to think. Ha!
ARE American home prices are falling. How bad is it? When did it start? And when will it stop? I’m going to answer all of that in just a bit.
Last week, I mentioned that a strong GDP report has told so many permabears and gloomer-and-doomers that they were wrong about being in a recession by now.
And gosh… the latest Jobs Report came in after that and it just added insult to injury for all these permabears - meaning those that are permanently bearish - permanently making dire predictions about the economy & housing.
And, even if you’re listening to this show years from now, this is how you know that a recession is NOT at all imminent.
The whopping 517,000 new jobs added last month nearly tripled expectations.
Still... I wonder if constant rumors about a coming recession will drag on longer than the fake meat fad.
These recession rumors keep getting stirred up.
Now, when it comes to jobs. You care about that a lot as a REI. You need your tenant to have a job in order to pay you the rent.
The number of American jobs saw their recent low in 2020. In fact, they fell into a deep trough - a BIG dip back then.
That was the pandemic shutdown. People had to stay home. The government paid workers to stay home. Maybe you were paid to say home then - about three years ago.
Well, that means that a lot of goods weren't being produced in 2020. Many services weren’t being produced either.
Well, when MORE stimulus-fueled dollars began chasing FEWER goods, that's exactly what began stoking the inflation fire for the next few years, right up to & including now.
That’s where the monetary inflation came from.
That’s why I’ve regularly been paying $8 for a bottle of good quality salad dressing.
Aren’t you doing some of these things?
Yeah! Hey, what’s wrong with you? In today’s polite society, you aren’t adding a 25% tip for your $6 bottle water?
No, I hope you’re not. I’m not doing THAT yet. Ha!
Well, that was when jobs cratered, in 2020. By today, with all of these American jobs roaring back, total jobs are now 2.7 million above pre-pandemic levels. There's now just a 3.4% unemployment rate.
That is just really hard for the doom-and-gloomers to deal with.
That’s the GOOD news.
Though more jobs are good news, it's not all good.
The bad news here is that strong employment means more inflationary pressure.
To that point, Jerome Powell recently said that Americans should expect a couple more interest rate hikes to keep combating inflation.
Not everything is all good in the good ol’ USA. I mentioned some of the economy’s other problems last week.
But what's the reason for all this job creation? Why is this happening in America?
In a word, it is American innovation.
Innovation creates jobs.
Now, there might have been one point in your life when you thought that innovation DESTROYS jobs - like, for example, with the fact that today’s bank tellers and grocery store cashiers are disappearing.
Innovation does not destroy jobs. Innovation creates jobs. We’ll like at why shortly.
But first, the Global Innovation Index was released and it shows that America is the 2nd-most innovative nation in the entire world.
Yep, of 193 UN-recognized world nations, the US is only second to Switzerland.
People have falsely believed that innovation destroys jobs since before the tractor replaced horses and mules.
Yep, last century, one new tractor replaced five horses or five mules and that meant that it soon took fewer farmers to feed the animals, because fewer animals were needed.
For the ultimate result & outcome, look no further than where you are today. We are more technologically advanced than at any time in human history.
The result is that we have 11 million more jobs than available workers. It’s kind of the opposite of unemployment.
Innovation is what got us here.
Twenty years ago, no one could have foreseen ALL of today's new job opportunities as a: drone operator, quantum machine learning analyst, YouTube creator, a podcaster, social media director, app developer, information security analyst.
New jobs that didn’t exist before, like a digital marketer, TikToker, metaverse wearables developer, and on and on.
Well, that right there is evidence that in twenty years, it’s hard to foresee what new jobs WILL exist that don’t exist today. But they WILL be created.
Even eBay, which some regard as a “digital yard sale” company - though they’re more than that. But eBay just announced new hires for Web3 and NFTs—those fields barely existed two years ago.
In a few years, when self-driving cars replace Uber drivers, those driver jobs will simply migrate to better-and-higher uses, just like it did for jobs of a bygone era like telephone switch operators & travel agents & bowling pin boys & and elevator lift attendants.
But people will still fear for the "loss of jobs". Don’t fear for a loss of jobs. Fear for a loss in innovation.
American innovation drives all this job growth.
So the fact that we aren’t having a recession anytime soon is really frustrating for all the permabears.
Politics is another sad reason that people create gloom & doom-type of media.
Some people wanted to WISH a recession into existence since last year, especially leading up to last year’s mid-term elections because they wanted to sow seeds of fear because they didn’t like the political party in power.
People think that if they can just convince enough people that there’s a recession, then they can topple the current administration.
Then if that incumbent administration gets toppled and THEIR people are now in power, even if it doesn’t change anything in the economy, that same recession-promoter will stop promoting a recession because they got their political wish. It’s politically-driven.
I don’t do that here. I don’t do left-right politics. Instead, I do up-down. Up is integrity. Let’s go up.
I first heard that up-down framework from Dr. Chris Martenson - someone I really respect. We had him on the show a couple times here.
How do you do up-down instead of left-right? Follow people that you disagree with on social media for some new perspectives.
Trying watching some YT channels that you don’t agree with. Even delete your YT history & start over if that does the trick.
Today’s suggested video and social feeds can often keep people in one narrow “think” silo.
So two big reasons that crash bros have been wrong are discounting American innovation and being blinded by politics.
OK. Well... so what? I mean… really… like… who cares?
What if gloomer-and-doomers plow ahead with more fear-mongering headlines like: "giant crash ahead", "total market collapse" or "massive depression coming"?
How does that really hurt anyone?
Like I briefly mentioned last week, it matters because it keeps us living in fear.
Your brain's amygdala is wired to be stimulated by danger, alerting your nervous system.
Has all that dreary material from some other sources talking about crashes and depressions and collapses even made you want to... quit your daydream?
You'll never get that lost time back.
Permabears rarely admit that their dire predictions were wrong. They'll just go on making more intransigent apocalyptic forecasts in order to get clicks.
People have been predicting the end of the world exactly since... the beginning of the world.
Let’s bring some balance here. Let’s talk about both the bad news and the good news.
If you & I believed all the bad news, a meteor would have plummeted from the sky and struck us both dead by now.
That’s why some people with their constantly dire predictions want you to think.
It’s the old school media notion of “If it bleeds, it leads.”
Don’t believe for one second that I think that America’s powers that be are all 100% responsible & looking out for your best interest.
Janet Yellen recently said: “You don’t have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years.” Yes, that’s what Treasury Secretary Janet Yellen said, who, as longtime listeners know, I have called “Grandma Yellen” because she looks like my late Grandma Weinhold. C’mon - she just looks like a Grandma. Nothing wrong with that - she looks like a sweet ol’ grandma. I’ve definitely disagreed with her in the past. That is, I’ve disagreed with Yellen, not my Grandma. Ha! But Yellen is right on this one. And yes, Yellen works for the president. But she’s not the only one who’s starting to see the possibility of a recession becoming less likely. Economists at Goldman Sachs lowered their estimate on the possibility of a recession in the next year from 35% down to 25%, and that is thanks to the strong labor market. A 25% chance of a recession this year, though some forecast it higher than that. Speaking of the President, I was hoping that one Joseph Robinette Biden, Jr. would have talked about housing more in last week's SOTU address that he delivered. In any case, the strong labor market is keeping us out of a recession. And MY take is that job strength is underscored by a legacy of continued American innovation.
But we won’t play the Star-Spangled Banner again this week like we did last week… emmm because some of those jobs are part-time jobs.
Coming up straight ahead - some bad real estate news - what about those falling American home prices?
Learn more about GRE and how our mission helps you achieve financial freedom - not debt freedom - but something more important - financial freedom - at our educational website, GetRichEducation.com
Follow Get Rich Education on your favorite social media platforms - Instagram, TikTok, Facebook, LinkedIn, Twitter and YouTube.
On most every social platform, our name is Get Rich Education. Pretty easy to remember! We are easy to find on social.
Might I first suggest our YouTube Channel.
That’s where you’ll get some great, free in-depth learning, including where we’re about to release a video of me shopping in grocery stores in various US states - yes pushing a shopping cart through the aisles - for evidence of inflation and what that means to you. Look out for that on our Get Rich Education YouTube Channel.
More straight ahead. I’m KW. This is GRE. _________________
Last week, I told you why I don’t expect our core markets to see much price movement in the near term.
By our core market, that’s residential properties that are lower-middle class up the median in the US Midwest & South - which I call the stable markets - as opposed to the volatile, coastal markets.
As a real estate investor, you may very well care about the state of rent growth and occupancy rates so prices might not be the #1 thing, but they still matter to you.
Well, both US home prices and inflation BOTH peaked in June of last year.
The fact that last June was the peak of US home prices is per the widely-cited Case Shiller National Home Price Index.
And since then, national home prices have corrected back… 2.5%. Yes, down two-and-a-half percent from their price zenith, eight months ago.
Yes, a rare period where home prices have NOT appreciated.
Redfin recently told us that of the 50 most populous cities in the nation, the 10-11 that have fallen the most over the past year (so this is annualized here) - and I’m just rounding to the nearest whole percent here are:
San Francisco - home values are down 10% YOY
Sacramento, California: down 6% San Jose, California: down 6% Los Angeles, California: -5% Oakland, California: -4% Seattle, Washington: -4% Pittsburgh, Pennsylvania: -4%. I’m a little surprised at Pittsburgh. I just visited Pittsburgh a few months back and I don’t know why they’re down 4%. I might research this. Austin, Texas: down 3%. Not a coastal market, but a market that overheated in the pandemic runup. New York City -3%. Phoenix, Arizona: -2% Let’s get an 11th city in there with Boston, Massachusetts: -2% Alright, so, it’s chiefly volatile coastal markets that have experienced the price correction to this point. Most of those are mild. The only one down more than 6% is SF at 10%. But how far do they fall… in those high-priced, volatile, mostly coastal markets. And, hey. You can go back to this show from its beginnings in 2014 and 2015 and this is why I told you that we avoid the high-priced, volatile markets here - most of them coastal. They don’t cash flow. Their values aren’t stable, and their LL-Tenant laws don’t favor REIs at all. This is just what I’ve been talking about for over 8 years now - all on record - right here on this show. Alright, well that’s backward-looking. For some forward guidance, I told you about MY price forecast last week.
Here’s what some OTHER influential figures have to say about the future direction of the national median home price for this year:
CoreLogic expects a 2.8% increase.
Deputy Chief Economist at Redfin, Taylor Marr is forecasting a 4% drop in the median home price compared to 2022.
Chief Economist at Zillow, Skylar Olsen expects a more modest 0.5% decline.
NAR Chief Economist Lawrence Yun thinks prices will stay even, with no appreciable gain or loss.
And finally, Danielle Hale, Chief Economist at Realtor.com expects a 5% INcrease in home prices.
So, right there, with that panel of five economists, there’s a national HPA expected range for this year of -4% to +5%.
Now, I talked about the worst appreciating major markets & the national numbers.
How about the big-city real estate markets that have continued to appreciate & expect to continue to this year?
The Top 10 are just about all in the eastern half of the United States, expected to appreciate anywhere from 2% to 8%. In no particular order, they are:
Though mortgage rates have hit a five month low, now near 6%, you know, I think that MORTGAGE RATE direction is more difficult to forecast than home prices are.
But I’ll tell you, at this point, I will advise you that mortgage rates have more upward pressure on them than downward pressure since there’s high job growth.
High job growth can keep inflation buoyant so that makes the Fed want to keep hiking rates.
So, in summary. Home prices expect to stay stable or perhaps rise just a touch in many stable Midwest & South markets, and they probably have further to fall in high-priced markets, many of which are coastal markets.
Jacksonville, FL is one notable exception. That is one major coastal market that usually behaves like a stable market and has good cash flow.
Jacksonville is one coastal place that I like for investors.
Real estate has been more attractive to buyers this year, compared to last year as evidenced by the increase in purchase applications.
But for anyone that says that it’s never been a better time to buy real estate. I don’t believe that for a moment.
NEVER been a better time?
2012 was a pretty awesome time to buy real estate. That was about when prices hit some sweet lows. But those prices are never coming back.
I’ll tell ya, when do I think was the WORST time to buy real estate in the recent past? It was 2021. That’s when the housing inventory was so low and everyone was competing for houses and you had to drop so many contingencies that sometimes you had to feel like you better waive your home inspection (which is not something that I recommend). 2021 is when you often had to pay all-cash to compete against a horde of bidders. That’s bad. That means you’ve got no leverage. And 2021 is when you often had to offer over asking price. 2021 had choppy seas for buyers. But it was a good year for sellers. And you know, even in 2021, with it’s challenges, you would be hard-pressed to find a better investment than real estate when it’s carefully-bought income property. That’s still where you would have a strong risk-adjusted return, buying in the stable, cash-flowing markets where we do. We’re talking about “Real Estate Pays 5 Ways” type of properties - yeah. A San Francisco row house in 2021 that you had to pay all-cash & $100K over offer price for? No, not a good strict financial investment. But today’s market - now you’ve got more inventory and you have these incentives that more & more income property providers are offering you like I mentioned last week. I want to mention them again because they are so special, they don’t often exist in the marketplace.
There are three ways you can save thousands of dollars in today’s real estate market.
These three incentives - you can’t get them from every provider at GRE Marketplace. But this is now common. Ask about them.
1 - Many sellers are crediting buyers like you 2% of the purchase price at the closing table. You can use this to buy down your interest rate if you want to.
So on a $250K income property purchase, that’s $5,000 cash to you at the closing table.
I don’t know how long this incentive will last. Because though mortgage rates have fallen a full 1% from their peak, you’re still getting cash at the closing table to buy your rate down.
The second incentive is free property management for up to 2 years.
If you don’t have to pay a PM fee, that can increase your cash flow by about $150 each month - or more - on every one of your properties.
I don’t know how long that one will last.
3 - Rent guarantee. This means that if your property is vacant, the seller pays rent to you until the property is occupied.
That third one - the rent guarantee is the only one that I would expect will last long-term.
On your next income property purchase at GRE Marketplace, be sure to ask about these incentives.
If you’re listening to this episode in the distant future, they’re probably not going to be there anymore… then just, take this as a point of historical context.
Understand that GRE Marketplace is not like a big box store. It’s more like an organic farmer’s market where we help match you with experienced property providers.
And much like an organic farmer’s market, check back regularly for new offerings. It’s a vibrant market. And you see all those markets in the Midwest & South there. Check back every few weeks.
To help you out, we actually video-interview the PMs in most markets on that page.
Yes, with today’s incentives, your PM could be like your unpaid servant for two years - ha! We interview them right there on Marketplace to give you a good feel for them.
Wealthy people’s money either starts out in RE - or ends up in RE. And I really wish that a resource like GRE Marketplace existed when I began investing in RE. I had to figure out so much by myself then.
It is still free. There is still zero subscription fee. GREmarketplace.com is still a completely free service to you. Create one login and get access to all providers at GREmarketplace.com.
Next week, a show unlike any we’ve ever had before. I’m Keith Weinhold. DQYD!
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Mon, 6 February 2023
Learn my new outlook for 2023 and 2024 home prices. First, I follow up on my real estate prediction of 9%-10% appreciation for last year. You learn exactly how I performed. Why aren’t real estate prices expected to rise or fall substantially in the near future? Affordability is an upside constraint to home price growth. Low supply protects against a substantial price downside. So many have wrongly predicted a recession by now. (I have never said any such thing.) The latest GDP and jobs numbers beat expectations, frustrating gloom-and-doomers. It’s even possible that the Fed engineers a “soft landing”. Not all is well. 64% of Americans live paycheck-to-paycheck. America has galactic-sized debt. We have a labor shortage. Inflation is still high. Mortgage rates have hit a five month low, now near 6%. There are three ways you can save thousands of dollars in today’s real estate market. 1 - Many sellers are crediting income property buyers 2% of the purchase price at the closing table. You can use this to buy down your interest rate. 2 - Free property management for up to 2 years. 3 - Rent guarantee. This means that if your property is vacant, the seller pays rent until the property is occupied. The third one above is the only one expected to last long-term. On your next income property purchase, our free in-house Investment Coach can help you get these incentives. Start with Naresh at: GREmarketplace.com/Coach Hayden Crabtree, founder of My Property Stats joins me. His real estate deal analysis software helps you organize your existing real estate portfolio and analyze future deals. He’s also a successful author and specializes in RV & boat storage properties. GRE listeners get a 10% discount on his real estate analysis software at MyPropertyStats.com/GRE. Use Discount Code ‘GRE’ for 10% off your first year. Resources mentioned: Show Notes: GRE listeners get a 10% discount My Property Stats real estate analysis software: Get started with our free coaching on your next GRE Marketplace income property purchase at: RE values rose 10.2% in 2022: https://www.cnn.com/2023/01/20/homes/existing-home-sales-december/index.html Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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: |
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Mon, 30 January 2023
Really… Detroit? It’s in America’s cash-flowing Midwest. But is there a stigma involved? Does it matter? In the 1950s, Detroit was the wealthiest city in the entire world, led by the manufacturing and automotive industry. But it endured a horrific economic and population downfall late last century due to aging manufacturing plants, high taxes, overregulation, poor services, corruption, and lack of public administration. Detroit even filed for bankruptcy. Between 2010 and 2020, the population of the Detroit Metro grew 2%+, per the US Census Bureau. Time magazine named Detroit one of the World’s 50 Best Places To Live—one of just five US cities. Our own COO, Aundrea Newbern, MBA, recently chose to move to the Detroit Metro. The average Detroit income property from today’s guest provider rents for $1,100 to $1,200 and costs about $120K. These are renovated single-family homes, often brick. The Big 3 auto manufacturers are all headquartered in Michigan today. Detroit’s substantial employment sectors today include: manufacturing, automotive, engineering, IT, medical, trade & transportation, technology, and finance. The income property provider is aware that Detroit has a stigma. They encourage you on an in-person tour. Get started at: GREmarketplace.com/Detroit Often, you’re buying property at less than replacement cost. This provider encourages buyers to do independent third-party property inspections first. (I love this!) If you’d like to learn more, start at: GREmarketplace.com/Detroit Resources mentioned: Show Notes: Explore Detroit income property: Detroit makes TIME’s ‘World’s Greatest Places’ list, 1 of only 5 US cities: https://time.com/collection/worlds-greatest-places-2022 Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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: |
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Mon, 23 January 2023
Learn the beginner's mistakes to avoid. Is setting up a real estate LLC even worth it? Learn how to build the right credit score for a mortgage loan, including why you actually don’t want a score over 800. If a cash flowing property is so great, why would anyone sell it to you? I outline a myriad of reasons. Should you make a lowball offer to a real estate seller? Learn negotiation techniques. Earnest money procedures are covered. The real estate buying process is slow. From the time that you make the offer, it can often take over 30 days to close the deal. Once your offer is accepted, I recommend a professional third party inspection. It can cost you $300 to $500 for a single-family income property up to $1,000 for a fourplex inspection. I cover property appraisals and how they verify the quality of the bank’s collateral. Learn how to get a good feel for your property manager and what their duties are. I discuss the Management Agreement between you and your manager. Be sure to tell your insurance provider that this is a rental property, not your primary residence. A mobile notary meets you at your home, workplace, airport, or even a restaurant in order to complete the paper-and-ink closing process. This wraps up the deal. Get started with income property at: GREmarketplace.com. For free coaching to help get you started, contact our free Investment Coach, Naresh, at: GREmarketplace.com/Coach Resources mentioned: Show Notes: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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:
Welcome to GRE! I’m your host Keith Weinhold, here to help BEGINNING Real Estate Investors Today.
The biggest beginner mistakes to avoid, when you make an offer - can you lowball a turnkey provider, and all those buyer steps like LLCs, mortgage pre-approval, inspection, appraisal, and closing. Today, on Get Rich Education. _____________________
Welcome to GRE. From Athens, Greece to Athens, Georgia and across 188 nations worldwide. The voice of REI since 2014.
This is Get Rich Education Podcast episode 433 - and this is your Beginner’s Real Estate Investing Audio Guide. Hi, I’m your host Keith Weinhold.
We’re talking about how to get into long-term buy & hold RE investing - and that’s because it’s the most generationally-proven way to build wealth.
First, let’s talk about a couple of the biggest mistakes that real estate investors make - it’s being invested in only one geographic market. Often, that’s the market that they just happen to live in.
There is more risk with being in only one market than most realize, because you’re now tied to the fortunes or misfortunes of just one area’s economy.
Another substantial, common real estate investor mistake is that they continue to hold onto one - I’ll call it - special - property in their portfolio that they usually need to get rid of - but they have either sentimental ties to it - or they just hold onto it for convenience, and do you know what that property is?
I’m actually talking about a specific property here.
It’s the home that YOU YOU USED TO LIVE IN yourself. Well, what’s wrong with renting out the home that you used to live in yourself?
You might still have the preferable owner-occupied financing locked in on that one - and afterall, that’s a better rate than you could get on a non-owner-occupied rental.
The problem is that the property probably doesn’t perform BEST as a rental.
But you might be clearing, say $600 per month by using your former primary residence as a rental today.
Look, for you, it’s often about the cash flow - and yes, it is about the cash flow.
But there’s something even more important than cash flow - that’s because nearly any property will cash flow if the loan were paid off.
That’s why it’s really more specifically about the rent-to-price ratio of a property.
If you’re renting out the home that you used to live in, and it wasn’t strategically bought as a rental, if your rent-to-price ratio is 0.4%, meaning that for every $100K in value it has, you’re only getting $400 of monthly rent income, then you’re losing cash flow dollars every year - and every month.
Look, let’s give a real life example of the .4% RV ratio. Say that you can get $2,000 rent out of that $500K property that you used to live in.
But instead, three $150K homes bought strategically as rentals can have a combined rent income of $3,000.
So it’s either one $500K property at $2,000 of rent income. Or three $150K properties at $3,000 of rent income.
So you’re losing $1,000 dollars of cash flow every month - by not buying and owning strategically in markets in the Midwest and South where the properties make sense as a RENTAL on the day that you buy it.
Your primary residence only made sense as a primary residence on the day that you bought it.
Now you can see that the only reason that you still own it, is because you defaulted and “fell” into it. Don’t fall into things. Often, you want to be intentional.
You are a better investor when you’re intentional rather than emotional.
It’s even better for you now. Beyond your $1,000 of additional cash flow with some repositioning, now, with three properties instead of one - now you’ve also taken care of the first real estate investor mistake that I mentioned.
WITH three rentals rather than one, now you can be diversified across multiple markets.
Two birds are killed with one stone. Now with some re-positioning, you’ve increased your cash flow by $1,000, AND you’re in multiple markets. One property isn’t divisible.
And this $1,000 of monthly cash flow example is small. Of course, the differences can be greater than this.
We’re talking about real estate investing for beginners today, so let me clearly guide you through step-by-step on just how you go about buying your first property - writing an offer, getting an independent third-party property inspection and vetting your Property Manager which is known as due diligence, then the appraisal, and onto closing and receiving cash flow from the tenant.
As you’ll see, much of today’s show pertains to any investment property at all.
But we’re talking mostly about how to buy what are known as turnkey homes, especially homes outside your home market - as most of the best deals are not found where you live.
Turnkey means three basic things. #1- You buy a property that’s either brand new construction or fully renovated. #2- A tenant is placed for you - and you get to approve them. And #3- the property is held under management for you from Day 1 - if you so choose.
Like they say, the best investors live where they want to live, invest where the numbers make sense.
Today’s content is primarily geared toward United States real estate investors - but those that live outside the United States will benefit here too. You might want to buy a property in the US.
Here’s a question that you might have - “How do I go about setting up an LLC - a Limited Liability Company - to hold my investment property in?”
I’ll tell you - I don’t think “How do I set up an LLC?” is the best question to ask.
The best question to ask is, “Should I set up an LLC?”
The three main reasons people set up an LLC are for either anonymity, tax purposes, or asset protection.
Now, if you know that you WANT to set up an LLC - I’ve done four episodes on that topic with Rich Dad Legal Advisor Garrett Sutton.
You can go to GetRichEducation.com, type “Garrett Sutton” in the search bar, and those four episode numbers will appear so that you can listen. He was just on the show with us 9 weeks ago on Episode 424.
But the reason that the question is, “Should I even SET up an LLC?” is because:
Now, note that I’m not saying you can’t get an LLC or shouldn’t get one. I’m saying, prioritize those questions to yourself.
First, it’s “Should I get one?”. If that’s a definitive “yes”, only THEN ask: “How do I set one up?”
Why do you think you have to? Did some attorney use fear tactics to get you to?
If the result of the LLC’s administrative overburden provides a greater reward in the form of asset protection, anonymity, or tax benefit - which is typically a flow-through taxation type anyway, you might then … get an LLC.
So, as a beginning real estate investor, understand that real estate is a credit-based asset - meaning it’s usually bought with a loan.
So let’s talk about getting your finances in order before you contact a lender or select an income property.
That begins with you having enough cash liquidated for a 20% down payment on the property - add about 4% for closing costs, depending on the state that you’re buying your property in - and on the lowest-priced property that’s still in a decent area of a low-cost city - which might be a $100,000 property …
24% of that then is about $24,000 that you’ll need. You should have some extra on top of that as reserves.
Now, let’s look at another part of your finances - your DTI - your debt-to-income ratio. It cannot exceed 43% to 45% - maybe up to 50% in some circumstances.
So if your monthly minimum debt payments - everywhere in your life - housing payment, minimum credit card payments, minimum car payment - if that sum is $5,000 and your gross monthly income is $10,000 - that’s a 50% DTI. You can’t exceed that.
Of course, before a bank is willing to loan you money, they want to have a reasonable assurance that you aren’t weighed down with debt elsewhere because their fear factor goes up that they won’t get paid back.
Next, let’s talk about your credit score. We dedicated an entire episode to this back in Episode 54. If you can remember back that far, Philip Tirone was here with us and you learned more about credit scores that you probably ever thought you would …
… and he even went on to call the credit scoring system a total scam. He was quite opinionated - it was interesting and eye-opening, but ...
Playing within the scam here - as it might be.
There are many different credit scoring models, but the FICO Score - F-I-C-O - is a respected one that you’re probably going to see your mortgage lender use.
It stands for Fair Isaac Company.
Their credit scoring range is 300 - the worst, up to 850. 850 is essentially a perfect score.
Importantly, 740 is the highest score that helps you here.
If you have a 782 or an 836, it doesn’t help you qualify for the loan or get you a lower mortgage interest rate or anything else.
740 is where you’re optimized.
Now, just a quick overview of FICO credit scoring ...
There are five primary ingredients that make up your credit score. In order of importance, they are your payment history, amounts owed, length of your credit history, new credit, and finally credit mix. That first one, Payment History, is the most heavily weighted one. It’s 35% of your score. As you might expect, the repayment of past debt is a major factor in the calculation of credit scores. It helps determine your future long-term payment behavior. Both revolving credit (i.e. credit cards) and installment loans (i.e. mortgage) are included in payment history calculations. Although installment loans like mortgages take a bit more precedence over revolving credit - like credit cards. This is why one of the best ways to improve or maintain a good score is to make consistent, on-time payments. The next way, your Amounts Owed – 30% This category is basically credit utilization or the percentage of available credit being used - or borrowed against. Credit score formulas “see” borrowers who constantly reach or exceed their credit limit as a potential risk. That is why it’s a good idea to keep low credit card balances and not overextend your credit utilization ratio. So if you’ve got just a $1,000 balance on a credit card with a $10,000 credit limit, that’s seen as a good ratio. You’re staying well within your limits then. The third FICO credit score ingredient is the Length of your Credit History – 15% This factor is based on the length of time all credit accounts have been open. It also includes the timeframe since an account’s most recent transaction. Newer credit users could have a more difficult time achieving a high score than those who have a long credit history. That’s because if you have a longer credit history, FICO has more data on which to base their payment history. The fourth of five FICO ingredients is your “Credit Mix” – Now we’re down to an ingredient only comprising 10% of your score. Credit mix just means that it helps your score if you have a combination of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Finally, “New Credit” makes up the last 10% of your FICO score. Don’t open too many new credit accounts in a short period of time. That signifies a greater risk to lenders – and that’s especially true for you if you’re a borrower with a short credit history. And you sure don’t want to open up any new lines of credit, down the road when you’re in the qualification process for buying a new property unless you check with your Mortgage Loan officer first. Now, those five factors have been weighted the same for quite a few years. Knowing what factors make up your FICO® Credit Score can help you qualify for more loans and get better mortgage interest rates. That’s the bottom line. This helps you get pre-qualifed or pre-approved with your Mortgage Lender. To get prequalified, you just need to provide some financial information to your mortgage lender, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much they can lend you.
After pre-qualification, you can seek the higher-level status and that is getting pre-APPROVAL for credit. Pre-approval is better than pre-qualification.
If you think about it, it makes sense. Qualifying for anything in life is not as good as getting approved for something - I suppose.
Pre-approval involves providing your more detailed financial documents - like W-2 statements, paycheck stubs, bank account statements, and your previous two years tax returns. This way, your lender can VERIFY your financial status and credit.
Now that you’re pre-approved with a lender, you can focus on the market and property that you’re interested in.
RidgeLendingGroup.com is the mortgage lender that we recommend most often because they SPECIALIZE in income property. They don’t have any seasoning requirements.
Seasoning means that the person selling YOU the property needs to have held onto it for a certain length of time - or the lender won’t finance the property for you.
While you’re in the pre-approval process, you can be learning about a cash-flowing investment market.
You want to pick a geographic metro market that typically has low-cost properties, and high rent incomes in proportion to those low costs.
In fact, the market is more important than the property. Because your income comes from your tenant, and your tenant’s income comes from a job.
So you typically don’t want to own much property in a town with 12,000 people that’s in an outlying area - not part of a greater metro - where 1/3rd of the employment is tied to one tungsten factory or even one semiconductor manufacturer.
Because now, too much of your income stream is tied to just one industry.
If the tungsten industry goes down, so goes your tenant base.
You also don’t want to buy slummy property. Those tenants often don’t pay the rent. You also don’t want to buy much above an area’s median-priced home, because the numbers don’t work out.
So you want that working class housing that’s just below the median price point for the area.
If you’re not already confident about that and familiar with the right provider ...
We have information on the right market, with the right provider, with properties - and they’re typically in the MidWest and South - at GREmarketplace.com
So read a market report there. That’s good, pointed information.
Most investors are interested in a property for the production of cash flow. That’s the margin by which your monthly rent income exceeds all monthly expenses.
Rent income minus expenses should be a positive number.
So that’s your monthly rent minus VIMTUM. V-I-M-T-U-M.
Vacancy, Insurance, Maintenance, Taxes, Utilities, and Management.
I like easy ways to remember things and VIMTUM is an easy way to remember.
So, you’re listening to the Beginner’s Real Estate Investing Audio Guide here as a regular episode of the GRE Podcast.
If you’re not a beginner & you’re still listening, it’s either a good review and you might even be learning some new things along the way yourself.
Including, should you ever lowball a turnkey provider and a negotiation approach that I have for that - in a few minutes.
But first, one reasonable beginner question is ...
“Now why would someone would want to sell me a cash-flowing property in the first place?
Why would someone - like a turnkey provider - why would they sell me a good thing that pays them every month that they could continue to hold onto for cash flow?
If a property pays someone every month while they hold onto it - why in the heck would they sell it to me?
OK, some seller out there has a golden goose that lays a golden egg every month, so why in the world would they give me an opportunity to buy the goose?
Well, there are just so many reasons for selling cash-flowing property - yes, a ton of reasons for selling even a young, healthy goose that lays golden eggs every month & is expected to so for years.
Well, a turnkey provider runs out of money too. They can’t buy all the properties themselves.
They’d prefer a lump sum payout when they sell this property, because their business model is to go pay all cash for another distressed property that they can fix up.
And if you think that they snatched up the good ones themselves a while ago - yeah, they probably did do some of that.
In fact - I WANT them to have snatched up some good properties from their own market earlier. It shows me that they believe in what they sell. If they didn’t buy what they were selling themselves, I’d actually be MORE concerned.
Now, other reasons that the - I guess general public seller might want to sell you a property is ...
One reason is moving. Say that a family in City A owns a few mom-and-pop rental homes that they self-manage and they’re moving to City B in another state, they’ll often sell their income properties.
Some people want to self-manage their property (often because they never explored their best-and-highest use, but anyway) & if they have to move to City B, they’ll sell the property rather than try to find a Property Manager in City A.
Another reason people sell cash-flowing property is that - even if someone is not moving, that person might be tired of the self-management hassle - but yet they don’t try professional management - because that person has the DIYer mentality - that soooo common do-it-yourself mindset.
OK, most people just don’t take a strategic approach to real estate investing like you are by listening to this.
Other reasons for people selling cash-flowing property are death, marriage, divorce, and all kinds of either joyous or tragic life milestones.
If a husband-and-wife own rental properties but running & managing them was kind of the husband’s thing & the husband dies … the wife doesn’t know how to run the properties & she’s likely to sell rather than hire a Property Manager.
People may sell their cash-flowing property in case of all kinds of emergencies - medical and otherwise - because they may need a quick lump of cash - instead of the steady stream of cash flow over time that just won’t work for them in their new situation.
OK, most of those situations involve some sort of external life change for property sellers - a lot of them tragic.
Well - here’s a personal one for you...
A few years ago, I sold two cash-flowing apartment buildings at the same time - well, those sales actually closed on consecutive days - so nearly the same time.
Both of those cash-flowing apartment buildings that I sold were 100% occupied with tenants, I had competent management in place, and there were no deferred maintenance issues with the buildings.
You want to know my reason for selling two nice golden apartment gooses that were seasoned and steadily laying some nice golden eggs?
OK...can you guess why?
Alright, fortunately I didn't have any distress or emergency in my life.
...oh, and also, I wanted to sell them fast too, I couldn’t let these two cash-flowing apartment buildings linger on the market for a while. I really wanted to get rid of them.
I had no distress like those situations I mentioned earlier.
So can you guess why I wanted to sell these long-producing golden gooses in a good job growth market that produced nice cash flow, nice golden eggs?
I’ll tell you why.
That's because I knew I could 1031 Exchange those two gooses for two even larger gooses. Now I won’t get into the 1031 here on a beginner episode.
But I replaced the two smaller apartment buildings with two larger apartment buildings that would produce even larger eggs if I did it with a quick timeline - and I could defer any tax on my profitable gain.
I found - I guess - two very fertile egg producers that were going to produce even more cash flow over time.
So...I think you get the message here. To the buyers of my smaller apartment buildings, I appeared as a very motivated seller of cash-flowing property, even though I had no external stress in my life.
It was due to internal reasons that I wanted to sell...and it’s the internal drive to expand my income.
No shrinking thinking here at Get Rich Education. We are growing our means.
Now, when you’ve found a cash-flowing property that you want to buy, should you make a lowball offer to a turnkey provider? My definition of lowball here, is, a 10% discount.
We’ll say, that a provider is offering a property for $120,000 - then you’d make the offer for 10% less, which is $108,000. That’s a lowball.
My answer is ...
No. That’s not going to work. In almost every instance, that’s too much of a discount and it’s going to eat their margin too much.
Depending on how it’s presented, a seller might even be less motivated to work with you if they get a lowball offer.
This company has a business to run and with a turnkey property, you’re typically paying for the convenience. You leveraged their systems of them delivering this product to you that’s already renovated, rehabilitated, tenanted, and under management.
Now, can you can knock off $1K-$2K? And say, offer the seller then - $118K or $119K for the $120,000 property. Yeah, that might work.
It sure wouldn’t be deemed some unreasonable request. But it’s good to at least provide a reason - some rationale - in asking for the discount.
Let me give you some perspective on this negotiation too.
For every $1,000 less in a mortgage loan that you take out, how much do you think that saves you in a monthly payment? Did you ever figure out how much that saves you?
Well, at a 5% interest rate on a 30-year loan, reducing your mortgage loan amount by $1,000 saves you … $5. Five bucks in a reduced payment.
For more perspective, keep in mind too, that once the seller accepts your offer - it’s only the first part of the negotiation.
Later, it’s a negotiation with the inspection. We’ll discuss how to navigate THAT shortly.
I’m Keith Weinhold. You’re listening to the Audio Beginner’s Guide to Real Estate Investing, here on Get Rich Education. ________________ ***AD RESOURCES***
________________ Welcome back to GRE Podcast 433. This is your Audio Beginner’s Guide to Real Estate Investing. I’m your host, Keith Weinhold and we’re talking about buying an income-producing property, especially…
…a TURNKEY property - which just means that it’s already renovated, tenanted, and under management with a tenant on the day that you buy it.
Now, once your offer is accepted by the seller, I want to give you - really just a brief outline of what to expect next.
This isn’t intended to give you every step in exhaustive detail, but this is generally what comes next for United States real estate purchases, and custom varies somewhat from state-to-state.
So with that in mind, once the turnkey provider or seller accepts your purchase offer...
You need to send in your earnest money. Earnest money is not the down payment. It’s a smaller amount that shows good faith that you’re serious about your offer.
It’s often an amount of $5,000 or less and it shows the seller that you’re serious enough about buying the property that the seller has the confidence to take their property OFF the market and not show it to anyone else.
The seller should give you instructions on how to place your Earnest Money.
Now remember, your earnest money deposit is not going directly TO the seller, it is going to a third-party escrow account, and it is refundable to you in accordance with the terms of the contract that you signed.
Your contract should have an estimated closing date in there. I want to emphasize that the key word there is “estimated”.
While it is important that all parties work towards closing by this date, between you and me - let’s just be realistic - the reality is that many transactions get delayed beyond the closing date in the contract for a variety of reasons on the seller side, sometimes having to do with construction or renovation delays.
If this happens, it is nothing to be worried about, just remain in touch with the seller and you can simply sign a contract extension if needed when the time comes.
As you are financing your property, be sure to keep getting your lender anything that they ask you for up so that they can keep processing your loan.
As your closing gets near, they will probably ask you for some updated information and have some final stipulations from the underwriter, so just remain in close touch with your lender and try to provide them what they need as swiftly as you can.
During most of this time where you’re under contract & even before you’re in-contract to buy the property, most of your relationship with your lender and seller is just sitting around, waiting for the next stage.
Some days, frankly you’re thinking, “When will they reply to my e-mail?” OK, sometimes, RE moves slower than glaciers.
Once construction/renovation is completed on your property, I suggest that you order a professional third-party home inspection before closing.
As the buyer, this is at your expense, but the home inspection is cheap insurance for you and it is an important part of your due diligence. It might cost you about $300-$500 for a single-family turnkey income property.
A four-plex inspection might cost up toward $800 or $1,000.
When seeking an inspector - seek ASHI certification - that is American Society of Home Inspectors.
You’re looking for an inspector with a good reputation, licensed and bonded. It is good to look for a level of experience as well. The choice is really yours as the Buyer.
Your inspector points out deficiencies in what I’ll break into a few categories.
#1 is Major concerns – these are significantly defective, safety issues that require immediate repair. Often times, those things absolutely MUST be done in order for your lender to even finance the property so the seller is going to do those things for you. That might be something like adding a railing to a porch.
The second category are recommended repairs – So they’re recommended but not required. That might be adding some extra insulation in the attic.
The third category is “well, it would be NICE if it were done” - like a kitchen cabinet door that’s a little loose and doesn’t close snugly.
When you get your home inspection report back because the inspector has compiled their findings, the key to remember is that the inspector will ALWAYS return a (usually long) list of items that they recommend be corrected prior to closing.
Now, this even happens on new construction, so expect some findings.
I swear, even on a perfect, unblemished home it seems like the inspector would say that the bushes have to be trimmed or something. Ha!
And remember, you are not closing on the property in the condition it was inspected. Rather, the inspection is just part of the process on the path to getting the property up to its final condition.
Then you and the seller agree on what will be fixed (at the SELLER’S expense (not your expense), and verified to your satisfaction), prior to closing.
The seller is anticipating that they will need to make some final repairs (at their own expense) after they get the inspection repair request from you - that your inspector just compiled for you. This is all part of the normal process.
Of course, you can get in a car or hop on a plane and visit the turnkey property yourself and walk the property with your inspector, but I’d say fewer than 10% of turnkey buyers do this. I have never done this on an out-of-state property.
But going to see the property in person is never a BAD idea.
Today, it’s easier than ever for an inspector or provider to e-mail you a property video. The report that you get from your Home Inspector after he visited the home will have lots of photos and details.
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage. You are protected. Once the seller makes any needed repairs that the third-party inspector found, I suggest having a re-inspection done by that same inspector. This gives you the chance to confirm that any agreed-upon repairs have indeed been made. You might spend another $100+ on this re-inspection. Now, if the original inspection showed that a leaky faucet needed to be replaced, and the seller said they’d do it, and the re-inspection finds that that work wasn’t done as promised, then any FURTHER re-inspection costs are often a cost borne by the seller. Which seems pretty fair - they said they’d do work - and the re-inspection that you paid for confirmed that it hadn’t been done in this case. Now, back to the negotiation. If you asked for a reduced Purchase Price, that could lean away from you asking for too much in the inspection.
How do I like to play it? Often times, I make a full price offer for the property - and I might even let the seller know at that time that I’d like to give you your price - it’s a full $120,000 in this case - and since you got your price, I’d like my terms.
My terms are - that I’m more bold in what I request the seller to do from the inspection findings. Maybe I will ask them to add that extra insulation in the attic as one of those “Recommended buy not Required For Financing” items - or replace a window pane that had condensation inside it.
Then, what’s my justification for asking the seller for that. It’s that I’m paying your full price. Again, financing an extra $1,000 only costs me $5 per month.
Now, let’s talk about the property appraisal.
The appraisal is a tool that the bank uses to verify the quality of their collateral.
Because in your loan paperwork, at closing, the bank will basically tell you that if you don’t make your monthly payments, you’ll be foreclosed upon and the bank will take back the property - that’s their collateral.
So they want to make sure that the property seems to be worth as much or more than you’re in contract for - this $120,000 in our example.
Your lender is the one that orders the property appraisal, not you. In about 90% of U.S. states, you as the buyer pay for the appraisal. It costs about $500.
The appraiser is a member of a third-party company and is not directly associated with the lender. It wasn’t always that way.
In fact, one factor that led to the housing downturn of 2007 in the Great Recession is that some lenders & appraisers were “in cahoots”. Haha! That can’t happen anymore.
BTW, the appraisal and some of these other steps are all part of your closing costs. All part of that … about 4% of the property purchase price.
The appraisal is typically done by a certified appraiser physically visiting the home - and these people always seemingly have a tape measure with them.
The appraiser checks out the premises and their job is to use market comparables to make sure that the lender has adequate collateral in case you, the borrower, default.
OK, the bank doesn’t want to lend out more than the property is worth or else they could find themselves underwater if the borrower defaults. The appraisal protects against this.
And don’t confuse this appraisal with an assessment. An assessment is something that a county or municipality uses the measure the amount of property taxes that are paid. It’s really unrelated to this appraisal.
One interesting thing that’s related to the appraisal and the bank giving you the loan for 80% of the property is that the lender NEVER requires that you see the property in person.
Think about what that means. The bank never requires you to see the property in-person, yet they’re willing to loan you up to 80% of the value.
Even the bank knows that it’s not important for you to personally see the property - something that they’re willing to put their money behind.
Now, when it comes to finding properties and markets and teams, our listeners & followers encouraged us to set up a marketplace for them for finding the properties.
We’ve done that for you at GREmarketplace.com. And knowing that Property Management is the glue that makes your property stick together, we - and it’s Aundrea here at GRE that does it - where you find your properties at GRE Marketplace, Aundrea also interviews the property manage in each market for you so that you can get a good feel and vibe about them.
Most any provider is happy to do a PM Zoom chat or phone call with you too.
Now, just because a property is branded “turnkey” by a company, doesn’t mean that you can dismiss doing your due diligence. Turnkey can be a great system, but there’s nothing magical about that word alone.
Don’t overlook developing a good feeling about your Property Manager, because this is the one long-term relationship that you expect to have. I just can’t emphasize that enough. Your Manager is one of your key team members.
They’ll tell you the character of the current tenant that’s currently in the home. Find out how the manager is going to pay you. Feel them out, know what your communication flow is going to be like.
If they’re part of the same turnkey company, a good manager should also connect you with whoever renovated your turnkey property in case you have some questions for them.
Now, notice that I haven’t mentioned a real estate agent. Most turnkey providers work in a direct model so that you don’t have to go through agents. That’s one way that GRE Marketplace providers keep the price down for you.
You must sign a written Management Agreement with your Property Manager.
What the MA does is that it gives the manager the authority to manage your property for you, manage tenant relations for you, the MA will state their fees, and you’ll have your contact information in that agreement.
There are typically two fees - a leasing fee and a management fee.
A leasing fee is where you’ll spend ½ month’s rent to one month’s rent amount when the Manager screens a new tenant. So hopefully that only happens every 1 or 2 or even 5 years if you’re lucky.
Yes, you can typically approve or reject their selected prospective tenant. You are going to be the owner of the property afterall.
A management fee is often 8-10% of one month’s rent income - and that’s what you pay monthly - ongoing.
You can sign a Management Agreement with the property provider if they have management integrated in-house. If not, you can lean on your provider for some management recommendations.
Now, there’s one blank to fill in on your Management Agreement - it’s a dollar amount up to which the manager can pay for expenses that come up - against your account - without contacting you.
For example, if the number $500 is written in there, that means that if a maintenance or repair expense on your property exceeds $500, they must contact you prior to incurring that expense.
You get to choose that dollar limit. As a beginning real estate investor, go with a lower figure.
Then as you get comfortable or you don’t want to be bothered about the property as much, you can increase that dollar limit in which they need to contract you about approving maintenance or repairs.
Basically, if there’s something that has to do with the property & you don’t want to deal with it, then make sure it’s written in the Management Agreement that the manager will perform it.
Typically, it’s going to say that the manager will collect rent, handle tenant relations, respond to repair requests, send you the rent, keep your ledger of income & expenses on the property, post legal notices if a tenant is paying the rent late, and sooo many other associated duties that I personally don’t want to deal with.
Hey, I just want to live my life & keep this investment nearly passive.
Get that Management Agreement done - fully executed - signed by both you & the Manager BEFORE you close on the property.
Before you close, you can buy property insurance from any provider you choose.
Your turnkey provider is often happy to recommend some providers that their other clients have used in this market, or you can just Google and find your own.
Be sure to let the insurance provider know that this is a rental property (not a primary residence where you live and not a second home).
Most turnkey buyers purchase both hazard and liability insurance as part of their policy. Like any other insurance policy, you will have choices about deductibles & monthly payments, and coverage amounts.
If you are financing your property, your lender will most likely be able to combine your property taxes and insurance into your monthly payment, so you have one monthly payment for principal, interest, taxes and insurance (PITI) … much like you would on your primary residence.
The financing process typically takes about 30 days from the time you submit your EM.
Remember that YOU are a factor in how fast your property closes. If that lender needs another document, give it to them pretty promptly.
When you’ve finalized your due diligence, and verified that the seller has made all the agreed upon repairs from the home inspection report, you will be ready to close.
You likely live in a different state than the property and will close remotely. The title company (or its a closing attorney in some states) will prepare your closing documents - including your loan docs...
...and can arrange for a mobile notary to meet you with the docs wherever you choose (your home, your office, your local coffee shop, etc.) so you can sign the docs in front of a notary who will then overnight the docs back to the Title Company so the transaction can fund.
Yep, you can do the ink-and-paper thing with a mobile notary at your local Starbucks.
Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house that you are buying. That’s part of what they do for you.
It may seem like the closing process is a lot of work, but you’ll really spend most of the time waiting. Most of the time, you'll just be sitting on your hands, waiting for someone else involved in the transaction to come through.
So find something enjoyable to occupy your time and distract you while you wait, and feel secure in the knowledge that you've done your research and know how to make your closing process go smoothly.
When you complete that closing with the mobile notary - I’ve done these closings at my home’s dining room table, or even in my employer’s conference room back when I used to have a day job - then, hey!
You need to congratulate yourself on adding another income property to your portfolio.
You know, the good news is that of all of these stages we’ve discussed - the longest stage of them all is your ownership of the property. You Own & Collect the cash flow.
And hey, this isn’t reason enough alone - but it’s kinda cool that you own property in TN and FL and IN. You own part of each one of those states. You’re like a property collector!
And with each new turnkey property you buy, you might have just increased your mostly passive cash flow by $211 per month or $118 per month or whatever it is.
If you can swing it, it can be more efficient timewise for you to buy more than one property at a time.
As you buy more income properties, it not only gets easier because you know the process, but you often get quantity discounts.
For example, a management company might charge you a 9% management fee on your first three properties, but once you own four or more, they might charge you 8% on all four rather than 9%.
Insurance companies often have similar discounts for you….so you may very well get a little more profitable as you buy more property.
I’ve been actively investing in real estate since 2002 and just within the steps of ACQUIRING a property, like I carefully discussed today, some incremental half-step will come up in the process that I haven’t mentioned here - like signing a Lead Paint Disclosure Form.
So, you don’t need to commit all of this stuff to memory.
Now, something that novice real estate investors say sometimes is something like: “I would only buy an income property that I would live in myself.”
I contend that that is an awful criterion upon which to found strategic fundamentals on purchasing an income property.
Once one filters property that way, they have let their emotions trump facts.
If the fact that a clean, safe, affordable, and functional property has a good occupancy rate in a sound employment market, decent ENOUGH neighborhood, and the numbers make sense - that’s more important.
OK, you aren’t living there yourself so it’s not a sound criterion.
Shoot, if I moved into any income property that I own, my lifestyle would take a substantial hit. Yet I’m not a slumlord - I provide housing that’s clean, safe, affordable and functional.
But they’re not replete with fantastic amenities, it does not have Corinthian architecture with alabaster columns - OK - but I know there’s a demographic for my rental property type that demands this responsible-but-no-frills housing over time.
It’s about asking yourself a better question, like, “Will this property secure an income stream?”
Alright, would you rather have your property look “cute as a button” - or secure an income stream? I went deep on that topic just three weeks ago here on the show.
OK, we’re investors here.
Some think that in today’s electronic age, you should be able to complete a property purchase from the time you write an offer until you close on a property in the same-day.
Well, that’s certainly not true. As you witnessed, physical things need to take place because you’re buying a real, physical asset.
We’ve been talking today about how you buy an income property - just simply that - especially as it pertains to buying an out-of-state turnkey income property - from the time that you get a property under contract and submit the earnest money to escrow all the way to closing.
...because that’s how to generate passive income, which in turn, creates a rich life for you.
Again, this isn’t an all-encompassing guide today with EVERY little detail. But we’ve hit the major milestones in the process & more.
You’ve got a good general guide on the income property-buying structure.
You might have learned something about prioritization - perhaps LLCs matter less than you thought and a communicative Property Manager matters more than you thought.
Today’s show has the type of content that will be about as relevant 5 years from now as it does today.
Now, today is also evidence that real estate does not have the liquidity that some other investments do. It takes longer to get in & get out.
However, that low liquidity actually contributes to relative price stability in real estate. OK, there’s no panic selling in real estate.
Maybe the most important thing for you to keep in mind is that...
You cannot make any money from the property that you don’t own.
Your future depends on what you do today.
To “know” something and not “do” something is to really not know something.
The most important thing you can do is act...because you cannot make any money from the property that you don’t own.
But if you’re new to real estate investing & know that you need to “Start small but think big”, otherwise, all this knowledge really won’t move the meter in helping you live an amazing life like RE can, in the past 1-2 years, we hired an in-house coach, who is completely free for you to use.
If you’re still a little unsure or want some guidance, lean on our trusted source, Naresh at GREmarketplace.com/Coach
He is an expert at helping you along - totally free to you - again at GetRichEducation.com/Coach
It’s almost hard to express how much value this gives you & makes it easy. I wish something like this existed when I started out.
There would be nothing worse than for me to share today’s knowledge with you - then not let you know where to go to act upon that knowledge.
So if you’re ready to get started - connect directly with market & properties at our Marketplace - at GREmarketplace.com
For a little more help, personal and one-on-one with our experienced in-house coach, start at GREmarketplace.com/Coach
Both resources are free
It’s been my pleasure to bring you your Beginner’s Real Estate Investing Audio Guide today.
Next week, I we’ll discuss one particular geographic market that we never have before - and you probably never thought we would.
For properties, start at GREmarketplace.com For coaching, GREmarketplace.com/Coach
Until next week, I’m your host, Keith Weinhold. Don’t Quit Your Daydream!
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Mon, 16 January 2023
Everyone is moving here. Where is “here”? You get an answer that you never expected. Among those that move, it’s not for job-related reasons. It’s housing-related. The American mobility rate has declined from 20% in the middle of the last century to 8.4% today. Learn three reasons why more Americans are staying in-place. Lower domestic migration can have positive results like: less stress, more community formation, longer tenancies, and a boon for the remodeling industry. The negative impacts include headwinds for real estate agents and mortgage loan companies. Should you rent or own the home that you live in? Learn 18 rent vs. own trade-offs. Paying rent is NOT the same as throwing money away. Join me live on tomorrow’s webinar about car wash cash flow. You can ask me questions. Register free now at: www.GREwebinars.com Resources mentioned: Show Notes: Join me live on tomorrow’s car wash webinar: Most Americans Couldn’t Afford To Buy Their Own Home Today: https://thehill.com/policy/finance/3791139-most-americans-couldnt-afford-to-buy-their-own-home-today-survey/ Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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: |
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Mon, 9 January 2023
What happens when a real estate investment goes sideways? An international business was impacted—Panama coffee farms. The pandemic disrupted coffee supply chains and labor. Erratic weather affected crop yields. It’s been about four years since we’ve discussed this on the show. The Panamanian government shut down many businesses. There was little or no government assistance for idled workers. The co-founder explains Panama coffee problems and opportunities. Learn why the coffee parcel deed issuance has been slow for investors. There’s a new distribution partner going forward, named Typica. They help sell the coffee. This is all high-end, specialty coffee, like the geisha variety. Coffee farm parcels are in the volcanic soil highlands of western Panama, near Boquete. It’s shade-grown. The provider has acquired their 12th coffee farm. If you’d like to learn more about the investment, start at GREmarketplace.com/Coffee There are upcoming group tours in March and May. Resources mentioned: Show Notes: Learn more about Panama coffee farm investing: Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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: |
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Mon, 2 January 2023
Answer this one question and you won’t have money concerns for the rest of your life. The Dow Jones once fell so hard that it didn’t recover for 25 years Japan’s NIKKEI peaked in 1989 and still has not recovered. I discuss the differences between an economic recession and depression. During the 2008 housing crisis, national housing values only fell 19%. Originally, 401(k)s were called “Salary Reduction Plans”. They had to scrap the name to foster participation. Some investing questions are: How do I max out my 401(k)? How can I attend my dream college? How can I become a millionaire? After building context, I reveal the most important question in the investing world. Learn how to keep emotions separate from investing. The vital question is: “Will this property secure an income stream?” Resources mentioned: Show Notes: National Median Home Prices: https://fred.stlouisfed.org/series/MSPUS Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Analyze your RE portfolio at (use code “GRE” for 10% off): Memphis property that cash flows from Day 1: I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show. 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:
Full transcript:
Welcome to GRE! I’m your host, Keith Weinhold. Happy New Year! What is the most important question in the entire investing world? It is a vital one - and this coming year makes it as relevant as ever.
Asking yourself this question & answering it can make you wealthy - and you’ve probably never even heard this question before. That & loads of financial education, today on Get Rich Education! _____________
Welcome to GRE! From Lake Champlain, NY to Lake Charles, Louisiana and across 188 nations worldwide, you’re listening to one of America’s longest-running and most listened-to investing shows.
I’m your host. My name’s Keith Weinhold. I’m grateful to be here myself. Thank you FOR being here… and you aren’t here for me. You’re here for you… so let’s build your wealth today.
What’s the most important, vital, essential, and almost MANDATORY question in the investing world today?
While you’re thinking about that, let me build some context so that it makes sense.
Now, why don’t we discuss stocks more on the show here?
When most people hear the word “investing”, they might think of stocks first. Their mind might shoot there immediately.
When someone refers to the market, they just simply say, “the market”, they typically mean the stock market, like the DJIA or the S&P 500.
Look, with persistently higher interest rates, it’s likely that economic headwinds are still coming.
Now, what if things got worse than a recession and we entered a depression? I’m not saying that it’s likely, but let’s look at what CAN happen because this actually HAS happened.
What can happen in a depression?! The stock market falls and doesn’t recover for 25 years. That’s not a guess. That really happened in the United States!
Yes, the DJIA peaked in 1929. The market crash hit. These were the times of “The Great Depression”.
Stocks lost nearly 90% of their value. Yes, 90%. That means that after a loss like that, stocks would have to rebound 9X, 900% just to get back to even.
Well, I told you that the US stock market crashed in 1929. The Dow didn't fully recover until late 1954. Yes, 1929 to 1954. That is fully 25 years… just to get back to even.
25 years of zero gain. It HAS happened, right here in the USA, the most powerful nation in the world.
Well, you might wonder… ah, c’mon, could that really happen to any major stock market in an ADVANCED economy today, in more modern times, even if things got really bad?
Oh, yes, things don’t even have to get really bad. Understand that the third-largest economy on earth, still to this day is Japan.
Japan’s NIKKEI peaked in 1989. It still hasn’t recovered from its high 34 years ago. Yes, that’s the MAIN stock market index for Japan - the Tokyo Stock Exchange.
That’s still going on right now, today. It still hasn’t recovered back to its 1989 level. It’s not even close today.
So it doesn’t even TAKE a depression for those stock market calamities to occur in major world nations’ stock markets.
Well, what’s the difference between an economic recession and a depression?
The short story is that a recession is a substantial downturn in ONE nation’s economy, and an economic DEPRESSION is widespread across many nations.
And there are some other distinctions.
Right? And the old joke is that a recession is when your neighbor loses their job and depression is when you lose YOUR job.
Well, what about real estate? Real estate values don't always go up.
What happened to real estate in its ugly downturn about 15 years ago where we had a mortgage meltdown from liar mortgage loans and a glut of housing supply? (neither of which are happening now, BTW)
During the ugly Global Financial Crisis in & around 2008 & 2009. Well, during that time, real estate went down 19% nationally.
Yes, on a nominal basis, the national median home price was down 19% from $257K down to $208K.
That’s it? Maybe you’re thinking, “that’s it”? 19%. This is when everything was going wrong for housing and it didn’t even reach 20% bear market territory fifteen years ago.
And btw, I will put the link to the chart that shows this in the Show Notes for you.
Yes, we really do put links in the Show Notes for you when I tell you that we will. Haha!
You can see that at GetRichEducation.com/430
This is episode 430 of the GRE Podcast, so just go to GetRichEducation.com/430 to see today’s resources and today’s show notes also, you have access to an entire transcript - all of the lyrics… like we do for some of our episodes here.
So that if you have a deaf or hard of hearing person in your life, they can, I suppose “read” today’s show rather than listen to it.
Or maybe you want to read along as you listen… or read after you listen in order to reinforce your learning.
Now, at the start of the recession in 2008, the national median housing value was $234K… and it took all of but four years to recover and exceed that level.
Yes, from the start of the GFC, housing values only took four years to recover.
The source of that information is the Census Bureau & HUD.
That data is also available for you in the Show Notes at GetRichEducation.com/430
So the point is that real estate or stocks can lose value. But real estate is substantially more stable.
If you buy RE in a good market and you have an average or better PM (meaning they’re “just OK” with screening tenants), then you can sleep well. It’s hard to lose big.
You might not even be in real estate for the values. You might be in it for the cash flow.
This is helping you build context and provide you with a clue about The Most Important Question in the entire Investing World.
While you’re still pondering what that question might be, because I’ll build some more context for you so that this question makes complete sense… and let’s start to isolate it here.
Real estate builds wealth.
Stocks though, can maintain wealth after you’ve built it. But you’ve got to build it first.
So that’s why this most important investing question today… isn’t about stocks.
Well, what about stocks or mutual funds in a retirement plan? Is that more relevant?
Enjoy the compounding growth on PRE-tax dollars & all that.
Take stocks’ 10% return and like I detailed two episodes ago, adjust that down for inflation, emotion, taxes, fees, and volatility… and what do you have left?
I’ll tell you what the key question is not. How can I max out my retirement plan? Oh geez. The new annual contribution limit to 401(k)s this year is $22,500 BTW.
I’ll admit, I used to have a day job and I maxxed out my retirement for a few years before I realized that maxing out my retirement…
… was minimizing my present. And minimizing next year, and minimizing next decade, and minimizing my life for decades until I hopefully was still not just alive… but actually healthy enough to truly enjoy DEFERRING my quality of life all those decades.
Maximizing your retirement contribution means that you’re living a SMALLER life for decades.
The risk of delayed gratification is denied gratification.
Now there IS something to be said though, for the psychological benefit of you having something saved for the future, even if it certainly diminishes your life in the near-term.
Instead, with income property, I discovered that I can invest in something that pays me an income stream TODAY… without jeopardizing my future one bit.
In fact, I’m paid an income stream TODAY AND I will get a better return than my 401(k) long-term and the tax benefits too.
Today’s mainstream media tells you that it’s a bad time to buy real estate because prices & interest rates are up in the past year. But they’re talking about primary residences.
Instead, with rental property, your tenant pays all of your mortgage principal & interest for you & all of the operating expenses & a little on top of that called cash flow.
So “How do I max out my retirement?” That is not a great investing question. You’re contemplating how to defer your quality of life, delay your standard of living, and live a life of less.
Now, here’s another bad question. I heard a teenager say this the other day, “I want to attend my dream college.” “How can I attend my dream college?”
Dream college? What? College is still necessary for some skilled professions. But like we touched on last week here on the show, the value of a college degree is down yet the price of a college degree is up.
That’s why enrollment has been steadily declining since 2012.
But, even worse, “How do I attend my dream college?” Who would even ask that question?
It COULD matter whether you have a degree or not. But no one cares what school you went to. No one cares what your college grades are either.
The last time that you went to go see the doctor, do you feel like you got a good quality of care from them or not? That’s what you REALLY care about.
Did you want to know what college or medical school your doctor graduated from before you saw them?
Do you even know what college they went to? It doesn’t matter.
Did you ask your medical doctor about what their college GRADES were? See. It doesn’t matter.
Now, I actually don’t think college is a complete waste. I got a 4-year-degree. I learned some things. But it wasn’t the most efficient use of my four years.
But “dream college”? Who cares? Not a good question.
“Attend My Dream School”. It makes no sense.
Here’s a third question that is NOT the best question that you can ask yourself in investing today:
“How Can I Become A Millionaire?"
Ugggh. Awful question. I think that longtime listeners know where I’m going with this one. But let me update it because we’ve had some substantial inflation for almost two years now.
Let me tell you - you don’t want to be a millionaire.
The definition of a millionaire is not someone that makes a million dollars a year.
It’s having a million dollar net worth.
So if you add up the value of all of your assets and it totals 1-and-a-half million dollars and then add up the sum of your debts and that a HALF million dollars.
Well, your net worth is 1.5 million in assets minus a half million in debts which equals 1 million.
That is not where you want to be. Now, maybe if your 75 years old and you think you’ve got ten years left to live, you could live a somewhat modest life on a million dollars.
But, as you can see, that’s not where most people want to be.
Inflation has rendered the term “millionaire” nearly to middle class now.
The middle class is getting eaten by wages that don’t keep up with inflation.
A single millionaire will probably be a POVERTY marker within my lifetime.
Now, if you’re a millionaire that has $200K of CASH FLOW each year, that’s different. That’s better.
Net worth is not as important a measure as your residual income stream.
But just a millionaire? Wrong trajectory. Avoid. Avoid. Avoid.
So maxxing out retirement plans, attending a dream college, or setting out to be a millionaire are all losing financial plans… and they are all losing life plans.
We are building some context and eliminating some paradigms as I’ll soon posit “The Most Important Question in the entire Investing World”.
There is one question that can make you wealthy - and you’ve probably never heard this question before.
And if you act on the ANSWER to this premium best investment question to ask yourself… you probably won’t have money concerns for the rest of your life.
I think it’ll all make sense when I reveal it later today. While you’re been thinking about it, I’ve been building some context and a foundation about why this question matters, and why those other ones don’t.
If you’re new to the show, again, I’m Keith Weinhold. I’m a 20-year REI in the US. I am an active member of the Forbes RE Council. I write all of our articles on GetRichEducation.com too. I’m also a financial columnist for the Epoch Times.
I host this weekly Get Rich Education podcast every single Monday - this show right here. We don’t miss shows. I have never missed a week. And we also don’t replay old shows. Fresh material here for you every single week.
Most every financial influencer has been here with me as a guest on the show, running alongside me, including Robert Kiyosaki, Grant Cardone, Jim Rickards, Chris Martenson, T. Harv Eker, most anyone that you’ve heard of.
Besides writing for GetRichEducation.com, Forbes and Epoch Times, I also write our weekly “Don’t Quit Your Daydream” newsletter that I send directly to you.
Then, I am the “talent” - if you can call it that - that’s what it’s called in the industry “the talent”. It makes a slackjaw like me feel uncomfortable saying it.
I am the “talent” on the Get Rich Education YouTube Channel as well - building your wealth over there.
I also host webinars to help you get started with real estate. That’s where we look at actual addresses together and more. That’s something that we just began a few months ago.
I am also your instructor for a fastcourse that I made specifically for you at: GetRichEducation.com/Course
Those five course videos that average just 12 minutes each could comprise the most powerful and impactful 1 hour of investing instruction that you will ever see.
That’s free, again, at GetRichEducation.com/Course
When you know what you’re doing in real estate, you’re often getting paid five ways. And when you’re profiting like this, you’re not tempted to cut corners.
When you’re not cutting corners, you are providing others with good housing.
Let’s do good in the world. Provide good housing and let’s abolish the term “slumlord” in this nation.
Everything that I do here is completely free for you - every single thing that I just mentioned is free.
If you like our mission, and our direction - doing the right thing before you do things right - I invite you to “Subscribe” to our show now.
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Subscribing to Get Rich Education on your podcatcher is the only way you’re certain to NOT miss one wealth-building show.
More next. I’m KW. This is Get Rich Education. __________
Welcome back to GRE Podcast 430. I’m your host, Keith Weinhold. We are in our 9th year of coming at you every single week, 52 weeks a year.
There is one question that can make you wealthy - and you’ve probably never asked yourself this question before, or perhaps even HEARD this question before.
And if you act on the ANSWER to this premium best investment question to ask yourself… you probably won’t have money concerns for the rest of your life.
It begins with keeping your emotions separate from investing.
When it comes to buying a LT rental property, some of the worst advice that I’ve ever heard is: “Only buy a rental property if you would live in it yourself.”
Oh! That really limits your ability to put the most profitable income properties into your portfolio.
Now, of course, you had better only buy a primary residence that you would want to live in yourself.
But it’s definitely NOT that way with income property. It is not that way with rentals. Yet you need some standard here, however.
Look, years ago, I had a friend that saw me as a successful REI, so he wanted me to tag along with him to go out and tour rental properties on the weekends so that my experience might inform him on which property to buy and which ones to avoid.
Most of them were unsuitable. Unsuitable SFR, unsuitable condos, unsuitable duplexes and triplexes and fourplexes.
But we found one together - a fourplex - that I thought was suitable and he didn’t.
The reason that he didn’t like this, oh, about 1980-built fourplex building is because - though it was well-kept, some of its finishes looked dated.
One of the four units had a pink color-themed bathroom that had this sorta weird-looking pink wall tile and pink sink and pink bathtub. It all matched though. But yeah, it looked dated.
And another one of the fourplex unit bathrooms had those same bathroom fixtures but in a dated-looking olive green.
And the third a light blue, and then the fourth was a totally renovated new bathroom.
Well, it didn’t matter that the bathrooms didn’t match each other. Each family in the fourplex had their own unit in these 2 bed, 1 bath units.
And here’s the thing. The building was well-kept, it was fully-occupied, and it had a good history of occupancy.
That’s why the fourplex checked my “buy box” but my friend didn’t want to buy it. He just couldn’t get over the emotions that he felt in, say, a pink bathroom.
See, he couldn’t see living there himself. But he was not GOING to live in the fourplex himself. He would be an investor that lived offsite.
That didn’t make any sense to me. He gave in to emotions, and lost out on a profitable property.
So when an investor says that they wouldn’t live in an income property themselves, my response is often, “Oh, I didn’t know that you planned to live there.” Because often times, the investor does not.
Emotions got the best of my friend… and he didn’t buy this property that would have been a winner.
Here’s a different case. Now, being sentimental is an emotion. I’ve known someone that strongly considered buying a rental property in their own neighborhood chiefly because they used to play basketball at that house back when they were a teenager.
Sheesh, that’s an awful strategy. Investing is about facts, not feelings.
And certainly not the feelings that are evoked because you slam-dunked a basketball for the first time on an 8’ rim when you were 13. Ugggh. Dreadful investing strategy!
Would that property’s income exceed its expenses?
Sentimental feelings are an emotion. Instead, investing is about the facts.
Now, we’re building some backstory and context. We are hitting closer to home for what I soon want to reveal as the best investment question that you can possibly ask yourself.
Now it’s pretty likely that you want to avoid buying property in a badly blighted, crime-ridden neighborhood that’s also trending in the wrong direction, even if the property is CHEAP.
Because in those areas, it’s hard to find a respectful, rent-paying tenant… and the property could depreciate in value at the same time - in a tough neighborhood.
Actually, you typically want to avoid BEAUTIFUL neighborhoods too. Yes, “avoid beautiful”. That can sound unusual to newer REIs, but for LTRs, beautiful isn’t profitable. The rents aren’t high enough there.
So, depending on your target market, to go from a working class neighborhood (where the numbers often make sense) to an upper crust neighborhood, rents might triple but purchase prices could 10X.
That’s a losing formula for you.
So because you want to avoid rough neighborhoods and avoid beautiful ones, what you want to be attracted to are working class, SAFE enough neighborhoods that are just a little below the median home price.
You don’t want to go so low that you’re beneath the safe bar.
What are the condition of the cars like in the neighborhood? If someone would park a decent car outdoors overnight, that’s one sign that the neighborhood is safe, in addition to crime and school district data that you can find online.
So again, don’t let emotions prevail.
Also, don’t let PERSONAL PREFERENCES dictate what you do too much. Ah, you’ll learn some funny quirks about me here.
I’ve spent my life living in places that have a real change in seasons, including a substantial winter - that’s mostly in Pennsylvania and also in Alaska, BTW.
But distinct seasons are my personal preference. A lot of people don’t care about seasons. They just want year-round warmth. So that’s why I invest in the Sun Belt states - because I know that it’s what OTHERS want.
It’s not about where I want to live. It’s not about me. It’s not about my emotions.
I also know that even people who dislike cold will still live in a cold place if they have a job. Money is very attractive to people and money trumps climate for some people… so it can be good to invest in growing pockets of, say the Midwest.
Personally, I don’t prefer to live on HW floor. It’s harder, colder, and noisier than carpeting. I prefer plush, padded carpeting… and I’ve got some reasons for that. But I know that I’m in the minority on that one.
We actually did a poll on that on our Get Rich Education Instagram Stories and 83% preferred to live on a hard surface, only 17% on carpet.
But see, in my rentals, I use either vinyl plank flooring or hardwood laminate flooring - even in the bedrooms sometimes.
Not only is it more durable, but tenants actually seem to prefer it - even if I can’t figure out why. Ha!
So I keep emotions out of investing, I’m keeping sentimental reasons out of investing, and I’m even keeping my own personal preferences - like plush wall-to-wall carpet out of investing.
Stick with facts and demographics and infrastructure and migration trends, and jurisdictions that have strong protections for landlords.
So, with all of this in mind, what is the best REI question that you can ask yourself during the course of your entire investing career?
It is:
Will this property secure an income stream?
Yeah, that’s the big question. And it is unemotional.
When you ask yourself, “Will this property secure an income stream” for yourself, now you’re accounting for the quality of tenant that you can attract there.
Now you’re accounting for the long-term building maintenance question, and now you’re accounting on if you’re in a good market with enough job and population vibrancy for a long-term tenant base.
That’s the stuff that matters.
“Will this property secure an income stream?”
And what makes that question multi-dimensional is that even though the word “property” is in that question, the question is really asking more about what SUPPORTS the property - like the metro economic market and the neighborhood that it’s in.
See, a modest, 1950-built, 500 sf studio apartment can support an income stream for you if it’s in a thriving job market with a future.
Well, as far as your investing for the year ahead, we are still in high inflation - though it’s come down, and many feel that a recession is ahead.
Where do you invest in high inflation & a recession?
Well, gold is the classic inflation hedge. But long-term, it’s price merely tracks inflation, so though it could be good to have a little, it won’t grow your prosperity.
Bitcoin has been beleaguered in this brutal crypto winter as they call it. Bitcoin has a few redeeming attributes in my opinion.
But it’s risky. In fact, during the GFC of 2008, the pseudonymous creator, Satoshi Nakamoto was just publishing his white paper. We really don’t have any history of what bitcoin does in a prolonged recession.
Here’s the thing. If there’s a bad recession and you lose your job… what are you really going to need in your life badly? You’re going to need more income streams - like a RE income stream.
And you’re not going to be able to get a loan for a property anymore once you lose your job.
If high inflation persists, as any longtime listener knows, RE crushes it - income property with a loan.
Yes, by now, you know that you win the Inflation Triple Crown - winning with RE 3 ways at the same time - c’mon - recite them with me - Asset Price Inflation, Debt Debasement, and Cash Flow enhancement.
That’s the ITC.
This is why rental property with a loan is the singular best investment in high inflation and a potential recession.
History over hunches. RE has proven itself historically. You can have a hunch. But it’s typically best to look at what happens historically over & over & over again.
My question for you today is: “Will this property secure an income stream?” That’s the key investment question.
But over the years, I’ve learned that you’ve also had a question for me. It’s something like: “Where do I find the properties conducive to securing an income stream?”
These are exactly the types of income property at GRE Marketplace. That’s a resource that our team & I put together for you where I share the same exact property providers with you… that I buy from myself.
Gosh, I wish that this would have existed 20 years ago when I bought my first rental property through a RE agent that didn’t know what they were talking about & I wasn’t even aware of it.
It is free to signup just like thousands of investors already have. There’s no subscription fee and just one login gives you access to all of the property providers - and they’re typically in the profitable Midwest and South.
You don’t have to invest in your own local market. The best deals usually are not there.
When you open up your investing possibilities to the entire nation & beyond, you’re no longer limiting yourself.
And see, when you aren’t limiting yourself & you buy in a market with a strong rent income into a low purchase price, what have you done?
You’ve made your investment profitable.
How are you more incentivized to think when you’re profitable - you don’t cut corners. Those that aren’t making money on their rentals can be tempted to cut corners and for example, not replace faulty electrical outlets and not replace rickety porch stairs.
When you invest out-of-market and you’re profitable, you’re less likely to do those slumlord type of things… and that’s how this is congruent with our mission to do some GOOD in the world.
It’s not complete altruism. You want to be a profiteer like me. So I buy from these providers myself at GRE Marketplace.
Prices over there are often discounted because it’s a DIRECT model. There’s no real estate agent to pay at all.
We even video-interview the PMs in the markets there for you… since that PM can manage the property for you on Day 1… if you so choose… making this largely passive for you.
So, armed with this best-ever question of “Will this property secure an income stream?”
Understand that GRE Marketplace is not like a big box store. It is more like an organic farmer’s market where we help match you with experienced property providers.
Much like an organic farmer’s market, you check back regularly for new offerings. It’s a vibrant market. Check back every few weeks.
Make this the year when you take action & think big with income property. Hey, I’ll see you over there. I’ve got a video for you over there too to help walk you through GREmarketplace.com
Until next week, I’m your host, Keith Weinhold. Don’t Quit Your Daydream! |
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