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I state the reasons why I DON’T believe that the Federal Open Market Committee should lower interest rates. Rates are currently normalized.

Watch the full Spartan Summit Presentation here. The first half is played on this episode.

President Biden is trying to help the housing market’s poor affordability and undersupply.

Fed Chair Jerome Powell made recent remarks on the real estate market. He emphasized the lack of supply.

High rates = strong economy

Low rates = weak economy

Lowering interest rates to zero is artificial and introduces distortions in an economy.

If we have a recession, we need “rate cut ammo” in order to make cuts at that time.

Lowering rates also sets up an inflationary environment. That’s bad for society, but leveraged income property investors benefit.

A “Fed pivot” means that the FOMC changes from raising rates to lowering rates, or vice versa.

Resources mentioned:

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Mortgage News Daily mobile app

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Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to Greece. I'm your host, Keith Whitfield. President Biden tries to help the housing market. Everyone wants to know when interest rates will be cut. I'm asking, why would we cut rates anytime soon? Yes. Some fed talk today and a lot more on get rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text gray to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Daydream letter and it wires your mind for wealth.

 

Keith Weinhold (00:01:15) - Make sure you read it. Text gray to 66866. Text gray 266866.

 

Corey Coates (00:01:27) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:43) - Welcome, Jerry from Bowmanville, Pennsylvania, to Louisville, Kentucky, and across 188 nations worldwide. And Keith Wayne Holden, I'm grateful to have you here with me for another week. This is get rich education. I'm about to discuss the case for not lowering interest rates, and you'll hear a clip of Jerome Powell commenting on the real estate market shortly. But first, President Biden recently made a state of the Union address, and he unveiled his plan to help the Undersupplied housing market. Part of the plan was to help the buyer side the demand side with incentives, which I'm not sure that we need the support over there on that side. And now that would juice real estate prices. More on housing supply side. Biden's plan creates a $20 billion fund to build more rental housing and kill some construction restrictions. Okay.

 

Keith Weinhold (00:02:35) - Yeah, that's the key part of the plan. And that's more helpful. Help that supply side. Perhaps the most interesting part of the plan is a $10,000 credit that's meant to incentivize people to sell their starter homes. That's our president on housing. Let's pivot over to Club Fed. Yeah. Welcome in to Club Fed. There's no cover charge for some reason Janet Yellen still hanging around chaperoning. And she still looks like my grandma. Earlier this month, Fed Chair Jerome Powell acknowledged that the commercial real estate loan problems could cause manageable problems for regional banks, possibly for years. I find it interesting that he uses the word manageable when acknowledging problems on the commercial side. I mean, we'll see, but that kind of reminds me of one of Powell's predecessors, former Fed Chairman Ben Bernanke, in 2007, saying that the subprime loan problem was contained is the word that he used. And we all know that. I know the mortgage meltdown contagion of 2008 was anything but contained. Today, when we talk about Powell and interest rates back around 2021, he got beaten up pretty badly for not acknowledging rising inflation sooner.

 

Keith Weinhold (00:03:56) - But he's brought inflation down to about 3% without a recession. So some credit is due there, but not too much credit because the game's not quite over. And it took that torrid set of interest rate increases where they climbed a cliff in order to quell inflation. And that already hurt a lot of people, including those erstwhile commercial real estate people in their loans that jumped up to a higher interest rate. Now we're talking about interest rate policy. Let me give you something that's easy to remember. High rates mean a strong economy. Low rates mean a weak economy. With that in mind, let's look at where we've come from. And then we'll look at the future. A lot of people got drunk with easy money starting 15 years ago, because it was nearly free to borrow an interest rate of zero at the federal funds level. That gives you no incentive to save and more incentive to borrow and spend. Well, the federal funds rate was zero from 2009 to 2015 to get us out of the Great Recession.

 

Keith Weinhold (00:05:04) - And then it was zero again from 2020 to 2022 to help lift us out of Covid. That's the past since the federal funds rate, which a lot of other interest rates are based off of two since it quickly shot up starting two years ago, it's now been a full eight months since rates have moved at all. They haven't budged since July of last year. So that's where we are now and I'm fine with them staying here for a while now. Jerome Powell recently testified to the House Financial Services Committee. Let's listen in to him discuss real estate as he's questioned.

 

Jerome Powell (00:05:44) - The housing market is in a very challenging situation right now. You had this longer run housing shortage, but at the same time, you've got a bunch of things that have to do with the pandemic and the inflation and our response with higher rates. So you you have a shortage of homes available for sale because many people are living in homes with a very low rate mortgage that they can't afford to refinance. So they're not moving, which means the supply of regular existing homes that are for sale is historically low and very low transaction rate.

 

Jerome Powell (00:06:14) - That actually pushes up prices of of of other existing homes and also of new homes, because there's just not enough supply. The builders are busy, but they're running into, you know, all kinds of supply issues still around zoning and, and workers and things like that. So, so it's quite challenging. And of course, rates are high. So people who are buying a lot of the buyers are, are cash buyers or able to actually pay without a mortgage because mortgages are expensive, I will say. The first problem. The longer run problem of supply is a longer run problem. The other problems associated with low rate mortgages and high rates and all that, those will abate as the economy normalizes and as rates normalize. But we'll still be left with with the housing market nationally where where there's a housing shortage.

 

Keith Weinhold (00:07:02) - That's Jerome Powell on real estate. And I'm surprised that he said rates are high. Do you know what the long run federal funds rate is? It is 4.6%. That's the average. And currently it is at 5.3% where it's been for a while.

 

Keith Weinhold (00:07:18) - So it's not that much higher than average. The 30 year mortgage long run average is 7.7% for Freddie Mac. And that's been hovering around 7% for months now. So therefore both key rates are close to normal today. But despite that fact, seemingly everyone is waiting for the fed pivot. And what the fed pivot means is when they reverse their monetary policy stance. Meaning when they start lowering rates again after the long increase cycle that we're coming off of. Well, I'm here asking why should the fed pivot in lower rates since they're near normal now? All right. Let me give you some real perspective here. Look I'm going to describe a scenario to you and tell me what you think about this. Imagine a dreamy bygone era where there happened to be this period that saw a strong national labor market, plenty of jobs, steady GDP growth, rising wages and inflation a little above normal. All right, now that you're done imagining that cloudy slice of economic Americana. Pretty rosy scenario. Well, then you might consider raising rates in a situation like that to help cool off wage and price inflation.

 

Keith Weinhold (00:08:37) - Well, you know what I just did? I actually just described to you where we are today. That's what today's conditions are are. Yet there's still talk of lowering rates later this year. And now you might see why I'm questioning that because the economy doesn't need the help. Sure enough, in front of that same committee, Fed Chair Jerome Powell and other fed officials, they did say that they expect interest rates to come down later this year. I hope they're not doing that for political pressure or to try to reassure the stock market. Those would not be good reasons. And dropping rates to zero at the first sign of a crisis that shouldn't become a habit. Because, look, before the 2008 crisis, when they dropped from the zero, going all the way back to at least the 1950s, maybe longer rates were never zero. That entire time, see if the fed just steps back and doesn't touch rates for a while, then it's all the longer that more free market forces can prevail. I don't know that we need to constantly tinker with rates, like a greasy guy crawling under his classic car in his garage and tinkering around with it.

 

Keith Weinhold (00:09:52) - Another reason the fed should lower rates, and is because it needs to hold on to some rate cut ammunition in case there's a recession. Because in a recession, one of the best tools that the fed has to cool it off is by lowering rates in order to incentivize investment in a slow economy. But see what happens. If you use up all your ammo, you already start lowering it and you're already near zero. And then we have a recession. I don't know that America is ready for negative interest rate policy like some other nations have tried. And by the way, if you earn a negative interest rate, that means that if you park your money at the bank, you have to pay them interest rather than the bank paying you interest. They get the use of your money and you have to pay them for parking it there. That's a negative interest rate. Well, recessions have a strong correlation with lowering rates. I mean, just look back historically again, history over hunches. But you know, if you don't follow this stuff, the short story of what's happened the past several months is that interest rate cuts keep being delayed because of stubborn inflation that just won't fall down to the Fed's desired 2%.

 

Keith Weinhold (00:11:06) - And Powell also recently said that he needed just a bit more evidence that inflation was coming back down to normal levels before he'll reduce rates, although we're not far from it. That's exactly what he said. Now, if rates go back down and it's probably when rates go back down, look for the housing market to break loose. The interest rate lock in effect will wither away, property affordability will improve, and there's a good chance then, for a strong upward jolt on property prices on those values. Last year, the. There were some studies done and it was interesting. It showed that 5.5%, that is the magic mortgage rate level that makes the real estate market want to really transact. But this year, with rates that have stayed higher longer, surveys say that level is now up into the high fives. And there is another factor. As interest rates drop, the cost of maintaining our national debt also decreases. That is part of the calculus two. Well, if you're a fed watcher, a fed speak geek, you are in luck.

 

Keith Weinhold (00:12:15) - Because though it's not really much of a spectator sport, and the parties at Club Fed and all their PhD economists really aren't all that lively, if you're so inclined, one of the Fed's eight annual meetings where they announce any interest rate changes happens in just two days, and then the next two meetings conclude May 1st and June 12th. If you like to track rates, especially if you're perhaps in the mortgage loan process right now, my favorite website is Freddie Mac. The mobile app that I use is the Mortgage News Daily app, coming up here on a future episode of the show. Retirement. Some wanted, some don't. Real estate might give you an early retirement option, but I'm asking the question do you want to retire? Do you ever want to retire? We're going to go deep on that. And then what even is your definition of retirement today? You could learn something about yourself on that upcoming episode about retirement here. Speaking of spectator sports,, no, this is really one either. But you could have gotten on a jet and paid for a ticket to watch me speak.

 

Keith Weinhold (00:13:23) - Or you can listen free next to part of the recording of that presentation of mine at the Spartan Summit from earlier. They had me kick off their event. I was their opening speaker, and I share some things with that audience that really shake people up that they've never heard before. You will hear it both at new material as we play this and some things that you've heard before here on the show. But even those things I say differently in a format like this. So straight ahead, it'll be wealth mindset first and then the real estate investing fundamentals. If I could condense the best gray content in principles into less than an hour, you know, that's pretty close to what this presentation is. You hear about the first half of it coming up straight ahead. You're listening to get Rich education. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns, or better than a bank savings account, up to 12%.

 

Keith Weinhold (00:14:31) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six. Role under this specific expert with income property, you need Ridge lending Group and MLS 42056 in grey history, from beginners to veterans. They provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio.

 

Keith Weinhold (00:15:45) - Start at Ridge Lending group.com Ridge lending group.com.

 

Speaker 4 (00:15:55) - This is Hal Elrod, author of The Miracle Morning. And listen to get Rich education with Keith Weinhold and don't Quit Your Daydream.

 

Speaker 5 (00:16:16) - It is with great pleasure that I get to introduce you to our first speaker for today. He is the founder of get Rich education and host of the popular get Rich education podcast. His show has nearly 3 million listener downloads from all across the world. He also actively invest in apartment buildings, single family homes and agricultural real estate. He is a member of the Forbes Real Estate Council, and his work regularly appears in Forbes, Business Insider, and Rich Dad Advisors. Today, he's taking us back to the basics to discuss why real estate is such an attractive and solid investment option for those looking to find their own financial freedom. If you've listened to the grit Rich education podcast, then you've heard him speak. But today we are so thrilled that he's kicking off our second annual Spartan Summit. Ladies and gentlemen, here's Keith Reinhold.

 

Keith Weinhold (00:17:13) - Hi, my name is Keith Weinhold.

 

Keith Weinhold (00:17:14) - I am the founder of get Rich education. My presentation is called simply Why Real Estate? Because if you don't know why you're doing something, then you really won't care about how. And I'm really pleased to be first up here at the Spartan Summit, you're going to hear some things that you've never heard before today. For example, compound interest does not build wealth. Getting your money to work for you does not build wealth in the real world. And real estate investors, one of the first things they need to do is actually stop looking at property. So what is this financial heresy that I'm talking about? Well, I think it's going to be pretty clear to you in less than an hour's time here. It all starts with you thinking differently. You really need to open yourselves up. And I think you start to have the realization that any outsized thinker or doer, over time, did think outside the box to have that outsized impact, whether that's Thomas Edison or Jeff Bezos or Sara Blakely or Warren Buffett, they all dared to think differently.

 

Keith Weinhold (00:18:15) - And if you're not getting the results that you want in life, you know, maybe a great question to ask yourself is, am I thinking differently enough when you come of age in the world, whether you finish high school or college or whatever it is, you probably never really had this vision for yourself, or you're intentional and you say, yeah, I can't wait to go out there and live a small life. But then you know what? That's exactly what everyone does. Everyone goes out and lives a small life. So with thinking differently, you know, Mark Twain's got some great quotes about thinking differently. Mark Twain said, as soon as you find yourself on the side of the majority, it is time to pause and reflect. Absolutely love that for Mark Twain. Mark Twain also said one of his lesser known quotes is go out on a limb. That's where the fruit is. Yeah, absolutely. Love that one. So being a conformer does not build wealth or does not have a substantial positive impact on other people.

 

Keith Weinhold (00:19:16) - And you know, I wouldn't suggest that you think differently or do something differently if I weren't doing that myself. I don't know that I've had the outsized impact of some of those visionaries and inventors that I mentioned earlier. I probably haven't had as many years on this earth yet as them either. But one thing I did that was different is years ago I moved from Pennsylvania, where I was born, raised, and lived much of my life to Anchorage, Alaska. Well, that was deemed by Pennsylvanians and a good part of my peer group is a strange and unusual thing to do. But I knew that a place like Anchorage fit my interests for skiing and mountaineering because I had vacationed there. That was the place for me. The first ever home that I bought of any kind. I was only a rent paying tenant up until the day I bought a fourplex building where I lived in one unit and rented out the other three. That was pretty strange. I didn't start with a single family home. I quit my job, my good paying day job with benefits for residual income from real estate.

 

Keith Weinhold (00:20:14) - Another strange thing to do. I launched the get Rich education podcast in the year 2014. Kind of weird talking to myself in a little room all by myself. A lot of people didn't understand what I was doing then, so those are just some examples of some different things I've done. You know, you're different things are probably going to be different, but you really don't want to be a conformer if you think about it, high school was the place where you were rewarded for fitting in. But when you become an adult, really you get rewarded when you stand out and you don't be that conformer well, we talk about my presentation called Why Real Estate? We're really taking it from philosophy all the way through to the numbers here. And years ago, I would have loved to know why real estate made ordinary people wealthy. You know, an interesting thing. I'll just tell you, when I bought that first fourplex building, I didn't even know what terms like cash flow and equity meant. I did not even know the meaning of those terms.

 

Keith Weinhold (00:21:13) - And here I had owned a. Substantial building a $295,000 fourplex, which is a lot for me when I was working a day job and I bought it, and I think as a layperson before I bought that building and got down this road, I kind of thought, now, how could real estate possibly make people wealthy? Because real estate only appreciates at the at about the rate of inflation over time. That's about all it does. And I found that that part's true. And then real estate, it has the elements working on it from the outside. And it has tenants like working on it and wearing it down and degrading it from the inside. So how could real estate possibly be a good investment? I didn't understand that. I tell you, it's really important for you to learn from someone that's actually doing it. That's inside and doing this thing. I'm about as active as real estate investor could possibly be. I own Single-Family rental homes, up to larger apartment buildings, even some agricultural real estate. So it's important to learn from someone that's doing it.

 

Keith Weinhold (00:22:16) - And this presentation is really what my ears have shown me. And we talk about how you have to think differently and be opened up. You know, interestingly, we're in what people call the information age. We have been for decades this information age. But I like to say we're really in the affirmation age because most people would rather be affirmed and comforted in what they already believe, rather than get informed with information, because it kind of shakes you up a little bit, just like you're going to be shaken up today. So I would say, don't only seek affirmation, which is what most people do, seek information as well, and then make up your own opinion. What is wealth? You know, we kind of begin with the end in mind. It's ask yourself what is? I think that there are a lot of different definitions for that. I mean, money's got to be one of the first things that come to mind. And we are talking about financial betterment here. But, you know, it seems like people that want material things more than experiences, it seems like a lot of those people that want material things get knocked and get criticized.

 

Keith Weinhold (00:23:21) - I don't know, like I would rather have experiences than stuff. But really the abundance mentality is why not have both experiences and stuff if they're both easily within reach? Because they really are. But I think really the best definition of wealth, it's one that I've never heard criticize once in my life is freedom. Having the ability for you to do whatever you want to do whenever you want to do it. Real wealth is having that time freedom and not having to have a job. Being job optional, you can continue to go if you want to. Wealth really is freedom. So let's talk about money and freedom and what freedom really isn't. I've actually got a really nice proposal for you. Just imagine this. Imagine you're 20 years old. I'm talking to the 20 year old version of you. I'm going to tell you that I want you to mow my lawn for me regularly, and I am going to pay you $114 an hour to mow my lawn. Pretty amazing, right? Like, doesn't that sound incredible? Yeah, that sounds like a good deal.

 

Keith Weinhold (00:24:29) - You'd probably be pretty excited about that. Maybe even now you'd be excited about that. Not just the 20 year old version of yourself. Sounds amazing, but could you ever really get wealthy off that? Probably not. Probably not. Because in fact, you would have to work every single hour in a year, all 8760 hours in a year just to make your first million bucks. And that ain't happening in this scenario is completely implausible. No one would really pay that much to mow the lawn, most likely. And you couldn't work every hour in a year. You couldn't eat, you couldn't sleep, nothing like that. So it's really numbers like this that I think kind of slap someone in the face if they think they can just hustle and grind their way to wealth. I really don't think that's the best way. In fact, what I would share with you is that this is the exact opposite of being wealthy. This is the opposite of growing rich in your sleep, because you have to continue to trade your time for dollars.

 

Keith Weinhold (00:25:32) - In order to make this work, you need to continue to sell your time for money in order to make this work. And then really, what happens when you come of age and get older and you're probably not mowing lawns for money anymore. You end up in a place that looks kind of like this. Okay? And this is the workplace. What happens in the workplace? I like to say the workplace is where you pretend to work and your employer pretends to pay you, but there's probably a pretty good chance, and I would probably call this a pre-COVID workplace. But, you know, you probably did spend most of your working years so far in a pre-COVID workplaces. People were packed in pretty tight right there that I think,, but don't worry about being in the workplace. You've got the commute to relax anyway, right? It shouldn't be so bad. You're grinding, trading your time for dollars. But also this worker here, they're doing something else that the lawn mower didn't do. Okay. We're going to say that you mowing the lawn that classified a poor person.

 

Keith Weinhold (00:26:31) - You had to work for money. But the middle class person here, they're also working for money. But they do have a better and higher use of their investing dollars. They're also getting some of their money to work for them in something like a 401 K or a 403 B, or a thrift savings plan, or an IRA or a 457 plan or something like that. So the middle class person here, they get some of their dollars working for them. That's significant. But look, here's the real point getting your money to work for you doesn't build wealth. And all these middle class people here, they think there couldn't possibly be anything better than me getting my money out there working for me. So I'll just leave it there. It can't get any better than having my money work for me. Well, that's not true. And I find it to be a real conundrum and paradox that people will spend tons of time learning about how work works. They spend zero time learning about how money works, but yet money is the only reason that they even go to work, which is really unusual to me.

 

Keith Weinhold (00:27:36) - So getting your money to work for you does not build wealth. Now, that doesn't sound too bad on the surface, but if you think about a 10% return over the long term from the S&P 500, which is about what you could expect, most people don't even consider the five deleterious drags on that 10% of inflation and emotion and taxes and fees and volatility, all five of those simultaneous drags. Now, I think some of these are easier to explain and understand than others. For example, if you have a 10% rate of return and 3% inflation, which is a long term historic term, you're already down to a 7% inflation adjusted rate of return. We haven't even subtracted out those other four things yet, and I like to look at things in really long timeline. So let's take a look at some long timelines with some returns you can expect. And therefore I also like to look at inflation in a long timeline. We'll call it 3% inflation. You've got to beat inflation substantially in order to have any real return.

 

Keith Weinhold (00:28:39) - And things like stocks mutual funds, ETFs just don't do it. So let's look at long timelines of let's say over 100 years here. I talked to you about the drag of inflation. Let's talk about the drag of volatility. This is little understood. Stocks are quite volatile. They go up and down. They're choppy where real estate is a substantially smoother ride. So let's look at two different lines here on this graph okay. Over the last 120 years since about the year 1900, the stock market has averaged roughly that 10% return, 6% from capital appreciation and 4% from dividends. So therefore, the Green Line, this shows capital appreciation. You're probably pretty used to seeing this. The compound return. This looks thrilling. Your mutual fund advisor loves to show you this line. This line goes like exponential. Like, who wouldn't want some of that, right? Some even believe Einstein was purported to say that compound interest is the eighth wonder of the world. So what's wrong with it? Where does it break down? Okay, well, I'm going to show you a second line.

 

Keith Weinhold (00:29:46) - And both of these lines show a 6% return from the year 1900, more than 120 years of returns. So the green line is what you think you got. But what did you really get with this 6%, quote unquote compounded return? You don't get this. You get this? That's what you really got. This is the deleterious effect of volatility on stock returns. You're like whoa, whoa wait. Well why why did that happen? How did that happen? The difference here is that whole effect of, let's say you have a $100 stock and it loses 50%. Now it's down to 50 bucks, but it gains back 50% the next year. Now it's only up to 75. So you've gone from $100 down to $75, even though you lost 50% in year one, say, and you gain 50% in year two. So it's really a mathematical problem. Another way to say it is that time spent making up previous losses is not the same as growing your money. It's not the same as compounding your money.

 

Keith Weinhold (00:30:51) - In fact, the tip of the blue line, the end of it there. Today's dollars. That's only 38% of what you get at the tip of the Green Line at what you expect to get. So a lot of investing has to do with expectations. If you expect a green line and you only get the blue line, that's when you end up like this. You know, sort of these stereotypical stock kind of photos when people can't pay the bills. And the interesting thing is we've been in a 401 K based world for 35 to 40 years now, where that's sort of the norm. People continue to end up like this, but yet they still get into 401 K's, and think getting their money to work for them is a way to build wealth. We're here and we're talking about why it isn't and that is the problem. And compound interest and compound interest does not bail people out of their income and savings problem either. Four out of five people have less than one year's worth of income, save for retirement.

 

Keith Weinhold (00:31:48) - This is why we have a retirement crisis today. You can't count on compound interest alone. So I would like you to imagine another pretty dreamy scenario for yourself. Okay. And this this is a pretty important exercise. This is some better news for you. I want you to think about how much money you think you're going to make, both earned and through investment returns your entire life. We'll say it's inside this vault right here. Okay. And the reason that this is some, some better news is, you know what? If you're in this room, the chances are that you're going to have a greater net worth and greater residual income than other people will. Because you've shown up here, you've shown that you're interested in this. And a lot of people, they don't think about inflation and they underestimate their life's earnings. So let's say that your entire life's net worth, accumulated assets would be the way to say it. Let's say your total accumulated assets are coming up to $8.5 million. How's that sound? $8.5 million.

 

Keith Weinhold (00:32:58) - That sounds pretty good, doesn't it? Wouldn't that be amazing? Now just imagine this. I'm going to give you all $8.5 million at one time. You're going to receive this all at once. How would that feel like? Wouldn't that be amazing? How fast are you going to quit your job? Hopefully you at least give the two weeks notice. Where are you going to go on vacation? Are you going to have time to care for your loved ones now, or be a volunteer at habitat for humanity? Or finally have time to be a deacon at your church? Or do whatever is important to you because you are job optional. Now with this 8.5 million delivered all at once. But wait, here's the thing I didn't tell you when the 8.5 million is being delivered to you all at once, it's all going to be delivered to you on the last day of your life. That's when you're going to get it. What do you do now? I guess you're not going to do around the world trip anymore, right? You're just saying your goodbyes to people.

 

Keith Weinhold (00:33:55) - It's the last day of your life. All right. What if you got 80% of this amount, then at age 80, would that be a little better or 70% at age 70? Would that be a little better? So my point is, timing matters. I don't know, what can you really do if you get 70% of it at age 70? You know, maybe when you're 73, that's the last year you can really paddleboard very well because you've had six knee surgeries by that or something. So timing really matters. So you really want to be invested in something that gives you an income stream that provides liquidity to you over time. You really ideally most want this sort of lifestyle smoothing effect where they get this income metered out to them. So liquidity really, really matters. And what helps achieve this smoothing it is those income streams. In fact, I would go as far as to say that the standard advice that you hear out there from people invest for your future, period. I'd actually say that's bad advice or incomplete advice.

 

Keith Weinhold (00:35:04) - Why would you only invest for your future when you can invest now for a stream of income now and not hemorrhage or sacrifice the future at all, which is really something that you can do with real estate. Build an income stream. Now, it typically appreciates faster than stocks and you didn't sacrifice the future at all., there's more bad advice out there. I think sometimes you'll hear a person say, for example, oh, pay yourself first. That means put your money in a traditional retirement plan or something like that. Pay yourself first. Wait a second. How in the world is it paying myself first if money is deducted from my paycheck when I'm, say, age 35 and I don't get that back until, say, I made 75, look what the 401 K the most popular plan in the United States. You cannot take penalty free distributions until between age 59.5 and 70.5. That's just when they begin. And you also must begin paying taxes on it at that time. So. Would you really find it a good trade if you trade away one hour of your 35 year old self? And in return, you get one hour of your 75 year old self.

 

Keith Weinhold (00:36:16) - Does that sound like a good trade? A lot of people that invest in these traditional retirement plans, that's really the trade that you're making. And I used to be involved in traditional retirement plans. I used to think they were the best thing until I looked at it. A lot of people talk about the benefits of delayed gratification, and I think delayed gratification. There's something implied in that being a desirable thing, that there's a positive outcome and that there's some big reward for delayed gratification. But it's definitely not guaranteed. We're not guaranteed tomorrow. So I think for one K plans, they're known as tax deferral plans. But I think you could just as easily call them life deferral plans because that's principally what they do in my opinion. So let's go back to the lawn mower. The lawn mower again, I'm classifying that as the poor or however the middle class are doing a little something different. Remember, not only were they working for money, they got some of their money to work for them, oftentimes in a retirement plan.

 

Keith Weinhold (00:37:14) - I guess they're symbolized by these,, what do they look like here? Construction engineers or something like that. They're middle class, the wealthy. You're doing something that the poor and the middle class aren't doing. The middle class. They get their money to work for them. What are the wealthy do? What is this guy doing right here? What does he have figured out? He knows the best and highest use of his investing. Dollar is not getting his money to work for him. It's getting other people's money to work for him. And in real estate, you can actually get other people's money to work for you three ways at the same time. And you can do it ethically. I think it's important to be ethical. You never get called a slumlord. Like, for example, my mission is to provide housing that's clean, safe, affordable and functional. You can use other people's money three ways at the same time will call this OPM Other People's money. You might have seen that abbreviation before.

 

Keith Weinhold (00:38:11) - You can do it three ways simultaneously with real estate. And you know, the great thing is you don't need any degree. You don't need any certification at all in order to ethically use other people's money three ways at the same time. The first way is with the bank's money. Like for example, the way I bought that first fourplex is with 3.5% of my own money, is a down payment, and I borrowed the other 96.5. So use the bank's money for the loan and leverage you use the tenant's money for that all important income stream, and for paying down your loan for you. And then the third way you use other people's money simultaneously in real estate is that you use the government's money for very generous tax incentives, like you can defer your capital gains tax endlessly. You can get a mortgage interest deduction. There's something called depreciation which shelters a portion of your rent income from ever getting taxed. Don't get your money to work for you. Or at least don't make that the focus. The focus should be on ethically getting other people's money to work for you.

 

Keith Weinhold (00:39:18) - And you know, I think really a concept like this harkens back to the late business philosopher Jim Rohn. Right? Jim Rohn said formal education will make you a living, but self-education will make you a fortune. So you really getting a condensed self-education right here? So let's just look at one of these three. Let's talk about that ten in income stream. That's the important one. That's the one where you build residual income. If you do want that freedom, if you do want to build enough of that residual income so that you can be job optional and do what you want to do, think about it conceptually. Think about how amazing it is that the tenant pays you what they pay you. The tenant pays completely one third of their income most of the time in rent to you one third of the time. So that is like you getting paid and that tenant going to work for you ten days every month. We'll call it the first ten days of every month just to work for you and to pay you.

 

Keith Weinhold (00:40:22) - Do you have any idea how amazing that is? Think about that. What other company gets one third of people's incomes and can do it at scale? Apple doesn't get one third of people's incomes. Think of all the stuff that people buy on Amazon, all those consumer products. But people still don't spend a third of their income on Amazon. So this is amazing. Like, who else gets this? Really nobody but you in real estate. So, you know, we're getting you to think differently here. This is just again one of the three ways that you can ethically employ other people's money. The others were the banks money and the government's money. We're talking about the tenants money here. All right. That was almost the first half of my presentation at the Spartan Summit. We are get rich education. So to review what you learned earlier in the show here today, keeping it real simple. High rates are for a strong economy, and low rates are for a weak economy. A fed pivot means when they reverse their monetary policy stance.

 

Keith Weinhold (00:41:31) - For example, going from raising rates to lowering rates. From that point where we left off on my presentation there, I go on to discuss more about the importance of cash flow, how leverage beats compound interest, inflation, property selection, properties to avoid, and more. If you'd like to watch all of that presentation, you can in entirety with the video on the get Rich education YouTube channel. Also, the link directly to that full video is in today's show notes. On the way out today, again coming up on a future episode retirement, we polled our great audience with the two you want to retire question. And we're also asking what is retirement anyway? We're discussing both of those huge questions coming up here on the show. If you'd like to hear that episode more, be sure to follow the show on your favorite podcast platform. Until next week, I'm your host, Keith Reinhold. Don't quit your day dream.

 

Speaker 6 (00:42:32) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice.

 

Speaker 6 (00:42:42) - Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively. The.

 

Keith Weinhold (00:43:00) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Direct download: GREepisode493_.mp3
Category:general -- posted at: 4:00am EDT

Get our free real estate course and newsletter: GRE Letter

Learn why inflation helps dishonest people and harms honest ones. I use an example of a honeymaker.

Both new-build SFRs and apartment units are being shrinkflated.

Landlords skimpflate by: delayed maintenance, transferring the electric bill to the tenant, adding a surcharge for storage locker use, firing the doorman, charging to park beneath the carport, or not replacing an old fridge.

Instead, raising the rent is the ethical thing to do.

To comfortably afford the typical US home, it took $59K in 2020 and $107K today.

In a sense, you’re both richer and poorer than your grandfather.

Learn why investing through IRAs is a poor strategy.

I compare RE market conditions from when I bought my first property in 2002 with 2024’s conditions.

Timestamps:

Inflation and Immorality (00:01:51)

Explanation of how inflation impacts the economy and the moral dilemma it creates for producers.

Housing Affordability (00:04:26)

Discussion on the impact of inflation on home affordability and the consequences for renters and homeowners.

Rental Affordability and Apartment Shrinkflation (00:05:47)

Insights into the shrinking size of new apartment units and the implications for rental affordability.

Impact on Middle Class and Homeownership (00:08:29)

Analysis of how inflation affects the middle class and the changing dynamics of homeownership.

Affordability by Metro Area (00:11:09)

Breakdown of home affordability in different metro areas and its correlation with real estate cash flow.

Impact of Inflation on Wealth and Society (00:17:11)

Discussion on the implications of inflation on wealth accumulation and its societal effects.

Conventional Finance and IRAs (00:24:45)

Brief mention of conventional investment vehicles like 401(k) and Roth IRA in relation to real estate investing.

Conventional Wisdom (00:26:36)

Challenges conventional financial wisdom, emphasizing real estate investment over traditional saving and budgeting.

Roth IRA vs. Traditional IRA (00:27:45)

Discusses the limitations and drawbacks of Roth IRAs and traditional IRAs in relation to increasing income and real estate investment.

Market Timing (00:28:59)

Emphasizes the importance of having a sound investment strategy and taking advantage of market conditions, using personal experience as an example.

Real Estate Market Comparison (00:30:14)

Compares the real estate market conditions in 2002 to those in the mid-2020s, highlighting changes in pros, neutrals, and cons.

Investment Uncertainty (00:32:53)

Addresses the uncertainty of investment and the need to adapt to shifting market conditions, emphasizing the importance of taking what the market offers.

Property Highlights (00:34:13)

Details three available investment properties in different locations, providing information on purchase price, rent, and potential cash flow.

Long-Term Investment Strategy (00:36:55)

Advises on the ideal holding period for rental properties and the benefits of new build properties in the current market cycle.

New Build vs. Resale Properties (00:38:02)

Discusses the advantages of new build properties and the potential impact of declining home price premiums on resale properties.

Investment Coach Contact (00:39:12)

Encourages listeners to contact investment coaches for assistance in exploring potential income properties.

Disclaimer (00:39:42)

Provides a disclaimer regarding the information presented in the podcast and advises consulting professionals for personalized advice.

Resources mentioned:

Show Page:

GetRichEducation.com/491

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Sure, you might find monetary inflation annoying today. Learn why inflation is even worse than you think. It is an immoral force. How bad homebuyer affordability has become by metro region. Then why conventional finance and IRAs don't move the meter in your life and more today on get rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text gray to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

 

Speaker 1 (00:01:18) - It's called the Don't Quit Your Daydream letter and it wires your mind for wealth. Make sure you read it. Text GRE to 66866. Text GRE 266866.

 

Speaker 2 (00:01:35) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Speaker 1 (00:01:51) - Welcome, Gary. From Gainesville, Florida, to Brownsville, Texas, and across 188 nations worldwide. I'm Keith Weinhold. Hold in your listening to get Rich education. I'm honored to have you here. Inflation is immoral. Now, at best, you might find what the central bank, the fed, does as annoying on the consumer level. It might even severely debase your standard of living, eroding away your one and only quality of life. But how does inflation have an immoral impact on you and the actors? In an economy? A honey maker sells his jars of honey for $20. The fed prints money like crazy. The money supply doubles well. The honey maker now has three options. Keep selling honey for $20, which is where he eats the loss and keeps providing honey for his customers at the same price.

 

Speaker 1 (00:02:51) - Secondly, he can water down the honey or use other inferior ingredients, which is known as skin deflation or shrink the honey jar size known as shrinkflation. The last option is to be honest and increase the honey price to $40. But if he behaves honestly, he drives away his customers and they look for honey elsewhere. So therefore, those that choose to water down the honey will outcompete the honest guy. And over time, what happens with currency debasement is the producers must now weigh their financial well-being with moral integrity. And that is the problem. This is why inflation has an immoral impact on human beings. It's also a contributor to why food quality suffered during the big wave of inflation in the 1970s and 1980s. It led to rampant obesity and prescription drugs, now comprising half of our TV commercials. All these people now walking around as near zombies that need their meds. And on top of that, somehow society has quickly come to believe that this is normalcy. Then the 2020 wave of inflation is both fueling that trend, and it's now making homes unaffordable for the middle class.

 

Speaker 1 (00:04:26) - As a landlord, the honest thing to do then is to raise the rent. It's not honey inflation or rent inflation because the honey maker and the landlord didn't create it. It is central bank inflation. Higher rent is simply the consequence of more dollars in circulation and simultaneously new build homes. They are indeed experiencing shrink inflation as a result of this currency inflation. I discussed the incredible shrinking size of new build single family homes with you last week, where that new home size has fallen 14% in the past decade plus or minus. Well, the average American apartment size that's falling to, yes, apartment developers in their new projects. They're cutting square footage, and they're doing that to try to contain rents. The square footage of apartment units being built has not been this small since at least last century, and maybe ever. Soaring construction cost. That means developers have got to either pass along all of those increases through into the rents, or find ways to limit rent. Or one way to do that is by building smaller units.

 

Speaker 1 (00:05:47) - Yes, apartment construction shrinkflation. And who can blame the builder? Because rental affordability has been of increased importance in recent years, and developers have got to be able to convince their investors and their lenders that there is going to be sufficient demand at proforma rent levels among apartment units completed in 2022. That's the most recent year available. Average unit sizes fell to 1045ft², and that is the lowest level on record for apartments. And we just got confirmation on that through the US Census Bureau figures. Yes, that is for newly built multifamily rental units that therefore apartment sizes are down 8% from just five years ago. And that number could drop a bit further when 2023 stats are released. Yes, American lifestyles are being shrink inflated. All over the place, and it is even worse for those that don't own assets. And a recent peak of apartment sized construction was 2013, when they were just over 130ft². And I told you that the latest figure here is, again, 1045ft². The Covid era really saw new build.

 

Speaker 1 (00:07:12) - Apartment sizes drop fast because that's when people started to split up. Like if they weren't a family. Now, when rents rise, whether that's for apartments or single family homes or self-storage units or whatever it is, most any kind of real estate, you know, when those rents rise, people try to keep from raising the rent sometimes. Now landlords, instead of raising the rent, they can instead skimp flat themselves. They can do that by delaying maintenance, transferring the electric bill to the tenant, adding a surcharge for storage locker use, firing the doorman, charging to park beneath the carport, or not replacing an old fridge. That might have given you some ideas there, but I do not advocate that. That's the best way. The bottom line is that inflation is not just a persistent economic affliction. It's an immoral force. And the ethical thing to do, like you learn with the honey maker, is raise the rent. Now, when wages don't keep up with prices, that's a problem. Let's take a look at just how bad affordability is.

 

Speaker 1 (00:08:29) - All right. Here is the lowest salary amount that US households need to at least earn to comfortably afford the typical priced US home. Okay, we're rounding to the nearest thousand dollars here in 2020. That figure was just 59 K. In 2024 it's 107 K. All right, 59 K in household income up to 107 K today to afford the typical US home. Astounding. That is up more than 80% in four years. But at the same time here's how bad it is. Median US household income did not keep pace. You probably figured that much. American incomes are not up 80% in the past four years, but in 2020, the household income, the median was 66 K. Today it's 81 K. Well, that's up only 23%. So the income needed to comfortably afford a home is up 80%, while the actual median income has risen just 23%. That's per Zillow. Well, who does this hurt the most? Of course, it hurts that prospective first time homebuyer, not just because they usually have entry level incomes as well, but it's because they don't have any equity to roll forward into a purchase.

 

Speaker 1 (00:09:58) - And when first time homebuyers never get that mortgage loan pre-approval, what happens? They have to rent. So this affordability trend is good for income property owners. And you know, this is one big reason why. For a while now, I have said that I expect the homeownership rate to fall and therefore for America to have more renters, more rental demand. Well, that has now begun to fall from 66% in Q3 last year to 65.7% in Q4 of last year, and expect a homeownership rate to keep dropping. And that share of renters in the United States to keep rising. Now, let's break down this poor affordability by city. Let's break it down by metro area. I'll start with some select lowest priced cities, and then let's work our way up to the highest price cities. And I'll tell you as we ascend, when we pass the national mark, and you're going to notice that the lowest price cities, which are the earlier ones that I mentioned here, they tend to be the better areas for real estate cash flow.

 

Speaker 1 (00:11:09) - Here we go. In 2020, the typical Pittsburgh home could be bought with a 35 K household income. Wow, that's low today. It takes 58 K Memphis a very popular investor city here at GRA. Maybe our top investor city that has gone from 38 K in 2020 to a 70 K household income today. And it appears that more people will have to rent in Memphis. Cleveland from 41 K up to 71 K, Birmingham 42 K up to 70 4KD. Fruit 45 up to 76. Buffalo 42 up to 77. Saint Louis 45 up to 77 Kansas City 52, up to 93 Houston 56 up to 95 San Antonio 57. Up to 95. Columbus, Ohio 52, up to 96 Chicago. Still pretty affordable for such a world class city, but the median household income required to afford the average Chicago home in 2020 was 65 K, and today it's 105 K, and then you've got that aforementioned national average, 59 K and income needed four years ago up to 107 K today Philly 61 K up to 109 Jacksonville 58 K up to 109.

 

Speaker 1 (00:12:46) - Minneapolis 72. Up to 114 Baltimore 70. Up to 114 Atlanta 59. Up to 115 Tampa 57. Up to 116 I mean, we're looking at more than a doubling in Tampa. Las Vegas 65 up to 120. Dallas 68. Up to 121. Phoenix 66 up to 131. We're looking at about a doubling of the household income that it takes to afford the median home in Phoenix just over the last four years. Miami 76 to 151. That's another basically a doubler there. Denver 101 up to 173. Boston 118 to 205. New York City 135 to 214. And we just got a few left here as we're getting close to the top. Seattle 120 to 214 and then the top three Los Angeles 158 K to 279 K San Francisco 220 up to 340 K today. And number one San Jose, California Silicon Valley 263 K up to 450 4k. That's how much a household needs to earn to afford the typical home in their local market. Not an extravagant home, not a home that's even above average, just the typical home in their local market, as calculated by Zillow.

 

Speaker 1 (00:14:31) - That's what's happened to affordability, basically since Covid began about four years ago. So some other takeaways from what I just told you about there. The correlation here is that lower priced metros often have high homeownership rates because they are more affordable. Yet, paradoxically, those places, those low cost places with high ownership rates are often the best markets for you to own rental property in due to that affordability. And this is not just true in the United States. When you look at Europe and we shared a map of this on our general education Instagram page last week, Europe also has higher homeownership rates in less expensive nations, led by Kosovo at an astounding 98% homeownership rate. Can you believe that 98% Kosovo, part of the former Yugoslavia and then Kosovo in the high ownership rate, is followed by Albania in second, Romania and third? And again, today's U.S homeownership rate is nearly 66%. And then, conversely, some of Europe's more expensive nations have the lowest homeownership rates. Switzerland is the lowest at just 42%, and that's followed by Germany in Austria, with the next lowest European homeownership rates with declining US affordability.

 

Speaker 1 (00:15:59) - I mean, sometimes, do you ever think that it just feels like dollars are losing all of their value? I mean, some of these figures just look like funny money anymore. If you visited U.S Debt Record recently, you'll see that our national debt keeps ticking up, nearing $35 trillion now. Now, I recently listened to two guys talking about rising prices back when they were kids and when they were kids, they thought that meant that the economy is prosperous. Have you ever thought that even as a kid, I didn't. I never thought that rising prices were some sign of economic prosperity, like when you were a kid, that pack of baseball cards going up from. $0.50 to $0.60 symbolize that economic prosperity was taking place somewhere else. I never thought that. I guess as a kid, though, I thought that if a 100 K home increased in price to 200 K, that it meant that it doubled in value, although it surely did not. I probably thought that as a kid before I understood things like inflation and leverage.

 

Speaker 1 (00:17:11) - But inflation is not some law of nature. Not at all. I mean, if you want to look at what happens is technology progresses. Well, of course prices should go down if we are picking apples by hand and then a machine comes along that picks apples 100 times faster, and you don't need to pay all these human harvesters anymore, well, then the price of apples should plummet. Prices should go way down as we get better at producing things. So just imagine how much higher prices would be today if there weren't these productivity gains that try to hold down the inflated prices just somewhat. My gosh. But instead, governments are incentivized to expand the money supply to pay for programs rather than tax you. What's the easiest way to pay for a $1 trillion federal infrastructure program? Just print a trillion bucks out of thin air. That way they didn't have to send you a tax bill because people don't like seeing tax bills. They didn't have to ask for your vote either. Just quietly print it. And now that they printed $1 trillion more, every single dollar that you're holding on to just got diluted.

 

Speaker 1 (00:18:29) - That's another reason that inflation is immoral. If you hold dollars in a savings account, fed inflation diluted it. If you hold dollars in a stockbroker as account inflation just diluted it. If you hold equity in a property, inflation just diluted it. Well what hedges you against inflation. Gold and bitcoin. They both break the government monopoly on money. That's just simply hedging yourself. And then what doesn't just hedge but help you profit from inflation. As we know that formula is income property with debt. Now the United Nations, they recognize 193 sovereign states across the world, but many with their own currency. And like I said, governments are incentivized to expand the money supply to pay for programs rather than tax you. It's not just an American thing. Everybody does it. It is just a race to the bottom with every currency, all of which eventually go to zero. Historically, they all have. Well, you and I, we actually gotten richer from our technology advancements in some ways. And at the same time, we are horror for our debased dollars by almost any standard out there.

 

Speaker 1 (00:19:59) - You and I are both richer than our grandfathers were. The technology is better. The iPhone in your pocket would blow away your grandfather or your great grandfather. But back in my grandfather's day. See, here's the difference. He could pay for both of his kids to go to college and do it without student loans. Grandpa could easily find a job in a factory, bought a house. His wife didn't have to work. He supported his kids. His wife was home so she could take care of the house and kids. We have lost that. That wave of high inflation in the 70s and 80s made it so that both parents had to soon work, eroding the nuclear family. Inflation destroys families because wages often don't keep up. When you have these ways of inflation, both parents work and the wife cooks last, meaning even more obesity. And now, in this era of inflation, the 2020s, the first time homebuyer has instead become the renter so that the median age of the first time homebuyer is now 36, per the Nar, which I think I mentioned on a show last year.

 

Speaker 1 (00:21:13) - And that number looks to be going higher. So the American dream, owning your home, it looks like that soon won't even begin until you're near 40. And it's not just a result of government inflation. Government regulation has driven up the cost of doing business, hence why the prices are so high. You're seeing more and more evidence of inflation widening this chasm between the haves and the have nots. I mean, Macy's, the department store they recently announced. Plans to reorganize their stores around this hollowing out of the middle class businesses are reacting, and inflation is the problem. In fact, it made a lot of news a few weeks ago. You might have seen this story where, gosh, can you believe that a public figure would say this out loud? Kellogg CEO Gary Pinnick commented on how Americans are dealing with high grocery prices when he was quoted as saying, cereal for dinner is something that is probably more on trend now. And he got blasted for it. From malnutrition to family erosion to unaffordable homes, inflation from the central bank is the culprit and it's reached levels of immorality.

 

Speaker 1 (00:22:35) - More straight ahead. I'm Keith Whitehouse and you're listening to episode 492 of get Rich education. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns, or better than a bank savings account, up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Speaker 1 (00:23:47) - Role under the specific expert with income property you need. Ridge lending Group Nmls 42056. In gray history from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com. Hi, this is Russell Gray.

 

Speaker 2 (00:24:27) - Co-host of the Real Estate Guys radio show, and you're listening to get Rich education with Keith Reinhold. Don't quit your day dream.

 

Speaker 1 (00:24:45) - Welcome back to Jewish Education where we are day trading. We are decade trading. I'm your host, Keith Reinhold. As we approach springtime before your tenant considers moving out, this is the time to remind them of the cost of moving. I've seen landlords effectively do this with a well worded letter. If you're raising the rent, this could accompany that notice. Tell them how costly moving is, because tenants often don't realize that until it's too late.

 

Speaker 1 (00:25:16) - And moving is also one of the most stressful things that a human can do. Vacancy and turnover are your biggest expense, so you should consider doing this before your tenant makes moving plans, because by then it's too late. Andrew Carnegie said that 90% of all millionaires become so through owning real estate. I could still believe that 90% figure today. But sadly, Carnegie's quote wasn't quite inflation proofed, and I'm sure he would admit that if he were alive today, a net worth of $1 million today does not make you rich. Millionaire. Yeah, not a wealth marker, but it probably means that you aren't poor. But yeah, a millionaire is no longer that aspirational. multi-Millionaire might not be a net worth of $2 million or more if you're under, say, 60, a $2 million net worth, that probably means that you better keep doing something to generate income. Here at gray, we probably spend less than 5% of our content, or even less than 2% of our content here, describing what most people think of conventional investment vehicles like, say, a 401 K or a Roth IRA.

 

Speaker 1 (00:26:36) - Instead, we follow something more like what Andrew Carnegie said, because being conventional, it just doesn't get you anywhere. And trimming your expenses, that really doesn't move the meter much in your life, unless you do enough of it to make you miserable. Saving money by getting your haircut at home is not going to build financial freedom. How many at home haircuts would you need in order for that to happen? There's no number. Neither will finding a way to get a free Thanksgiving turkey, or saving $90 on a flight itinerary by adding a layover and losing three hours of your time. That's not respecting your own time. So this is why we don't talk about conventional stuff here. Savers lose wealth, stock investors maintain wealth, and real estate investors build wealth. But now really, why else don't we discuss something like the benefits of a Roth IRA or comparing them to a traditional IRA? The main difference there being with a Roth you fund with post-tax dollars, meaning that you pay the tax today versus a traditional IRA where you pay the tax later rather than now.

 

Speaker 1 (00:27:45) - Well, you can't draw the funds penalty free until you're older, for one thing. And also, if you're under age 50, you can only contribute $7,000 a year to an IRA, and it's a care year if you're over 50. It doesn't move the meter in your life. And also, since we're a show about increasing your income, not cutting your expenses in a don't live below your means, grow your means vein. Well, this year's Roth IRA income limits are 161 K for single tax filers in 240 K for those married filing jointly. All right. Well, if you are not there at that income level yet, you are targeting exceeding those limits. So you won't be qualifying to participate anyway. Even if you had wanted to 401 K's in IRAs, they take money out of your pocket every month and every year. And I said with income property, you made a plan to put more money, tax advantaged money in your pocket every month and year. And this is all why I frown on budgeting, too.

 

Speaker 1 (00:28:59) - Now, one classic investor axiom that makes a little more sense to me is that you can't time the market. This is precisely why time in the market beats timing the market. Another phrase you've surely heard. I think that another way to say this is take what you've been given. Yeah. In general, once you've got a sound strategy, take what you've been given. The epiphany of real estate pays five ways is a motivator to adding more property. For example, when I bought my first property, yes, that modest and seminal Blue fourplex in 2002, there were pros and cons to buying 22 years ago. Just like there always are. Well, what I did is I took what I was given because I begin to understand how real estate could benefit me. And do you want to know what the market conditions were like back then? Let's look at this and compare this to today's income property market. This will be really interesting. What are the big factors that have changed in 22 years? Well, back in 2002 there were pros, neutrals and cons to buying.

 

Speaker 1 (00:30:14) - Then back then the pros were a good rent price ratio and I got a historically low six and 3/8 mortgage rate. Yes, I still remember that the neutral back then was an average vacancy rate, and the cons back in 2002 were low inflation, a high housing supply. The fact that I had made a $295,000 full price offer for that fourplex, which felt high at the time. I asked the owner if he'd come down and he said no. And another con is that I own in a small metro area, Anchorage, which was more vulnerable to economic change. That's something that I didn't even realize at the time. And another con to me, buying back then, as successfully as that turned out, was weak. Future demographics. Tenants quickly vacated because it was so easy for them to get first time homebuyer loans, liar loans amidst that loose lending environment. So right there were the pros, neutrals and cons in the marketplace. When I first started out taking what I was given, I took what the market gave me and became a profiteer.

 

Speaker 1 (00:31:32) - Once I had a strategy. Now this current environment, let's look at it. It could very well be better than when I started out. Here's what the market is giving investors here in the middle of the 2020s decade. The pros are low vacancy, higher inflation, though I would not call it high any longer. Another pro low housing supply. The polar opposite of when I begin there is strong future demographic demand. And another pro is like I've been touching on earlier here in that first part of the show, this dreadful first time homebuyer affordability. And what that does is that increases tenancy duration. Those are the pros today. The neutrals are strict loan underwriting and historically average interest rates okay. So those are both neutral conditions. And then the cons today are lower rent to price ratios and higher insurance premiums. So there they are. They're the progression of pros neutrals and cons in the real estate market. Since I bought my first property in 2002, one has got to own assets. When the middle class is hollowing out, it's caving in.

 

Speaker 1 (00:32:53) - No one wants to end up as desperate as Google's. I struggling to catch up with Microsoft and OpenAI. We don't want that to happen. And uncertainty. As you think about the future and growing your portfolio, you know, uncertainty that is an ever present condition with zero antidote. Uncertainty will only disappear when the world ends. These factors oppose neutrals and cons. They constantly shift. And in fact, life is about not knowing. The only safe years of your life are past years. Live in the question. Take what you've been given. That's the message here. Like I discussed last week, investor purchases are breaking records in today's environment. And speaking of today's market conditions, let me give you something tangible that you can really sink your teeth into with some real property addresses. These are ones that you find at Gray Marketplace. Let me start with the most expensive one first in San Antonio, Texas. It is a 2024 new build fourplex for a price of $1,100,000. Yeah. Hey, big spender, $1.1 million.

 

Speaker 1 (00:34:13) - The rent is $7,580. Class A neighborhood 5000ft², three bed, two baths per unit. Gosh, I wish this would have been my first ever fourplex. Mine was two beds, one baths, and when I bought it, it was about 20 years old. Well, the interest rate on this new build San Antonio fourplex is 4.25%. You need to use the seller preferred lender for that you're down. Will be $275. Projected monthly cash flow is $1,413. The second property is at 16 1027 Street Northeast in Canton, Ohio. Yes, canton, Ohio, the home of the Pro Football Hall of Fame, which I visited about five years ago. This is a single family rental in canton. The price is 130 K. The rent is 1125 B class neighborhood 1100 and four square feet. It was built in 1952. It has three beds in one bath. 33 K is the down payment, $279 of projected monthly cash flow. And then the last one that I'll detail here is 8700 East 79th Terrace in Kansas City, Missouri.

 

Speaker 1 (00:35:35) - It's also a single family rental 213 K purchase price. The rent on it is 1875. And gosh, that is a really good rent to price ratio. They're almost 9/10 of 1% here in Kansas City. B is the neighborhood class. It's 1180 eight square feet built in 1967, four beds, two baths. And it is a down payment of 53 K down with a projected monthly cash flow of $449 there in this Kansas City single family rental. Now you don't want to count on rent increases, but rents in the Midwest are now rising faster than any other region in the whole nation. And that's not hard to do, by the way, because in most U.S. regions, rents are hardly rising at all today. Now, as far as homes built in the 50s and 60s, although it's still good for you to mark more for maintenance expenses on properties of that age. You recall that I said earlier that you're likely doing more decade trading than day trading with these rehabbed or new build investor homes and 7 to 10 years.

 

Speaker 1 (00:36:55) - That's typically how long you want to plan on holding for, because by that time, or even earlier, it might have been as little as three years here recently. But by that time, sufficient equity has built up so that you want to sell in order to keep your return high and trade up tax free. Well, you only need new or rehabbed systems or components, therefore, to last 7 to 10 years, and you're typically selling the property before you need anything like a new roof or new Hvac. I personally don't believe I've ever held any rental property for more than ten years now, as I gave details of those three available properties there. This really is a time in the market cycle for you to consider new build properties. If you can swing the higher price, and that's for a lot of reasons you probably realize. The first one is that because builders are still buying your rate down for you to under 6%, you saw their with that San Antonio new construction fourplex, how a builder is buying down your rate to 4.25.

 

Speaker 1 (00:38:02) - Gosh, another trend that's been developing is the new home price. Premium over resale property seems to have declined substantially in the US, but builders just cannot keep doing these rate buy downs forever. Once rates go down, they're going to have less incentive to do them. For one thing, there won't be a need there. And also see, it depends on the builder, but a lot of builders, they bought land back in 2021 that they're only building on today, and those builders got to pay lower 2021 prices for that land that they're now building on. Will in a year or two, when builders are selling property where they had to buy the land in 2023, that is going to be reflected in higher prices in a year or two. So go new build if you can swing it. If not, you've got your 7 to 10 year hold strategy for resale properties, and that's 7 to 10 year hold. Strategy also applies to new builds on a scarce asset that everyone is going to need all 340 million Americans.

 

Speaker 1 (00:39:12) - And if any of these income properties or ones like those seem interesting to you, go ahead and contact your gray investment coach. If you don't have one, they'll help you for free. And our coaches really just make it easy for you. You can book a time right on their calendar, set up a friendly zoom or phone call, and strategize at Gray marketplace.com. Until next week, I'm your host, Keith Weintraub. Don't quit your day dream.

 

Speaker 3 (00:39:42) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 4 (00:40:11) - The preceding program was brought to you by your home for wealth building. Get rich education.com.



Direct download: GREepisode492_.mp3
Category:general -- posted at: 5:00am EDT

Others quietly fund a savings account for you with every income property that you own. 

This is known as your ROA, your Return on Amortization. Primary residence owners don’t have this benefit.

Tenants rent a property from you. To own the property, you got to “rent” the money from the bank.

Landlord tipflation: have you ever asked your tenant for a tip? I don’t recommend it.

Integrity: Now that the statistics are in, I follow up on my 2023 Home Price Appreciation (HPA) Forecast. See how it went.

When measuring HPA, I explain why I use existing home prices, not new home prices.

The size of a new-build home has shrunk 12-15% in just the last decade.

Learn about the surprising correlation between rents and home prices. Be honest. Is it completely different that what you thought?

Redfin just reported that real estate investor purchases are breaking records.

Find the right income property for building your wealth. Our GRE Investment Coaches provide you with free guidance at GREmarketplace.com

Timestamps:

Welcome to Get Rich Education (00:00:01)

Introduction to the episode and a brief overview of the topics covered.

The Benefits of Real Estate Investing (00:01:58)

Discusses the benefits of investing in real estate, including equity growth, cash flow, tax benefits, and inflation profiting.

Tenant-Made Equity Growth (00:02:47)

Explains how tenants contribute to the landlord's equity growth through monthly principal pay down.

Landlord Tip Inflation (00:06:39)

Compares the lack of tipping in the landlord-tenant relationship to other service interactions and discusses the concept of "landlord tip inflation."

Review of Home Price Appreciation Forecast (00:09:06)

Reviews the accuracy of previous home price appreciation forecasts and discusses the factors influencing the real estate market.

Use of Existing Home Sales Numbers (00:13:01)

Explains the rationale for using existing home sales numbers in home price appreciation forecasts and discusses the trend of new home construction.

Impact of Population Growth on Real Estate (00:17:03)

Highlights the impact of population growth on real estate prices and rental demand, emphasizing the significance of demographics in real estate investing.

Special Episode Announcement (00:21:33)

Announces the upcoming special episode 500 and expresses gratitude to listeners, particularly those from Colombia.

Listener Guest Invitation (00:22:43)

Encourages listeners to share their experiences and the impact of the show on their lives, inviting them to become guest speakers on the podcast.

The surprising correlation between rents and home prices (00:26:07)

The correlation between the direction of rents and home prices, and how they move together.

Investor purchases breaking records (00:29:21)

Insights on the increasing investor purchases, housing shortage, and the impact on the real estate market.

Real estate anniversary (00:32:11)

Keith Weinhold's heartfelt reflection on his parents' 50th anniversary in the same home, emphasizing the significance of providing people with a home.

Commitment and growth in real estate investing (00:33:46)

Encouragement to commit to real estate investing, learn, grow your portfolio, and build your empire.

Conclusion and disclaimer (00:37:10)

Disclaimer and conclusion of the podcast episode.

Resources mentioned:

Show Page:

GetRichEducation.com/491

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

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text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Today, get in on a savings account that others fund for you. Landlord Tip Foundation a follow up to see how my last home price appreciation forecast actually performed. The surprising way that rents correlate with home prices. Investors are now feeling a record share of property buys and a heartwarming 50 year anniversary that I'm in awe of today. An get rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text gray to 66866.

 

Keith Weinhold (00:01:17) - And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Daydream letter and it wires your mind for wealth. Make sure you read it. Text gray to 66866. Text gray 266866.

 

Corey Coates (00:01:42) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:58) - Welcome to GRE, from Italy's Sorrento Peninsula to America's Florida peninsula and across 188 nations worldwide. You're listening to the 491st consecutive weekly installment of the get Rich education podcast. I'm your host, Keith Weinhold. And when you invest in real estate with a strategy, which is what we've discussed here for over nine years, you can't help but be a profiteer, even a wild profiteer. It might feel like so much money is falling out of the sky that you might need an umbrella to keep yourself from being hit with it. Raining Benjamins. In fact, with one of the five ways that you expect to be simultaneously paid. All right, let's not focus on the equity growth here, which has been torrid the last four years.

 

Keith Weinhold (00:02:47) - Not the cash flow, which has been slowed lately, not the tax benefits or the inflation profiting benefit. What else is there that ROA you return on when we talk about so much money falling out of the sky that you catch a case of affluenza, that ROA, it's really one of your quieter profit centers. It is like a savings account that someone else is funding for you. Let's say that you check in at your table of your typical mortgage income property, and it shows that it has $400 of monthly principal pay down. All right. Well, imagine if you had a number of economic actors say you own six rental properties, and then you've got six tenants, six economic actors, perhaps people that you've never met. And all six of them are putting 400 bucks a month into a savings account with your name on it. That is $28,800 a year. That goes into your quote unquote, savings account. Yeah, nearly 30 K a year that your net worth is growing by that you hardly even think about.

 

Keith Weinhold (00:04:02) - And it's all just part of the profitable background noise that you hardly even hear, along with your leverage depreciation, cash flow taxes and inflation, profiting your tenant builds up your equity. This way, even if your property didn't appreciate at all. And again, in your own primary residence, your ROA is zero because you had to work to pay down your principal, your tenants not doing it for you. Now, this account that they're funding for you, it's not as liquid as a savings account, but it's perhaps more like an old bank CD, a certificate of deposit. It's your money, but you can't access it. In a couple minutes. You would need to do a sale, or you could do a cash out refinance and then it's yours. Your ROA is your tenant made annual principal pay down divided by your equity. Okay. And what if you had more and larger properties? Then this small example I gave you the quietly increases your net worth nearly 30 K every single year. Well, a lot of investors have more or a larger properties where you might have 300 K in annual principal pay down alone.

 

Keith Weinhold (00:05:22) - The more rental properties you own, the more tenants you have that month in, month out. Every single month they fund a low liquidity savings account with your name on it. And think about it. How did you get in this advantageous position? Well, first you educated yourself. You'll know that they will rent the property from you. And how did you get the property? You don't own an outright. That typically implies too much opportunity cost to have the entire value of your property tied up and paid off. Although they rent the property from you, you got to rent 80% of the money from the bank to buy the property with reap the reward, and you might have to use that umbrella to avoid getting rained on. With the financial windfall. And residential real estate investors have been feeling the rain pouring down for the last three four years. Many commercial real estate investors with short term mortgages don't feel the same way now when you're paid five ways, which has been enhanced by inflation since 2021, you don't really need tip inflation.

 

Keith Weinhold (00:06:39) - Hunt up of that. In fact, have you ever asked your tenant for a tip, or has a tenant ever paid you a tip for providing housing for them? I wouldn't expect it. It hasn't happened to me. In fact, I've never heard of it. But if. If so, tell us about it right into us at get Rich education. Com slash contact. That's our contact page. A tip for your landlord. Now, think about it this way. You've got all these people asking for tips, really, since the pandemic began. And that's when it really heated up. And then the pandemic receded. And yet the tip requests persist. Baristas, delivery people, fast food workers and the parade of other micro interaction participants that you encounter throughout the day. Those people have no shame in asking you for a tip, and that's even if the service is poor. Now, I'm not saying that you should or shouldn't tip them, but they are micro interaction participants in your life because they're just handing you a coffee, or they're handing you another drink that has too many ice cubes in it.

 

Keith Weinhold (00:07:55) - On the other hand, what you do is you provide tenants with the roof over their head 30 days in a row, 24 hours a day. By buying the property, you educated yourself. You sunk in a down payment. You build up your own good credit to get a loan to provide housing for a stranger. Well, I guess you'll be asking your tenant a new question each month. Would you like to tip me 18%, 20%, or 25%? Landlord tip inflation? No, I doubt that you're really going to do that. But this is the case that compared to the service level from vendors that you interact with at a lower economic level, you sure could ask for this landlord tip inflation. Let me know if it's ever happened to you now, starting at the end of 2021, near the end of each year here on the show, I have provided you with a home price appreciation forecast for the following year. Well, we have got the results now from last year, so let's check the performance.

 

Keith Weinhold (00:09:06) - And yeah, don't you wish everyone that made predictions or forecast they reliably review them and followed up with how they actually performed. That's what we're going to do here. Now there are some things that I don't like to predict. In fact, I was the guest on Tom Wheelwright’s show at the end of last year as his 2024 Real estate predictions expert. And if you watch that, he really had to press me to get my mortgage rate forecast. I told him back then that 6% by the end of the year was my best guess. But that's all it was not formulaic, not a forecast, and not a 100% confidence level at all. So when we talk about Gray's home price forecasts and our track record, let me share a little context with you here. First, so many other people, including some expert peers that I actually respect. They really got home price appreciation so wrong in this era, especially in 2021. That's when many forecast a home price crash 2021. That's the year we had the highest home price appreciation in a long time, nearly 20% nationally.

 

Keith Weinhold (00:10:23) - And of course, I have never called for any national home price downturn at all, even a mild one. I'm on record here on the show back in 2020 and 2021. That is when I shared the fact that, look, this administration, our elected officials, whether you like them or not, for better or for worse, they don't want to see people kicked out of their homes and living on the street back then. Remember, like mortgage loan forbearance. But at the end of 2021, I forecast a cooling down of home price appreciation. And I told you then that I expected 9 to 10% for 2022. And at the end of 2022, the result was indeed 10% home price appreciation. And then at the end of 2022, we had already seen mortgage rates spike two and a half times from their lows. And again, many said that was going to catch up with us so that in 2023, home prices would just have to sink. No, they didn't sink. That's when I told you that the only housing crash was going to be a supply crash, and the higher mortgage rates actually correlate with higher home prices, not lower ones.

 

Keith Weinhold (00:11:39) - That's what historically happens. And I said right here on the show that home prices absolutely can't crash. In fact, they won't fall at all. So 0% was my forecast for last year. No gain, no loss. We now have the number in. Only for last year. Yes, real estate statistics can move slower than an Alaskan glacier. Well, it affirmed that indeed, prices didn't fall. They came in up 3.5% last year. That's the result. We'll round it up to 4%. And we maintain a consistent data set here. The same measuring stick. And that is the Anna's national median single family existing home price. Let me just add that of course I'm neither omniscient nor clairvoyant. I'm giving you the best information my research can provide. It is surely possible that I'll get it wrong sometime. I just haven't yet. Now. And you learn something about real estate here. Why do I use only the existing single family home number? Therefore, why exclude no new build homes? Well, in short, this is how you better compare apples to apples.

 

Keith Weinhold (00:13:01) - New home construction changes over time. And in fact, the trend for the last decade is that new build homes are shrinking in size and are also being built closer together to each other when they're constructed. So you can see how this disrupts the apples to apples comparison. Ten years ago, the existing single family home was about 1600 square feet and is still 1600 today. But ten years ago, a new build, single family home was about 20 300ft². And it's just 2000ft² today, or 2036 to be exact. So yeah, new build sizes have shrunk 12 to 15% in just the last decade. So this is why I use existing home numbers. And by the way, this shrinking trend, this is the opposite of the early 2000 trend. When you saw a super sizing of homes about 20 years ago, that's when the term McMansion really increased in popularity there about 20 years ago. But it's the opposite now. The shrinking new home trend looks to pick up steam because, like I talked about a few weeks ago, affordability is down.

 

Keith Weinhold (00:14:19) - Remember, it's worse than it's been since George Jefferson was on television 40 years ago. Don't let's not play The Jeffersons theme music again. The deluxe apartment in the Sky. We played that two weeks ago. Moving on up to the East side. I think that's the music that meant Manhattan's Upper East Side. For those uninitiated on that, that has long been one of New York City's most affluent neighborhoods. Yes. Then the Jeffersons were also funding their landlords return on amortization and more. But getting back to today's new home construction, you can. Therefore, you could say that homes are experiencing shrinkflation today from about 2300ft² to 2000ft² in just a decade, and you can easily see that falling below 2000ft² within two years here. Yes, that type of shrinkflation is more impactful than you paying the same for your shrinking jar of prego spaghetti sauce. Now that you understand why existing home sales numbers are used in Jerry's Home price depreciation forecasts sourced by the Nar, you'll recall that at the end of last year, I forecast 4% home price appreciation for this year.

 

Keith Weinhold (00:15:43) - We'll check back on that in one year's time. Now, that's amidst the fact that I understand we've got high asset prices all over the place right now, almost everywhere you look, a record high US stock market near record highs in Bitcoin and near record highs in home values. Yes, more home price appreciation is likely. In fact, real estate investor purchases are breaking records. I've got more to tell you about that later. In fact, there is even more fuel being poured out of the housing record right now. And this was breaking news a couple of weeks ago in our Don't Quit Your Daydream newsletter. So if you're a reader, you saw it. And that is the fact that population growth drives real estate prices and rents. News broke that we just experienced the largest one year population increase in all of American history, with an astounding 3.8 million. Our population was up 3.8 million people last year, more than ever in previous census estimates of a 1.6 million person increase had underestimated immigration flows. This was reported in Newsweek and elsewhere.

 

Keith Weinhold (00:17:03) - Now, look, I've been directly investing in real estate since 2002, and I have rarely encountered a supply demand inflection point like this that requires such attention from you, locating an available property that is already more elusive than finding the missing car keys, and it's going to get even more scarce. This has the appearance of an astounding real estate investment window that we are now entering. See, in most asset classes, the future is largely unknown. Like in stocks, futures markets, derivatives, bonds, crypto, gold, oil, all kinds of other commodities. There are so many unknowns there. And real estate has unknowns too. But there are no three giant certainties for residential real estate in America going forward. Number one is more inflation. Number two is a prolonged scarce housing supply. And thirdly, it is astoundingly good demographics that fuel more demand. This third one is newer. And this is what I'm highlighting here. The demographics were already good, but it's just been turned up another notch. All three of these things are inevitable, and so many people try to predict the future and they fail.

 

Keith Weinhold (00:18:30) - But these three profitable real estate tailwinds for investors are as assured. I mean, there is a third. Is you forgetting someone's name immediately after they introduce themselves? Yeah. The way to get around that is to recite their name back out loud as soon as you meet them. But what I'm getting at is that this is not hyperbolic to call this potentially a once in a decade opportunity. Other high income countries like Japan and so much of Western Europe, they are sweating buckets, thinking about how their nation's aging populations are sending them over a demographic cliff. And besides just the magnitude of the population growth, again, the biggest one year increase in American history, understand that America's largest group of immigrants are working age producers aged 25 to 54, and they are overwhelmingly renters, not homeowners. So this is your surge in rental demand and this immigration surge. It may or may not last, depending on policy, regulation and the presidential election outcome late this year., you know, Jeff Bezos discussed this one time.

 

Keith Weinhold (00:19:55) - He discussed about how everyone wants to know the future and understand this. You already know more about the future than what you think, whether it's about your future business life or your investing life or your family life, or the way that you're thinking about technology in autonomous cars or flying cars, in machine learning and artificial intelligence, you know, with things that a lot of people, they ask themselves a question about the future, and they ask, what will be different in ten years? Well, there's nothing wrong with that question. In fact, it's a perfectly good question. But instead, ask yourself the opposite. What will be the same in ten years? Yeah. What will be the same in ten years? Now, black swans aside, in real estate investing, it is indeed those three things more inflation, a prolonged scarce housing supply, and astoundingly good demographics for rental demand. That's what will be the same. And now you have the basis for a sustainable wealth strategy. The bottom line is that even if it comes to a sudden stop, the addition of an all time record 3.8 million Americans in one year, that has left an indelible mark on real estate demand, the economy, and nearly all of society.

 

Keith Weinhold (00:21:33) - Residential real estate investors are going to own a scarce asset that everyone will need. You're listening to get resuscitation. It's episode 491, and that means that we're just nine weeks away from what is going to be a special, unforgettable episode 500. It's an episode that you probably want to listen to more than one. Coming up in two months on May 6th. And I'll tell you, I really know how to put the performance pressure on myself for May 6th, don't I?, hey, I really want to give a shout out to our great listeners in Columbia. Last month, I spent nine days in Colombia and eight days in Ecuador exploring a coffee farm, checking out urban sites and doing some Andes mountaineering, taking in the best of steak, coffee, chocolate and fruits to. And I've got to say, when Colombians learned that I was there, you Colombians were amazing at reaching out, making me feel welcome, telling me how the show has helped you. Ecuador. And it wasn't quite the same. I love you and your beautiful nation, but frankly, I didn't hear much from the Ecuadorian listeners.

 

Keith Weinhold (00:22:43) - I don't know why there was a big difference there, but I'm appreciative of some of the South American listenership for a show that's based on about 95% US real estate here. Speaking of listeners and the show, at times, we have listeners here on the show. If gray has impacted your life and you'd like to come on the show and tell us about it, I and our audience like hearing from you and how an abundance mindset and real estate investing has changed your life right into us. At our contact page again, get rich education. Com slash contact and tell us about yourself. We've had some really cool listener guests here on the show, like Grammy Award winning music producer Blake La Grange, the inventor of a home fitness system, Sean Finnegan, and even my former coworker that used to have a neighboring cubicle right next to me, back when I had a day job in a fertile who became a listener. If you think you're just maybe a boring accountant with a spouse and two kids, but Jerry has influenced you, well, you're exactly who we want to hear from a write in and let us know.

 

Keith Weinhold (00:23:53) - Coming up next, hear the surprising correlation between rents and home prices. Then investor purchases are breaking records in more. I'm Keith Weinhold, you're listening to get rich education. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns, or better than a bank savings account, up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation.

 

Keith Weinhold (00:25:01) - If you want to invest where I do, just go ahead and text family to 66866. Role under this specific expert with income property, you need. Ridge lending Group NMLS 42056. In gray history from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Caeli Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at RidgeLendingGroup.com. RidgeLendingGroup.com.

 

Matt Bowles (00:25:48) - Hey, everybody, this is Matt Bowles from Maverick Investor Group. You're listening to Get Rich Education with Keith Weinhold. And don't quit your daydreaming.

 

Keith Weinhold (00:26:07) - Welcome back to Get Rich Education. I'm your host, Keith Weinhold. As I like to say, history over hunches, it's easy to have a hunch about how something works in real estate. But take a look at history and see what really happens. History over hunches. So to that point, you might be surprised at the correlation between the direction of rents with respect to home prices.

 

Keith Weinhold (00:26:31) - Now, the cost of rent has grown over the last 12 years. That's not news to anybody, but many think that rents and home prices move inversely. If demand for home purchases falls, then rents rise, right? No. Instead, they move together. When rents move up, home prices tend to move up to. Rents rose gradually from 2012 to 2020, and they rose rapidly since 2020. Well, home prices, they behaved in a similar way. They also rose modestly from 2012 to 2020, and they rose rapidly since then. Rinse and home prices have therefore been positively correlated. And in fact, I've been investing long enough to remember that when the home price bubble burst from 2008 to 2010, where rents fell a little. Then to an underscore my point some more, both rents and prices bottomed together around 2011. Yes, I think most real estate investors believe that this positive correlation is less likely than that. A movie about Barbie could ever reach $1 billion in sales. Well, that happened too.

 

Keith Weinhold (00:28:01) - So I simply look at what really occurs when I do my research. It's history over hunches, and that's why these should not be mind blowing discoveries. Just look at what really happens. So if your tenant balks that rents are rising, well, you know what? Home prices are probably rising to the bottom line here with rents and prices being correlated, is that whether it's to rent or own, wait a million homes when the economy grows, that is the real history over any other hunch. Now, as a wealth building show here I am empowering you with the information that you need to improve yourself. You can't follow the herd. You've got two choices. Either you can be a conformer or you can build wealth. Your wealth is not coming from anyone else. Chances are a rich uncle won't be helping you. In fact, getting an inheritance remains a rarity in the US yet as of 2022, data from the Federal Reserve shows only about a fifth of American households had ever received an inheritance at all. And it gets worse.

 

Keith Weinhold (00:29:21) - According to NYU, the most common inheritance amount is between 10,000 and $50,000. Yeah, that's enough to fund your life for one average month, or maybe one good month, depending on how you're living. The good news is that great listeners and others are getting the message, because last month, Redfin reported that real estate investor purchases are breaking records. Yes, investors bought 26% of the country's most affordable homes in the latest quarter ended, and that is the highest share on record ever. We've got all these on record ever sort of things that we're talking about on the show today. Yes, Redfin let us know that low priced homes are increasingly attractive to investors in today's environment. Redfin agents in Florida and California report that investors are the ones hungry for homes, but they can't find properties to purchase due to an ongoing housing shortage. But we can help you with available supply here at gray. But these overall record investor purchase figures they are, according to a Redfin analysis of county home purchase records across 39 of the most populous US metro areas, not just a couple states.

 

Keith Weinhold (00:30:45) - There are a lot of investors out there fighting for properties, said a Redfin premier agent in Orlando, Florida. There just aren't enough properties to go around, which is putting a cap on how many homes investors can buy. In fact, single family homes represented over two thirds of investor. Purchases. So congratulations, you are acting. You are making it happen in this canyon, this chasm, this divide that's opening up between the haves and have nots, shrinking the middle class. You are getting on the right side of that. I want to tell you more about being an investor shortly. But first, I have somewhat of a heartfelt real estate anniversary for you, and it has to do with my own family. March 5th, 1974 is a special day. You might note that tomorrow will be the 50th anniversary of that special date. Now look, I can remember every single place that I've ever lived. The modest single family home that I grew up in, college dorm rooms, a pathetic pool house, efficiency apartment in Westchester, Pennsylvania, a condo, a house as an adult.

 

Keith Weinhold (00:32:11) - Can you can you remember every place that you've ever lived? There's a good chance that you can. It's how intimate, really and important real estate is to your life. And think about how significant you are. You're providing people with a home that they will always remember. This is key. Think about how this contrasts. If you supplied the world with software packages or patio furniture, that stuff is forgettable. You're doing something significant when you help abolish the term slumlord and provide other people with that clean, safe, affordable, functional housing. Well, tomorrow my parents, Curt and Penny Weinhold, will have lived in the same home for 50 years. 50 years in the same home for my parents in sleepy and remote Appalachia. Coudersport, Pennsylvania. I asked my dad about that recently, and he said that when the paperwork with the lawyer was finished, he recalled walking into the house and happily shouting. He was tired of renting. When I visit my parents annually in Pennsylvania, I am still sleeping in the same bedroom of the same home, on the same block in the same small town where they still live in the first home that I ever remember.

 

Keith Weinhold (00:33:46) - Great job Mom and dad. You committed. You married before you had my brother and I. You're still happy, you're still healthy, and you're still together. You're even in the same home I grew up in. I'm in awe. I won the parent lottery five decades in the same home. You know where the creaky spots in the floor are of that old Victorian place. And when my brother is there, the four of us know right where to sit in our same spots at that same kitchen table. And, you know, as tomorrow is an amazing 50 years there. There are some lessons in this. Find out what the great things in life are, learn about them and commit to them. Like me trying to be the highest man on earth recently, or you buying the property or getting married. So many of the most successful people get diligent and learn and then make lasting commitments. Being a real estate investing devotee is a commitment. Each property that you add is a small commitment itself. I encourage you to act if it resonates with you.

 

Keith Weinhold (00:35:03) - Learn and grow your portfolio. There are always going to be naysayers that try to hold you to the confines of conformity and mediocrity. So fear, uncertainty. Telling someone that times are uncertain is like telling someone that they're breathing air. Well of course, no kidding. Each condition, uncertainty and breathing air have persisted every day of your entire life. In the year 1920, ten kilos of gold would buy you an average home. Today, ten kilos of gold will buy you an average home. Home prices aren't high so much as the value of the dollar is simply down. Homes are not overvalued by the most timeless financial measure. Gold mortgage rates near 7% are still below. Their long term average. So go forth and build your empire. You can either teach a man to fish or give a man a fish. Here at Jerry, we do both. We teach them in or women to fish at get worse education. Com which this show is a part of and then a great marketplace. Com we give a man a fish.

 

Keith Weinhold (00:36:30) - We have the supply of housing. You have access to the national providers with the lower cost real estate that makes the best rentals. And starting about two years ago, we added free investment coaching here, giving you that fish and making it easier than ever to get started or get your next property. Play a game worth winning and commit to something worthwhile. If you haven't yet, I encourage you to look into that at GREmarketplace.com. Until next week, I'm.

 

Speaker 3 (00:37:03) - Your host, Keith Weinhold.

 

Keith Weinhold (00:37:05) - Don't quit your day dream.

 

Speaker 4 (00:37:10) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of yet Rich Education, LLC exclusively.

 

Keith Weinhold (00:37:38) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Direct download: GREepisode491_.mp3
Category:general -- posted at: 4:00am EDT

Owning raw land, timberland, and farmland is often the domain of the wealthy. This is partly because it is difficult to obtain loans for this property.

Today, we discuss an income-producing timberland that also tends to increase in value.

For under $7,000 you can own quarter-acre parcels of producing teak trees in Panama and Nicaragua.

You can invest yourself. All at once, this provides diversification with a hard asset in a foreign nation and a different product type.

Over a twenty-five year period, each $7K quarter-acre teak parcel is projected to return $94K. You get title to the property.

Learn more at: www.GREmarketplace.com/Teak

With ownership of two quarter-acre parcels, you can qualify for a second residency in Panama for under $22K with legal fees, etc.

A SFR does not grow into a duplex. But teak trees grow in volume while its unit price typically appreciates. Teak price growth is historically 5.5% annually.

I’ve met the company CEO and Chairman in-person. This provider has offered this opportunity for 24+ years.

They’ve recently added a sawmill, increasing profits.

What are the risks of teak tree investing? Disease, pests, fire, geopolitics and more. They are proven mitigation plans.

In-person teak tours for prospective investors are offered.

Trees grow through recessions, COVID, market cycles, and Fed rate decisions.

Learn more about teak tree investing at: GREmarketplace.com/Teak

Timestamps:

Welcome to Get Rich Education (00:00:01)

Keith Weinhold introduces the podcast and emphasizes the importance of real estate and financial information.

The US economy and land ownership (00:01:44)

Keith discusses the strength of the US economy and the importance of diverse and resilient real estate portfolios.

America's top 100 landowners (00:02:29)

Keith talks about the largest landowners in America and the reasons why land ownership is often associated with the wealthy.

Investing like a billionaire (00:05:32)

Keith introduces the topic of investing in producing land and the benefits of owning producing land.

Introduction to ECI Development (00:06:21)

Keith introduces Michael Cobb and discusses the company's projects in Latin America.

Marriott resort project in Belize (00:07:08)

Mike talks about the construction of a Marriott resort in Ambergris Key, Belize, and the challenges of financing such projects.

Development and tourism in Belize (00:08:37)

Michael Cobb discusses the development and popularity of Ambergris Key, Belize, and the involvement of major hotel brands.

Teak tree parcels investment (00:11:30)

Michael Cobb explains the investment opportunity in quarter-acre teak tree parcels and the generational wealth stewardship associated with it.

Reasons for teak investing (00:14:05)

Michael Cobb discusses the reasons why people are interested in teak investing, including hard asset diversification and international residency opportunities.

Cash flow cycles and teak investment (00:16:42)

Michael Cobb explains the 25-year cash flow cycle associated with teak investments and the generational income potential.

Optimal growing conditions for teak (00:19:26)

Michael Cobb discusses the optimal growing conditions for teak and the physical growth of the trees.

[End of segment]

Teak Plantation Locations and Growth (00:19:42)

Discussion on the optimal locations for teak growth and the historical track record of teak price growth.

Teak Price Growth and Business Plan (00:20:44)

The historical 55% annual increase in the value of teak and the business plan's conservative approach to teak price growth.

Physical Properties and Residency Opportunities (00:21:33)

The value of teak and the opportunities for achieving residency in Panama by owning teak.

Residency and Citizenship (00:24:33)

Differentiating between residency and citizenship in Panama and the process and benefits of obtaining permanent residency.

Sawmill and Value-Added Component (00:27:56)

The integration of a sawmill into the investment proposition and the value-added potential of processing teak into lumber.

Sawmill Investment Opportunity (00:30:07)

Details of the investment opportunity in the sawmill, including the expected return and investment structure.

Risks and Mitigation (00:32:41)

Discussion on the risks associated with teak plantation investment abroad and the mitigation strategies in place.

Property Management and Tours (00:35:25)

Outsourcing property management and the availability of tours to visit the teak plantations in Panama.

Long-Term Investment Perspective (00:37:43)

The long-term growth potential of teak investments and the comparison to the investment strategies of wealthy families and institutions.

Earth's Highest Real Estate (00:38:11)

Discussion about Earth's highest point, the equatorial bulge, and the location of teak plantations in Panama and Nicaragua.

Investing in Teak Parcels (00:38:11)

Information about purchasing teak parcels, the absence of loans, and the potential for building wealth through teak investments.

Consultation Disclaimer (00:39:34)

Disclaimer about seeking professional advice and the potential for profit or loss in investment strategies.

Resources mentioned:

Show Page:

GetRichEducation.com/490

Learn more about teak investing:

GREmarketplace.com/Teak

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to gray. I'm your host, Keith Reinhold. An affordable way to simultaneously invest like a billionaire. Get diversified in multiple ways with real estate. Help the earth. And if you prefer, even achieve residency in a second nation today and get rich education. When you want the best real estate and finance info, the modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text gray to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Daydream letter and it wires your mind for wealth.

 

Keith Weinhold (00:01:16) - Make sure you read it. Text gray to 66866. Text gray 266866.

 

Corey Coates (00:01:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:44) - What category? From Sorrento, Italy to Sacramento, California, and across 188 nations worldwide. I'm Keith Reinhold, and you're listening to get Rich education the Voice of Real Estate since 2014. As we're two months into the year now and the US economy has continued to stay strong. Let me ask, how's your portfolio doing and how resilient is your real estate? How diverse is it? How would you grade yourself on those criteria?

 

Donald Trump (00:02:17) - I would give myself, I would look, I hate to do it, but I will do it. I would give myself an A-plus. Is that enough? Can I go higher than that?

 

Keith Weinhold (00:02:29) - Well, well, whether your, I guess, straight A's or not. Consider this land report.com. They recently published a report about America's top 100 Las donors. Now, Lynn could be vacant and nonresidential, yet have active ranching or agriculture or forestry taking place.

 

Keith Weinhold (00:02:52) - That way the land produces something while it might increase in value at the same time. But the reason that often land is the domain of the wealthy is that it's harder to get loans for land, and therefore one must often pay all cash. Well, by the time they were done. Today, you'll learn about producing land that's actually available at such a low price point that alone typically is not required for you to buy it. In 2024, America's largest land owner is Red Emerson, and that's what the report found. Read and his family owned 2.4 million acres in California, Oregon and Washington through their Timber products company and the number since they became America's largest landowners in 2021, when they acquired 175,000 acres in Oregon from another timber company. Well, with that acquisition, the Emerson surpassed Liberty Media chairman John Malone's 2.2 million acres. And then in third place is CNN founder Ted Turner. Yeah, he's America's third largest landowner, with 2 million acres in the southeast on the Great Plains and across the West. And it was a few years ago now.

 

Keith Weinhold (00:04:05) - It was 2020 when news broke that Microsoft co-founder Bill gates was America's largest farm land owner, with more than 260,000 acres. So the wealthy are attracted to real assets that can produce yield in something like land, which they aren't making more of. That's the backdrop for today. Surely we'll talk about income producing land, although most years it won't pay out and it's available to any investor, big or small. But before we do, let me share that. About ten days ago, I climbed up the highest point on Earth here while we're talking about non-residential real estate. Well, where was it? Where was I? Yes, I was on Earth's highest piece of real estate. Kind of a trivia question here, and I used to think that that must mean Mount Everest, but it's not. So there's a clue for you there. Where is Earth's highest point is you ponder that. I'll give you the answer later. Let's talk about investing like a billionaire with the opportunity to own producing land did it to you? We've discussed this topic before, but it's been quite some time and there have been some important updates, including a sawmill for the production timber.

 

Keith Weinhold (00:05:32) - After success in the computer industry, today's guest formed ECI development in 1996. I suppose going on nearly 30 years now. He served on advisory boards for the Na as a resort community developer. They have projects in Belize, Nicaragua, Costa Rica, El Salvador, Honduras and Panama, and neighborhoods include homes, condominiums, golf courses and over five miles of beachfront. So they got some really beautiful properties. He and I first met in person in 2016. He and his family lived in Central America from 2002 to 2016. It's always fantastic to have back on grea, and I guess I must button up here because it is the chairman and CEO, Michael Cobb. It's good to be with you. Thanks for having me.

 

Michael Cobb (00:06:21) - Back on the show. It's fun to have these conversations. I didn't realize we met in 2016. That's a little while ago.

 

Keith Weinhold (00:06:27) - Yeah, it has been eight years. Yes, we met in the region then down there and Mike's about the most relatable and down to earth guy that you can find and literally down to earth is.

 

Keith Weinhold (00:06:41) - Besides the resort development, you've made it easy and inexpensive for investors worldwide to buy producing teak tree parcels. But before we discuss that, you've got a project that's drawn a lot of interest on Ambergris Key, Belize, which many of our listeners already know, that's Belize's largest island and its top tourist destination. I have visited and owned property there, and it's coming online next year. It's pretty exciting. Tell us about it.

 

Michael Cobb (00:07:08) - It is exciting. It's been in the works for goodness, eight years. I think we signed our contract with Marriott maybe 7 or 8 years ago. We started construction just about a year ago last January. So almost exactly a year. Yeah, it's a marriott resort, 202 room oceanfront resort. It's fantastic. It will be done in August of 2025. Soft opening heart opening October 25th. So yeah, about 1618 months from now have this project finally finished. You know, the big challenging thing in this part of the world is financing. But it's really hard to get financing or affordable financing.

 

Michael Cobb (00:07:42) - Let me say it that way. Yeah. And so we took our time and we would not start a project until it was fully funded. I think a lot of challenges are people start these projects are kind of betting on the. Com. Right. Oh well we'll figure it out later. And we don't operate that way. We've been around for yeah 28 years. And so we're very very conservative. And until we had all the money to build the hotel, the resort, we did not start. And so we kicked it off last January. It was just down there last week. Steel is arriving. The superstructure is already going up. Yeah, man. It's just so nice to see it really coming to fruition. But you know, it's prudence and patience to take our time, make sure we have all the funding and then launch so that what we start finishes. And that's really been our mantra for almost three decades now.

 

Keith Weinhold (00:08:27) - Make it up, make it real, make it happen. In the largest town there on Ambergris Key, Belize, just a few decades ago, it was still this sleepy fishing village.

 

Keith Weinhold (00:08:37) - And with the setting that that island has and all the great snorkeling and everything else, it's really become popular and is boutique hotels grew into larger hotels. Yeah, it was probably, what, ten years ago perhaps, that you saw some of these big brands start to take more of an interest, like Hilton and Marriott, in branding the buildings what is.

 

Michael Cobb (00:09:00) - And, you know, I give a presentation called Why Belize, Why Right Now? And you nailed it there when you talked about the timelines. Right. And how a country or a region, it's not even a country in this case. Ambergris key. It's very specific. Right. How ambergris Key Belize has moved through this timeline, this path of progress. And at some point it goes from being a niche market or a no name market to a niche market, to a boutique market. And then all of a sudden, you're right, at some point the brand start to pay attention and then you move into popular acceptance and really mainstream tourism. And so, right.

 

Michael Cobb (00:09:31) - The cruise ships started going to Belize about 15 years ago, which put Belize as a country into the mind of a more mainstream traveler. And then you're right, about eight, ten years ago, the brand started to pay attention. And we do. We have a Hilton, we have a curio by Hilton, we have an autograph by Marriott, our company, ECI. We picked up the best Western franchise, and so we operate a Best Western on the island for that middle class market. And then Marriott, obviously, for the very high end traveler who wants an oceanfront 4 or 5 star kind of property. So yeah, but the brands are paying attention. And by the way, we're just seeing the beginning of that happening. This popularity curve Belize has entered what I would call the fast growth period. And over the next five, maybe eight years, we're going to see incredible growth in the tourism industry. Airlift is up. JetBlue just started flying down. So we're starting to WestJet. So we've got Canadian Air.

 

Michael Cobb (00:10:22) - We've got a discount carrier southwest. So when those things start to happen what you see is a market dynamism that's you know really it's exciting and it's going to change. Very, very rapidly. The pace of change is going to grow rapidly as well. So great time to look at Belize. If folks are interested in sort of that positioning in the path of progress in the marketplace.

 

Keith Weinhold (00:10:43) - Each time I visit Ambergris Key, Belize, the level of development increase is palpable. And, you know, this is an opportunity for a US or Canadian buyer or a buyer from outside that nation to come in. And it's just a very easy step with the English language and the common law in Belize, where you can invest yourself in this Marriott project that Mike discussed. Now, Mike, a while ago, to change topics, you recognize that the world has been really deforested and losing its valuable teak hardwood forests so continuously since 1999, you've offered a program so that individual investors at a really affordable price. We'll get to that price later.

 

Keith Weinhold (00:11:30) - They can own quarter acre parcels with the property deeded in their name, and reap the benefits and returns from the growth of the teakwood on top of the land. And now this is pretty novel, because for hundreds of years, only the hedge funds and super wealthy had access to an investment like this. So get us up to date with what you're doing on the teak hardwoods, because I know that so many of our listeners and viewers have already gotten involved.

 

Michael Cobb (00:11:56) - They haven't really. Thank you for being one of the people who put the word out there. Right? Because most people don't even know you can own teak or let's just back it up and you say, own timber, right? You start there. You're right. Only the super rich land barons, hedge funds. Those are the people that have always owned timber for centuries. Right. And so I think in most people's minds it's like, oh, I can't even get there. How would I even do that? Right. Well, then you take it overseas and you take it into something very, very specific, like teak timber.

 

Michael Cobb (00:12:25) - That's just not on anyone's radar. So. So you have done a great job. Thank you for getting the word out to just let folks know that this is something that they can do. So quarter acre teak parcels. We are now on our third plantation in Panama. We have one in Nicaragua as well. And so we're in our third plantation in Panama. Just because of the incredible number of folks, well over a thousand folks now who have decided they want to invest in own teak. You said something really interesting, Keith. You said you get to own the land, you get title to land and you get the harvest of the trees. That's absolutely correct. But it gets better because when the trees are harvested, they get replanted. And then the next generation of people your children, your grandchildren, whoever that might be, get the next harvest. But because you still own the land and the trees are replanted, a third harvest, you know, and a fourth harvest. So what you've really created with teak ownership is generational wealth stewardship.

 

Michael Cobb (00:13:24) - And that is something that's just so far beyond the comprehension of so many people that it can be so easy and so affordable to do.

 

Keith Weinhold (00:13:32) - I'm an investor myself in producing land like this in Latin America, so I know what some of my reasons are for being interested in this. And yes, it's more than the fact that I'm just a geography guy. It's the fact that I know I'm diversifying in multiple ways at the same time, a different product type in residential real estate. And I'm getting international diversification in a different nation, for starters. So are those some of the reasons that you see for why so many people are interested in teak investing like this? What are their reasons?

 

Michael Cobb (00:14:05) - Yeah, I think you've nailed a big part of it, which is the hard asset. A lot of folks, your listeners, readers in the news that are right, I mean, hard assets are important. I hope more people recognize that. Right. And more and more people are, thank goodness. So hard. Asset real estate being this particular hard asset.

 

Michael Cobb (00:14:22) - Right. And then the international diversification, one of the challenges we have is us, especially in Canadians to some degree, is that we kind of locked into the US system like we can own, say, Toyota stock, right? Japanese company, we can own Nestlé, a Swiss company, but generally we're doing it on the New York Stock Exchange. And so even if we own an international stock, it's still the US basket are still the Canadian basket that we hold it in. Right. And so when you physically own a titled property outside your home country, you have now truly diversified internationally. And there's a lot of prudence in that. And even just tiny little percentages of your portfolio, 5% of your portfolio, 10% of your portfolio outside your home country and hard assets is prudent because you want some other baskets for those nest eggs. Antiqued because it's such a low price point of entry with a huge yield, by the way, that it has become very, very popular for folks who want that international diversification in a hard asset.

 

Michael Cobb (00:15:23) - But to have the true international diversification because it's a physical asset outside your home country. And then I. Just say this and we can pick up on the theme or not. The other reason that people are looking at teak in Panama and Nicaragua, by the way, both countries, is because of the availability or the qualification for a visa for a second residency. And a lot of times people look at that as a plan B, if we kind of think maybe the US is going off the rails or Canada or wherever your home country is at, or it could go off the rails. Doesn't have to be now. It could be going off the rails in the future. You sort of that Boy Scout mentality of, you know what, I want a plan B, and if we have a second residency outside our home country, we now have an option. If we don't like the way things are going or where they get to, we can actually pick up and we can move and we have the right legal right, because we have a residency to live in another country.

 

Michael Cobb (00:16:17) - That's another reason that a lot of people have picked up the teak because it qualifies you for that residency. But I think the bigger reason is the international hard asset diversification. I think that's the leading reason people do it.

 

Keith Weinhold (00:16:31) - I want to ask you more about the residency shortly, but tell us more about the investment. We're thinking about maybe capital growth as the trees grow. And then what about the income?

 

Michael Cobb (00:16:42) - Sure. And so I think let me back it up. A lot of people think in cash flow cycles, right? If we have a job, we get paid every two weeks. You know, you have a lot of folks that have invested in properties. We get a monthly rent check, right? Or if we have stocks, maybe we get a quarterly or annual dividend. Right. So those are the what I would call the common time frames that we think about in cash flow. But what the Uber wealthy, what the hedge funds, what the family offices, what the endowment for places like Harvard, Yale, these big institution or big institutional thinkers have known for centuries is that there are actually other cash flow cycles that are largely ignored by the what I would say, the average investor.

 

Michael Cobb (00:17:21) - And those cash flow cycles are much longer. Teak, for example, is a 25 year cash flow cycle, right? You plant the trees and in 25 years you harvest them. You plant them again, not them. You plant new ones, right? In 25 years you harvest those and then so on and so on. So what you're creating is this 25 year cash flow machine. Now the kinds of returns are truly outsized. I mean you're talking about double digit ers. Now a lot of people say, well Mike, that's great. But what happens if I need the money in year 15? You can't have it because there is no money in year 15. Your trees are still growing, right? So it's this weird investment timeline. It's almost flatlined until the very end. And then it jumps way up and then it drops back down to a flatline again. And so it'd be silly to put tons of money into teak unless you had thousand times tons of money, right? But for some small piece of your investment portfolio where you have enough cash flow coming in from your maybe your job, your rent, your dividends, whatever, that a small piece that moves into this 25 year cash flow cycle with the thought process that this is how I steward wealth into the future, to children, grandchildren, great grandchildren, because the 25 year cycle is almost generational, right? In fact, in the US, it probably is generational because we're having children in the ages of, you know, 25 to 30.

 

Michael Cobb (00:18:44) - So it kind of starts to line up with generational income as opposed to, you know, sort of that whatever biweekly, monthly, yearly income. So it's just a different cash flow cycle.

 

Keith Weinhold (00:18:56) - That's right. And I brought up before that, when you think about the growth of one of your investments, you now get to think about it in two ways. If you own a duplex, it might have growth in its price. However, it doesn't grow into a fourplex and have growth in its price. However, with teak, you might have an increase in the value of the wood, perhaps on a board foot unit basis, and at the same time it is growing in height and volume.

 

Michael Cobb (00:19:26) - Absolutely no. That's a cute way to say it. I never really thought about a duplex growing into a fourplex, right? That's good. Exactly. And so what you do, you're right. You have the physical growth of the trees. And we have located our plantations in the optimal growing conditions, fatigue. And they are very known.

 

Michael Cobb (00:19:42) - Right? I mean, the British started plantation growing teak 350 almost 400 years ago in Southeast Asia. And so the Brits have just meticulously kept statistical records of every plantation that they were involved with the altitude, soil type, rainfall, temperature, on and on and on. And so it's really well known exactly where teak will grow well, and both where we have our plantations, it does Nicaragua and Panama, and we'll stick on Panama today, but the locations are dead center bull's eye locations for the best optimal growing of teak. So you have this growth of a physical thing, right. But you mentioned the board foot price. And by the way, the track record on teak being grown in plantations is 350 years. So what a track record, right? But since 1970. Two. The average price of teak over 5152 years has been 5.5% a year. That's the growth in the price of teak, right? And so you know who knows the future, right? I mean, the future is the future, right.

 

Michael Cobb (00:20:44) - But if a 50 year track record on a 5.5% increase in the value of the teak itself is pretty powerful, right? That's the long track record of nice growth. And when we factor in our teak into our business plan, we take that 5.5 and we make it zero. We just say, what if there is no increase in the price of teak over 25 years? How much will the tree grow? And if that tree is cut down and is sold as lumber? When we'll talk about our Solomon in a minute. If that tree is sold as lumber, what's the value of that lumber today? And what will the tree be worth in that value 25 years from now? And so if things do continue to increase at 5.5% a year, that's just all gravy. And that just starts to take that rate of return and just ratcheted up even further.

 

Keith Weinhold (00:21:33) - Teak has a number of physical properties that make it valuable, from its beauty to its fire resistance and more. Mike has now touched on a few interesting things.

 

Keith Weinhold (00:21:44) - We'll come back and talk about that soon, including how you can achieve residency in Panama by owning teak, what the risks are, and more about their sawmill that he just mentioned, adding value to the operation there. And then we're going to talk about what the prices are. We're talking with ECI Development Chairman and CEO Michael Cobb more when we come back. I'm your host, Keith Wynn. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns, or better than a bank savings account, up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.

 

Keith Weinhold (00:22:52) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six. Role under this specific expert with income property, you need Ridge Lending Group and MLS for 256 injury history from beginners to veterans. They provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com.

 

Speaker 5 (00:23:49) - This is the Real World Network's Cathy Fekete, and you are listening to the always valuable get Rich education with Keith Reinhold.

 

Keith Weinhold (00:24:06) - You're listening to the SOS created more financial freedom for busy people just like you than nearly any show in the world. This is guitarist education. I'm your host, Keith Whitehill. We're talking with ECI development chairman and CEO Mike Cobb about teak hardwood investing in Panama and Nicaragua.

 

Keith Weinhold (00:24:22) - Like, tell us more about how one can achieve residency, for example, in Panama if they own teak there maybe just how residency varies from citizenship?

 

Michael Cobb (00:24:33) - Sure. Well, why don't we start with the second part, how residency differs from citizenship. And there's a good place to start. You know, citizenship is you become a citizen of the country. You have a passport, you can vote. You have every legal right of that country. Right. The decision would have residency to use a US term is like a green card, right? It's the legal permission to live in that country for some period of time. Many of them are permanent. In fact, Panama's is permanent. So once you have a Panama permanent residency, you could literally pick up, you could move there tomorrow, and you could live for the rest of your life in Panama. And so it gives you the legal right to live there. But you don't have a passport. You can't vote. I guess that's the main difference, right? You don't have a passport, you can't vote.

 

Michael Cobb (00:25:18) - But for most people, in fact, the overwhelming majority of people, a residency delivers exactly what somebody wants, which is the ability to live somewhere. Right? And we don't care if we vote or not. I mean, right, we'd still be citizens of our home country, US, Canada, or wherever we can vote back home or citizen. We have our passport from those countries, but the right to live somewhere else is powerful. And so the teak in Panama qualifies you in two ways for two quarter acre parcels, and then the legal fees and stuff like that. It's just under 22,000. A little less gives you permanent residency in Panama. Right? That's such an affordable way to be able to I call it the back pocket. Right. The insurance policy or the plan B in the sense that, like, I think a lot of folks are worried about the direction things are headed. And, you know, you have the teak parcels, which are going to produce a tremendous return. And then this byproduct that you qualify for and you have to go, you have to get down there a couple times.

 

Michael Cobb (00:26:16) - I mean, there's a little bit of administrative stuff, some legal fees, that's all included in that 22,000. Right. So that's all included. You have to go there a couple times. So there's a little bit of friction I would say. But when you get finished with that friction, you are a permanent resident of Panama and you only have to go there one day every two years. So you fly down every other year, whatever. Go, go talk to your trees, maybe sing to your trees a little bit, whatever you want to do and fly. All right. And you have a permanent residency. So it's a very easy, fast way to get that plan B now in the future, if you ever said, well, I really love Panama, I'd like to live here. Panama is beautiful. The city itself, it's got skyscrapers, apartments on the 50th floor of use or killer. You can be out on the beach or somewhere. You can be up in the mountains. So there are a lot of different climates and geographies in Panama where you might say to yourself, yeah, I think I want to come down here and live someday.

 

Michael Cobb (00:27:09) - Well, you already have your residency. You already have the legal right to do that.

 

Keith Weinhold (00:27:14) - Yeah, I mean, 100%. Now, Panama isn't predominantly English speaking like Belize is, but Panama just has a lot of inherent familiarity and feel to a lot of Americans. Since the canal is there and there is that strong American presence, and they've even dollarization their economy there, for example, in Panama. So it might be that nice plan B for you. And tell us more about the residency and the investment into the sawmill and how that works. So it sounds like there's now a value added component is you essentially vertically integrated and now have this sawmill with the teeth. Tell us more about that.

 

Michael Cobb (00:27:56) - So we've always factored in the sawmill into the investment proposition. Because if we were to just take the logs for example, 25 years, you cut down the trees, you stick the logs in the container and send them off to China or India, which is where most of the logs go. The return on investments.

 

Michael Cobb (00:28:13) - It's not great, it's okay, but it's not great. The way you actually get a phenomenal return on investment is you take those logs and you turn them into lumber, which has about a 3 to 4 x differential, or what we call first stage end product or simple end product, which would be something like flooring, which is basically lumber that's been finished one more level rooted and bulldozed so that you can put them together right on a wood floor. So those two modifications from the log all the way to the first degree of finished product, the returns start to really jack it up into that double digit IRR right over 25 years, which again is phenomenal. So we talked about price. But just to give an idea, a $7,000 quarter acre parcel at harvest turned into lumber and first level finished. Product turns into about $94,000, right? So 7000 turns into $90,000, which is a tremendous return. But the way you get that return is to deliver to the marketplace lumber and first grade finished product. And so Soma has always been part of our business plan.

 

Michael Cobb (00:29:19) - Well, we are now two years away from our harvest on our first plantation, the one I planted back in 1999. Right? I mean, it's incredible thinking that, you know, 20, gosh, 24 years ago planted a teak plantation. So we're two years from harvest. We have one more set of kind of odds and end thinning of just trees that didn't quite grow. Right. We're going to use those thinning over the next couple of years to practice in our sawmill. Because you know what? We are going to make mistakes. I mean, you don't ever get it right the first time. So we're going to make mistakes. We're going to learn from them. And by the time we actually do the real harvest of that first plantation, 100 acres of teak, two years from now, we will be up to speed with our sawmill will size up, we'll capacity up to do that. But yeah, so folks can actually we have a $2 million opening in the sawmill. And it's a real simple formula.

 

Michael Cobb (00:30:07) - It's two times your money and then a proportionate 10% interest in the sawmill. So for example, just rough numbers off the top of my head. You put in $100,000, you get twice your money back in about a 3 to 4 year period. As a sawmill really becomes operational. We take the first harvest, like the thinning, aren't going to produce much. In fact, we hope to just basically kind of break even over the next two years while we practice. Then we cut down 100 acres of teak. We start putting that through the sawmill, right? So you get two extra money, you invest 100 to get back to 100, and then your return would be about 13 or $14,000 a year. On going after that, because you get a 10% carried interest in the sawmill into the future as well. So that's the investment opportunity that produces a shorter cash flow, much tighter on the cash flow. But then a nice trailer for many years. But the investment is 100,000. So it's a more significant investment than, say, somebody wanting a little bite sized piece of a quarter acre parcel or two quarter acre type parcels paired with the residency that gets you that.

 

Michael Cobb (00:31:13) - So a couple different levels of investment depending on what your goals are, but also what your timelines are.

 

Keith Weinhold (00:31:19) - We described the sawmill investment numbers there. And then just to clarify, on the quarter acre parcels, they cost $7,000 each with an expected value or return of $94,000 after 25 years.

 

Michael Cobb (00:31:37) - That's correct. 6880. I'm using round numbers, but 6880 is the quarter acre teak and right at harvest when it processes through the sawmill. A little over that, but $94,000 is returned to the investor along the way. I'll mention this. There are maintenance fees. It's about $150 a year. We just take a credit card. We just tap it once a year. That takes care of property taxes, thinning, cleaning, anything that they have to do with the plantation. So $150 a year, your maintenance fee. But yeah, 6880 turns into 94,025 years. If teak continues to go up at 5.5% a year, the return would be better than that.

 

Keith Weinhold (00:32:16) - You probably have investors that come in oftentimes from North America, maybe some from Europe, and they see this as a really low cost of entry, $6,880 for one quarter acre parcel.

 

Keith Weinhold (00:32:29) - So are there any risks that one should consider? Therefore, if they're a first time investor abroad, maybe something they're not thinking about if they buy a rental single family home in their own hometown?

 

Michael Cobb (00:32:41) - Yeah. Very different. I mean, in some ways it's very different. In other ways it's pretty similar. Right. You're going to get title to the property. The process of getting title will be a little different. You're going to have to send in copies of your passport, a notarized utility bill. Just some things that you wouldn't have to do if you were buying a property in the States. But at the end of the day, you will get what's called Escritorio Publica public title. So it's a registered land deed. And so that part of it's all pretty similar risk factors. Absolutely. The business plan has them in there. But the big ones are any kind of disease. It's monoculture. So I mean a disease could come through and kill all the trees. Right. The good thing there is, again, teak has a 350 year track record of being managed and grown in plantations.

 

Michael Cobb (00:33:24) - So it has a long track record where they've kind of figured out, well, if this happens, then do this or if this pest comes along. This is how we, you know, we mitigate that, but nothing can mitigate all risk. That fire is an interesting one. Fire is a risk in the first three years of teak. So we call it baby teak. But once the tea trees are 3 to 4 years old, they're really above any kind of fire. Because you clean the plantation and the guys are in there with the machetes chopping to keep the, you know, the brushed and grass down in the dry season, which, by the way, you mention the qualities of teak, the hardness of teak is actually the most. Prized quality. And so the hardest of the teak that we get will actually be taken and sold as marine lumber, which is an unbelievable differential in price. But only 5 to 10% of your teak would qualify as marine lumber. So it's a small percentage, but the value of that is very, very high because it's set to hardwood.

 

Michael Cobb (00:34:20) - But the rest of the tree is also likewise very hard. The dry season is what cures the teak. And so in the dry season teak drops its leaves. And so it's very resistant to fire. If you do good maintenance on the plantation, we do so fires only a risk really in the first three years. And we actually warranty the trees of a fire comes through. In the first three years. We replant the plantation for any parts that are burned. So there's sort of a warranty that comes with the first three years. I mean, the other risks are political risk. What if Panama goes off the rails? The good thing about Panama, it's got the canal. And that is a major, vital strategic US interest. I just don't see the US letting Panama kind of go off the rails. But it could. But those I think are the three what I would call main risk factors. And we mitigate those to the best way possible.

 

Keith Weinhold (00:35:13) - You heard Mike mention about the thinning and cleaning. Yes, there is ongoing management, but that is already handled and taken care of in any of the prices that you already mentioned.

 

Keith Weinhold (00:35:24) - Is that right, Mike?

 

Michael Cobb (00:35:25) - Yeah, correct. And we outsource to a company called Geo Forest. All Geo Forest, all. They've been our plantation manager from since 1999. And and they're phenomenal. What they do, their world class. They've been doing it for longer than 25 years, maybe 30 years at this point. But we outsource what we have to outsource because we're not management plantation managers. So we can find folks that are.

 

Keith Weinhold (00:35:47) - The same property manager for a quarter century, a property manager that actually doesn't get fired. Hey, that's a novel concept. Two times two is what some investors back here in the U.S. are thinking with their residential real estate investments. If you want to learn more about this investment, I encourage you to check it out. You can do that through Gray Marketplace at Gray marketplace.com/teak. Mike, do you still offer tours.

 

Michael Cobb (00:36:16) - Oh my goodness yes. And I hope that you will take us up on the opportunity to come down and see the dairy and province. But yes, we do.

 

Michael Cobb (00:36:24) - And I don't know the dates off the top of my head, but for folks who are interested, uh, two things. One, we actually run a tour that's fun because it's a group of people and it's just, you know, you come down and you do it. But if somebody says, hey, I can't make those dates, but I want to come see the trees. Yeah, it's very reasonable. I think it's a couple hundred bucks. They pick you up at your hotel, they'll run you out to the plantation, bring you back. But it's a whole day. I mean, it's four hours outside of Panama City and four hours back, so it's a long day. And if it's a couple, it's still 200. It's basically for the vehicle out and back. Right? The driver and the vehicle. So you can come anytime or you can come with a group. And if you come with a group there is no charge. I mean, we get the van or the bus and we pay for it all.

 

Michael Cobb (00:37:03) - And yeah, we make peanut butter and jelly sandwiches and we have fun.

 

Keith Weinhold (00:37:07) - All right. Well, I think people have probably covered for the tea more than the sandwiches, but that is a nice touch that you do for people because you do that whether someone is a great investor or not, whether they haven't invested at all yet, and they just want to go ahead and check it out. And you can learn more about those dates at GR marketplace.com/teague Mike, it's always such a fun chat to discuss something so exotic. It's been great having you back on the show.

 

Michael Cobb (00:37:34) - Nice to be back with you. I look forward to seeing you in Panama one of these days.

 

Keith Weinhold (00:37:43) - Trees grow through recessions, they grow through market cycles, they grow through Covid, and trees just keep growing through every single fed rate decision. The wealthiest families on the planet, the top 1%. They have locked up vast portions of their wealth for timeframes even longer than the 25 year peak harvest cycle. In fact, Harvard has fully 10% of its endowment, specifically in timber.

 

Keith Weinhold (00:38:11) - To follow up on what I asked earlier, as we're discussing non-residential real estate today, Earth's highest point above sea level is Mount Everest. The highest from base to peak is Monica. But Earth's highest piece of land, uh, the highest point is measured from the center of the Earth is Chimborazo Volcano, Ecuador. That's because Earth is not a perfect sphere. But there's an equatorial bulge. That's what I was climbing ten days ago. Earth's highest real estate, Chimborazo, was also there for the closest real estate to the sun and moon. But back down here at a lower elevation where the teak plantations are in Panama and Nicaragua, there are no loans for teak. But at prices under seven K, many GRI listeners have found that they don't need a loan and they have bought ten or more parcels. But you can buy as few as 1 or 2 a quarter acre teak parcels and then later cash it out for yourself or build that wealth legacy for your family. Kind of like the top 1%. If it sounds interesting to you, learn more.

 

Keith Weinhold (00:39:22) - Get started at GR marketplace.com/t. Until next week. I'm your host, Keith Wild. Don't quit your day dream.

 

Speaker 6 (00:39:34) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively. The.

 

Keith Weinhold (00:40:02) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Direct download: GREepisode490_.mp3
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You’ll get an exact mortgage rate prediction from the President of the lending company that’s provided investors with more financial freedom than anyone in the nation. 

Learn how to best access your equity, yet keep your low mortgage rate first loan untouched.

In this Get Rich Education podcast episode, host Keith Weinhold and guest Caeli Ridge, President of Ridge Lending Group, delve into the direction of mortgage rates. 

They highlight the importance of understanding today’s environment and discuss refinancing opportunities in the current market. 

Caeli outlines various loan products available to investors and predicts over 50% of appraisals now come in high, indicating strong future valuations. 

She also forecasts higher mortgage rates to persist, with a possible Fed Funds Rate reduction by June and a 6.125% rate for 30-year fixed mortgages, non-OO, with 25% down, by the end of 2024. 

The episode emphasizes education and strategic planning in real estate investment.

I get my own loans at Ridge. You can too at RidgeLendingGroup.com

Timestamps:

The impact of inflation on real estate investing (00:00:00)

Discusses leveraging properties to increase wealth, the relationship between mortgage rates and real estate, and the impact of inflation on property values.

Understanding the importance of mortgage rates (00:03:52)

Explores the neutral relationship real estate investors have with mortgage rates, the impact of mortgage rates on home affordability, and the significance of current mortgage rates.

Historical perspective on home price affordability (00:06:18)

Provides insights into the historical trends in home affordability, comparing past and current median home prices and the impact of inflation on home values.

The power of leverage in borrowing (00:10:14)

Illustrates the impact of inflation on loan principal balances and monthly mortgage payments, emphasizing the benefits of optimizing borrowing.

Mortgage rate prediction and refinancing trends (00:16:57)

Discusses the future direction of mortgage rates, refinancing trends, and the importance of considering interest rates in the context of overall investment strategies.

Explanation of high points charged on investment property loans (00:23:12)

Provides an explanation for the high points charged on investment property loans, related to the servicing of mortgage-backed securities and the absence of prepayment penalties.

Accessing Equity with HELOC and HE Loan (00:24:21)

Discussion on accessing equity using keylock and HE loan, including LTV ratios and interest rate comparisons.

Trade-offs Between HELOC and HE Loan (00:25:27)

Comparison of trade-offs between keylock and HE loan, including flexibility and interest payment structures.

Considerations for Second Mortgages (00:26:36)

Exploration of the benefits of having a second mortgage as an option and the potential drawbacks related to minimum draw requirements.

Blended Mortgage Rates (00:27:56)

Explanation of how to calculate blended mortgage rates based on the balances and interest rates of first and second mortgages.

Appetite for Adjustable Rate Mortgages (00:28:44)

Assessment of the current environment for adjustable rate mortgages and comparison with fixed-rate mortgages.

Obstacles for New and Repeat Investors (00:29:45)

Common obstacles faced by new and repeat real estate investors, including understanding investment goals and managing debt-to-income ratios.

Forecast for Mortgage Rates (00:33:45)

Prediction for future mortgage rates based on inflation indicators and the potential impact of the Fed's decisions.

Loan Types Offered by Ridge Lending Group (00:35:54)

Overview of the various loan types offered by Ridge Lending Group, including Fannie and Freddie loans, non-QM loans, and commercial loans.

Resources and Tools for Investors (00:38:03)

Information about free resources and tools available on the Ridge Lending Group website, including simulators and educational content.

Conclusion and Recommendation (00:39:38)

Summary of the discussion with Caeli Ridge and a recommendation to explore the services offered by Ridge Lending Group for real estate financing needs.

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Complete episode transcript:

 

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. A new take on how to profit from inflation. The best strategies for accessing equity from your property while leaving your low rate loan in place. A surprising trend with real estate appraisals. Then the president of one of the most prominent national mortgage companies joins me to give a firm mortgage rate prediction today on get rich education. If you like the Get Rich Education podcast, you're going to love our Don't Quit Your Daydream newsletter. No, a eye here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free sign up egg get rich education.com/letter. It's real content that makes a real difference in your life. Spice with a dash of humor rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting GRE to 66866. Text GRE to 66866.

 

Speaker 2 (00:01:11) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker 2 (00:01:18) - This is Get Rich Education.

 

Keith Weinhold (00:01:27) - Welcome to Gary from Oak Park Heights, Minneapolis, to Crown Heights, Brooklyn in New York City and across 188 nations worldwide. I'm Keith Weinhold, and this is Get Rich education. When you have that epiphany, that leverage creates wealth, it can be enough to make you want to be the town iconoclast. Walk around, beat your chest, and boldly proclaim that financially free beats debt free. You might remember that I helped drive that point home a few weeks ago when I talked about the old fourplex owner, Patrick, who owned his fourplex next to mine years ago. He wanted to pay his down and I wanted to leverage mine up. I told you then that rushing to pay off one property by making extra payments on the principal is like drilling a deep hole into one property. And the deeper you drill, the more likely that hole is to cave in. Your return goes down and now you've got more of your prosperity tied up in just one property, just one neighborhood and just one market.

 

Keith Weinhold (00:02:34) - The most sure fire way to wealth, and exactly what wealthy people do, is optimize and almost maximize the number of properties that you own. And as long as you buy right as they inevitably inflate, just keep borrowing against them. And that way you never have to pay capital gains tax either. And that goes beyond just real estate. That's assets of many types. You'll want to own more assets. The way to do that is with more loans. And paradoxically, that is why the richest people have the most debt. As you watch your debt column grow, watch your column grow even faster. And as we're talking about mortgages and the direction of interest rates today, us as real estate investors, you and I, we have a somewhat neutral relationship with mortgage rates. Yeah, it's often a neutral relationship. Now, prospective homebuyers, they often want mortgage rates to be low. Sellers often want rates to be low two so that they'll have more home bidders, legacy landlords, ones that own a bunch of property and they're not buying anymore.

 

Keith Weinhold (00:03:52) - They often want mortgage rates to be high because it hurts first time homebuyer affordability, and then it keeps the rents high and it keeps the occupancy high. And then you and I see we both own real estate. We also look to opportunistically put more in our portfolio. Well then we want rates to be high in a sense and low in a sense too. So you might have relative neutrality, feeling aloof about it all because you're thinking about it from both sides. But in any case, we can always predict the future. But the one thing that you know for sure is what you have now. A lot of people don't optimize their potential for what they have now. Instead, they speculate about the future. Now, one thing a lot of people have now is so many Americans are still loving their 3% and 4% mortgage rates they locked in 2 or 3 years ago, and they're refusing to give it up. However, over the past two years, when the number of real estate listings were at historic lows, a lot of life changing events have occurred in the past two years 7 million newborn babies with a need for a larger sized home and a desire to get out of the starter home.

 

Keith Weinhold (00:05:11) - Also in the last two years, 3 million marriages, including some of those marriages, are among older couples who now need to sell a home that can help solve the market. And then, of course, most home sellers. They also become home buyers. Next, they need another place to live. So home sellers, they often don't add a net one to the supply. We had a million and a half divorces, 7 million Americans turning 65 years old that might want to trade down during the retirement years and also during the last two years. Consider that there were 4 million deaths and 50 million job changes, some of those inconsequential, while others with fundamentally changed commuting patterns. So the point here is that life moves on. For some, though still a minority, but a growing minority, it is time to give up the three and 4% mortgage rate. Still not enough of them, but for better or worse, that is what it's going to take to move this market and put some available supply out there.

 

Keith Weinhold (00:06:18) - Now, today we have apparently finally just come off this period where home price of. Affordability had hit 40 year lows for 40 years for decades. Again, with low affordability, you dislike that if you're a home buyer or seller, you might feel neutral about low affordability as a landlord or a real estate investor because it makes your new purchases less affordable. But it keeps your renters as renters when you buy that income property. From an affordability standpoint, the very best time to buy was 2013. Yep, 2013 is when prices hadn't fully recovered from the GFC and mortgage rates had fallen dramatically. Now, to open up that range in years, from an affordability standpoint, it was just a sensational time to buy a home or property from 2009 to 2021, just historically extraordinary, that sensational affordability level during that decade or so, 2009 to 2021, that added to the exceptional rise in home values over end since that time. But yeah, a few months ago, affordability reached its worst level in 40 years and it has since improved.

 

Keith Weinhold (00:07:43) - I mean, 40 year lows in affordability reach then in 1984 and what happened in 1984, that is when Ronald Reagan defeated Walter Mondale for his second presidential term. Steve Jobs launched the Macintosh personal computer. John Schnatter opened the first Papa John's store in Indiana. LeBron James was born in 1984, and on television running were The Cosby Show and The Dukes of Hazzard. Hey, if you were alive then and you watch those shows, um, I know you wouldn't confess to watching Charles in Charge back then, and you'll never get back those socially redeeming hours that you spent watching Punky Brewster, and you would not admit to doing that either. What is this show, the Jeffersons still on TV in 1984? Look into that. Yeah. You know, that was kind of a real estate ish show. The deluxe apartment in the sky. Yes. It was on then. Yeah. Sherman Hemsley, Isabel Sanford Q that up.

 

Speaker UU (00:08:55) - Where we're moving on now? All up to this island, to a deluxe apartment in the sky.

 

Keith Weinhold (00:09:06) - Yeah, they even had the episode where the landlord came over and threatened not to renew their lease. I'll tell you. Has there ever been a television show in history where the landlord was depicted as a good guy? I mean, a landlord in television, they're always cast is a money hungry bad guy that won't fix anything, or is just trying to unscrupulously kick out the tenant, a slack jawed slumlord, every single time. I never really understood that show's theme music, either Beans or Burden on the grill or something. Let's get back to mortgage loans. Understand this. It might be in a way that, okay, you've never thought about it before. It's the power of leverage in borrowing. Now, you probably won't hold any 30 year fixed rate loan all 30 years in reality, but they'll make this effect clear. Let's just act like you have done this on a property. Now the median home price is near 400 K today. But what was it not 40 years ago, but in this case 30 years ago? All right.

 

Keith Weinhold (00:10:14) - So 1994, per the Fred numbers, which are sourced from the census and HUD, it was 130 K. Yes, a 130 K median priced home in 1994. So then if you put a 20% down payment on that property, you'd have a loan principal balance of 104 K. Now imagine it was an interest only loan somehow, and you still just owed a 104 K balance on that home today, whose median price is up to 400 K. Well, that 104 K. That just seems like a little math that you could almost swat away. I mean, this is how inflation makes the numbers of yesteryear feel tiny. But now if you're 104 K loan were an amortizing loan and the principal were being paid down to hopefully all principal pay down made by the tenant. During all those years, mortgage rates were 9% back then. So if you were making the final payment today on what's now still a median priced home, today your mortgage payment would just be 837 bucks a month. It feels like nothing. Inflation benefited you both ways on the total principal balance and the monthly payment.

 

Keith Weinhold (00:11:35) - Just feeling lighter and lighter and lighter in inflation adjusted terms now. And if your mortgage rate were 6% on that property, your payment would only be 623 bucks. You might have refinanced to something like that. I mean, 623 bucks. That is lower than the average new car payment today of 726. But if you had not gotten that loan back in 1994 and instead would have paid all cash for the 130 K property, were you 130 K all cash that was put into the property back then? Well, that would have had the purchasing power of today's approximately 400 K reflected in the price of today's median priced home. But to take it back ten years further to 1984, the George Jefferson year, the median home price was 80 K and your loan would be 60 4k. I mean, these numbers feel like little toys or almost lunch money or something. So this is the power of optimizing your borrowing and perhaps but not quite maximizing your borrowing power because that does risk over leverage. That is the inflation profiting benefit that you're feeling right there.

 

Keith Weinhold (00:12:59) - Coming up in just a few minutes, the president of one of the most prominent national mortgage companies for investor loans will be here with me. We're going to talk about mortgage rates some more, the overall temperature of the mortgage market. And I expect that she'll give a firm mortgage rate prediction for where we're going to be at year end, because she's done that with us before. They see so many investor loans in there at their lending companies. They've really got a great pulse on the market. We have set up the makeshift gray studio again for yet another week. Here is this week I'm in Nevada, where I will be the best man at my brother's wedding. I have been on the road a lot lately. That's what a geography guy like me does. Gotta get out and see the world. Life is meant to be lived, not postpone. Before we discuss both general and some intermediate Murray's concepts shortly. If you happen to be new to real estate investing. And you just like to listen to that one episode that tells you, step by step, how to get started and how to build your credit score and make an offer on a property, and best navigate the inspection process and the property appraisal inside the management agreement and more.

 

Keith Weinhold (00:14:15) - You can find that on get Rich Education podcast episode 368. It's simply called How to Buy Your First Rental Property. More next. I'm Keith Reinhold, you're listening to get Rich education. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation.

 

Keith Weinhold (00:15:24) - If you want to invest where I do, just go ahead and text family to six, 686, six. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four plex's. Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com.

 

Speaker 3 (00:16:12) - Hi, this is Tom Hopkins, and I can't tell you how smart you are to be with get rich education and make these ideas you.

 

Keith Weinhold (00:16:32) - What is the future direction of mortgage rates? How do you qualify for more mortgage loans at the best terms with the lowest interest rates, and Americans have at near record equity levels in their properties? So what's the best way to access that equity yet? Keep your low rate mortgage in place. We're answering all of that today with a company president that's created more financial freedom through real estate than any other lender in the entire nation.

 

Keith Weinhold (00:16:57) - That is, the top tier and eponymous ridge lending group is time for a big welcome back to Charlie Ridge. Keith, you flatter me. Thank you very much.

 

Caeli Ridge (00:17:07) - I'm very happy to be here, sir. Good to see you.

 

Keith Weinhold (00:17:09) - Well, you help us here because debt and loan are our favored four letter words around here at gray. Can you help us efficiently optimize them both, Charlie? Interest rates have just been on so many people's minds. Shortly after, they had their all time low in January of 2021, and they since rose and then have settled down. Charlie, I've been trying to think through myself why people seem to put this over emphasis on the interest rate now. It's surely important. It is your cost of money. But the way I've thought that people overemphasize the rate is because maybe people love to discuss the direction of interest rates, even more so than real estate prices in rents is because prices and rents nearly always go up in interest rates can go up and down. So therefore it's maybe more interesting for people to talk about.

 

Keith Weinhold (00:17:57) - I also think about how rates sort of tap into that human fear of loss by paying interest, trumping the triumph of gain through cash flow or appreciation. And then maybe as well, it's because higher mortgage rates, they mean higher rates of all types which permeate into all of one's life's debt. So these are my thoughts about why people maybe put an over emphasis on mortgage interest rates. What are your thoughts?

 

Caeli Ridge (00:18:23) - I'm sure there's probably something to that. And you're right, Keith. Interest rates are always the hot topic. Everybody wants to talk about interest rates. I think that overall though, it is a lack of education and there's a psychology to it. You and I have talked about interest rates at nauseam over the years, and I do understand, but I think you and I agree, because we live in this space and we're constantly looking at the math. They are probably third or fourth on the list of priorities. When you're deciding on if this investment is valid. For fitting into my goal box, I think it's more about getting information out there and informing the masses about interest rates, and doing that math to make sure that they're not just pigeonholing themselves into keeping a 3% interest rate, or not expanding their portfolio because they're afraid of giving up what they have and not really realizing the power of the equity, the tax deduction, the rent increases.

 

Caeli Ridge (00:19:15) - All of those variables are often ignored when people start talking about interest rates, until you start to have that reasonable, rational conversation that helps them identify what the math is. Because the math won't lie, right? The math will not lie.

 

Keith Weinhold (00:19:29) - Yeah, that's right. Things more important than interest rate with an investment property might be the price you're paying for that property, or the level of rent that's there, or even maybe knowing you already have a good property manager that you trust in that market where that property is. But of course, rates matter somewhat. Now we're going to get a future looking prediction from you later. But your last mortgage rate prediction, Charlie, you may not remember the details of it. It was made here on the show in November of 2022. That's when rates were 7%. Back at that time, you said that rates should keep climbing but at a slower pace, and that happened. And you predicted the peak by spring of 2023 of 7.625%. What happened is in October of 2023, they hit 7.8% per Freddie Mac.

 

Keith Weinhold (00:20:17) - So you almost completely nailed it because most everyone believes that that was the peak for this cycle. And if so, you're within a few months in just 2/10 of 1% of identifying the peak.

 

Caeli Ridge (00:20:32) - Thank you Keith. I appreciate that acknowledgement. I get it right a lot. My crystal ball has been broken several times over, especially the last couple of years, so I'll want to acknowledge that too. I pay attention to the fed and as a good friend of mine is always saying, don't fight the fed if you are listening to what they're saying, actually listening to the words that are coming out of their mouths, it's not too terribly hard to kind of predict where we're going to be in certain milestones of any given year. So I do have a good prediction for this year. We'll share later. As you said, rates are not completely irrelevant. I just want to impress upon your listeners that they really should be looking at the investment holistically, and not just laser focused on that interest rate. There's more to it.

 

Keith Weinhold (00:21:15) - That was excellent. You have more audacity than me when it comes to predicting interest rates. It's a business I typically stay out of, so I'm going to outsource that to you later. I'll predict things like real estate prices, but I think rates are notoriously difficult. And what's happened with rates now that they have come off their peak substantially from back in October of 2023. What's happened with the refinance business, is that something that's picked up again there?

 

Caeli Ridge (00:21:39) - Yeah, we're starting to see a bit more. I would say that last year refi numbers were down right for obvious reasons. But we are seeing some more business in the refinance department. I think depending on the individual and largely the strategy of the investment, the long term versus the mid-term versus the short term, we're seeing a little bit more on the refi side for the short term rentals than we are in the long term. But overall, yes, I would agree that they're starting to pick up. I may mention to Keith it might be useful for the listeners.

 

Caeli Ridge (00:22:06) - So while I agree, we've seen that interest rates started on their descent, which was great news, everybody was excited to see that. We're still finding that the points that are being secured or paid on, especially investment property loans, are still on the high end of the spectrum. And for those that aren't aware of the why behind that, how might be important. Just to mention that when we talk about mortgage backed securities, the overall servicing of these mortgage backed securities that are bought and sold and traded on on the secondary markets, they're pretty smart in forecasting when rates are high, what happens to those mortgages? When they come back down, they start to refinance, right? They start to pay off. And the servicing rights of these loans take 2 to 3 years before they're even profitable. So the servicers and the secondary markets know that they have to charge those extra points to hedge their losses, because when the loans that they're paying for and servicing today are going to pay off in six months or 12 months, they're going to be at a loss.

 

Caeli Ridge (00:23:01) - If it takes them 24 to 36 months to be profitable. That's why investors are seeing especially investors are seeing extra points being charged on the loans that they're securing today.

 

Keith Weinhold (00:23:12) - Oh, that's a great explanation. And really, this is because there's no prepayment penalty associated with residential mortgage loans in the United States typically. So therefore, the person that's on the back end of these loans, the investor there needs to be sure that they're compensated somehow when one goes ahead and maybe refinances out of their loan at a presumably lower interest rate, maybe in as little as 12 months or so.

 

Caeli Ridge (00:23:39) - Yes, sir. Exactly right. Yeah. And prepayment penalties on conventional. There are no prepayment penalties on conventional. Just to clarify on a non QM product which of course we have to, you know, debt service coverage ratio products etc. on non-owner occupied those typically will have prepayment penalties. But the Fannie Freddie stuff, the GSE stuff no prepay ever.

 

Keith Weinhold (00:23:57) - Now the rates have come down presumably off their peak in this cycle. You know, I think a lot of people wonder about all right now, what's a prudent way for me to harvest my equity since we have near-record equity levels in property and yet keep my low rate mortgage in place? I think a lot of people don't even understand that you can do that and take a second mortgage to access some of that dead equity.

 

Keith Weinhold (00:24:20) - What are your thoughts?

 

Caeli Ridge (00:24:21) - I love a keylock in general. We do now have one of our newer product lines is a second lien lock. We have two options there. Both of them cap at 70% LTV. That's combined loan to value. So all you need to do to figure out what you're going to have access to is take the value that you think the property would appraise for times 70% from that number, subtract the first lien balance, and that will give you what your line on a key lock. Secondly, and position you lock would be. And I love it.

 

Keith Weinhold (00:24:49) - All right. So therefore if one has 50% equity in a property they could access 20% more up to that 70% CLTV. That combined loan to value ratio between your first mortgage and your second mortgage, which might take the form of a keylock a home equity line of credit.

 

Caeli Ridge (00:25:07) - Perfectly said. We also have second lien he loans worth mention. He loan is really exactly the same thing as your first lien mortgage. It's a fixed rate.

 

Caeli Ridge (00:25:15) - Second it's just in second lean position 30 year fixed. Those go to 85% CLTV. So you get quite a bit more leverage. But the rates are going to be on the 1,213% range.

 

Keith Weinhold (00:25:27) - That's interesting. Tell us about some more of the trade offs between the key lock, where we typically have a fixed rate period in a floating period afterwards, and the he loan some more of those trade offs as we devise our strategy.

 

Caeli Ridge (00:25:41) - Yeah. The key lock is variable right. The interest rate can change. As you said. The reason I prefer the He lock, if the numbers made sense, is that you're only paying interest on monies that you're using at that point in time. So if you had $100,000 key lock and you're only using 20,000 of it for whatever investment purposes or whatever, then you're paying interest just on the 20 that he loan is exactly as you would expect. You're getting all of that money at once, and you will be paying interest on all of it, whether or not you're using it.

 

Caeli Ridge (00:26:10) - There's less flexibility on a key loan. While it does provide extra leverage, I do generally prefer that he lock.

 

Keith Weinhold (00:26:18) - Now, sometimes a question that I've asked myself in the past, Charlie, when I was new as an investor, is sort of why wouldn't I take a second mortgage? He lock or he loan? Because I don't necessarily have to draw against it, but it might be good for me to have it as an option just to be sure that it's there.

 

Caeli Ridge (00:26:36) - Absolutely. Especially the key lock, because like I said, I will not pay interest on anything you're not using. And to have it when the time comes, right. If you want to be prepared, which I think is huge. We both agree there. The one thing I would mention about that though, is oftentimes on the helocs there will be a minimum draw at closing. You can put it right back after closing, but chances are there's going to be a 50,000 or 100,000 minimum draw, depending on what the line limit is.

 

Caeli Ridge (00:27:01) - Maybe 75% of the entire limit is what the minimum draw would be. But again, you can put it right back after closing. So maybe you pay 30 days of interest on that before you're able to to stick it back in the lock. Otherwise, it's one of my favorite strategies for investors and having access to those funds when the time comes.

 

Keith Weinhold (00:27:20) - That's an interesting piece there. So you as an investor is you're devising your strategy as you're looking at the equity position in your own home as well as your rental properties. Maybe you're looking at a low rate of, say, you have a 4% mortgage loan, but you've had a bloated equity position, and you go ahead and you take out a second mortgage in any of the forms of Charlie is talking about. And that second mortgage has, say, a 10% interest rate. Well, you don't simply take the 4% on your first loan and your 10% on the second and average it and say, well, now I'm paying 7%. Of course, you have to wait those averages.

 

Keith Weinhold (00:27:56) - It's pretty likely that you have a higher mortgage balance on your first loan than your second loan. So depending on their balances, therefore, if your first mortgage has a 4% interest rate and your second mortgage has a 10% interest rate, you're blended rate might be something like five and a half.

 

Caeli Ridge (00:28:10) - Exactly right. And there's all kinds of tools and calculators online. If somebody wanted to check that out you can find them very easily. Just the weighted average of mortgage rates. And you can plug in your numbers. It'll tell you exactly if you're using this amount or this amount or whatever it is, what your weighted average would be.

 

Keith Weinhold (00:28:27) - Yeah, definitely important for you as an investor checking your arbitrage and your cash flow. Certainly, Charlie, I wonder now that we are in an environment finally where rates have actually fallen, how is the appetite for arms adjustable rate mortgages looked in there?

 

Caeli Ridge (00:28:44) - We're still on what's called an inverted yield from the 0809 housing and lending kind of debacle, we found ourselves in a place where adjustable rate mortgage or arm's actually priced in interest rate higher than a 30 year fixed, creating that inverted yield.

 

Caeli Ridge (00:28:58) - We have yet to see the correction of that. So we're still kind of in that place where depending on the characteristics of the transaction, the arm might be a higher interest rate. Maybe it's about the same as the 30 year fixed. If there is a scenario where the arm is lower, it might be an eighth or a quarter of a percentage point. So it's unlikely that we would recommend an arm over a fixed. There'd be have to be some very specific circumstances. If it's only a quarter point improvement to rate for a five year arm versus a 30 year fixed.

 

Keith Weinhold (00:29:26) - Charlie, you deal with so many investors in there, both newer investors and veteran real estate investors. So when we talk first about the new investors, are there any just sort of common obstacles to overcome that you see in there for people that are looking to get their first investment property?

 

Caeli Ridge (00:29:45) - I think they're why a lot of times we'll have investors come to us and really not even understand more than they just don't want their money in the stock market anymore, and they want to find another venue or another vehicle in which to create their investment freedom, their financial freedom through.

 

Caeli Ridge (00:29:59) - So I would say for brand new investors, really start to ask that question, what is your why? What is it that you want to get out of this? Do you want total replacement income of your ordinary income today? Do you love what you do for work and you just want supplemental income? How much does that income need to be? Does it need to be what you're making today? Can it be a little bit less? Does it need to be more based on what you expect your lifestyle to be? So lots of different questions to be asking yourself. So I would say that commonly just really understanding at least a baseline. And then we can start connecting some dots together and planting seeds that I talk about a baseline of, of what it is that you're hoping to accomplish through real estate.

 

Keith Weinhold (00:30:37) - So that's what you often see with the beginning investor. How about that repeat investor. Their obstacles to overcome that are common in there on expanding one's portfolio. Maybe that's a debt to income ratio threshold that one reaches and you need to strategize with them there.

 

Caeli Ridge (00:30:54) - Yeah, the debt to income ratio problem ultimately when you get there is probably a good problem to have, right when you're having to have conversations that way. I think that the obstacles to overcome is making sure that you have a good support team, and I think that would start with your lender, someone that has a multitude of loan products that aren't just one size fits all. I would say that we check that box very well, but strategizing. One of my favorite conversations with my clients is having those strategy one on one calls about their debt to income ratio and figuring out from a scheduling perspective, how can we maximize their deductions, because that's one of the beautiful things about real estate investing, right? Is that schedule E so maximizing over there without it taking you over certain thresholds to continue to qualify, there can be a weighted scale there as well. And those are the conversations that we have with our clients usually earlier in the year. But we're always looking at our client's draft tax returns. That's important.

 

Caeli Ridge (00:31:47) - Before you ring that bell, get us copies of your draft tax returns so that we can run the math, and we'll even show them how the pluses and minuses work. It's pretty interesting to most people. And then come up with a solution that says, okay, if you want to do this for 2024, here are our recommendations X, Y, or Z. And then they can make the informed decision that fits what their goals are for the year.

 

Keith Weinhold (00:32:08) - Yeah, these are the scenarios that a mortgage loan company that specializes in income property loans can help you with your future planning. How can you set yourself up considering your personal situation, your tax deductions, how much income do you want to show, and all those sorts of things to give you more runway to add income properties to your portfolio. And you do see so many scenarios in there and so many investors. Sometimes when you're here, I like to ask you to get a temperature of the appraisal market. What percent of appraisals are you seeing coming high on and what percent are coming in low? Approximately.

 

Caeli Ridge (00:32:43) - We're probably over 50% on the high, but not by any large margin. I'll see 10,015 thousand regularly over what we had expected in the actual value. Pretty commonly, just right on the money, right on the mark. I think it's real market specific, to be sure. I don't see that the short values come in all that much. If it is, generally it's probably because the investor is brand new, didn't unfortunately talk to us in advance. They were doing the BR method and they didn't get the right comps or have the right advice about what that RV might end up being. So they got trapped in a situation where they learned the hard way.

 

Keith Weinhold (00:33:21) - Interesting. I don't know that I remember that from the past, where more than 50% of appraisals have come in high. That pretends well for future valuations, at least here in the near term. All right, Charlie, well, we talked about your record with mortgage rate predictions here and how good that track record was. Why don't you let us know where you think mortgage rates are going to be by the end of 2024.

 

Caeli Ridge (00:33:45) - I do think that the rates are going to be higher for longer. Don't fight the fed, remember? Listen to what they have to say. I would preface this by saying that all of the indicators for inflation, except for one of them, have been hot to the side. That does not help us with interest rates. The employment jobs report, you've got the CPI, all these different metrics have come in hot where they're higher than what we would want to see them for that inflationary measure, where the feds have been extremely clear that they want to hit that 2% mark, where that number came from, I don't know. That's another conversation. There's only been one metric that actually worked to the rate environment to get it lowered, which is the PCE, the personal consumption expenditure. For those that aren't familiar with that acronym, I think they're going to be higher for longer. There's been a lot of headlines out there saying that I'm getting to a rate. I promise. I'm just going to to preface this first, that March might be the first reduction in the fed funds rate, which, by the way, remember, is not the same as a long term 30 year fixed mortgage rate.

 

Caeli Ridge (00:34:42) - There are links to them, but they are different. I don't think that's going to happen. I think that if we're going to see rates come down, the first fed funds rate reduction, probably sometime in June, is where I may put my predictions. And then by the end of the year, the interest rate, I'm going to put at 6.125 for 30 year fixed mortgages and non-owner occupied purchase with 25% down. That's my prediction.

 

Keith Weinhold (00:35:09) - You are on the record though, and it's so interesting, at least with what the fed does with rates generally. It's like an entire world where good news is bad news, right? If you've got great job growth and great GDP, well, that's bad news because they're probably going to keep rates high since those things tend to keep inflation high. It's like, what if you want the lowest mortgage rate, everyone in the world would be unemployed except you. You know, it's just so funny. I'm glad you said that. Yeah.

 

Caeli Ridge (00:35:36) - The worse the economy is, the better the rates are.

 

Keith Weinhold (00:35:38) - Yeah. That's right. You offer so many products in there, mostly to investors, but you have other ones that it's not just for buy and hold type of investors. It's for those that are doing better strategies like you mentioned in other strategies. Well, you tell us about all the loan types that you offer in there.

 

Caeli Ridge (00:35:54) - Yeah, we do have quite a few. Thank you for asking. So we start with the Fannie Freddie's. We call these the golden tickets. Everybody. Highest leverage, lowest interest rate. A lot of times the newer investors will start by exhausting those. There are ten per qualified individual. If you're a married couple, you can have up to 20, as you and I have talked about in the past, Keith. Beyond that, we've got something called Non-cumulative. QM stands for Qualified Mortgage. Fannie Mae and Freddie Mac are the definition of what a qualified mortgage is. So everything outside of that box of underwriting is now non QM. And non QM in and of itself is extremely diverse, not just for investors, for anybody, but within that subset of product you've got debt service coverage ratio where there is no personal income documentation.

 

Caeli Ridge (00:36:33) - It's all about the properties rents divided by the payment. We have bank statement loans in there. We've got asset depletion. So if you've got $1 million in an exchange, a stock exchange account, there's a formula that we can use to utilize that as income. Beyond that, we have short term bridge loans for those that are fixed and flipping or fixed and holding where you need cash for the purchase and the renovation or rehab. So we have second lien helocs. Those are newer to our product line. So I'm pretty excited about those. We touched on that. We have commercial loans for commercial property, commercial loans for residential if it were applicable. And then of course the all in one, which is a first lien Helocs still my favorite, but we've spent lots of time talking about that. So that's probably a good overview or at least abbreviated checklist of products we have.

 

Keith Weinhold (00:37:16) - And I've got investor loans in there myself or new purchases I've done investor loans in there myself or Refinancings. I mean, you're who I go to for my own loans and you're in nearly all 50 states, right? And these are the states where the property is not where the investor resides.

 

Caeli Ridge (00:37:34) - Yes, sir. Exactly right. We are in 48 states. We are not in New York or North Dakota. Otherwise we're going to be funding everywhere that they're looking to purchase, refi, sell, etc..

 

Keith Weinhold (00:37:45) - We'll let our audience know where they can learn more, because I know you offer a lot of good free tools, like something we didn't get a chance to talk about a first lien helocs all in one loan. Like for example, you have a simulator there when an investor can just go ahead and run through that. So we're one find all of those resources.

 

Caeli Ridge (00:38:03) - So check out our website. There's a lot of good information on there. Lots of video content free education. The simulator link will be on there. If you wanted to check out the comparison between what you have now, your 3% interest rate, or your 2.5% interest rate compared to this all in one. I'll tell you guys that I've run that scenario all the time, and people are very surprised when they see that this adjustable rate first line is beating the pants off of a 2.25% rate.

 

Caeli Ridge (00:38:26) - So check that out. Our community is in the website we meet every other Tuesday. It's called live with Charlie. That's Ridge Lending group. Com. Email us info at Ridge Lending Group. Com and then you can call us of course toll free at (855) 747-4343. The easy way to remember is 85574 Ridge.

 

Keith Weinhold (00:38:45) - Charlie Ridge. Informative as always. And brazen. With the mortgage rate predictions. You can learn more about how they can help you at Ridge Lending group.com. It's been great having you back on the show Charlie.

 

Caeli Ridge (00:38:58) - Thank you Keith.

 

Keith Weinhold (00:39:06) - Oh, yeah, there's such experienced pros in there. And as you can see, they offer nearly every loan type. In fact, there were so many that I almost asked her, do you even loan lunch money to elementary school kids? Uh, because, uh, because they've seemingly got a loan type for most every real estate investment scenario that there is primary residence loans as well. Helpful people over there at Ridge. In fact, I even visited their headquarters office and I was hosted by Charlie there one day.

 

Keith Weinhold (00:39:38) - See what they can do for you in there. They are real strategists in helping you grow your real estate portfolio, going beyond just what a typical retail mortgage company does. It helps people with primary residences. You can join their free community events too, and they've really expanded their educational offerings to a giant degree the past couple of years. Financially free beats debt free, and she helps bring it to life and make it real. So big thanks to Charlie Ridge at Ridge Lending Group. Until next week, I'm your host, Keith Wangled. Don't quit your day dream.

 

Speaker 5 (00:40:17) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 6 (00:40:45) - The preceding program was brought to you by your home for wealth building. Get rich education.com.




Direct download: GREepisode489b_.mp3
Category:general -- posted at: 4:00am EDT

Learn the pros and cons of bitcoin, the world’s largest cryptocurrency.

Bitcoin can be moved well across space and time. You can’t move dollars over time due to inflation; you can’t  move gold over space due to weight and security concerns.

Real estate, bitcoin, and gold are all scarce and take real-world resources to produce.

Bitcoin is a global digital currency that’s decentralized.

Nick Giambruno joins us to discuss why bitcoin has value today. 

Since there can only be 21 million bitcoin, it cannot be debased like dollars are.

By April, bitcoin will experience a halving. Rather than 900 new bitcoins brought into issuance daily, there will be 450. 

The SEC’s recent Spot EFT approval will give more investors bitcoin access.

The higher the stock-to-flow ratio, the harder the asset. 

What about governments shutting down bitcoin, regulating it, or taxing it to death? We discuss.

Bitcoin price volatility is a problem in currency adoption.

Lots of energy is used in bitcoin mining. But much of it is stranded energy.

Bitcoin cannot produce income.

Keith Weinhold stresses his preferred way to hold bitcoin.

Timestamps:

Bitcoin's value proposition (00:00:01)

Keith Weinhold introduces the topic of Bitcoin's value and why it is relevant to a real estate show.

Jamie Dimon's criticism of Bitcoin (00:05:27)

JPMorgan Chase CEO Jamie Dimon expresses his disdain for Bitcoin and blockchain technology in a heated conversation.

Bitcoin's resistance to debasement (00:07:19)

Keith Weinhold discusses the resistance of Bitcoin to debasement and the skepticism of governments and financial institutions towards it.

The origin and value of Bitcoin (00:08:18)

Nick Giambruno, an international investor, explains the history and value proposition of Bitcoin, emphasizing its decentralization and resistance to debasement.

Bitcoin's hardness and production rate (00:14:21)

Nick Giambruno delves into the concept of Bitcoin's hardness and its production requirements, comparing it to other assets like gold and real estate.

Bitcoin's upcoming halving event (00:16:28)

Nick Giambruno discusses the significance of Bitcoin's upcoming halving event, which will impact its stock-to-flow ratio and reinforce its value proposition.

Bitcoin's scarcity (00:19:42)

Bitcoin's limited supply and its unique scarcity attribute, compared to other commodities like gold.

Upcoming halving event and Bitcoin ETF approval (00:20:53)

Discussion on the significance of the upcoming halving event and the approval of a new spot for Bitcoin ETF, indicating the growing acceptance of Bitcoin.

Bitcoin as a currency and value proposition (00:22:42)

The value of Bitcoin as a currency for transferring value and its resistance to debasement, emphasizing the importance of self-custody of Bitcoin.

Global adoption of Bitcoin (00:24:30)

Comparison of Bitcoin adoption in different nations, highlighting the potential benefits for early adopters and the impact of Bitcoin on the world's financial landscape.

Bitcoin's market potential and investment consideration (00:27:27)

The potential market share of Bitcoin in the global economy and the consideration of Bitcoin as an investment asset.

Government's ability to regulate Bitcoin (00:34:11)

Discussion on the government's potential regulation and taxation of Bitcoin, emphasizing the power of economic incentives and Bitcoin's resilience to government intervention.

Bitcoin's uniqueness and credibility (00:36:12)

Differentiating Bitcoin from other cryptocurrencies, highlighting its credibility and resistance to change, making it the real innovation in the crypto space.

Bitcoin as a Store of Value (00:37:55)

Discussion on Bitcoin's role as a store of value and its comparison to gold.

Bitcoin as an Emerging Form of Money (00:38:25)

Explanation of Bitcoin as an emerging form of money and its distinction from established money like gold.

Bitcoin's Transaction Network and the Lightning Network (00:39:37)

Explanation of Bitcoin's transaction network, scalability, and the use of the Lightning Network for smaller transactions.

Earning Income from Bitcoin (00:41:40)

Discussion on earning income from Bitcoin through related companies, dividends, and caution regarding Bitcoin lending services.

Bitcoin Exchanges and Custody (00:44:20)

The importance of custodying your own Bitcoin and the risks associated with centralized Bitcoin exchanges.

Connecting with the Guest (00:45:13)

Information on how to connect with the guest and access a helpful Bitcoin guide.

Bitcoin's Energy Use and Price Volatility (00:46:01)

Insights into Bitcoin's energy use, price volatility, and the use of stranded energy sources by miners.

Real Estate vs. Bitcoin (00:47:04)

Comparison of real estate as a wealth builder with the merits and risks of owning gold and Bitcoin.

Disclaimer and Conclusion (00:47:54)

Disclaimer about the content and a conclusion to the episode.

Resources mentioned:

Show Page:

GetRichEducation.com/488

More on Nick Giambruno:

FinancialUnderground.com

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

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text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Why does Bitcoin have any value? And why is a real estate show dedicating one episode to this topic now? The benefits and criticisms of the world's largest cryptocurrency Bitcoin today on Get Rich Education. If you like the Get Rich Education podcast, you're going to love art. Don't quit your day. Dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free. Sign up egg get rich education com slash letter. It's real content that makes a real difference in your life, spiced with a dash of humor rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.

 

Corey Coates (00:01:06) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:22) - Work degree from Quito, Ecuador, where I am today, to the Mosquito Coast, Nicaragua, and across 188 nations worldwide.

 

Keith Weinhold (00:01:29) - You're listening. One of the United States longest running and most less than two shows on real estate investing. I'm your host, Keith Reinhold. Yes, we're a real estate show, but with 488 episodes, it's time to focus at least one of them. Finally, on Bitcoin. We'll bring it back to US real estate next week. Now, this is for a few reasons. Today, Bitcoin is largely misunderstood. It's become so big that it's hard to ignore. And there are two recent Bitcoin events two happenings with global impact that makes now the right time to cover this. Now look, I think that it's human nature that when you learn about something new for the first time and you don't understand how it works like Bitcoin, it's sort of innate to you start criticizing it or sort of discounted in your mind, chiefly because you don't understand it. Though Bitcoin's pseudonymous creator, Satoshi Nakamoto wrote the Bitcoin paper in 2008 and the first Bitcoin was issued in 2009. And, you know, when I first heard about it sometime after that, I probably discounted it in my mind as well.

 

Keith Weinhold (00:02:45) - And I think most people that don't understand Bitcoin, you know, they first think something like, oh come on, what is this. Just magic internet money. How does that work? How could that have any value. And I think is one matures when encountering the unknown. They inquire rather than criticize it. Look now and I'm getting really personal here, aren't I? I don't do drugs and I never have. But I don't criticize those that do drugs because it's a world that I just don't understand at all. Last year I was having dinner with a couple. They asked me what book I'm currently reading, and I told them that it's a 350 page book about Bitcoin, and the response was laughter, sort of dismissing it. And they said, well, how could anyone write that many pages about Bitcoin just completely discounting the whole thing? Well, for me, a turning point on Bitcoin is when I found highly intelligent people that understood it well and they were excited about it and they endorsed it. Now real estate has more intrinsic value than the dollar or gold or Bitcoin.

 

Keith Weinhold (00:04:02) - Because real estate is essential to your survival. You can make arguments that the dollar, gold and Bitcoin all have questionable backing. But today enough people agree that the dollar, gold and Bitcoin all have value. People are agreeing all three gold, the dollar and Bitcoin have varying levels then of anthropogenic faith. Today you and I, we live in a digital world that's comprised of 195 world nations. Well then, shouldn't money be made of something that's digital and doesn't know any national borders? Think of Bitcoin's value proposition this way you cannot move dollars across time. That's due to inflation. You can't move gold across space that's due to weight and security. But consider this Bitcoin can be officially moved across both space and time. Its supply is absolutely fixed. At 21 million, there can never be more than 21 million bitcoin either. It's traded on the blockchain, which is basically a digital ledger, but not every intelligent or influential finance person believes in Bitcoin. Of course, not every one of them. For example, it gets a little heated here from last month.

 

Keith Weinhold (00:05:27) - This is one of the most powerful men in the world. JPMorgan Chase CEO Jamie Dimon. He's getting annoyed about CNBC asking him about Bitcoin just entirely too often. What do you make of the other firms the BlackRock's of the world.

 

CNBC (00:05:42) - That that obviously and Larry Fink change his view of this obviously. And maybe he changed his view because you think he genuinely believes in Bitcoin or or believed it because he thinks that there's a marketplace for it and he wants to be part of that market. But what do you think of the there's about a dozen big financial companies, fidelity included.

 

Jamie Dimon, JP Morgan Chase (00:05:59) - Number one I don't care. So just please stop talking about this. And and I don't know what he would say about blockchain versus currencies to do something versus Bitcoin that does nothing. And maybe that's not different than me. But you know, this is what makes a market. People have opinions. This is the last time I'm ever in state. In my opinion.

 

CNBC (00:06:18) - Gold really didn't do anything either.

 

Jamie Dimon, JP Morgan Chase (00:06:21) - Yet because it's limited in supply.

 

Jamie Dimon, JP Morgan Chase (00:06:23) - So it's and it's been used. Uh, so you think so, huh? I do think there's a good chance that when bitcoin when we get to that 20 million bitcoins 42 know that Satoshi is going to come on there laugh hysterically. Go quiet. All Bitcoin is going to be erased I think. How the hell do you know it's going to stop at 21? I've never met one person who told me they know for a fact they take that as it's not.

 

CNBC (00:06:44) - It hasn't happened because by the last one will be mined in 2150. And it gets harder and harder every time there's another halving. But but, Jamie, I do like looking back over.

 

Jamie Dimon, JP Morgan Chase (00:06:55) - Just do what you want. I'll do what I want. Ask for gold.

 

CNBC (00:06:57) - You can. The six characteristics that make gold valuable for 4000 years. They're all present in Bitcoin. That's all I'm saying. I love you and I don't want to. And I also don't I don't also don't want to be a you may enjoy Joe.

 

Jamie Dimon, JP Morgan Chase (00:07:08) - You may be right.

 

Jamie Dimon, JP Morgan Chase (00:07:09) - Yeah. Like I don't own gold either. So okay. That's what.

 

CNBC (00:07:11) - I mean.

 

CNBC (00:07:12) - Couple of quick final question.

 

Jamie Dimon, JP Morgan Chase (00:07:12) - I like to own things that pay me incomes, but it doesn't cost money to carry anyway. And it costs money to carry Bitcoin to. By the way.

 

Keith Weinhold (00:07:19) - Uh, that was Jamie Diamond. Now governments and banksters like Jamie Diamond, they often dislike bitcoin because it cuts out the use of their chief product, the dollar. So governments are especially hesitant to want to promote bitcoin, a lot of them in the world. Anyway, I've got a conversation with a bitcoin expert coming up. We're going to talk about its value proposition and then the criticisms. Yes, I'm in Quito today. I was last year in Ecuador two years ago, this Colorado sized nation of 18 million people. I plan to attempt climbing to the summit of a 20,000 foot mountain later in the week. As for today, let's continue with why should Bitcoin have any value? Today's guest is the founder of the Financial Underground, and he is the editor in chief of that publication.

 

Keith Weinhold (00:08:18) - He's a renowned international investor, and he specializes in identifying big picture geopolitical and economic trends ahead of the crowd. And you've seen him featured seemingly in everything from Forbes to the Ron Paul Liberty Report. He was a speaker at the well-known New Orleans Investment Conference as well. Hey, it's great to welcome on to gray, Nick. Jim Bruno.

 

Nick Giambruno (00:08:41) - Hey, Keith, great to be with you.

 

Keith Weinhold (00:08:43) - I think a lot of our listeners are real estate investors are going to be wondering now, why are you talking about Bitcoin on a real estate show? Actually, I think there are a few more commonalities here than what a lot of people think. What a real estate in Bitcoin have in common. They're both scarce, neither can be easily deluded, and they both take real world resources to produce more of. You could apply those same three attributes to gold. So real estate gold and bitcoin they have this scarcity. And really I think that's a wise investing theme. Go ahead and invest in what's scarce. Limit what's abundant and take zero cost to produce like dollars.

 

Keith Weinhold (00:09:21) - So really that's the commonality between real estate in Bitcoin. But on a real estate show, I think we have a lot of listeners that just don't have an overall common understanding. Nick, of just what is bitcoin and why does it have any value in the first place?

 

Nick Giambruno (00:09:37) - Well, that is a some very good observations and a very profound question. What is Bitcoin. Well, Bitcoin is a relatively new asset. However it has been decades in the making. People don't understand that Bitcoin didn't just fall out of the sky, or is some kind of accident in some mad sciences garage. This is something that has been in the the works basically since the late 70s, and it came out of the Cypherpunk movement. Now, you may have heard of these people. You may have not. The Cypherpunks are basically I find them as the good guys. They are involved in creating technologies that empower the individual and disempower the state. They are behind some of the most prominent freedom oriented technologies that you and I may take for granted, including encryption.

 

Nick Giambruno (00:10:27) - And that's another story in and of itself. Let me just briefly get into that, because that's what puts the crypto cryptography in cryptocurrency. Cryptography is a very important field. It's basically the method of encoding information so that only the recipient can see it. And it's very important to understand that while we take for granted the average person has access to unbreakable cryptography today, that was not always the case. Cryptography has been around since the time of the ancient Greeks, and maybe even before, but it's always been a government monopoly until very recently in terms of historical standards, when cryptography was made available to the average person. That is a very profound thing, because now the average person can secure their information and secure their online life in a way that nobody can break. The US government can't break it. Chinese government can't break it, nobody can break it. And that is very important. And that laid the foundation for Bitcoin. So what is bitcoin. It's just a summit. But it is a superior alternative to central banking.

 

Nick Giambruno (00:11:27) - And that is a very revolutionary thing. It basically does the job of what a central bank does but much much, much better and removes all of the corruption, all of the nastiness that goes along with central banking. So what we have here is a genuine, workable alternative to central banking, and we can get into the details of that. But if you want to look at it, what it is, that's what it is. And at the same time, it's a form of money that is not just resistant to debasement, it's totally resistant to debasement. You're talking about gold and real estate. Well, gold. What made gold money over thousands of years? Yes, it is scarce. However, I always like to use this example. There's a concept that's related to scarcity, but it's not that it was scarce. And the reason is, is think about platinum and palladium. There's actually scarcer than gold, like there are fewer ounces of platinum and palladium in the world than there are gold ounces. So why don't people use platinum and palladium as money? It's a very, very important point.

 

Nick Giambruno (00:12:26) - The reason is, is because the platinum and palladium supply is not resistant to debasement. So it's scarcer, but it's not resistant to debasement. What does that mean? It means the annual supply growth of platinum and palladium are basically equal to the stockpiles. So depending on what this year or next year's annual production of platinum or palladium are going to be, it can wildly swing the market. That is not true of gold. Gold is only about 1.5% growth per year. And that's very, very consistent. What does that mean? That is a very important concept. So the gold supply only grows at about 1.5% per year.

 

Keith Weinhold (00:13:02) - And this is basically an inflation rate.

 

Nick Giambruno (00:13:04) - Yes it is its inflation rate. But it's very small and nobody can really change that. Think about it. There's a. It's not as if people don't want to increase the gold supply. They would love to. The way that the gold is distributed in the world, and the cost it takes to mining it puts a really hard limit on what you can produce each year.

 

Nick Giambruno (00:13:22) - So that's what makes it a good store of value. And if something is not a good store of value, it's not going to be a good money. These are some very, very fundamental concepts I'm talking about because they also apply to Bitcoin.

 

Keith Weinhold (00:13:35) - Then when someone asked me what Bitcoin is to give it a really short definition, I call Bitcoin a global digital currency that's decentralized. And you brought up the decentralization. That's really important. That's where I can make a peer to peer payment without having to go through an intermediary where I can send my Bitcoin directly over to Nick. There was no bank involved in that transaction, for example, the decentralization of Bitcoin. But we talk more about why Bitcoin has value. I believe you began touching on it there, Nick. Bitcoin has this hardness, which is a strange term to people because Bitcoin is digital. So can you tell us more about Bitcoin's value that comes through its hardness.

 

Nick Giambruno (00:14:21) - Let me just touch on a quick point you made also. So simply put, the value proposition of Bitcoin is that it allows anybody, anywhere in the world to send and receive value without depending on any third party.

 

Nick Giambruno (00:14:32) - At the same time. It's a form of money that is 100% resistant to debasement. That's its value proposition. That's a very profound thing. So going to the hardness. Yes, hardness is a concept that a lot of people get confused. Look, I love gold, I own gold, I recommend gold chain from the gold community. And I know the gold community. So I think a lot of people in the gold community get confused around this hardness now. They think it's hard, like physically hard, like abrasive metal. That's not what art means. Hard. And in terms of a hard asset, what it means is hard to produce. That's what it means. Yeah, that's what a hard asset is. It's hard to produce. And what is the opposite of that? Something that's easy to produce. Nobody would want to store their value, store their savings, store their economic energy into something that somebody else can make with no effort, almost like, you know, oh, let's put our life savings in arcade tokens or frequent flyer miles.

 

Nick Giambruno (00:15:26) - It's ridiculous when you think of it in that way. But that is, in my humble opinion, the most important attribute of money is that it's hard to produce all the other attributes of money. Quite frankly, are meaningless if the money is not hard to produce. Because if it's not hard to produce, none of the other stuff matters. And that's the most crucial attribute of money.

 

Keith Weinhold (00:15:45) - Yes, reinforcing why we have that investing theme of invest in something that's scarce and difficult to produce and takes real world resources to produce, much like real estate does. Much like gold with all the mining and assaying and much like Bitcoin, because to produce new Bitcoin, it takes electricity, it takes hardware and it takes software, some real world resources in order to produce Bitcoin. We talk about the production rate or the inflation rate in just a couple months. Here we're coming up on something really interesting, which is really one reason why I have you on the show talking about Bitcoin now. And that is the having event, the halving being that rate of new Bitcoin issuance is cut in half every four years.

 

Keith Weinhold (00:16:28) - So tell us more about that and bring the stock to flow ratio into the conversation here. We're at a cusp.

 

Nick Giambruno (00:16:34) - Of a very important moment in monetary history. Because you can quantify the hardness of an asset. It is quantifiable. It is basically the inverse of the supply growth. And there's another way of saying that, as you mentioned, the stock to flow ratio basically. In short, you got the stockpiles. That's what's available. And then you have the flow which is like the new supply. So the higher the stock to flow, the harder the asset is and the more resistant to debasement it is. And same thing when you take the the supply growth, you want a smaller supply growth. It's just the inverse of the stock to flow. So gold has always been mankind's artist money for thousands of years and gold's stock to blow ratios about I think it's around 60 which means it takes about 60 years of current production to equal current supplies. If you look at silver, it's much less than gold.

 

Nick Giambruno (00:17:25) - And every other commodity is closer to one, which means that every year the new production basically equals the existing stockpiles. And that's not a very good attribute for something that you want to have as a store of value. Now, what is going to happen in this having that's coming up in around April of this year? You can quantify the stock that flow. I just told you how to quantify it. So right now Bitcoin and gold have about equal stock to flow ratios in about equal hardness. However a key feature of the Bitcoin protocol is that every four years the new Bitcoin supply issuance gets cut in half until around the year 2140, when it is just goes to zero. So Bitcoin is not only going to exceed gold's hardness in a few months, it's going to double it. Now that is a very interesting moment in monetary history because mankind has not had a harder money than gold I don't think. Ever. So this is all going to be very important and it's coming very soon in April. Late April I think is when it's going to happen.

 

Nick Giambruno (00:18:28) - So a very important moment in monetary history.

 

Keith Weinhold (00:18:31) - There is real profundity there with the stock to flow ratio of Bitcoin exceeding that of gold with the upcoming having. And if you, the listener still hung up on the stock to flow ratio, we're talking about the ratio of the existing stock, how much of this stuff already exists, whether it's real estate or gold or Bitcoin divided by the rate of new issuance. So the higher the stock to flow ratio, and as it has the greater hardness it has. And currently 900 new bitcoins per day are being produced. And the having means just what it sounds like in April that will drop to 450 new bitcoins being mined into existence each day. So really you can think of Bitcoin as being disinflationary. It will continue to inflate until the year 2140. Like Nick described. That's when new bitcoin will cease to be mined. And until that point, the new amount the flow continues to get halved. Every four years, there will only ever be 21 million Bitcoin that exist, and 19.6 million of those have already been mined.

 

Keith Weinhold (00:19:36) - So you can get an idea of the hardness and how this helps supply the value of Bitcoin.

 

Nick Giambruno (00:19:42) - Well, absolutely. And it's he talks about that. I think it's something like 93% of the time, supply has already been mined, and the remaining 7% are going to come online over the next 120 years or so. You might want to get some before other people figure this out. There is definitely not enough Bitcoin for every millionaire to have one bitcoin, it's far less. I think there's something maybe 50 million millionaires in the world, probably more. They can't all have a bitcoin. It's a very tight supply and we have a situation here too that is related. Because Bitcoin is the only asset, the only commodity were higher prices cannot induce more supply. If gold went to 10,000, you can be sure there are going to be more gold miners getting into the business, more economic deposits being found and and exploited and more supply eventually coming on to the market. Great point. And the same is true for every commodity.

 

Nick Giambruno (00:20:38) - Gold is just the most resistant to that process. However, Bitcoin, no matter how high the price goes, it cannot induce the production of more Bitcoin. That's a very unique scarcity attribute that I don't think people really appreciate very much. It's certainly there.

 

Keith Weinhold (00:20:53) - So this upcoming halving event is one reason why I'm having Nick on the show now to do our first ever Bitcoin episode in almost 500 episodes. And the other reason is the nation see of the SEC approving a new spot to Bitcoin ETF. And all that basically means is it helps give everyday investors really easy access to Bitcoin without having to set up a crypto wallet and bam, hey, your mom can become a crypto bro now.

 

Nick Giambruno (00:21:22) - It is certainly a milestone in acceptance. I think it signifies that Bitcoin is no longer a fringe. It's here to stay. It took over ten years for the SEC to approve one of these things. I think the Winklevoss twins applied over ten years ago for the first Bitcoin ETF, so they reluctantly did it. I don't think they want it to do it.

 

Nick Giambruno (00:21:43) - I think they lost a couple of key court cases that kind of forced their hand, but they did approve it. I frankly don't recommend the ETFs. It's not really Bitcoin because what you have is a Bitcoin IOU, several Bitcoin IOUs. So let's say you buy the Blackrock Bitcoin ETF. Will you have an IOU from your broker for the Blackrock ETF share. And the broker has an IOU from Blackrock. And then Blackrock has an IOU from Coinbase which actually holds the Bitcoin. So I always tell people look it's a spectrum. If you want to take that trade off and you're taking a trade off for convenience over a security and sovereignty, if you want to take that trade off, that's go right ahead. But be have your eyes wide open and be conscious of the trade off that you're making. I always prefer to, uh, tell people Bitcoin is unique. This is a bearer asset. People forget about bearer assets. Bearer assets are a very good thing. They give the people who hold them ownership over them.

 

Nick Giambruno (00:22:42) - I think people who are interested in sovereignty. One thing too that's very important is that even if the Bitcoin price stays flat forever, it doesn't go up at all. It still offers people tremendous value as what we were talking about before, even if it stays flat and doesn't go up ever again, it's still offers anybody, anywhere in the world the ability to send and receive value from anybody else, anywhere in the world, and to hold money that's resistant to debasement, that's hugely valuable, even if the price doesn't go up. So and you can only get those benefits if you hold Bitcoin properly in your own bitcoin wallet, where you control the keys and only you control the keys, because that's who has ownership to this. Bitcoin is by who controls those private keys. You can just kind of think of that like the password dear Bitcoin. So that's what you want to do. If you can learn how to drive a car you can learn how to self-custody Bitcoin.

 

Keith Weinhold (00:23:33) - I love what you did there, Nick, because what you helped us do is you helped us transition from talking about Bitcoin as an investment asset to using bitcoin as a currency, if you wish to use it to transfer value.

 

Keith Weinhold (00:23:47) - Really, Nick, I think a lot of people in the United States, one reason that they're not that interested in Bitcoin is because our currency, our United States dollar, it sure has problems. It sure recently went through a big wave of inflation, but our currency just is not as bad as some of these worthless pieces of paper have been in the Argentine currency or in Turkey or in Iran or Haiti. So maybe Americans don't have enough of a reason to want to go ahead and get a currency that holds its value. So what are your thoughts with what people in other nations are doing, including El Salvador, with immediate legal tender versus the United States, where we have this dollar that's being debased but just not quite at the rate of most other world nations.

 

Nick Giambruno (00:24:30) - That's a good point. I see this in my travels around the world. It may seem like an advantage for the Americans, but I think it's a disadvantage because they're going to be catch on to this last because they're going to have, oh, we've got the dollar.

 

Nick Giambruno (00:24:43) - The dollar's great. So why do I need to look at other alternatives. And and they're going to be the last people. So you're going to have I think what you could see over this the next few years, and certainly over the longer term, is that countries like El Salvador, the countries that are experiencing the highest rates of inflation now and are thus more motivated to look at a superior form of money like Bitcoin or gold, but a lot of them are going to Bitcoin. These are going to be the countries that might fare better over the long term, because they're going to be relatively early adopters in this superior monetary technology. Nobody takes a horse and buggy from New York to California anymore. No, you don't need to because you have airplanes, you have cars, superior technologies for transportation. And likewise, we now have a superior technology for money, which is to say storing and exchanging value. That's all money is. People think it's all confusing. You need a PhD and there's all these charts and confusing jargon.

 

Nick Giambruno (00:25:38) - Money is not confusing. It's actually intuitive and anybody in the world can understand it. It's just something that stores and exchanges value. It's really quite simple. So now we have a superior technology for storing and exchanging value. And I think people who adopt it first are going to reap the most benefits. There are a lot of Americans who have adopted it, but they have been spoiled by the fact that the dollar has been the world's reserve currency. Now, I think that's going away. That's a whole other story. I think that's the two big reasons why, you know, you shouldn't just depend on the dollar one. We can talk. This is a whole new discussion about the dollar as the world reserve currency. I think it's going away. But now despite that we also have a superior alternative with Bitcoin. So yeah, I think the people who are going to adopt this technology sooner are going to reap the most benefits.

 

Keith Weinhold (00:26:24) - Well, Nick, in your opinion, is Bitcoin's takeover inevitable and how does that look?

 

Nick Giambruno (00:26:30) - I don't think anything's inevitable.

 

Nick Giambruno (00:26:32) - I think it's a good that I mean, if I thought it was inevitable, I would sell everything and buy it. I have a more diversified portfolio, but I have a strong conviction in it, very strong conviction in it. But nothing is certain. Nothing's 100%. So I never tell people, you know, and I'm not giving anybody any investment advice. I'm not a registered investment advisor or anything like that. But in any case, even if I was, I wouldn't tell anybody to go all in on anything. And that's certainly not how I manage my risk. However, I do have a very high conviction in it, and I think as it stands now, it has an excellent chance at gaining huge market share in the market for money. And people don't think of money as a market, like a real estate market or a technology market, or the market for any industry. But money is a market. It's probably the biggest market. And I think Bitcoin is you need to put it into perspective, the market cap of all the gold in the entire world is about $13.7 trillion.

 

Nick Giambruno (00:27:27) - The market cap for all Bitcoin in the world, last I checked, is around $850 billion. So we're less than 10% of gold's market cap. It has. And that's not even including all the fiat currencies. All the fiat currencies have a much larger market cap than even gold. So Bitcoin is just a blip on people's radars. So I think it has a lot of upside from here.

 

Keith Weinhold (00:27:46) - One important question an investor can ask themselves once they learn more about Bitcoin is, can I really afford to have absolutely none? You're listening to get reciprocation. We're talking with Nick Bruno of the Financial Underground Warren. We come back when now we've talked about the upside of Bitcoin. Let's talk about a lot of the criticisms you're listening to get rejection I'm your host Keith Weiner. Role. Under this a specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's.

 

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Keith Weinhold (00:29:52) - This is Richard Duncan, publisher of Macro Watch. Listen to get Rich education with Keith Winchell. And don't quit your day dream. You're listening to SOS created more financial freedom for busy people just like you than nearly any show in the world. This is jet versus cash, and I'm your host, Keith Whitehall. We're talking with the Financial Underground's Nick Bruno. We're talking about Bitcoin in a dedicated episode for the first time ever here in the history of the show. And when we had a chance to talk to Nick Bruno, you can see why we wanted to do this. But, Nick, a lot of people in the United States are concerned that the US government might do something similar to what China did and just go ahead and shut down Bitcoin and shut down cryptocurrency because Bitcoin, it basically competes with the US government's product, the dollar. So what are your thoughts when people say, oh I don't know about that. The government can just shut Bitcoin down.

 

Nick Giambruno (00:30:53) - I'm glad you mentioned China because the communist governor of China is a very powerful governments.

 

Nick Giambruno (00:30:58) - It's one of the most powerful and maybe arguably the most powerful government in the world. And they've tried many times to ban Bitcoin. You know how it turned out. It was a total failure because Bitcoin is basically code in its mathematics. So it's not the easiest thing to ban even if they wanted to ban it. You're trying to ban mathematics because that's all Bitcoin is. And further many Bitcoin wallets and it all works on cryptography. As and as I said, cryptography is just advanced mathematics. Many Bitcoin wallets have a way to back up your funds a 12 word phrase. So if you can memorize well words, which represents your wallet, you can potentially store billions of dollars just in your head. Now this is how are you going to ban that? You can't ban that. It's completely impractical. I always tell people, you know, look at how governments have tried to ban cannabis. Everybody has been able to buy cannabis in any city they wanted to. And then also other countries have tried to ban US dollars.

 

Nick Giambruno (00:31:57) - Argentina tries to ban U.S. dollars, Venezuela tries to ban U.S. dollars. You know what it does? It creates nothing. But an underground market doesn't extinguish people's desire to have dollars. And I think that's what we have here. I think economic incentives are more powerful than governments. And aside from that, I don't think that's going to happen because what they approve all these ETFs, that they were just going to turn around and ban it? I don't think so. Further, you have lots of court cases. There is established federal court cases that have ruled that computer code, which Bitcoin is just computer code, is equivalent to free speech protected under the First amendment of the US Constitution. Oh yes, I understand the Constitution is not people can change it and it's malleable. But still, that complicates any government's desire to ban it. They're going to have to overturn those federal court cases. That's not going to be easy. And even if they do, how are you going to ban something that somebody can just memorize with 12 words written on a piece of paper or in their head, it's completely impractical.

 

Nick Giambruno (00:32:58) - And then, of course, you have the example of China, which has banned Bitcoin several times. You know what? Absolutely nothing happened. But Bitcoin business is moving out of China and Bitcoin adoption among regular Chinese people going up. They can hinder businesses and large like entities that have big presences. They can hinder that certainly. But Bitcoin is global. It'll just go where it's treated best. It's like water. It'll just move to wherever it's treated best. I always say this too. So even if like the northern hemisphere disappeared, let's say there's an all out nuclear war between Russia and the US that will basically wipe out the northern hemisphere. You know what? Bitcoin won't miss a beat in the southern hemisphere. It'll still keep going in the southern hemisphere because it is decentralized and un over tens of thousands of computers around the world. And if even one of those computers survives Bitcoin lives on. So I think this is a very, very hard I wouldn't want to be trying to ban this thing because it's not practical.

 

Keith Weinhold (00:33:56) - Other critics say, all right, if the government can't ban it, well, the government can just then allow it make it be legal, but they can regulate the heck out of it and they can tax it at really high rates. What are your thoughts there?

 

Nick Giambruno (00:34:11) - Well, the government can do whatever it wants, but I think, yes, it can do all of those things. But I think here's the main point is that Bitcoin is we talked about economic incentives. Economic incentives are more powerful than politicians. And I think that's a truism. So as more people become holders of bitcoin aware of bitcoin, I don't think restricting bitcoin or banning bitcoin or adding regulations to Bitcoin or adding taxation to it, I don't think that's going to help anybody win an election. Is that going to help anybody win an election? I don't think so. That would be extremely politically unpopular. Yeah, that could happen. It would be bad news for the people who live in that jersey. But you know what? It's not going to kill bitcoin.

 

Nick Giambruno (00:34:52) - It's going to just be a hindrance for the people who live under these Luddite politicians who would do such a thing. But I don't think they're going to do such a thing. They just approve the ETF. I think Bitcoin has reached escape velocity in terms of its political popularity. I don't think anybody is going to win an election by being tough on Bitcoin.

 

Keith Weinhold (00:35:11) - A number of congresspeople hold bitcoin, Cynthia Loomis being one of the more prominent ones. And then you and I talked about the SEC spot Bitcoin ETF approval earlier. Well, that's a bit of a de facto stamp of approval on bitcoin really in a sense. And I think another criticism Nick, in my opinion this is easy to dispel. But some people will say, well, there are tens of thousands of cryptocurrencies out there. This stuff's just junk. There's something like hump coin that a prominent rapper promotes. I mean, all this stuff is just a bunch of junk. When all these cryptocurrencies come out. And I tend to think that's very different than Bitcoin.

 

Keith Weinhold (00:35:50) - Just like if there's some new stock IPO with zero fundamentals that comes out, I mean that doesn't diminish blue chippers like Apple or Microsoft at all. So I think of Bitcoin as the first or one of the first cryptocurrencies with a finite supply. So these overnight fly by night new cryptos I don't think that's really a very good criticism of Bitcoin.

 

Nick Giambruno (00:36:12) - No, I think this is one of the most popular misconceptions is that there is this crypto asset class and that Bitcoin is just one of 20,000 cryptocurrencies. And I think this is transparently false. It's like saying, oh, you know an increase in the pyrite supply is going to, you know, dilute the gold or something right. So it's kind of ridiculous. And the reason behind this is very simple. Bitcoin is the only one that nobody controls. Nobody can change bitcoin. It's the only one that is like that from Ethereum which is number two on down. They can be changed. A group of people can get together and change it. And in fact, Ethereum's monetary policy has been changed more often than the Federal Reserve's monetary policy.

 

Nick Giambruno (00:36:54) - It's just instead of the FOMC getting together and deciding what we should do with the money supply, it's a group of Ethereum developers and insiders that get together and change it. And the same thing is true of every other cryptocurrency. So that's the very defining feature of Bitcoin is that nobody can change it. That's what makes it interesting. If somebody could change Bitcoin, it wouldn't be interesting. And we don't need to get into the weeds of that. But needless to say, Bitcoin is the only one where the supply has credibility. We all know the bitcoin supply is 21 million. Nobody can do anything to change that. What is the Bitcoin supply going to be in five years? I could tell you with precision what it will be in five years. I can tell you with precision what it'll be in ten years. And you tell me what the Ethereum supply is going to be in five years. Can you tell me what the supply is going to be in ten years? You tell me what any cryptocurrency aside from Bitcoin supply is going to be in five years.

 

Nick Giambruno (00:37:41) - No you can't because it depends on how the developers are going to change it. So it's quite ridiculous to lump these two things together. They're entirely separate. Crypto is a cesspool. Quite frankly. Bitcoin is the real innovation.

 

Keith Weinhold (00:37:55) - And immutable protocol as they call it. Nick, I think one criticism is to pull back. We all know that money is three things. It's a store of value. It's a medium of exchange and it's a unit of account. And a lot of people say, I don't think Bitcoin can be a legitimate currency because all people do is store it. So it might meet the store of value criterion of those three. But I don't know about its legitimacy as a currency. Does that matter? I mean, people kind of use gold as a store of value, but not a currency. What are your thoughts?

 

Nick Giambruno (00:38:25) - Yes, it does matter. And it's a good question. The answer is is Bitcoin is not an established money. Take gold for example. Gold has been around for thousands of years.

 

Nick Giambruno (00:38:34) - It is an established form of money. Bitcoin is an emerging form of money. It's a very big distinction. So I personally think the way this will go and you know people disagree. But I think just logically, if you look at it, yes, story of value comes first. Why. Because once people store their value in Bitcoin, the monetary network of people who will be willing to exchange that bitcoin for something else grows and you can't have one before the other in terms of like nobody's going to exchange bitcoin if they're not already storing bitcoin. So the more people that store bitcoin have it available to exchange it for other people, it's like a network effect, any kind of network effect. That's a monetary network effect. And that's time to build further Bitcoin related misunderstanding is you kind of view Bitcoin in a different lens than just paying for like a cup of coffee, because that's really not what it's made for. The Bitcoin network has a hard limit on the number of transactions that I can process every day in order to keep it decentralized, because if it processed everybody's coffee transaction, you would need huge data centers to run the Bitcoin software.

 

Nick Giambruno (00:39:37) - The matter is, is that the Bitcoin software needs to be decentralized. So right now, anybody who has an average laptop, an average Raspberry Pi can run Bitcoin. That is very important for its decentralization. And if you were putting everybody's retail transaction on the Bitcoin blockchain would be impossible. You need large data centers. Now does that mean Bitcoin can't scale to become a medium of exchange? Absolutely not. You have to just think of bitcoin. What is a Bitcoin transaction represents. It represents final international settlement and clearance. So it's more akin to an international wire transfer. You wouldn't pay for a cup of coffee with from a Swiss bank account to Starbucks in New York. That's basically what you're talking about. What you do is you build layers. There are different layers that are built on top of that bedrock, which is the Bitcoin network that is immutable, unchangeable, and then you build transaction networks on top of that. So what we have with Bitcoin, the most prominent one right now is called the Lightning Network, which is another network that's built on top of Bitcoin that is really more suitable for smaller day to day coffee transactions.

 

Nick Giambruno (00:40:43) - You can actually send about 1/32 of a penny over lightning. So you can do all sorts of micro-transactions. Very interesting. So that's akin to, you know, like a credit card or a credit card is kind of like a layer two network that's built on top of central banks, which do international clearing and settling, and credit cards are built on top of that. And you can think of the same kind of solutions that are going to be built on Bitcoin. You're going to have different layers for different applications. And in terms of these medium of exchange and transaction network in Bitcoin it's the Lightning Network. And it's very exciting to use.

 

Keith Weinhold (00:41:19) - Yeah the Lightning Network it's been around for a while. It's been getting more adoption to help promote payments through Bitcoin. Being a real estate investing show here, oftentimes our listeners are interested in buying a property that will produce income from a tenant that's in that property. Can Bitcoin produce income?

 

Nick Giambruno (00:41:40) - Bitcoin itself cannot produce income because it's just simply money. It's simply an asset in the same sense that gold doesn't produce income.

 

Nick Giambruno (00:41:47) - If you want to earn income from Bitcoin, invest in Bitcoin related companies and Bitcoin related businesses that pay dividends. There are some and there is going to be many more. There are Bitcoin mining companies. These are companies I specialize in covering. In my financial research. They're relatively new. They don't pay dividends yet, but there are several that are looking to establish dividends. You can also lend your bitcoin I mean that's not bitcoin giving you a yield. That's you earning a yield from lending your bitcoin. I would caution you because there's been a lot of these kinds of bitcoin lending services that have gone bankrupt. BlockFi Celsius I'd be. And so whenever I hear about Bitcoin yields I caution people to be not just vigilant, be double vigilant of how you would normally be because there's been so many scams in this area and bad companies that have gone bankrupt. Taking advantage of people looking to earn a yield on their bitcoin. It's really a nascent industry. And you know what? Look at Bitcoin's compounded annual growth rate over any period of time for years.

 

Nick Giambruno (00:42:50) - You don't need a yield. It's going up if the trends continue. And I always tell people if you're going to invest in Bitcoin, have at least a four year time horizon, because that's a long time horizon. But the reason is, is because that gives you through one halving cycle, these having cycles go every four years. It's almost impossible. There's maybe a couple of instances, a couple of days where the bitcoin price wasn't higher than it was four years ago. So I always tell people have a four year time horizon when you're dealing with Bitcoin. And when you look at the returns, that could be possible. And I think the pastor. Returns. Past performance doesn't guarantee anything in the future, but I think that being said, we can expect this cycle to be similar to the other cycles. When you see that kind of potential, it should really make you not interested in these yield products.

 

Keith Weinhold (00:43:39) - You mentioned a couple of bankrupt crypto exchanges there, BlockFi and Celsius. I got caught up in some of that.

 

Keith Weinhold (00:43:48) - Now I keep all of mine on a hard wallet because really what these exchanges do is they're centralize something that's supposed to be decentralized like Bitcoin, and it gives Bitcoin a really bad name. Nick, I had some people reach out to me when FTX imploded and people said, this proves that Bitcoin is a scam. And I had to gently explain to people, whoa whoa whoa whoa whoa whoa whoa. Just because Wells Fargo or Chase fails. We didn't say the dollar failed. It wasn't a failure in Bitcoin. It was a failure in these exchanges.

 

Nick Giambruno (00:44:20) - Oh, yes. This has been going on for a long time. And before FTX, there's Mt. Gox. There's a lot of these things. So I think the underlying lesson here in all of these examples is that don't trust third parties. And with Bitcoin you don't need to trust their authorities because if you can learn to custody your own Bitcoin, you are totally responsible, totally in control of your destiny. You don't have to worry about one of these bitcoin companies going bankrupt because you hold it and only you hold it.

 

Nick Giambruno (00:44:48) - And I think that's what makes it special.

 

Keith Weinhold (00:44:51) - This has been a great chat and I think a really good Bitcoin 101 for a person that still doesn't understand very much about it. And you help people understand Bitcoin, you do an awful lot of other things, including informing people about global trends and macroeconomics. So if someone wants to connect with you and learn more from you, what's the best way for them to do that?

 

Nick Giambruno (00:45:13) - The best place is Financial Underground Comm. I have a really helpful Bitcoin guide that shows people how to use it in the most sovereign and the most private ways possible, and I keep that guide up to date with the current best practices, because these things change very frequently. Like what is the best wallet, what is the best hardware wallet, and so forth. So I keep this guide alive with the best current practices. I think that would be a big help for people. Could definitely save them many, many hours of time by simply just identifying today's best practices. So I think that would be very helpful.

 

Nick Giambruno (00:45:45) - You can find all that at Financial underground.com.

 

Keith Weinhold (00:45:49) - Nick Bruno has been super informative. Thanks so much for coming on to the show.

 

Nick Giambruno (00:45:54) - Thank you Keith, great to be with you.

 

Keith Weinhold (00:46:01) - Another Bitcoin criticism is its energy use. Oh, look at all the electricity that mining consumes. What a waste. But the more you learn, you find that Bitcoin miners, they often use stranded energy sources that might not get used otherwise. In fact, miners have an economic incentive to use stranded and low cost energy. Volatility in Bitcoin's price has been a real problem if you want to use it as a currency. The price for one Bitcoin peaked at almost $70,000 in late 2021, and just a year later it was under 16 K, and now the price has swelled up a lot again from that recent low. In any case, if you choose to own Bitcoin or any other crypto, please store it on a cold wallet for security. It's a small device. It's about three times the size of a thumb drive. It looks like a thumb drive, and there is a learning curve that you have to meet in order to use one.

 

Keith Weinhold (00:47:04) - I don't own much gold or bitcoin, just a little. They both have their merits and risks like we've discussed. I'm a real estate guy. Even most gold and bitcoin proponents that I've talked with seem to agree with me that real estate is the proven wealth builder. I'm not sure if we'll ever devote another episode to Bitcoin here. I hope that today's episode at least equipped you to ask better questions, in case you want to know more about it. Today's episode had a more international than usual feel. Bitcoin has no boundaries. I'm in Ecuador and our guest Nick joined us from Argentina today. I'll be back in the US next week when I have some really important real estate trends to tell you about. Until then, I'm Keith Reinhold. Don't quit your daydream.

 

Speaker 7 (00:47:54) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss.

 

Speaker 7 (00:48:09) - The host is operating on behalf of get Rich education LLC exclusively.

 

Keith Weinhold (00:48:22) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Direct download: GREepisode488_.mp3
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Our in-house Investment Coach, Naresh, joins us with a real estate market update. 

Two popular investment markets are Memphis BRRRRs and Florida new-builds.

He provides free coaching at GREmarketplace.com.

Timestamps:

The immigrant crisis worsens (00:00:01)

Discussion on the increasing number of immigrants and the housing shortage crisis in the United States.

Housing supply shortage (00:02:44)

Analysis of the shortage in housing supply, estimated to be around 4 million units, and the decline in available housing units.

Impact of immigration on housing demand (00:05:07)

Forecasted impacts of immigration on housing demand and the expected population growth due to immigration.

Challenges and solutions for housing immigrants (00:09:03)

Discussion on the challenges of housing immigrants and potential solutions, including easing construction restrictions and promoting the building of entry-level housing.

Title insurance explained (00:17:29)

Explanation of title insurance, its types, and its significance in real estate transactions.

Update on property manager's situation (00:15:08)

An update on the property manager's situation involving stolen rent payments and the tenant's agreement to compensate for the loss.

Mortgage rates and inflation (00:21:52)

Discussion on the current mortgage rates and their correlation with inflation, as well as predictions for future rate movements.

Mortgage Rates and Fed's Strategy (00:22:54)

Discussion on the impact of the Fed's decision to hold rates and its potential effect on mortgage rates.

Incentives and Real Estate Markets (00:25:08)

Explanation of incentives offered in Memphis and Florida real estate markets, including the BR method and new build properties.

Real Estate Investment Strategies (00:29:04)

Comparison of the Memphis BR method and Florida new build as investment strategies, emphasizing the benefits of each approach.

Property Investment Insights (00:32:16)

Discussion on the impact of property ownership and the potential for life-changing outcomes through real estate investment.

Economic Uncertainty and Real Estate (00:37:07)

Anticipation of potential economic volatility and its impact on real estate investment decisions, emphasizing the stability of real estate during uncertain times.

Resources mentioned:

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or e-mail: info@RidgeLendingGroup.com

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Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Hold. The immigrant crisis worsens. Where are we going? To house all these people. A simple explainer on what title insurance is. Then where do you find the best real estate deals in this market today on get Rich education. If you like the get Rich education podcast, you're going to love our Don't Quit Your Daydream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free! Sign up and get rich education.com/letter. It's real content that makes a real difference in your life, spiced with a dash of humor. Rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.

 

Speaker 2 (00:01:06) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:22) - Welcome to jewelry heard in 188 world nations from Lima, Ohio to Lima, Peru. I'm your host, Keith Weinhold. Get rich education founder, Forbes Real Estate Council member and longtime real estate investor. Our mission here. Let's provide people with good housing, help abolish the term slumlord and get paid five ways at the same time. Immigrants keep pouring into our southern border. In fact, federal agents encountered roughly 2.5 million migrants there just last year alone. Now, though, not all will become permanent residents. Understand? 2.5 million. That's the population of the city proper of Chicago or Houston. All in just one year. How are we going to house all these migrants? This crisis has only worsened in that 2.5 million migrants in a year figure is, according to US Customs and Border Protection data. Now, understand first that America has about 140 million existing housing units. That's what we're dealing with today. By every estimate out there, we already have a housing shortage. The layperson on the street knows that and estimates about its magnitude.

 

Keith Weinhold (00:02:44) - I mean, they're all over the map, some as high is America is already 7 million housing units undersupplied in order to house our current population. And you have other estimates as low is that we're only 1.5 million housing units. Undersupplied. So let's interpolate and kind of be conservative, or just use a figure closer to a common consensus and say that we are 4 million housing units. Undersupplied. All right. But if that's our given, here's what that means. 4 million housing units undersupplied to merely reach a balanced housing supply, we'd need to build enough homes to meet population growth, plus 400,000 on top of that. And we'd have to do that every single year for an entire decade. Just astounding. And to be clear, that's not to be oversupplied with housing. That's just to reach an equilibrium between supply and demand. Now, the supply of available housing, and this is basically what I'm going to talk about next, is the number of homes for sale at any given time, right. That began gradually descending in 2016.

 

Keith Weinhold (00:04:02) - And back then it was one and a half to 2 million available units. And in the spring of 2020, like I've talked about before, the housing supply just crashed to well below 1 million, and it still hasn't gotten up from its mighty fall. In fact, it's only about 700,000 units available today. All right, that is the Fred active listing count and Fred's sources there. Statistics from Realtor.com. All right, so that's what we're dealing with. That's a dire situation. All right, well, how do housing starts? Look, are we building up out of the ground enough to maybe start getting a handle on this sometime in the next decade? I mean, is there anything that could be more encouraging than more housing starts? Well, really, there's nothing encouraging there at all. In fact, new housing construction starts have hit a ten month low. My gosh. So that's the supply side. All right. What about the housing demand side? Well America's population grew by 1.6 to 1.8 million people between 2022 and 2023.

 

Keith Weinhold (00:05:07) - And that number is forecast to climb during the next few years, worsening the housing shortage crisis. And with US births falling and deaths rising, it's immigration, immigration is what is going to fuel the majority of population growth for the next decade. Immigrant related growth that is going to impact local housing markets across the country. And it's expected to hit especially hard in the northeast, Florida, California, Nevada and Texas. And what's happening is outraging some people. Some cities are housing migrants in public places, even arenas, including ones that Texas Governor Greg Abbott has bused to the northeast. And, of course, New York City Mayor Eric Adams has been outspoken about how to handle the migrant crisis. Understand that there are homeless veterans out there in America, yet the state of Maine is giving migrants up to two years of free rent for new apartments. In that right there has made a lot of people. And there are a lot of other cases out there like that of migrants getting free housing. Now, just consider this John Burroughs research and consulting.

 

Keith Weinhold (00:06:31) - They provide a lot of good information to the real estate market, and they have for a long time credit to them. And by the way, if you'd like us to invite John Burns onto the show here or if you have any other comments or questions or concerns, feel free to write into us through get Rich education. Com slash contact. So you can send either an email or leave a voice message. Well, according to their industry respected data, some of which is compiled through the US Census Bureau back in 2021, that's when we reached an inflection point where the US population grew more through immigration than it did through natural increase in natural change. That is simply the births minus deaths, and that is continued each year since there is more US population growth through immigration than there is through natural increase. In fact, bring it up to last year, our population grew by 1.1 million through immigration and just 500,000 through natural increase, more than double more than double the increase through immigration as natural change. And John Burns makes the forecast through the year 2033.

 

Keith Weinhold (00:07:47) - So the next nine years, the growth through immigration will outstrip that some more and become double to triple that of natural growth overall. Every single year through 2033, we'll add 1.7 to 2 million Americans. And they all need to be housed somewhere. So the bottom line here is that immigration fueled growth already outstrips natural growth. And that should continue and only be weighted more heavily toward immigrants every single year for the next decade, probably beyond the next decade. We just don't have projections that far yet. Well, how are you going to house all these people when we're already badly undersupplied and understand I'm not making any judgments on saying who or who should not be able to enter our nation. That is for someone else to decide. And in fact, I'm the descendant of immigrants. They're my ancestors. And you may very well be too. And over the long term, immigrants can be an asset. I am simply here asking where and how are we going to house them for the next decade and what that means to you.

 

Keith Weinhold (00:09:03) - Tiny homes, 3D printed homes, shipping container homes none of them seem to be the answer. And of course, population forecasts. When you look out in the future like that, they're going to vary based on the percentage of successful asylum seekers in the 2024 presidential election winner, and more. So, the figures that I shared with you, they are only the average case. In any case, the crisis is poised to worsen because now you've seen that there is a terrible mismatch between population growth and housing starts. How are you going to solve this? The government needs to ease construction restrictions and promote the building of entry level housing. More up zoning should be allowed. Do you know what up zoning is? It means just what it sounds like increasing the housing density, often by building taller buildings. So up zoning is taller building heights. All right. Well let's look at really.

 

Speaker 3 (00:10:02) - Four.

 

Keith Weinhold (00:10:03) - Big impacts that this immigration wave is having on America's already scarce supply of housing. New immigrants typically rent property. They don't buy property.

 

Keith Weinhold (00:10:16) - So that's higher rental housing demand. Secondly, expect more multigenerational and family oriented dwellings. That's what's needed with additional bedrooms and affordable price points like entry level single family rentals. If you want to own rental property, that right there is the spot for durable demand. And thirdly, I'm sorry, another impact is expect to see more homeless people in your community like I've touched on before. In fact, homelessness is already up 12% year over year. That's partly due to inflation, and that is already the biggest jump. Since these point in time surveys have been used. The biggest ever jump in homelessness are ready. Those stats only go back to 2007. That's when they begin measuring it. And that's according to HUD and federal officials. And then the fourth and final impact of all this immigration is that builders and manufacturers will probably see a small uptick in labor availability these next. Few years. Okay, that part could help. America could help with this labor shortage crunch. But all the other major impacts put more demand and strain on what's already a paucity of American housing supply.

 

Keith Weinhold (00:11:36) - And the bottom line is that there are too many people competing for too little housing, driving up prices and driving up rents this decade. I've been talking about lots of people moving north across borders. Me, I've recently moved south across borders, though for only a few weeks here. I'm joining you from here in Medellin, Colombia today, where in between doing my real estate research here, I'll be trekking in the Colombian Andes this week and the Ecuadorian Andes next week, when I'll be based in Ecuador's national capital of Quito. And, you know, there's a real estate lesson in this itself. Really? Okay, me traveling to Colombia and Ecuador, people often label and mischaracterize areas that they haven't been to or say they hear of the drug trade in Colombia or of some of the more recent, I guess, civil unrest in Ecuador, where I'll be next week. And they think, sheesh, isn't it dangerous in those places? Oh come on, I mean, sheesh, Colombia is a nation of 52 million people and it's almost twice the size of Texas.

 

Keith Weinhold (00:12:44) - The question is where? Where in Colombia do you think is dangerous? Don't you expect there would be great variability there? Now you the great listener. You're smarter than the average American. So I think that you get it with last month's continued civil uprising in Ecuador, seeing that story in the news that actually reminded me to book a trip there, the opposite of staying away when they held up all the people at that TV station that was way out in Guayaquil, Ecuador. To tie in the real estate lesson here. Back to your home nation. If you do live in the US or wherever you live like I do, see our investment coach, Andrea. She moved from Georgia to the Detroit Metro a couple of years ago. I don't think you'd want to invest in real estate in Andrea's neighborhood, where she lives in Detroit, because it's too nice. The property prices are high and the numbers wouldn't work for you in an upper end neighborhood of metro Detroit. But people that haven't been to Detroit don't think about areas being too ritzy for investment.

 

Keith Weinhold (00:13:49) - Well, of course, some of the areas are. Some of my point is, stereotypes are hard to shake. I encourage you to get out and see the world now. I've got an interesting and really an unlikely update on my property manager that had the tenant rent payments stolen from his drop box, meaning I didn't get paid the rent. The property manager, he didn't make good on that and pay me the rent. He wanted me to take the loss from the rent payment that he failed to secure from the paper money order stolen from his overnight drop box. So the manager doesn't want to take the loss. I don't want to take the loss well, and I can hardly believe this, but apparently the tenant has agreed to make the property manager hold. The tenant would effectively pay rent twice for that month, and then the property manager will apparently finally pay me the missing rent after it flows through him. The manager. I don't know if the property manager had to convince the tenant that it's the tenant's responsibility to put the payment right into the manager's hands, or what? So the tenant, what they're going to do is pay an extra $200 a month until the $1,950 stolen rent is compensated, I guess what, eight months of stepped up rent.

 

Keith Weinhold (00:15:08) - And so I was just really surprised that the tenant would agree to do that. And, you know, in this saga that I've been describing to you for, I guess, the third week in a row now, you know, one Jerry listener, they asked me something like, doesn't your property manager know that you're rather influential in the real estate world? Like thinking maybe I'd get preferential treatment? Oh, to that I say, no, I don't want preferential treatment. I mean, few things are more annoying in society than people that position themselves like that. But I will tell you that I actually did meet this property manager in person before he started managing my properties, and he did wear a suit and tie in the conference room for meeting me, which I thought was interesting. Later today on the show, we've got a guest that's familiar to you. He was somewhat bearish on real estate when he was here with us back in November. That's when he talked about how activity was slow, and you might even want to sit on the sidelines of adding more property to your portfolio.

 

Keith Weinhold (00:16:10) - We'll see if that's changed today. Now over on YouTube, you might very much like watching me in our explained. Video series because in a video format, I can show you where the numbers come from at. Very simply, break down an investing term like net worth for one video or cash flow, or your return on amortization in another one. There's also a new video in our explained series about title insurance, and this is what you'll hear over there. The title to a house is the document that proves that the owner owns it. Without that proof, the house can't be bought or sold, and title insurance is written by title insurance companies. What a title insurance company does is research the history of the house to see if there are any complications, also known as clouds, in its ownership issues that cloud the title could be like an outstanding old mortgage that the prospective seller has on the property. A previous deed that wasn't signed or wasn't written correctly and unresolved legal debt or a levy by a creditor, like an old lien placed by a contractor who once did some work on the windows and was never paid for it.

 

Keith Weinhold (00:17:29) - They're all examples of clouds on a title, and make transferring the property ownership difficult or impossible. But if the title appears to be clean, no clouds, then the title insurer writes a policy promising to cover the expenses of correcting any title problems if they would happen to get discovered after the sale. Title companies may refuse to insure a clouded title to be transferred, so it's important to know about any potential issues as soon as possible. Now there are two types of title insurance. There is lender's title insurance and owner's title insurance. First, lenders title insurance. In most areas of the country, the mortgage lender requires that the property buyer purchase a lender title insurance policy to protect the lender's security interest in the real estate. Lender's title insurance is issued in the amount of the mortgage loan and the amount of coverage decreases and finally disappears as the mortgage loan is paid off. And then secondly, owner's title insurance. It protects the homebuyers interest and is normally issued in the amount of the purchase price of the property. Coverage means that the insurer will pay all valid claims on the title as insured, and in most real estate transactions, separate title policies are purchased for the lender and the buyer, and although it can vary by location, the buyer typically purchases the policy for the lender, whereas the seller often pays for the policy for the buyer.

 

Keith Weinhold (00:19:12) - And that's title insurance, if you like. Simple to the point education by video like that, and you'd want to get a really good look at me for some inexplicable reason. Uh, for more, check out the new explained series. It is now on our get Rich education YouTube channel or next. I'm Keith Reinhold, you're listening to get Rich education. Render this a specific expert with income property you need. Ridge lending Group Nmls 42056. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.

 

Keith Weinhold (00:20:35) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.

 

Speaker 4 (00:21:21) - Anybody? It's Robert Elms with a Real Estate Guys radio program. So glad you found Keith White old and get rich education. Don't quit your day dream.

 

Keith Weinhold (00:21:40) - Hey. Well, I'd like to welcome in someone that you might have met by now. That is one of our terrific investment coaches. Narration. The race. Hey, welcome back onto the show.

 

Naresh Vissa (00:21:49) - Keith. It's a pleasure to be back on race.

 

Keith Weinhold (00:21:52) - I know you've got mortgage rates on your mind. It's been such an interesting topic lately, since they peaked at about 8% back in October of 2023, and almost everyone this year anticipates that now that embedded inflation is lower, that rates of all types are going to fall, rates in inflation are typically correlated. And why don't you talk to us with your thoughts about where mortgage rates are currently and where they go from here?

 

Naresh Vissa (00:22:19) - Like you said, mortgage rates peaked around October. The fed did their last rate hike in July 2023, so that's why the lagging effect caused rates to rise a little. And then they've been slowly creeping down since October. And what does that mean? Or where do we go from here in this new year 2024? I've been pretty spot on with what the Fed's going to do. I think they made some mistakes. I think they should have done 2 or 3 more 25 basis point hikes in 2023 because we're seeing inflation creep back up.

 

Naresh Vissa (00:22:54) - And that's a huge problem for the fed because their target is 2%. But that's a completely different topic. We get Monday morning quarterback the fed all we want. The fed has essentially come out and said that their rate hiking campaign is over. They've hiked enough and it's a take it or leave it. They're just going to hold and hold and hold until inflation reaches that 2% target. So what does that mean for mortgage rates? If we know that the fed isn't going to raise rates anymore, that means we are. We've already seen it. Mortgage rates have slowly creeped down. And there is a legitimate chance that the inflation rate that the CPI hits 2% by this summer, there is a chance of that. Right now we're at 3.3 or 3.4%, but there is a good chance that by the end of this summer, let's say August, we hit that 2% target, which means the fed will immediately start cutting rates after that whenever the next meeting is, I think September 2024, they'll start cutting rates, which means that's going to have an effect on mortgage rates.

 

Naresh Vissa (00:24:00) - We can see mortgage rates plummet even more later this year going into 2025. Now, this is just a prediction. There's a chance that inflation could go up if there is a middle East crisis or World War three or whatever you want to call it, there's a chance that inflation spikes back up and the fed just they could hold rates where they are for two years. I don't have a crystal ball in front of me. There was a black swan event that happened in 2020. Obviously, there could be a black swan event that happens in 2024. We won't know. But what we do know is the fed is done hiking rates and they're going to hold as long as possible until we get to that 2% inflation target. What does that mean for real estate? If mortgage rates are going back down, you're getting a better deal today than you were in October 2023 or November 2023. So it's almost 100 basis points lower from the peak that we saw in October. So interest rates have gone down. They've somewhat normalized to a level that digestible for investors, still not quite digestible for the average homeowner.

 

Naresh Vissa (00:25:08) - And the best part about this, Keith, is that the providers who we work with are still offering amazing incentives, the same amazing incentives, if not better, with the lower interest rates. So previously we brought up a 5.75% interest rate incentive program, one year free property management, another program that was two two for two years of free property management, 2% closing cost credit, $4,000 property management credit, all sorts of incentives. And those incentives are still in play while interest rates have gone down. So instead of 5.75% incentive that these providers are offering, they're now offering 4.5% interest rate. So that's why I think if there were no incentives, hey, you know what? We should probably wait until the fed starts cutting again. But with these incentives, this is incredible because they're going to be gone again the moment the fed starts cutting aggressively. These incentives are all gone. So you may as well get in. Now when home values have somewhat corrected and some markets are seeing precipitous declines, home value declines, real estate declines.

 

Naresh Vissa (00:26:20) - So right now it's still an excellent time to invest. Given this economic landscape.

 

Keith Weinhold (00:26:26) - Gray listeners are pretty savvy. And you the listener, you realize that changes in the fed funds rate don't have a direct change, and they don't move in lockstep with the 30 year fixed rate mortgages. The fed has really loaded up with the fed funds rate near 5%. Now they basically have a whole lot of ammo in the cartridge where they can go ahead and lower rates if the economy begins to get into trouble. One reason mortgage rates are higher than other long term rates is that US mortgages can be prepaid without any penalty. The anomaly in what's been different and what's been happening here is that typically there's a spread of about 1.75% between the ten year note, which has been 4% or so recently. And the 30 year mortgage rate is about 1.75% higher, which. She would put it at 5.75, but instead mortgage rates have been almost 7%. So a greater than usual historic spread between the ten year teno, which is more what mortgage rates are based off of and what that rate actually is, and the reason that that spread has been so high as this perceived greater credit risk or anticipated economic changes like this recession that is always just perpetually around the corner.

 

Keith Weinhold (00:27:44) - So we don't really know where mortgage rates are going to go. We know that they're not high. They're actually below their long term average. But of course, they just feel high because the only thing that was unusual is the rate at which they've increased. With that in mind here as we talk about mortgage rates nowadays. Why don't you tell us more about the incentives that are being offered right now?

 

Naresh Vissa (00:28:03) - The incentives are still being offered. The question is, Keith, I want to share two different strategies or two different markets. It's kind of a mix of strategy and market. The two most popular markets we are seeing right now are in Memphis, Tennessee, and in Florida. Still, Florida continues to be hot. Why is that? Why these two markets? Well, number one, Memphis still has a lot of rehab properties that you can purchase in the 100 to $150,000 range. Before the pandemic, it was common to see properties selling for 60 to $80,000. Those properties are a dime a dozen now, because of what we've already talked about the inflation, the home values, rising real estate going up.

 

Naresh Vissa (00:28:51) - Memphis still offers those options. Now we work with a provider in Memphis who specializes in the BR method, the B or R r. So it's for cause the BR.

 

Keith Weinhold (00:29:04) - It's not the February temperatures. BR yes.

 

Naresh Vissa (00:29:07) - Yeah. It's not the February temperatures. It stands for you buy rehab rent then you refinance and then you repeat it with the next property. So buy rehab rent refinance repeat. So this is a little different from your traditional real estate investing where you're just buying. It's already rehabbed. So you're buying renting it out. And then end of story here. It's a strategy that is meant to build equity. Almost immediately. You rehab it. And look we're not going to get into the details of this right now. I highly recommend that, folks, they can go to the GRE marketplace and set up a meeting with me if they want to talk some more about BR or if their experience and they know about BR, they may not know that we offer BR properties. But our investors have loved Memphis, BR.

 

Naresh Vissa (00:30:02) - They have loved it. They have bought more and more is one of our hottest asset classes or strategies right now. Memphis BR so highly recommend it. What are the incentives? There actually no incentives that our Memphis, BR provider is offering, because the incentive of the BR strategy is enough to get people to keep buying. They keep getting inventory, they don't run out. They find ways to make it work. Now in Florida, we work with a provider who we've featured on this show a couple of times before, and they're owned by the largest Japanese real estate developer called Sumitomo Forestry. They're one of the largest Japanese companies in the world. Warren Buffett owns a huge stake, Berkshire Hathaway in Sumitomo. So I highly recommend this Florida provider because they're able to offer properties that values that other providers can't compete with at prices that other providers can't compete with. They're offering the incentives that I told you, the 4.5% program, in some cases, you can buy down the rate all the way down to 4.25% if you want.

 

Naresh Vissa (00:31:10) - They have two years free property management or one year free property. It just depends on the package that you choose. They're offering closing cost credits. You can negotiate the list price. These are the two most popular partners we are currently working with, and I highly recommend if you are liking this real estate market, you're seeing lower interest rates. You're seeing that there's been a correction in home values and you want to get in right now. Contact your investment coach. If you don't have an investment coach, go to the marketplace. You can select me if you want, or you can select the other investment coach Andrea, it's up to you and we can share more information.

 

Keith Weinhold (00:31:52) - You're talking about two different strategies here, the Memphis BR and the Florida Newbuild. And I think of the Memphis burger is something that's lower cost. It's for an investor with a more aggressive disposition where it will take some of your involvement, even though it's still only going to be remote involvement. And then on the flip side, with the Florida new build, you're going to benefit from those low bought down rates that the builder will buy down for you.

 

Keith Weinhold (00:32:16) - The longer you plan to hold the property, the more the rate buy down is going to benefit you. And then also think of the Florida new build is kind of being a low noise investment.

 

Naresh Vissa (00:32:29) - You're absolutely correct, Keith. So I highly recommend those who are sitting on the fence. I've come on this podcast before and said, hey, Keith, you know, right now I'm not really sure where things are going. Like it's a little dead. Maybe investors should hold off.

 

Keith Weinhold (00:32:44) - Yeah, back in November, that was your guidance?

 

Naresh Vissa (00:32:46) - Yep. That was. And now I think because we've seen the lower interest rates, you can just get in at a much better deal. Everyone can be happy. I think our investors would be happy. And it's a great time to start investing in real estate again. Don't put it off. I remember when I first got into real estate, I was putting it off, putting it off, and I look back and I say, man, I should have gotten in four years earlier or five years earlier.

 

Keith Weinhold (00:33:13) - How many properties do you think it took for you to buy until it changed your life? For me, it was probably when I bought my second fourplex and I had eight units. But I think if you're buying single family homes, it takes probably fewer units than that to really start changing your life.

 

Naresh Vissa (00:33:30) - Yeah, one units aren't going to change your life. Two units aren't going to change your life. In my case, it's just a personal story. I bought one the first year, another one the second year, and then my third year I scaled from 2 to 7. That was the life changing experience right there. And the last two properties I bought were new construction. So number seven and number eight were new constructions. And that also changed my strategy too, because I said, hey, new construction is just so much better than these older rehab properties, just less headache. We've talked about this before on previous episodes, and so moving forward, I'm actually saving up right now to buy my next new construction property.

 

Naresh Vissa (00:34:13) - New construction. Me personally, I think that's a way to go, there's no doubt about it. And because I went from 2 to 7, that was the game changer for me, at least on the taxes on the passive cash flow. And look, I'm relatively young. I'm in my mid 30s. But when I think about retirement, which I don't think about much, but sometimes I do, and when I do think about it, I'm like these eight properties, if I hold on to them, that's a nice retirement that I have in retirement. That's a great passive cash flow. By then the mortgages will be paid off. Although we believe in refi til you die. Just to get a little more specific about some of these incentives, I'm looking at the Florida ones right in front of me. Option one, for example, is a 4.25% interest rate. That's where the buy down the 2.75% buyer paid point buy down. But it comes with two years of free property management. I think the best deal if you want zero buy down it's two years of free property management seller paid closing costs of 1.5%.

 

Naresh Vissa (00:35:19) - So that's a 1.5% closing cost credit and a 5.75% interest rate that you'll be locked into. I think that's a pretty darn good deal.

 

Keith Weinhold (00:35:30) - There are some attractive options there. Yeah. It's interesting you raised when you talk about how many properties does it take to change one's life. Yeah. You're right. When you buy your first property, your second property, it isn't life changing. You probably haven't own property long enough yet to benefit from leverage, and surely not cash flow just off 1 or 2 properties. But what happens is you accumulate more is sometimes you don't have to use and save up your own money to buy a new property. You might want to do that, but at the same time, the properties that you bought a few years ago have built up enough equity. So now that rather than your money buying new properties, it's like your properties, buy your new properties for you as you do these cash out refinances. And that's where you really get things rolling. So it can take a few properties and a few years.

 

Keith Weinhold (00:36:16) - But nowadays you're so right about the opportunity really being with New Build. Today I'm a guest on other shows and a lot of people are just an economics host. They think about real estate investing, they think about higher mortgage rates, and they're like, you know, where's the opportunity for an investor today? And that's usually what I tell him. It's with these builder rate buy downs on new build properties. Take advantage of that this year.

 

Naresh Vissa (00:36:38) - Absolutely. So like I said great marketplace. You can get more information set up meetings with Andrea or me or whoever you're assigned investment coaches. If you don't have an assigned investment coach, take your pick and let's get your real estate investment journey either started or on cruise control.

 

Keith Weinhold (00:36:57) - If you have any last thoughts, whether that's this year's direction of prices or rents or the economy as it relates to real estate or anything else at all.

 

Naresh Vissa (00:37:07) - Well, Keith, I think we're about to see and we don't get political on here, but for whatever reason, we tend to see crazy financial markets during election years, whether it's presidential elections or midterm elections.

 

Naresh Vissa (00:37:22) - We saw the stock market drop wildly in 2022 during a midterm election year. Of course, 2020 will never forget the craziness of lockdowns and masking and social distancing and what the financial markets did. I mean, all the at least the stock market. President Trump lost all the gains that he had in the stock market as president, were lost in over a two month period in February and March 2020 because of pandemic. And then they came surging back. So the point that I'm making here is economically, I shared my vision of just systematically, I think inflation is going to hit the 2% by the end of the summer. The experts initially thought it would hit the 2% by March. In the latest CPI reading showed that inflation actually went up. I think we're going to see some type of, I don't want to call it a black swan, but this year is not going to go according to plan. Maybe the inflation plummets because something deflationary happens. Or maybe the inflation rises again because something inflationary happens. That's just not on our radar.

 

Naresh Vissa (00:38:30) - So how does that affect real estate. Well that doesn't change what we said five minutes ago, which is right now, today. Given all this uncertainty, today is still a great time to jump in, because if there is a deflationary event, you can always refinance your rate in a year or two when rates are much lower. And remember, mortgage rates are tax deductible.

 

Keith Weinhold (00:38:54) - A presidential election year brings more uncertainty than usual. You can buffer yourself from that volatility with real estate and investment that's more stable than most anything else out there. I encourage you, the listener, to check out Naresh and the other coach, Andrea at Great Marketplace, and it can really help you out and help you put a plan together. Hey, it's been great having your thoughts. I think the listeners are going to find this helpful. Thanks for sharing your expertise. Thanks, Keith. Yeah, there's some valuable guidance from Naresh on where the real deals are in this market today. Memphis Bears and Florida, new builds. They're really just two of the dozens of options from Gray's nationwide provider network.

 

Keith Weinhold (00:39:44) - Learn more, see all the markets or connect with a coach all at Gray marketplace.com. Enjoy the Super Bowl I'm Keith Weinhold. Don't quit your Daydream.

 

Speaker 6 (00:39:59) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 7 (00:40:27) - The preceding program was brought to you by your home for wealth building. Get rich education.com.



Direct download: GREepisode487_.mp3
Category:general -- posted at: 4:00am EDT

California is strengthening protections for tenants. I discuss. It’s already a disadvantageous state for real estate investors. 

My Property Manager had my tenant’s $1,550 rent payment stolen from his drop box last year. He expects me to take the loss. I won’t. Who is liable for the payment - the thief, bank, tenant, manager, or the investor (me)?

Tom Wheelwright, CEO of WealthAbility, joins me. We discuss the role of property tax in funding essential services. 

The conversation touches on the regressive nature of property tax, alternatives to it, and the importance of understanding tax strategies.

US taxes of all types keep ratcheting higher over time. But they’re still lower than most world nations. 

The episode also considers the impact of elections on tax policies, emphasizing the need for informed voting regarding taxation.

You need a tax professional that knows how to find you all the deductions for real estate investors here: GetRichEducation.com/Tax

Timestamps:

Landlord-Tenant Relationships (00:00:00)

Discussion on landlord-tenant relationships, stolen rent payment, and potential elimination of property tax.

New Renter Protections in California (00:02:30)

Overview of new laws in California regarding upfront deposit amounts, eviction protections, and banning of crime-free housing policies.

Options for Homeowners in California (00:03:50)

Details about new housing laws in California, including more options for accessory dwelling units and their impact on the housing crisis.

Stolen Rent Payment Dilemma (00:05:53)

Narrative about a stolen rent payment, liability concerns, and the property manager's proposed resolution.

Feasibility of Eliminating Property Tax (00:13:45)

Discussion on the possibility of abolishing property tax and its funding of schools, fire departments, and police services.

Property Tax Funding (00:18:37)

Insights into the funding of property tax and its allocation to schools, fire departments, and police services.

Property Tax and Its Impact (00:19:37)

Discussion on the challenges and implications of property tax as a wealth tax and its regressive nature.

National Property Tax Rates (00:20:40)

Exploration of the national average property tax rate and its impact on property value and inflation.

Proposition 13 in California (00:21:34)

Analysis of the impact and benefits of Proposition 13 in California, which limits property tax increases for homeowners staying in the same home.

Alternatives to Property Tax (00:23:27)

Exploration of alternative taxation methods, such as transaction tax and the potential elimination of property tax in favor of a transaction tax.

Primary Residence Capital Gains Tax Exemption (00:25:16)

Insights into the primary residence capital gains tax exemption and its impact on homeowners, including the need for inflation adjustments.

Future Taxation Trends (00:27:24)

Discussion on the potential for heavier taxation and comparisons with taxation policies in other countries.

Potential New Tax Types (00:29:16)

Exploration of the possibility of new tax types, including the concept of a poll tax and its implications.

Value Added Tax and Tax Reduction Strategies (00:31:17)

Insights into the potential implementation of a value-added tax in the United States and strategies for tax reduction through understanding the tax code.

Selecting the Right Tax Advisor (00:33:00)

Advice on choosing a qualified CPA and the importance of having a knowledgeable tax advisor for effective tax planning.

Election Year and Taxation Policies (00:34:54)

Analysis of the potential impact of the upcoming election on taxation policies and the importance of considering tax implications when voting.

Property Tax and School Funding (end)

Perspective on property tax funding for schools and the broader community impact, addressing objections to paying property tax.

Property Tax (00:37:07)

Discussion on the controversial nature of property tax and its impact on property ownership.

Tax Strategy and Deductions (00:38:13)

Importance of finding the right tax professional for real estate investors to maximize deductions and benefits.

Disclaimer (00:39:25)

Legal disclaimer regarding the information provided in the podcast and the need to consult appropriate professionals for personalized advice.

Resources mentioned:

Show Page:

GetRichEducation.com/486

Get matched with the right tax pro:

www.GetRichEducation.com/Tax

Tom’s book, “Tax-Free Wealth”:

https://www.amazon.com/Tax-Free-Wealth-Massive-Permanently-Lowering/dp/1612681204

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

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GREmarketplace.com/Coach

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GetRichEducation.com

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Our YouTube Channel:

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Follow us on Instagram:

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Keith’s personal Instagram:

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Complete episode transcript:

 

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. California and new renter protections. My own property manager had my tenants rent payments stolen from his drop box, and he wants me to take the loss. Then Tom Wheelwright joins me for a discussion about can we abolish the property tax today on get rich education? If you like the Get Rich Education podcast, you're going to love our Don't Quit Your Daydream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free. Sign up and Get Rich Education. Com slash letter. It's real content that makes a real difference in your life, spiced with a dash of humor. Rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting GRE to 66866. Text GRE to 66866.

 

Speaker 2 (00:01:06) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker 2 (00:01:13) - This is get rich education.

 

Keith Weinhold (00:01:22) - Welcome to GRE! From Montpelier, France, to Montpelier, Vermont, and across 188 nations worldwide. And Keith Weinhold, in your listening to get rich education across the United States, it's fortunate for us that states with landlord friendly policies also tend to be those states where the numbers make sense to. And for landlord tenant relationships, it's the state and local policies that often trump the national ones. Now, of course, in residential real estate or any real estate for that matter. I mean, you can make money in all 50 states, of course, but there's a reason that we generally avoid certain places, and that includes California. One difficulty in California has long been the process of getting a prompt eviction. It can be hard to do that even if you have just cause, where it can take months and months, or even longer than a year to get an eviction. Let's listen in to this minute and a half clip on how tenants rights are being strengthened in California. Just a little more.

 

Speaker 3 (00:02:30) - Well, every month, renters in California spend a hefty portion of their paychecks on housing. And as we kick off, 2024, seven is on your side with the new laws. Renters should know to save some money and also protect themselves against eviction. Before you lock in an apartment, you usually need your first month plus a security deposit in advance. Well, now the amount you have to pay up front could potentially drop by thousands of dollars.

 

Speaker 4 (00:02:54) - Landlords can now charge just one month of security deposit up front, and previously they could charge two months if the unit was unfurnished or even up to three months of the unit was furnished.

 

Speaker 3 (00:03:05) - Renters are also getting new eviction protections. Soon, it will be harder for landlords to evict a tenant under the no fault, just cause policy. Currently, a tenant can be evicted if the landlord or landlord's family is going to move in, but starting April 1st, the landlord or their family will have to move in within 90 days and live there for at least a year.

 

Speaker 3 (00:03:24) - Local governments are also now banned from crime free housing policies. Cities and counties can't mandate penalties or evictions against people who have been charged, convicted or had police called on them. The ban also applies to the family members of tenants. Now, renters are not the only ones benefiting from the new housing laws. Homeowners will now have more options when it comes to so-called granny flats or accessory dwelling units.

 

Speaker 4 (00:03:50) - Now they can separate and either build or sell an Adu and accessory dwelling unit and sell that separately as a condo. Lawmakers think that that's something that's going to help the state's housing crisis.

 

Speaker 3 (00:04:02) - And with housing prices sky high, this could give many would be homebuyers the opportunity they need to afford a starter home.

 

Keith Weinhold (00:04:09) - Yeah. So there it is in California this year. Lower upfront deposit amounts for tenants and more protection from evictions. California landlords, they can now charge just one month of security deposit upfront. That's the most they can charge. Previously, they could charge two months if the unit was unfurnished and up to three months security deposit if the unit was furnished.

 

Keith Weinhold (00:04:36) - Now, on the flip side, you've got to give California credit for helping homeowners, existing homeowners. They will now have more options when it comes to so-called ADUs accessory dwelling units, which some people call granny flats, because now they can separate and either build or sell in Adu. They could sell that separately as a condo, and that might help California's affordable housing crisis and the housing shortage crisis that could give more California homebuyers the opportunity that they need to afford a starter home. So that is better for first time homebuyers in California. And whether you live there or not, this matters. California has the same population as all of Canada in between 11 and 12% of all US residents are indeed Californians. Let me tell you about a completely weird situation that I have with one of my property managers. Now, I own rental properties in different states around the US, and each of those local markets has their own manager, and you might have this situation as well. Or perhaps that's what you would soon like to do to have this situation of having properties in multiple markets.

 

Keith Weinhold (00:05:53) - Well, about 12 months ago now, I got a message from a property manager that manages a bunch of single family homes for me in this one particular area, and he let me know that I was not going to be seeing a rent payment for one of my tenants. And that's because the tenant paid the rent, but they paid it with a paper money order that was left in the manager's overnight drop box and the mail from that box. Was broken into by a thief and stolen. And then apparently the thief converted the money order at the bank by in this house. Unbelievable. By waiting out the name of the money order recipient, which I guess would have been the manager. And then the thief wrote in his own name on the Wite-out. Now there were three tenants that had their payments stolen from my property manager like this. So mine was one of the three from my tenant. And the thief also broke into two other real estate offices around the same time. So the thief broke into three offices total, apparently.

 

Keith Weinhold (00:07:01) - Now, the question that we're leading up to here is, I tell you more about this. Who is liable for this missing payment? And really, there are five parties here where you could give an answer. Is it the thief, the manager, the tenant, the bank or me? The investor who is liable for that stolen payment? Who should make good on it? Who will make good on it? Now, the amount that we're talking about is a stolen rent of $1,550. Okay. This is a rental single family home that I have. So I've been out this $1,550 for about a year now. And by the way, the tenant that had the rent payment stolen a full year ago, they still live there in their rent is now 1750, but it was 1550 them. Now I'm only making a thing of this a full year later and starting to ask my manager to make me whole now. And that's just because I've got a lot going on in life and $1,550. That's just not enough to make that big of a deal over.

 

Keith Weinhold (00:08:03) - But when life took a pause and I got to thinking about this some more, the principle of it is really bothersome. Wouldn't it bother you? I mean, if I let others like my manager get away with something like this, then I could get walked all over in other ways. Now, when I requested that the manager paid me because it was their drop box that it was stolen from, really, the only answer that they want to give me is that they can't pay because they don't have insurance to cover that type of loss. Well, I don't either. Now, should the bank be the liable party here for processing a payment where the pay to name was whited out, and then the criminal wrote over it with his name? And by the way, the criminal used his real name. And that's also part of how he got caught, which is unbelievable. And they also, though they do know who the criminal is because they have video surveillance of him at the bank depositing the money orders. I mean, how should he have been able to catch them? But the process of trying to get the criminal to remedy this or the bank to remedy this, those approaches have not worked.

 

Keith Weinhold (00:09:14) - And I think that the manager wants me to take the loss and pay because he doesn't want to take the loss. And you know, something? Admittedly, between the tenant, the manager and I, I'm probably the one that could most afford the loss, but that does not make it right now. At last, check the property manager who keeps refusing to pay up. They propose something ridiculous that I want to share with you in a moment. You're not going to believe it. Well, as you know, you have a written management agreement when you enter in an agreement to have your manager manage your property for you and that management agreement that's between you, the investor and your manager, just those two parties. And as we know, one job that your manager does for you is that they collect the rent for you. So I figured what I would go do is look at my management agreement, and I'm going to go cite that line where it says that the manager collects the money for the property owner.

 

Keith Weinhold (00:10:16) - But would you believe it? Nowhere in our agreement does it state that the manager collects the payment for the owner. So here's one lesson. The next time you're signing a new management agreement, see that that line is in there. I think it's just kind of easy to assume that it is. But, you know, those agreements, they're typically written by the property management company. So they might write it in ways that protect them. But here's the thing. The manager still doesn't want to pay $1,550 and was stolen from the drop box. They had proposed something that seems wild to me when I said I'm not going to let go. They told me that their plan is to ask the tenant to pay by adding an extra 150 or $200 to their monthly rent payment until the deficit is paid up. So that would be what, something like eight months of payments. Now, I doubt that the tenant would agree to something like that. If the manager is accepting rent in a drop box, it seems like it's the manager's responsibility to make sure that it's secured.

 

Keith Weinhold (00:11:20) - So to me, of the five parties involved here, it should be either the criminal, the bank for processing the payment that way, or the manager that should be held liable. One of those three parties, not the property owner and not the tenant. So you've got to believe that I consider firing this property manager and using someone else. And by the way, whenever you have to do that, if you ever do have to do that, and I've had to do it before, you can ask the provider that sold you the property for new property management recommendations, or you can find some new property managers by checking online forums with other clients that have actually used property managers. If you replace your manager. What that does is that your manager, they're going to lose more than just that 8 to 10% monthly management fee. They'd also lose future leasing fees. They lose any arrangements that they have with service providers to service your property, like plumbers and electricians. When it comes time for you to sell your properties that your manager manages for you, that manager might also lose the ability to collect referral fees at that, manager has the real estate license so you can make firing your manager hurt them more than you might think.

 

Keith Weinhold (00:12:40) - Now, I don't like hurting anyone in business. That's why I'm trying to find a constructive way to resolve this. But the manager has had a long time to make this right with me. They're probably just hoping I would forget about the whole thing. The property manager does not want to take the loss, and I will not either. I'll keep you updated on how this weird situation concludes here, but yeah. Hey, I'm an investor just like you. I want to dig in and get involved sometimes and see if something like a stolen rent payment happened with a stock that you own. I mean, you might take the loss there and you wouldn't even know that it happened. So I like real estate investing trends agency with a manager. I don't have the day to day involvement responsibility, but yet I can see a lot of what's going on with the monthly statements that they send me. Or if I have a concern, I know who I can directly contact to remedy something. And if you're a new real estate investor, please be mindful that this situation with my manager and the stolen rent payment is not typical at all.

 

Keith Weinhold (00:13:45) - In 20 years of doing this, I have never had a situation like this. In a few minutes here, we're going to discuss how feasible it is that America could eliminate the property tax altogether. And our guests. He's also going to tell us why he's been seeing more people like you paying tax on the gain from the sale of your primary residence. Hey, would you like to see me at breaking down real estate investing concepts on a whiteboard? Yes, a magic marker in hand with a whiteboard and an easel. Well, you can watch me do that from the comfort of your home. Over on our YouTube channel, we recently launched our explained series, and I begin it by breaking down basics and just showing you an actual net worth and actual cash flow statement, and then figuring out how you can take those and learn exactly when you can quit your job and retire. It's easier to do the numbers over there than it is here on an audio format, and later I'll whiteboard some more advanced concepts for you soon, like explaining an inverted yield curve.

 

Keith Weinhold (00:15:00) - Watch me on the whiteboard in our explained series. It is free on YouTube right now and our channel is pretty easy to find because it's called get Rich education. Eliminating the property tax. Next I'm Keith White hold. You're listening to get rich education. Role under the specific expert with income property, you need Ridge lending group and MLS 42056 in gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them.

 

Keith Weinhold (00:16:20) - It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Speaker 5 (00:17:02) - This is author Christine Tait. Listen to get Rich education with Keith Reinhold and don't quit your Daydream.

 

Keith Weinhold (00:17:19) - A renowned tax and wealth expert is back on the show with us today. He's also a CPA, and he's the CEO of a terrific tax firm called Wealth Ability. He's the best selling author of the Mega-popular book Tax Free Wealth, which you may very well want to check out again, because he just updated that book with a third edition. I have the original tax free wealth on my bookshelf.

 

Keith Weinhold (00:17:40) - Welcome back to Dr. Tom Wheelwright. Thanks, Keith. Always good to be on your show. Tom, we have a lot of real estate investors listening. Why don't we talk about property tax? It applies to one whether they own income, property or whether they own a primary residence. Tom, I thought about the discussion that we were going to have today. I was thinking about it yesterday. And you know what happened? I looked out my window and the garbage had just been picked up from the curb, and this was shortly after my driveway was plowed of snow. Okay, now, if an alien came down from another planet and we described that there's a property tax in the United States, so we'll probably believe, oh, all right. Well, they're going to like, pick up your trash and like, plow your driveway for you and everything for that property tax you pay. It's like, oh no. Well those are separate services that I pay. So really what I'm getting at is maybe more philosophically in big picture, should there be a property tax? That's a big question.

 

Keith Weinhold (00:18:37) - Yeah. But let's do talk about what property tax funds. So property tax funds schools. It's the primary funding mechanism of schools. If you talk to an old timer they still call it school tax sometimes. Yeah it funds schools. It funds fire departments. It funds the police. So those are the three big services that have funds. This is why, by the way, Keith, when there was that group in Seattle that took over that section of the city and the government refused to send to kick those people out. I don't know if you remember this a couple of years ago. And I'm going, wait a minute, why are we paying property taxes? Because the police force and the fire department were being paid by property taxes on the buildings that had been taken over by this renegade group. Wow. And so I have a commercial property. I pay a huge property tax on that commercial property doesn't house children, so I don't send children to school, but I still pay tax for education. Why? Because I need educated employees, so I'm happy to do that.

 

Keith Weinhold (00:19:37) - I pay for fire protection. I pay it for police protection. I think what the money is used for generally is fine. I don't have an issue with that. The challenge I have with the property tax is twofold. One is it is a true wealth tax. If your property goes up in value, you pay more tax and it's a tax on inflation, because if you're a property goes up in value because of inflation, you pay more tax. And then second of all, you're out to sell your property. But it's also a regressive tax. So people who have no more income, they're on fixed income, they're Social Security. They have a pension plan whatever that their property goes up because of inflation, not because it's a better property and they're paying more tax even though their incomes not going up. That's my biggest challenge with property tax. That's really a good point. I had never thought about it that way before. The property tax can be a regressive tax. Therefore you pay a higher rate with a lower income, which is what a regressive tax means.

 

Keith Weinhold (00:20:40) - I know that some jurisdictions try to help senior citizens out with that. Maybe you both say like the first 100 K of assessed property value is exempt. But yeah, on basis you're right about that. With it being a regressive tax. Tom, I kind of look around the landscape. We deal with a lot of markets and properties and providers nationwide here at gray, and I seem to see a national effect of property tax rate of about 1%, something like that's pretty common 1% of value on a 500 K property. You're going to pay about $5,000 in property tax. Of course, that varies substantially. New Jersey is a really high one. So the states in the Deep South are really low ones. But what are your thoughts about that 1% average national effect? Think about that tax rate. Let's say you bought that property for $50,000. You bought the property for $50,000 based on your income. You bought it for $50,000. Now, because of inflation, it's $500,000. Now it's really a 10% of what you bought it for.

 

Keith Weinhold (00:21:34) - So it's not really 1% anymore. It's 1% of the price value. It's not 1% of what you paid for it. This is where California with prop 13 they apt their property tax. Right. If you didn't move into a new property. I loved that proposition. Frankly, I love prop 13 because what I said was, look, if you're staying the same home, your property tax isn't going to go up. Because you get no more value out of it than you did when you bought it. So why are you getting more tax even though you're not getting more value? That makes no sense. I'm not a big fan. You know, like Texas has a they rely heavily on property. Remember we have three types of taxes. We have an income tax. We have a transaction tax which the biggest one is sales tax. But it's also excise taxes. And then we have property tax. And property tax and estate tax are the only two wealth taxes we have. And property tax is a true wealth tax.

 

Keith Weinhold (00:22:29) - Why is it allowed. Why can we have a property tax in our hometown. But we can't have a federal property tax because Constitution doesn't allow a federal property tax. But our state constitution probably does allow a state property tax. And so robbery taxes are really interesting. I talk about in tax free wealth. Tax wealth has a chapter on property sales and property tax. It's my least favorite tax because again A it's regressive and B it's a tax on something I've never realized. The only benefit I have is that I live in it. But that benefit's not gone up even though the property tax goes up. You brought up so many interesting things there. Sure, that proposition in California is what kept people staying in their homes for a very long time. But we think about property tax and should there even be one? As we ponder that big question, what do other nations do? Because a lot of times I know you look at foreign nations tax policies. Most localities. A lot of them have a local property tax.

 

Keith Weinhold (00:23:27) - I don't think it's uncommon. What's interesting to me is that Missouri is looking at getting rid of their property tax and putting in a transaction tax instead. So in other words, you don't pay a tax for owning the property. You only pay a tax when you sell it. Well, that actually makes more sense. You know, in previous episode we talked about more versus United States. We talked about that whole idea of a wealth tax and realized gain. And some states do this already. California does this, Hawaii does this, Pennsylvania does this where you have a tax when you sell the property, an excise tax when you sell the property, or a transfer tax, if you will? That makes some sense because you did get the money. You actually have the ability to pay the tax. It's not coming out of your earnings. It came out of the sale of the property. So it's a tax on the sale. Frankly, if I had to choose, I would probably choose the transaction tax.

 

Keith Weinhold (00:24:23) - I mean, I would choose to have very little tax. I think we need fire. We need police. Those two things we absolutely need we need roads. We should have taxes to pay for those school. I'm a fan of school choice. And should we have property tax pay for those? Or is that something that we ought to pay for some other way? I don't know, there is argument that, again, that should be maybe you ought to pay that out of sales tax or a transaction tax. Yeah. I think I'm feeling your vibe on that one time that a transfer tax of real estate is somewhat more palatable than this ongoing property tax that you have to pay, because the transfer tax probably is realizing a gain there. Along with that, even though we probably don't like that piled on top of ongoing property tax, for sure. We think about property taxes, something that applies to every homeowner, whether they own income, property or not, is the pretty well known primary residence capital gains tax exemption for quite a while.

 

Keith Weinhold (00:25:16) - That's been 250 K if you're single and 500 K if you're married. Can you tell us more about that and where the direction of that's going? And is that adjusting with inflation or what are your thoughts. Yeah, it's not adjusting for inflation unfortunately. It's interesting. Some things adjust for inflation. Some things don't. Tax brackets adjust the exclusion for your primary residence doesn't. And your deduction for miles driven for charity doesn't adjust for inflation. But your deduction for miles driven for work does adjust for inflation. So it's very interesting to see what does Congress say. We're going to adjust for for inflation. What they don't. That came into effect under Bill Clinton prior to his presidency. You had to actually put your new house, had to be worth more than your old house is very much like a 1031 exchange where as long as you bought a new house that was equal to or greater in price than the sales price of your old house, you paid no tax but the minute you went down. So when, for example, you're retiring and you decide, well, I don't need all this house, my kids are gone, I'm going to go move into a condo on the golf course, or I just don't need that much space.

 

Keith Weinhold (00:26:25) - Then you had to pay tax. What happened in the Clinton era was we actually got this exclusion, which is as long as you live in the house for two years, two out of the last five years, you get 100% exclusion on the gain, up to 250, like you said, 250 single, 500 joint. I would love to see them index that. I think it needs to be indexed. Frankly, they need to adjust it retroactively because too many people got caught in this last run up where for the first time ever, I saw a lot of people paying tax on the gain from the sale of their house. Yeah, that's something that you hope that you don't have to do. We'll see if and when they do adjust that for inflation. I'm not always talked about property tax bill. Why don't we open it up somewhat more and talk more about what we discussed the last time you were here on the show with us? Well, I think we already learned then whether Americans, just over time, over the long term, are more likely taxed or more heavily taxed.

 

Keith Weinhold (00:27:24) - It seems like they're always piling on more and more taxes. What are your thoughts with where we're going on lighter taxation or heavier taxation? I said, well, we rarely get taxed less. We're actually taxed less than just about any other country. Just to be clear, we pay a lower share of our income in taxes than just about any other country. But of course, we have much, many fewer benefits. We don't have national health care. We have Social Security, but it's a small amount, right. In France, remember, they had these big protests, right? Because the French president raised the retirement age from 62 to 64. Why were so many people protesting that? Well, it's because in France the salaries aren't enough to keep up. And so they're relying on that. They can't save up and say, I'm going to retire earlier because I've saved up money. There's not enough income for them to save. So they're relying on the government to save for them. That was a hard thing for them.

 

Keith Weinhold (00:28:18) - We have a hard time understanding that in the US because our tax rates are so much lower. France, for example, I was. Reading. That's the other day. 50% of GDP goes to taxes in France. In the US it's about 26% of GDP. So we're almost half of what percentage of our GDP goes to taxes. So they're the highest. What's happening is you're seeing Germany. There's this going up Korea. Theirs has gone up, Japan theirs has gone up. And the US, they expect ours to be up. It's 28% of GDP within a few years. So it's all relative, right. The problem is, is that the taxes are more and more as a proportion of our gross domestic product. If you think the government should stay out of our lives, then you're on the wrong end of that stick, because that means that the government's getting more and more involved, and more and more money is being spent by the government instead of the private sector. Well, Tom, you've been here on the show with us a lot of times.

 

Keith Weinhold (00:29:16) - We've talked about how your rental income gets taxed. We've talked about capital gains tax and property tax and sales tax and income tax, one tax type we haven't talked about. When we think about whether things just get worse as the government piles on more taxes, is there any threat in your mind of a tax for those that don't know what that is? That's basically a head tax. That's a tax that's imposed on you just for existing. Is that a possibility? Zionist capitation tax and not a decapitation tax. It might feel like one. Yeah. It's, uh, commonly called the poll tax write poll. As in poll. You go to the polls that the number of people that is actually allowed, the government could impose that that is allowed under a constitution, a poll tax. Great Britain has a poll tax. So it's not unheard of. I haven't heard a lot of people talk about. The problem is, is that a poll tax is a tax on voters. And we know politicians don't want to put a tax on voters.

 

Keith Weinhold (00:30:16) - Right. So where's the incentive to vote? They're more likely to put a tax on corporations who don't vote. I'll tell you the favourite tax. The favourite tax is to put a tax on out-of-towners. Somebody who's coming into your place like a travel tax. One of the key policy points of any tax unit is you want to export your tax to people who don't vote for you. So you're always trying to put the tax on somebody who doesn't can't vote for you. Because if you put on people who do vote for you, you will soon lose your job. Interesting point. That's why you see taxes on Ubers and taxis and hotels, resort taxes. You see those kind of tax skills are basically export tax, right? They're taxing people who don't live and vote in your state or in your location. A poll tax would be a tax on people who do live in your state or location. I have a hard time seeing that one coming down the line. More likely is you really wanted us to be more competitive with the rest of the world.

 

Keith Weinhold (00:31:17) - We'd have a value added tax in the United States, we do not have one. And if you wanted to make us more competitive with the rest of the world, if you really want to raise funds or you want to pay off the deficit, or you want to get rid of an income tax, the best way to do it would be a value added tax. Well, maybe you, the listener, just have a shred of a little something to be thankful for. There are tax types you've heard of that we don't actually have yet. There actually are some remaining. It seems like they'll all get used up. Europe has a. Europe uniformly has a 20% value added tax that just goes to increases the price of your meals at a restaurant, increases the price of every product you buy. That's a value added tax. That's a national sales tax that is common in the rest of the world. We're the only major developed country that doesn't have one. Well, at least in Europe, they're not asking that.

 

Keith Weinhold (00:32:06) - When you get your restaurant meal bill that you add a tip onto the tax about, like what's happening a lot of times here. And I think a lot of people aren't even aware of that. That's another absurdity. Yeah. Another absurdity of being a consumer in the United States today. Tom, you're really an expert in helping people understand that there are so many parts of the tax code out there for reducing one's taxes. The tax code, mostly most of the pages are about tax reduction. There are just a few pages about the tax tables. And then basically the rest of the tax code says you have to pay the tax in those tables if you don't do these other things. So tell us more about how one and everyday people can learn and get informed by being matched up with the right professional, so they can learn about all those exceptions to paying those taxes in the tables. I appreciate your promotion of tax free wealth because that's the starting point. You really do need to understand the concepts, and the concepts are all in tax free wealth.

 

Keith Weinhold (00:33:00) - Okay, so really inexpensive way for you to get an education. Once you've got the education though, you do need a team around you. And what I think the most important person, well outside of your bookkeeper, who I actually think is the most important person of that team, I think your number two person is your CPA. And I'm going to be very specific. There are a lot of people who hold themselves out as tax advisors, and I would not touch them with a ten foot pole. Whether it's I don't want a financial planner giving me tax advice, nor do I want a CPA, give me financial advice. Let's have a specialist do the specialist work. I don't want an enrolled agent. And the reason I don't want enrolled agent. If I'm really simple, that's great. But remember enrolled agent, they have very little education. They took a test. An IRS test that takes a couple of hours. That's all they did. If you're a business owner, you're a serious investor. You need a CPA and you need a CPA who cares more about you than they do about protecting themselves from the IRS.

 

Keith Weinhold (00:33:59) - This is one of my big complaints about some of my fellow CPAs is they seem to be so concerned about an audit. And my question is, if you're so concerned about an audit, does that mean you're afraid of the IRS? And if your CPA is afraid of the IRS, it's probably time to get a new CPA. That's right. Well, please, I tell you, we have a resource on our website where you can connect with Tom's team and get messed up with the right advisor. That is it. Get rich education complex. But like Tom said, a good thing to do is read his book, Tax Free Wealth first. That way you'll be able to ask the right questions so you can get the right answers from the right professional that you can be messed up with. Tom, do you have any last thoughts? Here is we're still relatively new in a year here when it comes to taxation, and one taking their plans forward through the year. Let's remember that we have an election coming up this year.

 

Keith Weinhold (00:34:54) - And one of the biggest issues in this election is going to be taxation. There's certain politicians that would like to take the 2017 tax reductions and extend them. There are others that would like to eliminate them and actually raise taxes. A couple of years ago, we had a proposal called Build Back Better. Great. Started as a $6 trillion proposal and ended up being $2 trillion and change the name to, quote unquote, the Inflation Reduction Act, or as I like to call it, the Inflation Enhancement Act. But that's going to be back. So you may love one party. You may hate the other party. Just know that when you go to vote, think about you are voting for a tax increase or a tax decrease depending on who you vote for. Look at their policies. Look at what they propose. Look at what they've been talking about. Don't believe for a second that they're gonna all of a sudden say, well, we're not going to raise taxes, when in fact they're looking at you and they're going, is that my money in your pocket? It is a presidential election year.

 

Keith Weinhold (00:35:59) - The good news is you now have a way for your voice to be heard this year in taxes are part of that, Tom. We're right. It's a great having you back on the show. Thanks, Keith. Sometimes I hear people that pay property tax but yet don't have any children themselves. They say that, well, since property tax often funds schools that they're opposed to paying it. Well, let's look at it this way. I'm a person that doesn't have any kids yet. And even if I never do have kids, well, when I was a kid myself, I attended public school. So therefore I was the beneficiary of adults paying property tax to fund the school that I went to. So therefore, when you think of it in those terms, it's more palatable for a, I suppose, non father like me to pay it forward, pass it along and pay school tax for others. So though there may be other objections to paying property taxes, not having children, that's often not such a valid reason when you think about it that way.

 

Keith Weinhold (00:37:07) - Now, I think that the Liberty First Society's Christian Hall, she has an interesting take on property tax. Here's what she said. And I quote, property tax should end when you complete the sale or purchase, just like you do when you buy groceries or a bicycle. It's theft of ownership to keep paying property taxes, especially when government has the authority to take your property. When you don't pay your taxes for three years. That's not property tax, that's rent, and you're a tenant in your own home. Property tax makes government the owner of your property, not you. End quote. And again, that is from the Liberty First Society's Chris Ian Hall, thought provoking, if nothing else. Now, when it comes to finding the right professional to get real estate investors, all of our generous and legitimate deductions that we enjoy, I mean, it is one of the five ways real estate pays. After all, you do need to find the right pro so that they can find all the deductions for you.

 

Keith Weinhold (00:38:13) - And this is just the time of year to get that right. For more than ten years now, I have had the world's number one tax firm do my wealth strategy, my tax strategy and my tax preparation. I even use my bookkeeper through them. They understand what real estate investors need. They make sure that I don't miss out on optimizing benefits and deductions for mortgage interest and tax depreciation and property tax and cost segregation, which accelerates my deductions. And they make sure I get infinite capital gains tax deferrals and bonus depreciation and so much more. All the good things that real estate investors get when you work with an investor centric tax professional. In this way, you can also legally write off many of your expenses for property management and maintenance and utilities and even your travel. So you can do that by connecting with Tom's team by visiting get rich education.com/tax. That is this week's actionable resource. Until next week I'm your host Keith White. Hold don't quit your day dream.

 

Speaker 6 (00:39:25) - Nothing on this show should be considered specific, personal or professional advice.

 

Speaker 6 (00:39:29) - Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 7 (00:39:53) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

 

Direct download: GREepisode486_.mp3
Category:general -- posted at: 4:00am EDT

Has America already descended into a depression worse than the 1930s Great Depression?

Today’s guest, Doug Casey, suggests that we have. He joins us from Buenos Aires, Argentina, where inflation has been 100%+.

Is real estate cheap, adequately priced, or overpriced?

America’s national debt is so bad that we must now spend $1T annually just on the interest alone. 

Keith Weinhold and guest Doug Casey explore the silent economic depression in America, discussing signs and impacts on daily life. 

They compare real estate affordability across locations, viewing housing as a consumer good. Doug offers insights on Argentina's housing market, inflation, and the new president's influence. 

They critique government intervention, fiat currency, and advocate for gold-backed currency, emphasizing moral values. 

Strategies to counter currency debasement, like investing in durable goods and property improvements, are shared, alongside the benefits of spending on experiences and potential tax advantages of real assets.

Timestamps:

The silent economic depression (00:00:00)

Discussion on the concept of a silent economic depression and how it may be affecting America.

Real estate and property management issues (00:02:32)

An unusual property management incident and the impact of inflation on real estate in Argentina.

The guest's background and consistency (00:03:53)

The guest's background, consistency in views, and a discussion on diverse viewpoints.

Comparison of housing costs (00:04:59)

Comparison of housing costs and other expenses between the Great Depression era and the present day.

Real estate in the United States and Argentina (00:06:08)

Comparison of real estate prices and living expenses in the United States and Argentina.

Housing as a consumer good (00:09:29)

Discussion on housing as a consumer good and the impact of government policies on housing and wealth creation.

Comparison of housing costs and amenities (00:10:56)

Comparison of housing costs, amenities, and political changes in Argentina.

Impact of inflation on standard of living (00:14:37)

The impact of inflation on capital, standard of living, and the unsustainability of the current economic situation.

Government deficits and inflation (00:18:05)

Discussion on government deficits, inflation, erosion of the middle class, and the role of the government in creating inflation.

A Currency and Gold (00:20:22)

Doug Casey discusses the benefits of using gold as currency and the potential impact of government involvement.

Investing and Loans (00:22:42)

Keith discusses investing in real estate and loans, providing insights and tips for beginners and veterans.

Government Numbers and Inflation (00:24:54)

Doug challenges the accuracy of government unemployment and inflation figures and predicts higher inflation levels due to excessive money creation.

US Involvement and Financial Meltdown (00:27:57)

Doug discusses the impact of US military involvement, potential financial meltdown, and the unstable foundation of global debt.

Strategies to Counter Currency Debasement (00:32:05)

Doug presents the concept of saving in durable goods as a strategy to counter currency debasement and avoid capital gains tax.

Beating Inflation (00:34:41)

Keith proposes spending money as a way to beat inflation and improve quality of life, while Doug emphasizes the importance of saving for the future.

Doug Casey's Novels and Publications (00:36:44)

Doug promotes his novels and encourages listeners to subscribe to internationalman.com and watch his YouTube channel for more insights.

Improving Quality of Life and Beating Inflation (00:38:03)

Keith suggests making improvements to one's home as a way to beat inflation and improve quality of life, without incurring higher tax assessments.

These are the timestamps covered in the podcast episode transcription segment, along with their respective topics.

Resources mentioned:

Show Page:

GetRichEducation.com/485

Doug Casey’s YouTube Channel:

https://www.youtube.com/@DougCaseysTake

Doug Casey’s blog:

InternationalMan.com

Doug Casey on Donahue in 1980:

https://youtu.be/uAk6_74m_kI?si=qeQw0404xcTIAsOU

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

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GREmarketplace.com/Coach

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Our YouTube Channel:

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Keith’s personal Instagram:

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Complete episode transcript:

 

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. Is America suffering from a silent economic depression? It's gradually creeping into your life, but you just haven't noticed. That's what today's guest believes. Where do you look for signs of this? And what do you do about it? A silent depression today on get rich education. If you like the get Rich education podcast, you're going to love art. Don't quit your day dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free! Sign up a get rich education.com/letter. It's real content that makes a real difference in your life, spiced with a dash of humor. Rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.

 

Speaker 2 (00:01:06) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker 2 (00:01:13) - This is get rich education.

 

Keith Weinhold (00:01:22) - Welcome to GRE, heard across 188 world nations, including Equatorial Guinea. I'm your host, Keith Weinhold. This is get rich education, the voice of real estate investing since 2014. How can your quality of life and your one and only standard of living actually be getting worse today, especially here in the United States? From your iPhone, with fast Wi-Fi to a stable electrical grid to a bounty of produce for you to select at the supermarket, well, we'll soon learn why today's renowned guest and prolific author feels like we've already entered a silent depression. He is going to make his case. We have plenty to get to with our guest. But first, I've got a problem with one of my property managers, and this is a really weird one. In two decades of doing this. This is among the weirdest. What happened a while back is that one of my ten ends that this manager manages. Okay, the tenant paid his rent with a paper money order and he placed it in the property managers drop box.

 

Keith Weinhold (00:02:32) - They're at their offices. The money order was stolen out of the drop box by a thief. The manager doesn't want to take responsibility for it. And I'm the one that's been out. The rent money, the $1,550. I've told the manager, no, I'm not going to be pushed around like that. So there are more details on that, which I expect to tell you about next week. It is an interesting situation to say the least. I'll give you more on the payment stolen from the manager's overnight drop box. Now today's guest will join me from Buenos Aires, Argentina, where they currently have inflation of perhaps 100% or 200% per year. We're going to talk about real estate and probably more with what he calls the silent, depressed. Now I'm probably a more upbeat, optimistic sort than our guest in general, but that does not make him wrong at all with this silent depression. But here, in a world where we've increasingly heard the word diversity a lot for the last decade, well, there are a lot of ways to think of diversity, and I like to champion some diversity of thought around here with our guests viewpoint today.

 

Keith Weinhold (00:03:53) - Now, I just recently saw a YouTube video of today's guest on The Phil Donahue Show in 1980. It was probably about the best known talk show that there was back in that era. And by the way, I'll leave that link in the show notes for you so that you can watch it too. And since today's episode is episode number 485, you can get the show notes either it get Rich education comp 485 or on your pod catcher. But yeah, Phil Donahue, he was kind of before my time. But yeah, really well-known show. And it's interesting to see today's guest and what he looked like back then. And from watching that video myself, I can tell you that one place where I do need to give this guest credit is with consistency. Now, does every single the world is going to end sort of thing that he says will happen? Does that end up happening? That's up for you to determine. But, you know, he has been consistent on promoting his ideals for a smaller government and more he's returning.

 

Keith Weinhold (00:04:59) - Guest. Let's meet him and discuss the silent depression. Are we on the verge of an economic depression known as a silent depression, where you're not aware of it? Today's guest has pointed out that during the 1930s Great Depression, the average home cost just three times the average income, but today it costs about eight times as much. The average car costs about 46% of a year's earnings back then. Today, it eats up about 85% of the annual average wage. Rent, which previously claimed just 16% of yearly income, now demands an astounding 42%. So by these metrics and others, you might wonder if the average person is actually in a worse position than during the Great Depression, which was the most challenging economic period in the last hundred years. A lot of people feel it. You might be getting squeezed, and by the end here you'll hear some new ideas for what you can actually do about it. We have a rather revered guest here with us today. He's been here a few times before to discuss other economic and real estate concepts.

 

Keith Weinhold (00:06:08) - He's a very popular author, often writing around the topic of crisis investing and known as the International Man. He hosts a podcast on YouTube called Doug Castaic. He's known as the International Man because he's extremely well traveled. He has residences in multiple nations today. Hey, it's great to have back on GRI the incomparable Doug Casey. Thanks. Okay.

 

Doug Casey (00:06:30) - It's a pleasure to be here. At the moment I'm in Buenos Aires, where I've lived part of the Earth for a long time.

 

Keith Weinhold (00:06:38) - Truly the international man living up to it today. Doug, I touched on housing to start with. With real estate show housing is one's biggest recurring expense in life, unless it's taxes. But today I actually think it's a valid question. Is real estate cheap in the United States? Is it adequately priced or is it overpriced? Now, depending on how you slice it, the median U.S. home value is 450 K, but if your mind shoots right to dollars like that, when you consider valuation, the dollar has been debased so much that it's a pretty poor measuring stick.

 

Keith Weinhold (00:07:15) - I know you like gold. A bar of gold is the same today as it was 100 years ago and a thousand years ago, and today it takes about 40% fewer ounces of gold to buy a home today than the long run 100 year average. So what we just did there is we got rid of dollars. We compared the relative cost between two real assets gold and real estate. You brought up a really good point in one of your articles, though. I think it's a better way to measure the cost of housing as a percent of one income, it takes two and a half times to three times as much of that annual income to own a home or rent a home today than it did in the 1930s. So when we think about housing costs, what are your thoughts?

 

Doug Casey (00:07:58) - It depends on where you are and where should I start? Right now, as I said, I'm in Buenos Aires and the apartment that I'm in here is about 5500ft² in a part of town, which is very much like the Upper East Side of New York.

 

Doug Casey (00:08:16) - It's called the Recoleta. Now, what would a a very classy top building with 24 hour security apartment of 5500ft² cost you in, uh, on the Upper East Side of New York, I'd say probably $20 million, roughly here in the Buenos Aires. This apartment is really got a current market price of about $1 million. In other words, 5% of what it is in New York. Yeah, costs of maintaining it are in line with that. That's point number one. Point number two is in most of the world, or certainly here in South America, when you buy something, you buy it for cash. In the U.S., when you buy something, it's usually for a mortgage. And the old saying, I'll give you the price you want if you give me the terms I want. Right. Not quite as attractive as it was just a while ago, where the average mortgage, now 30 year mortgage fixed in the US 7%, and for a while it was 8%. What do I think of the price of housing in the US? That's where most of your listeners live.

 

Doug Casey (00:09:29) - First of all, housing is not, in my opinion, an investment. It's a consumer good. It's very expensive. Consumer goods are not throwaway consumer goods like toothbrushes. Longer live consumer goods like a suit of clothes longer yet like a car and a house is just a longer alive consumer good. But an investment is something that produces new wealth, right? Housing doesn't it? Can? I mean, if you use it as a business. Yes. Okay, look, treat your house like a consumer. Good. That's the first mistake that everybody makes. They think it's an investment. That's going to go up. It's not. It's like a car. It should depreciate. It's got expenses to maintain it. That income that maintains you. I know you can rent it out and so forth, but.

 

Keith Weinhold (00:10:20) - Yeah, we champion residential income property around here. Something that I think you and I do consider an asset. But yeah, you're completely right. When you talk about the primary residence side, a home is primarily a liability, not an asset.

 

Keith Weinhold (00:10:32) - Why is that? Because a home takes money out of your pocket every month. Rather than putting money into your pocket every month like you touched on. Doug, before we go on about that 5500 square foot apartment there in Buenos Aires, I'm not familiar with the area. Can you just tell me a little bit more about the amenities that you have there? Are there very steep condo association dues? Is there a doorman? Tell me more about it.

 

Doug Casey (00:10:56) - Well, we have a doorman here in the building. We only have six apartments in this building. I have a two story penthouse, so it's probably the best apartment in the building. This area, the Recoleta. Like I said, it's like the Upper East Side of New York. We have lots of fine restaurants with short walk away. I pay my maid. We have a full time maid here. In addition, she earns $1,000 a month. Where can you get a full time maid in the US for a thousand bucks a month? Let me point something out.

 

Doug Casey (00:11:25) - That's very interesting. In Argentina, they elected a new president. And this is one of the most radical political changes in all of Western history. The new president of Argentina is a chap named Javier Mula. He identifies radically and openly as an anarcho capitalist. In other words, what he's interested in doing is basically tearing apart the government of Argentina and getting rid of as much of it as he can, all of it that we can. Now. Argentina is full of taxes, full of regulations. That's a delightful place to live. But if you want to do business or create wealth, it's a very bad place to live.

 

Keith Weinhold (00:12:10) - Well, with inflation.

 

Doug Casey (00:12:11) - Yeah, exactly. I mean, right now they have inflation of about, they say 140% per year, but it's more like 200 or 300% per year. You can trust the Argentine government's figures at all. You can only trust the US government's figures marginally more. But Melaye, as we talk, is firing massive numbers of government employees. It's eliminating agencies and so forth, and the government and the next step will be radically reduced taxes, radically reduced regulations.

 

Doug Casey (00:12:41) - So this department here is, I think, within the next five years, going to be selling for about what one what its sister on the Upper East Side of New York might be selling out. So I hope to make 10 to 1 on my money on this piece of real estate as a speculation. And it's a nice place to live in the meantime.

 

Keith Weinhold (00:13:01) - Yeah, with Malay in Argentina, it'll be interesting to see if he sticks with their currency moving from the Argentine peso to the dollar. It sounds like he might already be backing off of that. But getting back to your condo there, Doug. And yeah, that would be a terrific arbitrage play if you indeed bought low in the Buenos Aires market goes up, it sounds like an exceptional value you get there. We talk about our homes overpriced today, especially in the United States. Or are they underpriced? We talked about how one spends more of their proportion of income on housing today, and if that might make them trend toward this silent depression. But of course, you also get more home today.

 

Keith Weinhold (00:13:39) - I mean, 100 plus years ago in the United States, a new Victorian style home, it had sparse amenities and maybe 950ft². And today, an American home averages 2415ft². That's the figure. So you might pay two and a half times more of your income, but you might get two and a half times more square footage and of course, maybe like you're finding in your place there in Argentina, Doug, the average American home, it has features today that would have been considered unthinkable a hundred years ago. Luxuries, things that would have been considered luxuries back then like air conditioning and multiple bathrooms, quartz countertops, closets so vast that you could play pickleball inside them. So you're getting more home today, and it really hardly feels like a depression era lifestyle for many. But there are some less fortunate people, and inflation has widened this gap between the haves and the have nots. So what are your thoughts, especially when it comes to housing and the fact that you're getting more today? But not everyone is.

 

Doug Casey (00:14:37) - Because advances in technology, number one and number two, the fact that the average person is wired to produce more than they consume and save the difference, of course, we have more today than we did 100 years ago. That goes without saying, but it doesn't seem that way because even though workers are more productive than they were in the past, everything is fine. As with debt today, people talk about inflation as if it's just part of the cosmic firmament. It just happens. It doesn't happen. The government is the sole and entire cause of inflation. It does it by printing up money directly and indirectly. And what that does is it destroys the capital that you save. Americans save in dollars. Okay. You want to get ahead. You use more than you consume and you save the difference in dollars. But when the government destroys those dollars through inflation, your standard of living goes down. Now, that's been disguised through that. It used to be that when you bought a house, you paid cash for it.

 

Doug Casey (00:15:52) - Then many years ago, it started out with the. A five year mortgage with 20% down. Now we're talking about 30 year mortgages so that you really never own your home. Inflation is the real problem. It destroys capital. It destroys people's standard of living. The standard of living, generally speaking, in the US is going down. It's disguised by the fact that when you borrow money, you're either taking capital that people have saved in the past and you're using it for consumer goods now, or you're mortgaging your future for a higher standard of living. Today, all of that we have in the US, I think is unsustainable. And we could have either a credit collapse if they don't create money fast enough, or if they raise interest rates too high, or we can have something resembling a hyperinflation we have down here in Argentina. Either way, it's going to be very, very bad news because in an advanced industrial society like the US, to poison the money supply with inflation is asking for economic catastrophe.

 

Doug Casey (00:17:06) - So I think what we're looking at over the next ten years, and this is true for a number of reasons, not least of them, is the fact that Americans have elected in Washington people that are the equivalent of Jacobins during the French Revolution. I mean, they have the same ideas. I'm looking for very, very tough times, quite frankly, not just in the US, but almost everywhere in the world.

 

Keith Weinhold (00:17:32) - Today in the United States, compared to 100 years ago, one spends more of their income on housing and transportation and healthcare, and less on food and clothing. And yet, Doug, to your point about inflation, like dollars are such a poor measuring stick. That's why earlier, when we look at the cost of housing, I tried to discard dollars by going ahead and looking at the ratio between the home price and the gold price. I brought up the point last month with our audience that actually there's no such thing as grocery inflation or rent inflation. It's the government that creates the inflation.

 

Keith Weinhold (00:18:05) - So it's not landlords or grocers that are creating inflation. Those higher prices are just the consequence of the inflation that the central bank creates. And that's creating this erosion of the middle class, because those in the lower middle class and the poor, they don't have assets that benefit from the inflation. Yet they have the same fixed consumer costs that we're talking about here, like housing, transportation, health care, food and clothing. Talk to us some more about the problem in the government and how that could help lead us toward a silent depression. I know you brought up the point that the US government is running embedded deficits of $2 trillion per year, and that number is going to go much higher, if only because the interest cost alone is $1 trillion per year.

 

Doug Casey (00:18:49) - Yeah, people have to stop looking at the government as being their friend. It's not. It's a predator. It's a dead hand on top of society. It's certainly not a cornucopia, which is the way most people see the government. The government will give them stuff, right? The government will do stuff now it doesn't.

 

Doug Casey (00:19:08) - The government produces absolutely nothing that it doesn't take away first from society as a whole. So they have people have to stop looking at the government. It's a friendly big brother. It's more like increasingly the kind of big brother that you might have discovered in George Orwell's 1984. If we want to save the idea of America, which is one of the best ideas that humanity has ever had, we have to get rid of the government or as much of it as we can, and go back to the values, moral values, social values type of thing that this country had 200 years ago, what it was founded. I mean, that's my answer to the question. And the money, the dollar itself is a floating abstraction. It's a fiat currency. It's an IOU. Nothing on the part of a bankrupt government which can't even tax enough to give the money value. It just prints up more money and people out of inertia accept them. Well, there's nothing else they can use to trade Buck. We should go back to gold as being money and even a gold backed currency.

 

Doug Casey (00:20:22) - A currency is money. It's just a medium of exchange and a store of value. You don't need to insert the government and a central bank in between you and what you do with your fellow citizens in a country. That's why we should use gold, which for thousands of years has proven to be the best thing to use is money. It's one of 92 naturally occurring elements. And just as aluminum is particularly good for building airplanes, uranium is particularly good for making nuclear. Power plants. Gold has unique characteristics that make it unique. Almost unique. Uses money so the government shouldn't be involved in this. In all, this is a radical thought. I know that's something that most people have even thought about. They'll say, oh, this is completely ridiculous off the wall. This is unrealistic. This is the direction that the country should be going, but it's going the opposite direction at an accelerating rate. So yeah, we're looking at a nasty depression and it's been building up for many years. This isn't a recent phenomenon that's come up just since Biden, although the Biden pieces are making it much worse.

 

Doug Casey (00:21:37) - This is a trend that's been building up slowly for decades.

 

Keith Weinhold (00:21:42) - With the government having all of that debt that I just mentioned, that would create the propensity for them to create even more dollars so they can pay back their own debt, which could create more inflation and just this perpetually vicious cycle. Doug and I are going to come back and talk more about where all this is headed. When you think about the profundity of some of these things, if our currency went on to a gold standard or a Bitcoin standard, the fact that the government would not even be involved in currency issuance anymore, as you think about that, Doug and I have more on the silent depression when we come back. This is Jeffrey situation. I'm your host, Keith Weintraub. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four plex's.

 

Keith Weinhold (00:22:42) - Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains in your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.

 

Speaker 4 (00:24:04) - This is Rich dad, sales advisor Blair Singer. Listen to get Rich education with Keith Winehouse. And above all, don't quit your day dream.

 

Keith Weinhold (00:24:22) - Welcome back to get Rich. And we're talking with Doug Casey, the international man, about the Greater Depression. That's really a silent depression as he sees it. And Doug, I want to know where you see us headed, because a lot of people see today unemployment under 4% in the United States, we have GDP growth that's decent. The rate of inflation is still higher than the fed target but has come down substantially. The Fed's even talking rate cuts this year. So where do you see this all headed with the silent depression.

 

Doug Casey (00:24:54) - First of all, it's a big mistake to trust the government's numbers. If you look at the way the government computed unemployment and the way it computed inflation back in 1980, it's very, very different from the way these numbers are computed today. And if you computed them the way they did way back when in 1980, you'd find that our current unemployment is something more on the order of 10%, and current inflation is not I don't know what they say.

 

Doug Casey (00:25:27) - It is not 2%, 3%, 4%. It's also more like 10% or more. But with the amount of money that they've created, I mean trillions of dollars that have been cranked out of Washington in recent years. I expect we're going to see inflation go back to much, much higher levels. There's no limit to how bad it can get. And since the government has promised all these things to various pressure groups in the US, they have to be paid. The taxes aren't there to do it. The borrowing they can't borrow anymore, especially as interest rates go up. And incidentally, I point out that because of the debasement of the currency, that's a better phrase to use than inflation. The basement of the currency is an actual thing that's done by the government and its central bank, whereas inflation people think, well, maybe inflation falls on the butcher or the baker or the gasoline maker. No it's not. Those people fight the effects of inflation. Inflation is something that comes out of Washington because the government has all these pressure groups that get all kinds of benefits.

 

Doug Casey (00:26:43) - They're going to have to keep printing up money to pay for these things, and you're going to wind up in the same position as Argentina has wound up. In fact, it's going to be worse because unlike Argentina, which doesn't have any foreign involvements, they had a war with the Falklands 40 years ago. But there's basically no Argentine Army. There's no Argentine Navy to speak of. But the US has 800 military bases scattered all over the world. They're very expensive to maintain. The natives aren't particularly happy to have foreign soldiers in their lands. In addition to the war in the Ukraine, why were involved in a border war between two countries is a mystery to me. And now we have Israel and Gaza dusting it up. Literally, I feel sorry for both sides, but on the other hand, I don't epoxide both their houses. It's not our problem. This has been going on between these people for 2000 years, and the US getting involved in it is going to add on to our ongoing bankruptcy and maybe start World War three.

 

Doug Casey (00:27:57) - There's new wars popping up all over the world that are going to cost us huge amounts of money. And of course, the Defense Department spends giant amounts of money building high tech toys, which are basically useless in today's military world. It goes on and on. It's a big problem, and I suspect we're going to reach a crescendo by the 2024 election, assuming we have one. I don't know who's going to win that election if had anybody, quite frankly. So it's we're looking at chaos, political chaos, economic chaos, the potential for a financial meltdown because the whole world is built upon a foundation of debt, which is a very unstable foundation to build things on. And of course, you've got all kinds of sociological problems, starting with total and absolute corruption of the US educational system, which is spread like poison throughout society. We're seeing that now, incidentally, with the presidents of Harvard and Penn, MIT, but all of the higher educational institutions in the US suffer from the same problem. This is like a many headed hydra.

 

Doug Casey (00:29:10) - Where are we going to take any one instance of a problem in society? And when we examine it, you find that it's even worse than you might think. Like I was talking about education. Your kids are being indoctrinated a great cost. I think it's the University of Michigan has 161. I believe that's the number for the University of Michigan D administrators. That's the diversity, equity and inclusion administrators. All are earning over six figures. And what are they doing? Well they're justifying their positions by doing absolutely ridiculous things in education that shouldn't be about educating as opposed to. Enforcing somebody's goofy ideas of diversity and equity and inclusion. So anyway, we've got lots of problems beyond real estate and beyond the high level of rent that people have to pay today. But listen, it's so hard to build a new house. God forbid, build a new apartment building today by the time you jump through all the hoops. Local. County. State. Federal. The cost of construction is probably twice what it should be.

 

Doug Casey (00:30:21) - Because of inflation. Because of regulations. I hate to be so gloomy, Keith, I do, but.

 

Keith Weinhold (00:30:28) - Well, there's a lot there. We talk about diversity. We're in an era where people are very conscious of that. But a lot of people think of it with regard to race or gender or perhaps religion. But I like to champion diversity of thought as well. And then when it comes to we.

 

Doug Casey (00:30:44) - Don't have any of that anymore.

 

Keith Weinhold (00:30:45) - Yeah, yeah, that's for sure. But when it comes back to the root of productivity, I think that's really important because whether the government gives away money to programs in the United States or outside the United States to Ukraine or Israel, whether you believe in that or not. And a lot of the giveaways have been in the hundreds of billions of dollars to those nations were now running a national debt of over $34 trillion. And my point is, is that the United States doesn't produce as much as they used to. However, the United States produces a lot of dollars and a lot of debt.

 

Keith Weinhold (00:31:17) - And when the government has giveaways, either domestically or internationally, a productive person is the one that has to end up paying for that. So, Doug, we think about a lot of the problems out here, much of it coming back to the root of inflation. But you tell us more about what can be done. In fact, I know you have a practical, common sense way where you don't save in dollars. You and I have talked before about how real estate or gold can give you a hedge or even help you profit against inflation, but you've talked about the importance of real material things, like food that you can store, or light bulbs that you can put away, or tools that you can use because you're also not taxed on those sorts of things. So can you tell us more about that?

 

Doug Casey (00:32:05) - There was a book written years ago, and it's still available on Amazon by an old friend of mine named John Pugsley, and the book's name was The Alpha Strategy. The point that John made in that book was that rather than trying to save in dollars, you should save in things that have a long shelf life that you're going to need and use.

 

Doug Casey (00:32:30) - So, for instance, if light bulbs common thing, they burn out if you wait until there's a sale on light bulbs. Get them cheap. Buy them in quantity, buy them extra cheap, put them aside. You're not going to have to buy a light bulb forever. Whereas if you don't plan ahead and do it that way. If your light bulb burns out, you don't have one. You got to get in your car or in gasoline. Buy it at the convenience store where it's going to cost you. License much, and you can do this with many areas of your life planning ahead. In other words, this is a variation, if you would on the old Mormon idea. A lot of people are aware that Mormons or their religion tells them that they should put aside three months or a year worth of food, and it's storing food which is properly canned and so forth, so that no matter what happens, they'll always be able to eat. Well, the alpha strategy is something that you take that attitude towards food and you apply it to all the consumable things that you have in life.

 

Doug Casey (00:33:37) - And as they go up in price, lightbulbs go up from $1 to $5. With inflation, if you made an investment that kept pace $1 to $5, you'd have to pay capital gains tax on it. But you don't on the consumable that you put aside. So, I mean, this is just one of a number of strategies that you can use to counter the effects of currency debasement.

 

Keith Weinhold (00:34:03) - I love that as a strategy on what you can do. You are not taxed on the gain in price or value of an entire pallet of food or tools, like a tractor or ladder or table saw. So it's a really elegant way to beat inflation. Doug, I have an idea, and it might not be one that you heard before. It might even make the listener laugh a little bit. Here. I have an elegant way to beat inflation and improve your quality of life at the same time. And it's something really simple. And that solution is to spend your money. It's an elegant way to beat inflation and improve your quality of life.

 

Keith Weinhold (00:34:41) - At the same time. If a mediterranean cruise for you and your wife is going to cost $18,000 this year, and you think it's going to cost $22,000 next year, spend beat inflation and get an experience that you'll never forget that as long as you've got something set aside already spend, it's a way to beat it and live a better life.

 

Doug Casey (00:35:01) - I can't argue with that case. But on the other hand, it's wise to put aside capital for the future, because once you consume that grows, the capital is not there anymore, and you may need it in the future. But this is one of the problems created by currency debasement. People start thinking in terms of live for today, because tomorrow we might die with their money, and that's not a good way to get wealthy. Although it's true, you do beat some of the effects of currency debasement that way.

 

Keith Weinhold (00:35:34) - Yeah, if there were no inflation, there would be less incentive to do something like that. In spend would also be less incentive to invest.

 

Keith Weinhold (00:35:41) - But Doug, you've given us a lot of good ideas today for this creeping of the silent depression fueled by inflation and some actionable things about what we can do about it. Give us any last thoughts and then how our audience can learn more about you.

 

Doug Casey (00:35:56) - I've written a series of novels. Well, they're quite well written that explain a lot of these principles in the form of an exciting story. They're called speculator, where our hero, uh, gets involved in gold mining in Africa and a bush war and so forth, and it becomes a drug lord. Or we show a drug lord can also be a good guy, and then he becomes an assassin because he's so pissed off. There are four more novels to come. So I suggest people go on Amazon, pick up those three novels that are out there. That's one thing they should do. Second thing, I'd encourage you to go and subscribe to International man.com, and you'll get a great free daily blog from me and other people. It's really a good publication.

 

Doug Casey (00:36:44) - And the third thing on YouTube is we have Doug Cassie's take where once or twice a week I, uh, talk about different subjects.

 

Keith Weinhold (00:36:54) - Though our subject is depression, our conversation has not been thoroughly depressing. So thanks so much for coming back out of the show.

 

Doug Casey (00:37:02) - I see you again, Keith.

 

Keith Weinhold (00:37:10) - Well, you might wonder what kind of prepper weirdo is going to save a bunch of durable goods like tires or crescent wrenches, or even store an extra car, or a few extra cords of firewood that may or may not be feasible for you, some of it having to do with your storage capacity, whether you live urban or rural. But what you can do if you're really concerned about persistent inflation is to beat it by making improvements to your own home, and you can do that sooner rather than later. And see, that way you might actually get to enjoy the item and integrated into your lifestyle. For you, that might mean getting yourself new windows, or a new water heater, or renovating a bathroom, or remodeling the kitchen.

 

Keith Weinhold (00:38:03) - And if you can avoid activities, though, that create a higher tax assessment, then you will not get taxed on those real assets, all while improving your quality of life at the same time. So there's an idea, some real guidance, spurred from today's chat with Doug Casey. Big thanks to him. Next week, I'll tell you more about the weird problem with my rent payment that was stolen from my property manager and what I'm going to do about it. My manager says he's not taking the loss. I'm not taking the loss either. Interesting stuff. Until then, I'm your host, Keith Weintraub. Don't quit your day dream.

 

Speaker 5 (00:38:44) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively. The.

 

Speaker 6 (00:39:12) - The preceding program was brought to you by your home for wealth building.

 

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Direct download: GREepisode485_.mp3
Category:general -- posted at: 4:00am EDT

Join our live, virtual event for Alabama income properties tomorrow at: https://gremarketplace.com/webinar/

Learn a lesson from a story about when I was a landlord. My neighbor was a fourplex owner-occupant, just like me. We built a fence together. He told me that he can’t wait to get his building paid off.

Don’t pay down your mortgage debt. In most cases, you can invest those dollars elsewhere for a higher return.

I discuss two things build wealth: 1) Leverage. 2) Borrowing against your assets, tax-free.

You don’t have substantial equity in your properties because you paid them down. You have substantial equity because its value has appreciated.

Today, you can report tenant rent payments to the credit reporting agencies.

Alabama has low property prices and the nation’s 2nd-lowest property taxes.

GRE Investment Coach, Aundrea Newbern, MBA, joins me. 

Join our live event for Alabama income properties Tuesday, January 16th at 8 PM Eastern. The provider is offering 5.99% interest rates and 3% PM fees on your first three properties. Sign up now at: https://gremarketplace.com/webinar/

Timestamps:

The introduction (00:00:01)

Keith Weinhold introduces the podcast and mentions the topics to be covered, including lessons from being a landlord, a formula for wealth, and a focus on a lucrative property market.

Keith's early real estate experience (00:02:46)

Keith shares his early experience as a landlord, comparing notes with another landlord and discussing their strategies for living for free in their fourplexes.

Debt mindset and wealth building (00:05:30)

Keith discusses his divergent mindset from his fellow landlord, emphasizing the importance of leveraging debt for wealth building and portfolio expansion.

The power of leverage and portfolio growth (00:10:08)

Keith explains how he leveraged equity to expand his real estate portfolio, emphasizing the benefits of using accumulated equity to acquire more properties.

Real estate market diversification (00:11:22)

Keith advocates for buying properties across different states and markets to access better deals and maximize portfolio growth.

Tenant management and credit reporting (00:13:42)

Keith shares tips on tenant management, including the option to report rent payments to credit bureaus to incentivize timely payments and manage tenant relations.

Financial perspectives and real estate strategies (00:16:12)

Keith discusses contrasting financial perspectives with a CFO friend, highlighting the benefits of leveraging debt for real estate investments.

Market pulse and expense control (00:20:26)

Andrea discusses the market pulse for income properties, focusing on the Southeast region, and addresses the trends in controlling investors' expenses, particularly related to insurance rates.

Conclusion and invitation (00:22:02)

Keith and Andrea conclude the segment by discussing the migration trends in the Southeast and the importance of controlling expenses for real estate investors.

Lower Property Management Costs (00:22:55)

Discussion on the stabilization and decrease of property management costs due to technology and institutional investment money.

Investment Timing and Market Trends (00:25:01)

Encouragement for investors to take advantage of the current market conditions, including interest rates, prices, and inventory.

Alabama Market and Incentives (00:28:24)

Details about the Alabama market, including low property prices and incentives such as the 333 property management fee and 5.99% interest rate.

Live Event and Registration (00:32:33)

Information on how to register for the live virtual event to learn about the Alabama market and have questions answered in real time.

Final Encouragement and Event Promotion (00:33:27)

Encouragement to attend the live event to learn about the Alabama market and connect with an investment coach.

Resources mentioned:

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to Dr.. I'm your host, Keith Weinhold, with lessons from being a landlord myself including some tough ones. A simple formula for how to get wealthy and stay wealthy without paying any taxes legally. Then we focus on one of the most lucrative property markets in the United States, and it includes an invitation to you today on get Rich education. If you like the get Rich education podcast, you're going to love art. Don't quit your day dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free. Sign up at get Rich education.com/letter. It's real content that makes a real difference in your life, spiced with a dash of humor. Rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.

 

Speaker 2 (00:01:12) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker 2 (00:01:19) - This is get rich education.

 

Speaker 1 (00:01:28) - Welcome to GRE! From Dorchester, Massachusetts, to Westchester, Pennsylvania, and across 188 nations worldwide. I'm Keith Weinhold. Hold in your listening to get Rich education. I trust that you're prosperous and well in a still somewhat new year here, along with my usual gray research of market trends, teams, and properties I've been serving on and writing for the Forbes Real Estate Council. Next week we have a thought provoking show on whether America is actually undergoing a silent depression that's creeping up on us, but I've got an important story to tell you today. It's really rather formative and foundational to the, I suppose, mind spring of abundantly minded real estate ideation. When I bought my first Seminole fourplex building for $295,000 about 20 years ago, you know, there was an identical fourplex right next to it. It was bought about the same time as mine, and it was bought by another guy about my age. His name's Patrick. We each had these blue fourplex next to each other, and I still remember his full name, although I'll just stick with his first name, Patrick here.

 

Speaker 1 (00:02:46) - He was a data and security engineer. Really sharp guy. And by the way, he only paid 275 K for his nearly identical fourplex next to mine. And since I paid 295, I felt like I overpaid. But he and I, we got to know each other a little bit. We kind of had a similar path. All right, as owner occupants, each living in one of our four units and renting out the other three and doing that right next to each other. We would compare notes as to how it was going with being an on site landlord. And, you know, Patrick and I, we both kind of figured out that we were living for free. And that's because the three $725 rent incomes, there were enough to pay our mortgages and our operating expenses on the buildings, but after that, there was really nothing left over. But we effectively had a free place to live in one of the fourplex units. Now, a few times, Patrick and I collaborated on some projects together to improve things around our contiguous fourplex buildings, and I specifically remember that one day we had bought materials at Home Depot, and then we met outside to build a fence together, and it was just this cheap host and rail style fence that we made with two by fours and painted blue is something that he and I built at the back of our buildings in order to keep vagrants from cutting through our yards.

 

Speaker 1 (00:04:19) - This was in Anchorage, Alaska, and Anchorage has a lot of these paved bike paths all throughout the city. And vagrants also use those to get around. And we had this bike path right behind our fourplex. Now, as you know, I am not that good at building stuff or fixing broken stuff. Okay, but this fence project that we were doing, it wasn't too complicated. And I had Patrick right there to help. Now, by this time, I had probably owned the fourplex for about two years, and I was really just starting to get this realization for what real estate investing could do for me, because I had only made a small down payment, yet the fourplex had appreciated quite a bit. This was around 2005, and I didn't even know that that effect was called leverage yet. But anyway, Patrick and I, as we're building this fence together or talking about our properties, he said one thing I can distinctly remember, and it's something that a lot of people say, and that is, I can't wait until I have this property paid off.

 

Speaker 1 (00:05:30) - Now, back at this time, there was no gray, yet I'm still rather fresh and new to real estate investing. This fourplex was the only property that I owned, but already this desire to have the property paid off, that is not a feeling I shared that did not resonate with me. Okay, I responded to him with something like, oh, do you think that's the best use of your money? All right, because I had a mortgage interest rate of five and 3/8 at the time, and his was probably pretty close to that too. Well, I told him that I want to keep the debt on my property because instead I could invest my spare dollars elsewhere and get a better return than five and 3/8. And that fact would be true even if my interest rate were eight or more. Really, his only reply to that is that he just simply doesn't like having debt. That's about the only answer that he had, even though it's usually irrational to. Pay off good debt like that. Now my financial freedom ideas, they were still in their nascent period back then.

 

Speaker 1 (00:06:34) - I sure wasn't going around and saying that financially free beats debt free or anything like that. That wasn't quite putting it that way yet. I sure didn't say, hey, don't you know that the scarcity mentality is abundant and the abundance mentality is scarce? Or that compound interest is weak in compound leverage is powerful? Or that a rich man digs for gold and a poor man is concerned with the cost of a shovel. But I already knew that if you focus on debt paydown like taking all your extra dollars to accelerate the principal pay down on, just say one fourplex building, you are just borrowing one deep hole in to the property. It's like a deep hole that might even cave in. Instead, wealth is built by expanding your portfolio size. More doors, more income, more leverage, serving more people with housing, and actually more safety because you can be in more markets that way. See, you gotta give your money multiple jobs. So the lesson is, Patrick and I were already on divergent mindset paths because by that time I had read books like Rich dad, Poor Dad, and it got me thinking differently.

 

Speaker 1 (00:07:54) - You know, it was the whole don't get your money to work for you get other people's money to work for you and that whole thing.

 

Speaker 3 (00:07:59) - I don't even think about it. I'm built a little differently, I guess, because I have had people come up to me and say, how do you do it, sir? How do you do it? I don't even think about it.

 

Speaker 1 (00:08:10) - Nuh uh. Geez. I, I do it because if you don't want to run with the herd, then you've got to think and act differently in order to diverge from the herd. Keep leveraging more income property. So Patrick and I built the fence that day, and I don't really know how much he paid down his building's principal balance, which is a lot like sending off your dollars to go die. But I can tell you what I did. Okay. About another year went by after building the fence. So now we're into year three of me owning the fourplex. What I did is I kept the building, but I got a home equity line of credit, second mortgage on the fourplex, and then I use those funds to make a down payment on a single family home so that I could live offsite and get some privacy from my fourplex tenants.

 

Speaker 1 (00:09:06) - So this is the start of me acting diversely from the herd. It was the opposite of paying down my property, borrowing against it instead. Yeah, I took more debt out on it, which is a tax free event, by the way, and you could go to 90% loan to value back then. Yes, that's back when dollars were being lent out more freely. I mean, that's what wealthy people do. What do wealthy people do when they need money? They just keep borrowing against the value of their assets. And it's a tax free event since the IRS does not tax debt. So if you want to be wealthy, that's what you do. What I also did by doing this was expand my portfolio size, increase my leverage ratio. And since I vacated one of the four fourplex units, now I had four rent incomes rather than three. I mean, that is, some don't live below your means grow. You mean stuff right there. And then two years after that, I kind of did the same thing again.

 

Speaker 1 (00:10:08) - I borrowed against my properties, and I used the funds as a 10% down payment on a second, more expensive fourplex building. So now I lived in a single family home and I had to fourplex buildings. And then a few years later, when equity accumulated in those two fourplex buildings, I sold them and did a 1031 exchange into two larger apartment buildings. Everything I've done so far is tax free, all expanding the portfolio, all serving more tenants, all reducing my risk despite increasing my debt, because the tenant pays the debt for me. And it was all with almost none of my own money. Instead, it's just using accumulated equity from one property and rolling it into more. Just keep rolling those same funds forward. Okay, so that is all what I'll call one line of leveraged equity. And by then I was beginning other lines because I started to buy property out of state and in multiple states. And it wasn't until 2012 that I discovered that buying across state lines is possible. It's proven. And that's where the real deals are.

 

Speaker 1 (00:11:22) - I mean, you might want to own some properties in your local market or you might not. But see, the thing is, is that there are 387 MSAs, Metropolitan statistical areas in the US as defined by the Census Bureau. So if you're only buying in your local market, chances are you're not getting the best deals. And another way to think about your portfolio's growth in your real estate equity management is to consider the fact that you don't have substantial equity in your home right now because you paid it down. You have equity in your home because it increased in value. So you can use equity from your home to buy perhaps ten other rental homes, as long as you can control cash flow. So it's about trading away antiquated notions of safety and security in exchange for freedom. But now most of Patrick and I's conversation about being neighboring fourplex landlords for a few years was, I would say, more anthropogenic meaning relating to human activity. Yes, that is dealing with tenants because although the discipline is called property management, it could just as well be called tenant management.

 

Speaker 1 (00:12:39) - And early on, this is where my naivete got exposed, like with a tenant that was laid on the rent and he said he'd pay it, but then he didn't pay rent and I had to a victim early on. I inherited that tenant from the previous owner, so I did not get to screen him. Now, three weeks ago here on our Christmas episode, when we did How the Rent Stole Christmas. That was fun. I shared a lot of my tenant relations tips with you on how to help ensure that your rent gets paid, but today you can do something that you couldn't do when I got started in real estate, you can report your tenants rent payments to the credit reporting agencies and affect their credit score. So if you are a do it yourself landlord today and you're doing your screening, you know, I would tell prospective tenants that before they even apply for your vacancy and put it in a positive light, make it known that one attribute of renting from you is that with their timely rent payments, it can help their credit score.

 

Speaker 1 (00:13:42) - So position it positively rather than any sort of threat, and it's going to help you get more timely rent payments if that's been a problem for you. Yes. Institute reporting to the credit bureaus, the credit scoring agencies, Equifax, Experian and TransUnion. That is another handle that you have as a landlord today. Yes. The only guarantee is that there will be some inevitable real estate problems for you. But like problems with anything else in life, your mind and my mind, we tend to inflate the significance of problems, whether it's a tenant that you just can't get to change their AC filters, or an unexpected water leak, or an overgrown tree that you have to pay an arborist to handle, or a persistently late paying tenant. Oftentimes, your fear about the problem is worse than the problem itself. In fact, it was the stoic philosopher Seneca that said, there are more things likely to frighten us than there are to crush us. We suffer more often in imagination than in reality. Gosh, isn't that so? On point? Yeah, we suffer more in imagination than we do in reality.

 

Speaker 1 (00:15:01) - You can say that about most any problem that you've ever had in your life. Now, some things have changed and some things have stayed the same since I began my real estate journey with that blue Anchorage fourplex. It looks like there are some signs of hope for financial education in the near future here. Formal financial education. When it was recently announced that Pennsylvania, my native state, will become the 25th US state to have a formal, standalone financial education class in high school. Hey, that's a really good start. But one constant seems to be that the dispiriting saying don't live below your means. You know, that still seems to trump the aspirational grow your means. And it's not about whether a person is intelligent or unintelligent in adopting one or the other. It's really more about having the ability to think freely. Now, today, I have a friend that's the chief financial officer, the CFO of a publicly traded corporation. He and I got together a few times last year, and he can talk about earnings reports and EBITDA.

 

Speaker 1 (00:16:12) - And he knows that language of business. He's a super sharp guy. But he told me that he has his house, his family's primary residence paid off. And I asked him about that, and I told him that I keep the maximum debt on mine. And why now? Your primary residence. It's not like a fourplex where your tenant pays your debt for you, but you've got to pay your own debt on your own home. Yet the mortgage rate on a primary residence is lower than it is on a rental. So the question persists is that really the best place to park your dollar? Is that where it's doing multiple jobs? You've got to consider that it's illiquid and its ROI is zero. Now, I didn't quite put it that starkly with my CFO friend, but in any case, and remember, this is a chief financial officer. He's a guy that's good with money. You know, at least he did give me this. He said from a financial perspective, he knows that it makes zero sense to have a paid off home.

 

Speaker 1 (00:17:16) - It just makes him feel better. And, you know, I accepted that this is not the way that I view the world. And that's okay. Coming up next in in-house chat with one of our gray investment coaches as we talk about the real estate market overall, controlling your rising expenses as a real estate investor and about real estate in the southeast Alabama, as well as an invitation for you with some pretty generous incentives that I think you're going to be excited about. I'm Keith Reinhold, you're listening to get Rich education. Role under the specific expert with income property you need. Ridge lending Group Nmls 42056. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.

 

Speaker 1 (00:18:45) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.

 

Speaker 4 (00:19:34) - This is our rich dad, Poor dad author Robert Kiyosaki. Listen to get rich education with eat whine oh God put your daddy.

 

Speaker UU (00:19:45) - You you you you you you you you.

 

Speaker 1 (00:19:53) - Hey. Well, today I'd like to welcome you in our terrific investment coach, Andrea, for an in-house chat here. How's it going, Andrea?

 

Speaker 5 (00:20:01) - Hey, Keith.

 

Speaker 5 (00:20:02) - Doing good. Trying to recover from the holidays. How are you?

 

Speaker 1 (00:20:05) - Yeah, it's still a fairly new year here. The holidays were a few weeks ago with the advent of a new year. Andrea, a lot of people make a resolution to increase the residual income, often by expanding the real estate portfolio. So really just taking the temperature here. How's your feel about the pulse of today's income property market?

 

Speaker 5 (00:20:26) - It's been interesting the past year, right? We've had a lot of ups and downs. I would say what we've typically seen from the different markets across the US, particularly the southeast, which is what we're going to talk about a little bit more today. We have seen that there's still inventory out there right now. We've seen interest rates slightly go down, not significantly, but we have seen some decreases. And we're seeing pretty steady demand for income properties right now.

 

Speaker 1 (00:20:49) - Yeah. Mortgage interest rates down more than 1% from their peak in October last year. Yeah. Oftentimes real estate and the pulse of the market comes down to supply and demand.

 

Speaker 1 (00:21:00) - To your point the demand sure is not going away. We've got a population growth, and we have a lot of pent up demand from the huge millennial cohort. And then over there on the supply side, there is so much new building in the multifamily space, but there's really a dearth of supply and a dearth of new supply coming onto the market for 1 to 4 unit properties.

 

Speaker 5 (00:21:23) - Yes, there is. And we're seeing a lot of that growth, like I mentioned in the southeast, which are the markets that I personally invest in. And I, you know, have a lot of our listeners go to to purchase as well. So very excited about what we're seeing happen in 2024 and what that means for our investors.

 

Speaker 1 (00:21:38) - Yeah. Now, back at the beginning of the year, two prominent moving companies, U-Haul and United Van Lines, they released their migration report for the year ended last year. And the southeast quadrant of the nation by far, that had the most net migration growth states in their list easily.

 

Speaker 5 (00:21:58) - It did. And I think that's going to continue. We're going to talk about that a little bit.

 

Speaker 1 (00:22:02) - Well, we pull back in. Just think nationally before we go into the southeast. You know, oftentimes investors of course are thinking about controlling their expenses. That's been a big issue that bubbled up last year is probably going to continue to be one this year. So we're talking about investors controlling their expense side from mortgage rates to property insurance rates that have really spiked. So do you notice any trends with controlling investors expense side? Since you and I are active investors ourselves?

 

Speaker 5 (00:22:34) - A couple of things that I've noticed in the southeast and my personal investments, as well as some of the markets that we have turnkey relationships with. Keith, we are seeing insurance continue to go up just a little bit, but we're not seeing those reckless, you know, doubling that we saw over the last 2 to 3 years. So it's going up not seeing doubling. So I'm hopeful that that continues. And it's not we're not seeing that fast rapid increase.

 

Speaker 5 (00:22:55) - The other thing that we're seeing a lot of is a lot of our turnkey companies that we work with, we're starting to see kind of property management costs stabilize or go down in certain areas. So we're seeing that expense decrease. The other thing is we're not seeing as rapid of increases and material costs and labor costs right now still going up. Things are not, you know, going down by any means, but we're not seeing those costs go up as much either. So this is allowing the investors to have a little bit more money in their pocket than they did over the last 2 to 3 years during the pandemic.

 

Speaker 1 (00:23:25) - Yeah, it's not that big of a consideration for an investor on the expense side. But yes, I do see more evidence of lower property management costs. So can you talk to us more about that trend? Is it more of the infiltration of technology into the space that's bringing the cost down for property management?

 

Speaker 5 (00:23:44) - Such a great question. And I do think that is part of it for sure.

 

Speaker 5 (00:23:47) - We're seeing a couple of things here. We're seeing some of these smaller kind of mom and pop property management companies. They are stepping out. They can't really afford to keep up with the technology and all the changes that are happening in the property management space, and what's causing that happen is these property management companies that can do a little bit larger scale. They're able to get these nicer systems and this better technology and things for their investors to be able to use as well as their tenants. And we are seeing that bring the cost down of property management a little bit.

 

Speaker 1 (00:24:16) - You're seeing more infiltration of institutional investment money into the single family rental space and rentals up to $4 per unit. And those companies, those institutional investors have deep pockets, and they have the ability to go ahead and implement a lot of these technology systems. So that's making it so that others, including these smaller mom and pop property management companies, they need to keep up with their technology that's lowering property management costs across these mom and pop property managers are going to be put out of business.

 

Speaker 1 (00:24:48) - So there are so many pros and cons about institutional investment money coming into the space. And that's just one of the potential pros for everyday investors.

 

Speaker 5 (00:24:57) - You're exactly right. I have nothing to add to that because you were spot on with that comment.

 

Speaker 1 (00:25:01) - Anything else, just in general that you see across the real estate market that you really think a real estate investor needs to know today?

 

Speaker 5 (00:25:08) - One thing that I really think is important for people to keep in the back of their minds is I talked to a lot of our listeners who are very, very interested in dipping their toes in the water, or they've been kind of sitting to the side the last few months, kind of seeing what will happen with the market. Right now is the time for you to invest. If you wait a few months, I suspect in several of these markets you may see interest rates come down, but you're going to see prices go up and you're going to see even more of a lack of inventory. So just kind of keep that in mind as you're thinking about where to invest, how to invest and when to invest.

 

Speaker 1 (00:25:38) - Here in gray. We've often talked about the fact that higher mortgage interest rates actually correlate with higher prices, not lower ones. And I think some people were sitting on the sidelines saying, is that really going to be the case? Yeah, we saw mortgage interest rates triple and prices still went up. A lot of people think rates are poised to fall this year. It's probably going to put more upward pressure on prices. Andrea, when we talk about one controlling their expense side, I think something that a lot of people overlook, and this is so simple, is buying in a state or buying in a market that simply has low property prices, because that's the best indicator of giving you a high ratio of rent income to purchase price. Low priced states.

 

Speaker 5 (00:26:23) - That's right. Yeah. And so I mentioned this in the last couple of minutes. But the southeast and the Midwest are those two areas where you really do have those lower cost properties that even if you're an entry level investor, you can get in there pretty easily.

 

Speaker 1 (00:26:36) - And now we've had a lot of investor interest in Florida with all their in-migration. We still like that market, but prices have really run up there. So we've increasingly had investor interest from our followers and people that you help coach about another southeastern state.

 

Speaker 5 (00:26:52) - That's right. So that market is Alabama. So we have had a provider that has been offering turnkey, fully renovated properties and sometimes new construction in the Alabama market. And it has been an absolute wonderful market for our listeners that have actually invested in that area.

 

Speaker 1 (00:27:09) - Alabama, compared to a place like Florida, has substantially lower property prices. We're talking about you as an investor here controlling the expense side. Alabama has the second lowest property taxes in the entire nation, second only to Hawaii. So that's something that's really baked into your recipe here with income property in Alabama.

 

Speaker 5 (00:27:32) - That's right. I mean, there's been increases in property taxes across the US over the last few years as values come up. But of course, in Alabama you haven't seen those fast rises.

 

Speaker 5 (00:27:42) - And because the rates are so low, it's going to adjust kind of accordingly with the market. So you're not going to see anything creep up really quickly there as well.

 

Speaker 1 (00:27:49) - In general. And a lot of jurisdictions you see property taxes increase commensurately with the value of your property. And we've been in Alabama with a really renowned provider there that provides property almost statewide across Alabama, and you're going to co-host with them on a great live event for Alabama Income Properties, because right now they're really offering a good set of incentives and they have available properties. So tell us more about that.

 

Speaker 5 (00:28:24) - Like you mentioned, they have properties across the state. So you have kind of an option of which geography within Alabama that you would want to invest in. They have different kind of price points as well. And then like you mentioned, they have some very exciting incentives. And I don't think that I have seen an incentive this good as far as property management goes in a really long time. So what they are offering our listeners is called the 333.

 

Speaker 5 (00:28:50) - And essentially what this is, is if an investor wants to purchase up to three properties, you can purchase one, 2 or 3. You're not committed to a certain number. You're going to get a 3% property management fee for three years on these three properties. Once you go over three, it does revert back to the normal price of 9% for the property management that you can get 3%, which is kind of crazy.

 

Speaker 1 (00:29:11) - So the incentive offered on this great live event that you're going to co-host tomorrow night is that three, three, three incentive. Let me just review it so that we have it right for a limited time. There's going to be a 3% property management fee for three years on up to three properties.

 

Speaker 5 (00:29:29) - That's exactly right. Yep.

 

Speaker 1 (00:29:31) - That is really attractive when it comes to controlling the investors expense side.

 

Speaker 5 (00:29:36) - It certainly is. That's not the only incentive they have, though. So they're also offering across their entire inventory, 5.99% interest rate on the purchases of any of these properties. And that's really low.

 

Speaker 1 (00:29:48) - That is really compelling. Yes. So that's substantially lower even than what you can get for an income property rate today. Income property rates are typically, oh, something like three quarters of 1% higher than what you typically see on that 30 year fixed rate mortgage. And that's what we're talking about here. This builder and provider buying down your mortgage rate for you to 5.99% interest. Do you know about the terms on that. Is that 30 year fixed advertising or.

 

Speaker 5 (00:30:14) - Yes, that is 30 year fixed amortizing. So you're not looking at anything variable. You're looking at kind of your mortgage payment every single month, which is really nice.

 

Speaker 1 (00:30:22) - Yeah. That's like rolling back the clock to to three years with getting a mortgage rate like that. That's going to help a number of people. Andrea, I'd like to get your thoughts. Do you have very many people that you work with? Here are followers when you're coaching that want to self-manage remotely or do they want that remote property manager?

 

Speaker 5 (00:30:41) - I don't think in the past year I've spoken with one investor that plan to actually purchase and manage themselves remotely.

 

Speaker 5 (00:30:47) - Everyone wants to use the property management function, which this particular provider does have property management in house.

 

Speaker 1 (00:30:55) - So they will want to use that 3% property management fee. Not being a do it yourself or, you know, they're probably taking after me. I don't want the job of property management. That's just a business. I don't really want to have that much to do with. I love to outsource that duty to somebody else. A big reason that a lot of people self-manage their property is because they just don't have that much of a gap between their income and their expenses. So when you buy in an investor advantaged market like Alabama, where you have a high ratio of rent income to purchase price, you can therefore have one of those expenses. Be your property manager, especially when it's only 3% in this case. So those are some really good incentives. The three, three, three and a 5.99% interest rate. Is there anything else you can tell us, especially with on tomorrow night's live event with what markets within Alabama we're going to be talking about?

 

Speaker 5 (00:31:44) - Yeah.

 

Speaker 5 (00:31:45) - So we're going to focus on a couple different markets. We're going to look at Huntsville as well as Birmingham. We may also talk about some markets that are in the southeast that they have some properties in outside of Alabama. So just stay tuned. I'm not promising that. But we may talk about that a little bit depending on how things go. The other thing that I think is really important to keep in mind is we're going to have a live buying opportunity. So we're actually going to show you some of the properties that are available right now. You're going to be able to see all the financials on them. And you can reserve them as soon as you want right after we get off. While we're on it, however you want to do it, we can buy it tomorrow.

 

Speaker 1 (00:32:18) - That is a really actionable event. Tell us more about the event, how one can register and be on there with you so that they can have their questions answered by you and the provider in real time. That's really the benefit of you attending tomorrow.

 

Speaker 5 (00:32:33) - You can go out to GR webinars. Com you'll be able to register there. It'll be at the very top of the page. Make sure that you know you fill in all of your information. You'll get an automatic email that'll remind you to get on to the webinar tomorrow, and you can jump on. You're going to have the opportunity to ask live questions. So we're going to be there to answer them. And then we'll go through the properties. And if you're ready to reserve, I can hop on a call with you right after we get off of the webinar and kind of talk through what inventory that we have available and help you through that process.

 

Speaker 1 (00:33:03) - Well, Andrew, before I ask you if you have any last thoughts, just summing it up here. I really encourage you, the listener, to join the live virtual event because you can see real properties like Andrea mentioned in an Investor Advantage market and get any questions answered that you have answered in real time, whether it's about the cash flow or property insurance costs or your property manager.

 

Speaker 1 (00:33:27) - It's Grace live event for Alabama Income Properties tomorrow, the 16th at 8 p.m. eastern. So go ahead and sign up right away at Grace webinars.com. Any last thoughts? Andrea?

 

Speaker 5 (00:33:39) - No, I'm just excited to see more faces, see old faces and talk to you all about the market and the properties that are available.

 

Speaker 1 (00:33:46) - This is really going to help a lot of people. Thank so much for coming back onto the show.

 

Speaker 5 (00:33:49) - Thank you.

 

Speaker 1 (00:33:56) - Yeah. Here's an opportunity for you to learn about a market and connect with Andrea. Of course, when we talk about the Alabama real estate market, that entails many market varieties and geographies. In fact, Alabama has 12 of the nation's 387 MSAs. I very much encourage you to attend the live event from the comfort of your home. It's for you if you want to learn about a market and really the fundamentals that drive investor advantage markets, you can meet Andrea and perhaps add some property to your portfolio. It can give you long term equity growth and short term cash flow.

 

Speaker 1 (00:34:34) - And I have actually been inside walked Alabama properties with this provider. And it is exactly what they do. This isn't some side venture. And they've been in business a long time too. They serve out of area investors and they do the management for you too. This is Grace live event for Alabama income, property and overall in America, entry level homes are few. You're going to have a chance to own scarce assets that seemingly everyone is going to want over time. It's coming up fast. It's tomorrow night, the 16th at 8 p.m. eastern. Sign up now! It is free at Grace webinars.com. Until next week, I'm your host, Keith Weinhold. Don't quit your day dream.

 

Speaker 6 (00:35:23) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 7 (00:35:51) - The preceding program was brought to you by your home for wealth building. Get rich education.com.




Direct download: GREepisode484_.mp3
Category:general -- posted at: 4:00am EDT

Yes, simply "five". The number "5" has remarkable symbolism on both real estate investing the GRE way, and elsewhere in your life pathway.

See how real estate actually performed when compared to other asset classes in the past year: stocks, gold, bitcoin, and bonds.

Everyone knows that some commercial real estate is sagging, like office. Industrial is steady. Retail is actually booming.

Recession predictions were so bad. In the past year, we had low unemployment, rising GDP, solid corporate profits, and inflation fell. 

I explain what an inverted yield curve means and why it matters to you.

Not only does “Real Estate Pay 5 Ways”, but the number “five” often has significance in both symbolism and numerology.

Using a $40K down payment on a $200K property, I add up how “Real Estate Pays 5 Ways” and sum a lofty 46% total rate of return with today’s real-life numbers. 

We have available inventory of income property. If you’re ready to buy, contact our Investment Coaches. It’s free at www.GREmarketplace.com/Coach

GRE Marketplace properties are less expensive because: there’s no agent to compensate, selective investor-advantaged markets, and not dealing with owner-occupant emotions.

Timestamps:

Asset Class Performance (00:01:25)

Comparison of various asset class performances in the past year, including stocks, global stock markets, bitcoin, treasury notes, gold, and residential real estate.

Inverted Yield Curve Explanation (00:07:47)

Explanation of an inverted yield curve, its significance as a predictor of economic downturn, and a simplified example to illustrate the concept.

Five Ways Real Estate Pays (00:12:18)

Discussion of the five ways real estate provides returns to investors: appreciation, cash flow, return on amortization, tax benefits, and inflation profiting, with a focus on the symbolic significance of the number five.

Real Estate Returns Calculation (00:18:49)

Illustration of a simplified method to calculate the total return on investment from a real estate property, covering appreciation, cash flow, return on amortization, tax benefits, and inflation profiting.

Investment Opportunities (00:16:23)

Promotion of investment opportunities with Ridge Lending Group and Freedom Family Investments, emphasizing the potential returns and benefits of investing with them.

Upcoming Episodes and Conclusion (00:17:44)

Teaser for upcoming episodes featuring investment coaches and discussions on property tax, and a conclusion expressing the significance of real estate returns and investment.

Replacing Toilet Flappers and Spackle (00:23:56)

Discussion on conservative estimates, tax benefits, and property management costs in real estate investment.

Visual Explanation of Five Ways (00:25:09)

Explanation of the five ways real estate pays returns and the simplicity of real estate math.

Introduction to Get Rich Education (00:26:17)

Overview of Get Rich Education's history, team, and independent voice in the market.

Real Estate Market Inventory (00:28:40)

Discussion on the slowing real estate market, available inventory at GRE marketplace, and the importance of free coaching.

Ethical Use of Other People's Money (00:29:51)

Explanation of the formula for starting or growing a portfolio of buy-and-hold properties, emphasizing the use of a small down payment.

Benefits of Off-Market Properties (00:31:13)

Explanation of competitive off-market property prices and the advantages of buying direct, investor advantage markets, and property management solutions.

Safeguards in Property Purchase (00:33:57)

Importance of property inspection, lender appraisal, and independent third-party property inspection in property purchase.

Free Coaching and Financial Readiness (00:35:03)

Emphasis on the free coaching at GRE marketplace, the absence of upselling to paid courses, and the importance of financial readiness before investing.

Disclaimer and Host Information (00:36:05)

Disclaimer regarding the content of the show and information about the host operating on behalf of Get Rich Education LLC.

Resources mentioned:

Show Notes:

GetRichEducation.com/483

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Speaker 1 (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. I compare real estate to how other asset classes have performed. Give you a simple example to help you understand an inverted yield curve. Describe the significance of the five in your life. Then help find a match with the right income property for you today and Get Rich Education. If you like the Get Rich Education podcast, you're going to love art. Don't quit your day dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free! Sign up and get rich education.com/letter. It's real content that makes a real difference in your life, spiced with a dash of humor rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.

 

Speaker 2 (00:01:09) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker 2 (00:01:16) - This is get rich education.

 

Speaker 1 (00:01:25) - Welcome to GRE. From Johannesburg, South Africa, to Mechanicsburg, Pennsylvania, and across 188 nations worldwide. I'm Keith Weinhold and you're listening to Get Rich Education. This is where your educational major is real estate investing. And your minors are in real estate economics and wealth mindset. That's what we do here. It all culminates with your doctorate in financial freedom. Before we talk about real estate, we recently had a year that just ended. And to know their real estate is the right place for you long term at times, especially after a year ends, we need to compare that to other asset classes. So what actually happened last year? Elsewhere in the investing world? Stocks, the S&P 500 was up 25%, even though for most of it invest in stocks, you're only paid one way, not five ways, but still 25%. That's a pretty healthy return on tech companies accounted for most of the gains, yes, what they call the Magnificent Seven that is putting the team on its back.

 

Speaker 1 (00:02:33) - Yeah, these are the seven tech mega caps Microsoft, Apple, alphabet, Nvidia, Tesla, meta and Amazon. They surged more than 75% last year, while the other 493 companies in the S&P 500 have gained just 12%. Yes, the Magnificent Seven now accounts for nearly 30% of the index's entire value. That's per the Wall Street Journal. And speaking of the S&P 500, it just added a prominent new member a few weeks ago, and that is Uber zooming outside, the United States, global stock markets had their best year since 2019. Bitcoin was up 157%. Yes, you heard that right. 157 as the crypto winter thawed out last year, the yield on the ten year Treasury note was up just eight basis points. That's virtually unchanged. Very little movement. And see, that's also why mortgage rates ended the year at the same level they started at, which is near 6.5%. That is because mortgage rates track that ten year note. Gold was up 11%. And here in residential real estate it was up 4%.

 

Speaker 1 (00:03:51) - That's on the median price of existing homes. But it's only through November, not the full calendar year. Yes, real estate is such a laggard with reporting statistics. So almost everywhere y'all look prices are up up, up. Yes. It's not just for those essentials on your last grocery store run where they're up okay. The value of your assets fortunately is up too. And really, one of the few places that pain was felt was in the commercial real estate market. I think you know that. But let me tell you how that pain is positioned to get even worse shortly here. All right. U.S. office vacancy rates hovered around 20% last year. Now, that's a rate that was actually worse than during the 2008 financial crisis. More companies told workers, hey, get back to your desk, okay? Calling workers back to the office at Salesforce, Amazon, Blackrock. But still, card swipe data in America showed that only about half as many people are making the trip into the office compared to pre-pandemic numbers.

 

Speaker 1 (00:05:03) - And you've got some companies like meta, the parent of Facebook and Instagram, they're getting creative and actually subleasing their office space to other tenants. But not all commercial real estate is struggling. The retail vacancy rate fell to just 4.8% last year. Retail is not dead, and that retail vacancy rate, that is actually the lowest in 18 years since the real estate firm CBRE started tracking it. And big box stores and malls, shockingly, are. So back. There's also a big real estate demand for warehouses, data centers and industrial space, thanks to the recent surge of AI and that pandemic induced e-commerce boom. But we probably haven't seen the worst of it yet because, okay, within the next four years, about two thirds of commercial real estate loans will likely be refinanced, with interest rates much higher than they were the first time around. The last thing that we have to recap for you that we learned from last year is all of those god awful, dreadfully wrong predictions. A recession. So many predictions were so wrong.

 

Speaker 1 (00:06:27) - Instead, we had historically low unemployment and solid corporate profits. Inflation fell. Now there is one prominent financial media platform, one of the nation's biggest. I won't mention their name, though you've surely heard of them. This agency gave zero room for any other outcome because they predicted a 100% chance of a recession last year. 100%. All right. They really look wrong. Although let's be mindful, technically, due to a statistical lag, we often don't know if we are in a recession until after the fact. But if you think that we were late last year, understand though, not absolutely everyone was a Debbie Downer, say back in late 2022, let's give some credit where it's due. Moody's Analytics chief economist Mark Zandi, he was one of the few experts who kept the faith for a soft landing. He pointed out the recessions typically come out of the blue, and that there was a good chance the fed would get inflation under control without taking the economy. Now, one condition that a lot of people pointed to saying that a recession should be here by now, is that dreaded condition that you probably heard of? Maybe.

 

Speaker 1 (00:07:47) - Maybe not. But that is known as an inverted yield curve, which is deemed as a harbinger of bad things to come, usually recession. Okay, now that phenomenon inverted yield curve. That sounds intimidating. I think when you hear that. Okay. And what that means in inverted yield curve is that the interest rate on long term bonds is lower than the interest rate on short term bonds. And that that right there is what's often a bad sign for the economy. Now, if what I just said right there kind of makes you scratch your head and say to yourself, what was all that gobbledygook again? And why does it matter? Why don't I give you a simple example of an inverted yield curve? Then you can actually remember. What I'll do is make this personal to you. A bond is just a fancy name for a loan. Let's say that you need a loan for $10,000, and you've got this great friend, a lifelong and trusted friend, and he will let you borrow the money from him.

 

Speaker 1 (00:08:56) - Now, if you take out the loan and tell him that you'll pay him back as quickly as next week, which is our short term bond. In this example where your friend might not charge you any interest on the loan at all, then just say that he wanted you to pay him a small 1% interest rate. Okay, see, your rate is low because there's not that much risk for him since you'll pay him back next week. That's not too long for him to wait. But say that you want to take the same $10,000 loan from that friend, but you're going to pay him back for ten years. An entire decade? Well, for him to want to make you that loan, he's going to need to get compensated more with a higher interest rate for the heightened risk in that long payback period. Okay, what if you move or if you aren't even alive in ten years? All right. That entails more risk for him, the lender. So therefore your loan comes with a 10% interest rate that you've got to pay your friend.

 

Speaker 1 (00:09:57) - This is analogous to the long term bond. All right right there I've just explained the normal yield curve condition right there. That's normal. The longer someone lends money out for to you, the more that they must get compensated. And that should make sense to you that that is a normal world. One week was 1% interest, one decade was 10% interest that you'd have to pay. That's normal. However, in inverted yield, curve simply flips that normal world upside down. It inverts it. It's the opposite of the arrangement that I just described with your friend. So this is where the shorter duration that one makes a loan for the higher interest rate they're compensated with. See, that's a weird world. That's an inverted yield curve. Because if your friend thinks that the world is going to crash soon with a recession or a depression, or Earth gets hit with an asteroid soon, well, then he'd want high compensation, even on a short term, week long loan, because freakish things are happening. And that's an inverted yield curve.

 

Speaker 1 (00:11:10) - And that's why having one like we have recently signals something dire, like a recession coming to many. Now, at the top of the show, I talked about the returns of various asset. Over the past year. Of course, that is only in terms of capital appreciation. That's all that most investors think about simply, did it go up or did it go down? It's an important question, but around here we know that real estate is a special asset class because when it's bought, right, it can pay you five ways at the same time. When it comes to the numbers, that number five, that is symbolic of why we do what we do here at gray. So let me talk about really, the existential and symbolic virtues that resonate with you across your life and the meaning behind that special number five. And it's about more than our real estate pays. Five ways, which is any listener knows is appreciation, cash flow, return on amortization, tax benefits, and then fifthly, inflation profiting.

 

Speaker 1 (00:12:18) - And I'm holding up five fingers right now, as I say this, according to numerology, the number five symbolizes freedom, curiosity and change, a desire to have adventures and explore new possibilities. But it signifies more than just high energy and excitement. In numerology, the five negative traits can include talking too much and overconfidence. Okay, that's what numerology says. Five ways real estate pays is a freedom formula. So that's actually numerology appropriate, I suppose. Now we don't do astrology or tarot cards here. Nothing hokey, concrete evidence though I will venture to guess that at least in some other facet of your life, five resonates with you. You've got five senses. Each one of your limbs has five fingers or five toes. In Christianity, there are the five wounds of Jesus Christ. If you're Muslim, there are the five pillars of Islam. Muslims pray to Allah five times a day. In Judaism, the Torah contains five books. Aristotle said that the universe is made up of five classical elements water, air, earth, fire, and ether.

 

Speaker 1 (00:13:41) - A lot of more popular folklore celebrates the five like Indiana Jones sort, the Sankara stones. They were five magical rocks. In music. Modern musical notation uses a musical staff made of five horizontal lines. Sports. The Olympic Games have five interlocked rings. When you shake hands to close your next real estate deal, you're each using those five fingers. In law, five is what renders a verdict. Five is the number of justices on the Supreme Court of the United States necessary to render a majority decision. There's a show on Fox called the Five and near the top of our Don't Quit Your day dream letter. We've got the five. Five is defensible in your investment fortress, just like the Pentagon is a five sided building in D.C. known for defense. Real estate pays five ways. And hey, even that phrase is five words. And it's a concept that was first introduced to the world right here on the Gerry podcast in 2015. So we're done with the touchy feely stuff, but look around five. It has a lot of meaning in your life.

 

Speaker 1 (00:15:02) - And in fact, the next time someone asks you why you're invested in real estate, hold up five fingers and confidently tell them that real estate pays five ways. What better way to affirm this than to come back with a concrete example shortly on how this helps you navigate toward financial freedom in your life, in ever changing real estate markets, we're going to use today's real life numbers in summing up the five. I hope you enjoyed me whipping around the asset classes in explaining what an inverted yield curve really means to you. More next, I'm Keith Reinhold. You're listening to get Rich education. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com.

 

Speaker 1 (00:16:23) - You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.

 

Speaker 3 (00:17:26) - This is Rich dad advisor Ken McElroy. Listen to get Rich education with Keith White.

 

Speaker 3 (00:17:32) - Hold and don't quit your day dream.

 

Speaker 1 (00:17:44) - Welcome back to get Rich education. I'm your host, Keith Wayne. Hold. You've been with me here every single week since 2014. A lot of you have anyway. You're listening to episode 483, and I'm deeply appreciative for you, the listener, coming up here on the show and in house chat with one of our investment coaches, Doug Casey, on the Silent Depression. And like I told you last week, soon, a return of Tom. We write when we discuss whether the US can just completely do away with and delete the property tax. Wouldn't that be amazing? Around here? We like to say that when we provide good housing to people, we can help abolish the term slumlord. But your real estate investing venture isn't solely altruistic. There are generous profits, too. And, you know, it's incredible to me how more real estate investors don't even understand the answer to basic questions like how do I get paid in? How much do I get paid, and where the sources of where that money comes from.

 

Speaker 1 (00:18:49) - And really, these are all huge reasons for why you and I are even investing in real estate at all. So I love doing this. Let's add up the five ways and come up with a total ROI. And it's always a little awe inspiring to do this, even with conservative numbers, to see how high your return gets. And let's use the year 2024 sort of numbers. And it's kind of funny in a sense. I dislike real estate elements where down the outside tenants might get difficult to manage on the inside, and you're certainly going to have some problems, including some weird problems along the way in your investor journey. So although in a sense I dislike real estate, rather I like what real estate does, for me, it's largely about those giant returns. So let me demystify real estate returns with a quick breakdown. And I think you know that the five ways are not for fix and flip property. This is just with buy and hold investing on a property that's ready to go, ready to be moved into turnkey.

 

Speaker 1 (00:20:03) - Here's a simplified method the concrete numbers. Right. Let's say that you make a 20% down payment. In this case that is a 40 K initial investment on a 200 K income property in just a year. Here's what can happen. The first way appreciation. You've got that initial property value of 200 K and appreciation rate of just 5%. Where your new property's value is now 210 K, you just experienced an equity gain of ten K divided by your 40 K initial investment. That is a 25% return to you just from the first of five ways you're paid. That is due to the magic of leverage, because you got the gain on both your down payment and the money that you got to borrow from the bank. The second way is with cash flow. Let's say your rental income is $1,600 a month, but things are running a little thinner on this property, and your expenses are $1,500 a month with the mortgage and all the operating expenses, that gives you leftover cash flow of only 100 bucks a month. That's 1200 bucks a year that's still divided by that same 40 K initial investment you made.

 

Speaker 1 (00:21:13) - All right. That is another 3% return to you. The third way you're paid is that ROA return on amortization. Also known as principal pay down. All right. Will you have a 160 K loan on this property? We'll use an 8% interest rate. So all you got to do is search for a loan amortization table, bring it up, and you'll see that you have a monthly principal reduction of about $110 a month. That is $1,320 a year that your tenant paid down, not you. So right here, your $1,320 equity gain is still divided by your same 40 K skin in the game down payment. That is yet another 3% gain. Then the fourth of five ways are your tax benefits. All right. Your property value is 200 K. That's how much your property is worth on the day that you bought it. And your building value might be about 70% of that. And the other is in the value of the land. So therefore you're building value. Or that improved portion of the property is worth about 140 K will annual depreciation is about 3.6% of that.

 

Speaker 1 (00:22:30) - That gives you a $5,000 tax depreciation benefit. If you're at the 25% tax rate, that's 1250 bucks a year divided by your same 40 K initial investment, that is another 3% return to you just piling on. And then the fifth and final way is your inflation profiting you profit from inflation as your debt gets debased by inflation. This is the least understood of the five ways you've got that 160 K loan amount at a 3% inflation rate. That gives you an annual debt debasement of $4,800, again divided by your same 40 K initial investment. This is another 12% return to you. All right. There we go. Now let's add up all of those ROI from the five ways real estate pays. You had 25% from appreciation plus 3% from cash flow, plus 3% from your ROA, plus 3% from your tax benefit, plus 12% from your inflation profiting that equals a 46% total ROI that you have from this property. I mean that right there. That is exactly why you're a real estate investor. That is exactly why I'm a real estate investor.

 

Speaker 1 (00:23:56) - What do you think it was for to replace toilet flappers and spackle? Drywall? Hey, this stuff's important, but I don't personally do it myself. That's the kind of stuff I dislike because I'm not good at it. Now, at a number of steps when I went through that, you'll notice that I was conservative or rounded down. I used an 8% mortgage rate and 3% inflation. Although there are numerous tax benefits, the only one I considered is tax depreciation. Your seller can often help pay your closing costs if you make a full price offer. So to keep it simple, I did not roll closing costs into that. See, all these numbers are realistic. While paying a property manager is accounted for. And as a reminder, that was only in year one. Your subsequent years returns. They are going to gradually diminish as equity accumulates in your property. And of course, that's an example. You are real life numbers. You're really going to be better than that or worse than that. And yes, we could get more precise numbers if we like, discuss numbers from 20 spreadsheets and really made your head hurt.

 

Speaker 1 (00:25:09) - But we're not going to do that. And you do enough years of this, and you're going to have hordes of people lurking in the viewers of your Instagram story about your latest month long vacation in the Maldives islands. Okay, now, if you need to see what I just explained visually and your newer to our platform and you haven't seen that yet, I also explain the five ways in a free mini video course so that you can really get a good look at all those numbers and where they come from. And you can get that at get Rich education. Com slash course. The cool thing about real estate math like I just did there is it simplicity. All we did there was addition, subtraction, multiplication and division. It real estate. I've never had to do trigonometry, calculus or use exponents. Okay, it's not about complicated maths. All it is is knowing what numbers to use. And in fact, that's probably why I'd expected. My skills are pretty rusty in calculus and trigonometry right now. I don't need to use that stuff.

 

Speaker 1 (00:26:17) - You can do all this with a pen and a napkin at. Lunch. And that is a big part of the beauty of this. So here at gray, we brought the world in awareness to this for about nine years now, and shortly after show inception, we helped lead you to the actual property addresses that are conducive to this because you kept asking me, where can I actually find properties, where this works? And then more recently, we added free coaching to help get you started or to help you get your next income property. And by the way, if you've ever wondered, there are eight of us that are here on the team at gray, and we often recruit new team members. We do that through our newsletter subscribers like you, because you already understand abundantly minded concepts like financially free beats debt free. We are not owned by any parent company. So when you tell a friend about the show or you interact with our sponsors, you're really supporting an independent voice here. And that's not to disparage the big corporate in any way.

 

Speaker 1 (00:27:26) - That's just simply not who we are. It was recently reported that Warner Brothers and Paramount are in early merger discussions. Well, gray won't be facing scrutiny from antitrust regulators anytime soon. And our sponsors, like you hear on our ads here during the show, they are ones that I use myself. We don't produce AI generated material here either. This is organic, original content, and a number of people on our team here have been with us for a while. Our investment coach Andrea since 2020, nourish since 2021, and our podcast Sound Engineer and has helped produce this show that you're listening to right now, every single week since episode three, in 2014, almost since inception, nine plus years now, Gray Marketplace is where you'll find the income properties for almost two years now. To make it even easier for you, you can even find and select from our two investment coaches on that page in order to help you out. And since our coaching is truly free, please respect their time. They're not there just to chat.

 

Speaker 1 (00:28:40) - It is for action takers now. Seven weeks ago, we did an episode here on how the real estate market is slowing it down. And of course, when we're talking about slowing down, the slow real estate market is in terms of the number of sales or the sales volume, not as many homes are transacting as usual. For one thing, there's always a lag around the holidays, but there's also an overall lack of American housing inventory, as you probably know well, I am happy to tell you that we do have inventory at GRE marketplace and a good selection. Everything from an older, renovated Ohio single family income property for a sales price of, say, 110 K to Alabama and new build single families for 300 K to Florida. New build duplexes for 500 to 600 K to four plex's for upwards of $1 million. If you want to benefit from everything that we discuss here on the channel, the actionable way for you to do that is with our free coaching. Yes, I'm talking about you. Make yourself that long term.

 

Speaker 1 (00:29:51) - Five ways profiteer. By not focusing on getting your money to work for you. That is a fixed mindset paradigm shift to ethically getting other people's money to work for you. Like we discuss here. That is, you simply put a small down payment on an income producing property. I mean, that's most of the formula right there. That's it. We're talking about how you can start or grow your own portfolio of buy and hold property, not fixing flips. It's often entry level property which is what makes a good long term rental property that's either already renovated or it is brand new. Oftentimes it's single family homes. Up to four plex is sometimes some apartment buildings. They're now a great marketplace. You can either shop off market property yourself, or have the free help of one of our great investment coaches. And your coach learns your goals, guides you, and makes it easy for you. They help you shop. The great marketplace properties, tell you where the real deals are nationally, and sometimes they tell you how to get improbably low mortgage rates when new home builders make those available, and your coach if you don't have one already, they give you the insights, the news on the latest good deals.

 

Speaker 1 (00:31:13) - For about a year now, a lot of new home builders have got to keep building and they have to keep moving properties to stay in business. So that's why amidst. Higher mortgage rates. You can get an interest rate for income property in the fives now because the builder buys it down for you and or even get a year's worth of free property management. Yeah, builders are often able to buy down your mortgage rate for you, because what they do is that they buy big chunks of money from lenders in bulk, where instead, if a lender does it directly with you, they have more documentation that they have to do with each individual investor for their smaller loan sizes. That's how builders are buying down your rate. They buy money in bulk from lenders. Now you'll see that grey marketplace properties are often less expensive than you'll find elsewhere. For properties that are turnkey and ready to be tenant occupied. Like this. Now, how are these off market property prices so competitive? Really? Where's the advantage come from here? Well, first of all, there is no real estate agent that the seller has to compensate with a traditional 5 or 6% commission.

 

Speaker 1 (00:32:30) - Instead you get to buy direct. Secondly, investor advantage markets just intrinsically have lower prices than the national median. They tend to be in the Midwest, southeast and Inland Northeast, and they come with a property management solution. And thirdly, the providers in our network, they're not mom and pop flippers that provide investors like you with just 1 or 2 homes a year. Instead, these are builders and renovation companies in business to do this at scale. So they get to buy their materials in bulk, keeping the price down for you. And really a fourth reason that you tend to find good deals at Gray Market Place is that you aren't buying properties from owner occupants where their emotions get involved, and they sometimes expect irrationally high prices for some offbeat reason because the living room is where they open their Christmas stockings every year for a decade or something like that. Now, just like buying your own home to live in, these income properties come with a lot of the same safeguards when you buy. We suggest that once your coach helps you make an offer and you're under contract for a property, that you have an independent third party property inspection done, and then the seller typically fixes any inspection findings for you at their expense, the seller's expense, before you close the deal.

 

Speaker 1 (00:33:57) - And we're talking about anything from a window that doesn't close properly to a faucet that drips. You want to have those conditions cured and taken care of before you buy. Now, as a buyer, it's not legally required that you do an inspection, but I recommend it even if it slows down your purchase process a little. Inspection is like cheap insurance for you. Don't rush that part as a condition of your mortgage lender giving you the loan, there will be an independent lender appraisal of the property's value before you buy. That part is mandatory. And this appraisal? It's another safeguard to keep you from overpaying. If you don't have an investment coach yet, it is truly free. They're there to help you out. Read a few sentences about each coach and pick the coach that you think resonates with you. Or just pick the one that you think has the best smile over there on that page. Uh, they are really well qualified. They have their MBAs, but more importantly, the coaches are relatable because they're active real estate investors themselves, just like I am.

 

Speaker 1 (00:35:03) - Coaching is truly something that's free. We don't try to upsell you to some paid course or some fee based coaching program later. There's nothing like that. So just create one login one time and connect with them at Gray marketplace.com. And it's really helpful if you're financially ready. First check with your mortgage loan company and get pre-approved unless you're paying all cash. Really? Today, with inflation about as little as you'd want to spend on a rental property, they won't give you an inordinate amount of problems. Is your 20% down payment on a 100 to 150 K property? Well, you should find this most helpful. You can get started with investor advantaged off market deals and investment coaches at Gray marketplace.com I'm Keith Reinhold. I'll chat with you next week. Don't quit your day dream.

 

Speaker 4 (00:36:05) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss.

 

Speaker 4 (00:36:20) - The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 1 (00:36:33) - The preceding program was brought to you by your home for wealth building. Get rich education.com.




Direct download: GREepisode483_.mp3
Category:general -- posted at: 4:00am EDT

After discussing the direction of rents, learn about an ominous new tax that’s proposed.

SCOTUS and Congress are considering a tax on unrealized gains. 

For example, if your gold or furniture appreciates from $5K to $8K, would you have to pay a tax on the $3K gain, even if you keep owning the gold or furniture?

Tom Wheelwright from WealthAbility joins us to discuss this.

Though this is considered a “wealth tax”, the middle class would have to pay it.

The tax case being heard is called “Moore vs. United States”. We expect it to be decided this year. 

Tom & I discuss how few people understand marginal income tax rates’ progressivity.

The last dollar that you earn is taxed at your highest rate. The first dollar that you earn is taxed at your lowest rate.

Timestamps:

Factors Driving Rent Growth (00:02:45)

Inflation, lack of inventory, expired rent freezes, shifting workforce, demand for single-family homes, high employment, barriers to homeownership.

Promising Development in Multifamily Construction (00:05:33)

Multifamily construction reaching a 15-year high, new supply likely to slow down apartment rent growth, inclusionary housing requirements for new construction.

Current Rent Trends (00:08:04)

Single-family rents up 5%, apartment rent growth at 3%, highest rent price growth in the northeastern quadrant of the US.

Supreme Court Case: Moore v. United States (00:11:47)

Overview of the case, implications of taxing unrealized gains, arguments for and against the taxation of unrealized income, potential impact on everyday investors and citizens.

Challenges of a Wealth Tax (00:18:07)

Discussion on the problematic nature of a wealth tax, potential impact on individuals and assets, comparison to estate tax, and potential implications of a wealth tax on various assets.

The tax on unrealized gains (00:22:43)

Discussion on the potential impact of a proposed wealth tax on unrealized gains and the complexities of taxing assets while they are still held.

The regressive nature of wealth taxation (00:24:38)

Exploration of the regressive nature of wealth taxation and the challenges in implementing and managing taxes on wealth.

Tax laws and equal protection (00:27:19)

Insights into how tax laws apply equally to everyone and how billionaires benefit from better advisors to minimize tax payments.

Tax rate misconceptions (00:30:15)

Clarification of misconceptions about tax rates, including the progressive nature of tax tables and the impact of earning more income.

Tax strategies and investment decisions (00:32:17)

Exploration of tax benefits related to investment strategies, including the impact of deductions and the suitability of IRAs for different investment types.

Updates on tax laws and book release (00:34:57)

Announcement of the third edition of the book "Tax-Free Wealth" and the incorporation of major tax law changes into the updated edition.

Wealthy's tax contributions and future episode preview (00:36:03)

Discussion on the tax contributions of the wealthy and a preview of a future episode topic on the feasibility of abolishing property tax.

Conclusion and show updates (00:37:13)

Closing remarks on upcoming content, including the landmark episode 500, and a call to subscribe to the show for valuable insights.

Resources mentioned:

Show Notes:

GetRichEducation.com/482

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

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GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

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GetRichEducation.com

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Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold, and it's a new year. We talk about what drives the growth of rents. Then a gigantic new tax is being proposed that could fundamentally change virtually every current investment you own and future investment you make today on Get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text GRE to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth.

 

Keith Weinhold (00:01:18) - Make sure you read it. Text grey to 66866. Text GRE to 66866.

 

Speaker 2 (00:01:30) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:46) - What could go from Beckley, West Virginia, to Boise, Idaho, and across 188 nations worldwide. You're listening. To get rich education, I'm your host, Keith Weinhold. What about this new proposed wealth tax? Should there be one? How big is it? As you're gonna find out, you would probably even have to pay this huge new proposed tax. If you're in the middle class. That's all. If it gets legislated, that's coming up shortly. But first, last week I told you about the future direction of home prices. As I revealed our 2024 National Home Price Appreciation Forecast this week, let's talk about the direction of rents in America, higher prices for everything that could make tenants feel tapped out. Although we have now had a few months of wage growth picking up before we get into the rent trend, this is get rich education.

 

Keith Weinhold (00:02:45) - So focusing on the education part as we often do, what are the factors that drive rent anyway? What drives rent growth and how did rent get to feel so expensive for a lot of people? Well, the fast growth of rent costs since 2020 that derives really from a number of factors, including inflation and also including a lack of inventory. There is a shortage of vacant rental properties in general and of affordable ones in particular. You've also got those expired rent freezes and expired discounts. I mean, landlords are making up for pandemic era rent freezes and steep discounts in urban areas. And by doing that, what they've done now is hiked up prices on new units and on lease renewals. Another factor that drives rent growth is what's happening with the workforce. And we've had a shifting workforce. As the pandemic increased, the popularity of remote work, you had deep pocketed renters that sought out larger homes, often single family homes, in areas that had previously been pretty low cost. So this migration then it increased the rents in suburban and outlying areas more than it lowered them in urban ones.

 

Keith Weinhold (00:04:06) - And see that trend overall that yielded a net increase in rents. And then another factor is that you have more demand for people to live alone. Prospective renters are increasingly looking for studio in one bedroom apartments, driving up demand for available housing, and that drives demand for space and therefore rent growth, because living alone, that means that rather than two people demanding to live in one unit, two people demand two places to live. And of course, high employment like we've had. That's another factor that drives rent growth over time. And the last factor that I'll share with you as a rent growth driver are barriers to homeownership. Yeah. Prospective homeowners, they remain renters for longer because they face high demand and low inventory on those existing homes. Like I've talked about before, higher mortgage rates. And you had those supply chain disruptions that really began a few years ago. Most of those are alleviated now, but that made it more expensive and more difficult to construct new homes. And then as mortgage rates rose starting back in early 2021, housing prices, they cooled off faster than rents, and rents are finally rising at a slower pace now then they did in the past two plus years.

 

Keith Weinhold (00:05:33) - And so those are the factors that drive rent growth. Now. Back in 2022, a promising development began, promising for those that are looking to pay less for housing in the future anyway. From their perspective, and that is the fact that multifamily construction reached a 15 year high nationwide, and that new supply is what's likely to slow down apartment rent growth. And since many cities require really this inclusionary housing, that means that a portion of new housing needs to be affordable. Well, therefore, new construction also means new affordable housing. Again, that's predominantly on the apartment side. But see, many families, they want a single family home. They want that privacy. They want that separation. They want to live in something that feels like their own, but they can't afford a single family home to buy. So they rent one. And, you know, I thought Zillow recently pointed it out really well when they said that single family rentals are the new. Their homes. They appeal to those that are priced out of buying.

 

Keith Weinhold (00:06:49) - And now you can see this reflected in rent growth. So now that we talked about some of the longer term drivers of growth, let's talk more about the current period of time. We don't have Q4 numbers in yet, but through Q3 we can see that the growth of single family rents is 5%. All right. That sounds healthy. And it is. And that's per John Burns research and Consulting. But that 5% increase is down from two years ago when it had its recent peak of between 9 and 10%. So again, right there, we're just talking about the annual growth rate in single family rents. It's about 5% through the latest quarter that we have stats for now. Compare that 5% to apartment rent growth, which is about 3% today. Even in an economic slowdown, rents rarely fall. And by the way, if rents ever do fall, I call it falling rents. Or perhaps I use the phrase declining reds for some reason. If price is contracting anything, some economists and analysts and others, they refer to this as negative growth.

 

Keith Weinhold (00:08:04) - I don't tend to use the term negative growth. That's confusing. I just call it a decline. Okay. Negative growth. That makes you wonder if someone means slowing growth rates or do they mean an outright decline. So negative growth is an oxymoron like jumbo shrimp or black light or friendly fire, or telling someone to act natural, or perhaps a working vacation? Okay, that's what negative growth means to me anyway. Now rents, whether it's single family rentals or apartments, when you blend those together regionally, you're seeing the highest rent price growth in the northeastern quadrant of the United States, which oddly contains a good chunk of the Midwest. So you just look at the northeastern quadrant of the United States. So leaders in red growth we're talking about here Providence, Rhode Island, Hartford, Connecticut, Cincinnati, Columbus, Saint Louis, Milwaukee and Chicago, they are all on that list. The highest rent growth blended together, single family rentals and apartments. By the way, two months ago I was in Hartford, Connecticut for the first time in a while.

 

Keith Weinhold (00:09:18) - Nice skyline there. Yeah, Hartford. You have an impressively urban feel for a city that's not among America's largest. Now. You're seeing slight rent price declines this past year in a lot of their really big, swaggering, broad shouldered gateway cities New York City, San Diego, San Francisco, San Jose, and also in Raleigh, North Carolina. I'm not sure what's going on in Raleigh, North Carolina, with their sluggish rent growth, but here, as testimony to the fact that rents don't often fall far, all of those bigger cities that I just mentioned, these big losers, they're only down between one half of 1% and 1% for year over year rents. So to review nationally in the last year, single family rents are up 5% and apartment rent growth is up 3%. But both have slowed from a couple years ago. Can the federal government tax your unrealized gains, also known as a wealth tax? We're going to talk about what that means. But how far could this go? If your home appreciates a 30 K in a year, but you want to keep living in it, might you have to pay tax on that gain even though you don't sell it, you just want to keep living there.

 

Keith Weinhold (00:10:41) - Could that even apply to you? If you own furniture that goes up in value, but you kind of like dining at that nice mahogany table of yours, could you get taxed on that every year? If the value of that goes up? And then you would have to ask the question, where are you supposed to get the money from in order to pay the tax? Might you have to sell that asset in order to pay the tax on it? So let's discuss a wealth tax that is tax on your unrealized gains. A renowned tax and wealth expert is back on the show with us today. He's also a CPA and the CEO of a terrific tax firm called Wealth Ability. He's the best selling author of the Mega-popular book Tax Free Wealth, which I have on my bookshelf. And a third edition is about to come out. He's going to tell us more about that. Hey, welcome back to Dr. Tom Wheelwright. Thanks, Keith. Always good to be with you. It's good to be with you, too.

 

Keith Weinhold (00:11:47) - And I think it's going to be especially informative and maybe disturbing this time, Tom, because really, it's been called the quadrillion dollar question. This is where Supreme Court justices decide whether the federal government can tax certain unrealized gains. And what this means is that these are assets that you own, but yet you haven't sold yet. So, Tom, tell us about this Supreme Court case hearing it known as more Maori versus the United States. Yeah. So this is a couple that invested in a company in India. They owned, I think, 12 or 13% of the company. And when the 2017 Tax Act was passed, what we commonly think of as the Trump Tax Act, one of the provisions was that in order to go to a taxation where you couldn't just put off bringing back the money all the time, they said, well, look, we're going to have a one time tax, we're going to have a tax on repatriated earnings. Some of you have heard that term repatriated earnings as if they came back.

 

Keith Weinhold (00:12:56) - Okay. So whether or not they came back as if they came back. And if you're a shareholder of 10% or more, then you have to pay that tax in certain situations. And so the laws actually had to pay the tax. This was the tax on the income of their corporation. So the corporation could have its own tax. But this is actually a tax on the shareholder. So that's actually where this is interesting because is similarly frankly we have taxes on partners and partnerships. Right. If you're a partner in a partnership you're taxed on that income. Whether or not you get the money in a corporation, typically you're not taxed on the income unless you get the money. That's a dividend. If you don't get the money, the corporation's taxed, but you aren't taxed. This was a situation where it's a corporation, but the shareholders were taxed. The Moores are arguing, well, this is equivalent to a wealth tax. And it's actually why I think the Supreme Court took this up, because it's not a case that you would normally think the Supreme Court would agree to hear.

 

Keith Weinhold (00:13:57) - Well, I think where this concerns people is, could this open up things so that the everyday person and the everyday investor could have to pay these unrealized gains on assets that they own, that have not sold? I mean, even their primary residence, if that appreciates from 500 K to 550 K, are they going to owe tax on that 50 K even if they plan to continue to stay there and hold on to it because they want to live their. That's what certain members of Congress would like. Liz Warren would absolutely like that to happen. Bernie Sanders absolutely like that to happen. I actually think that's why the Supreme Court took up the case, is because I don't think the Supreme Court believes that that should happen. I think it's going to come out. They're going to narrow what a wealth tax can and can't be, because I think they need to because they need to say, look. So we've had oral arguments already. So we expect a decision out sometime this year. But basically the arguments by the IRS were we do this all the time.

 

Keith Weinhold (00:14:56) - We have taxes, unrealized income. We have mark to market on stock trading. So that's a tax on unrealized income. We have a tax on partnerships. That's a tax on realized by undistributed income. The reality is this tax the Moores are are arguing against is a tax on realized but undistributed income. I think that's where the Supreme Court would come down. I'm actually willing to make a prediction on this because I think the Supreme Court say, well, this isn't a wealth tax, and a wealth tax would be prohibited under the Constitution because that would have to be based on population. A property tax, for example, is a wealth tax. Then the US that's reserved to the locales. We can't do a federal tax. We couldn't have a federal property tax. And that's, I think, what the Supreme Court is going to say. You can't have a federal property tax that's prohibited by the Constitution. You now have local property taxes because the locals can do whatever they want. But unless you have it apportion among the states based on population, you'd literally have to have a poll tax, which is a tax per person, as opposed to a tax on the value of what a person owns.

 

Keith Weinhold (00:16:07) - That's the difference. So there's a lot of complications. That's a direct tax versus indirect tax, all that kind of stuff. I think the important thing is to understand that there are realized, but undistributed income, that's like a partnership, right? You can be a partner in a partnership. The partnership really uses the income. They get the money, but they don't distribute it. As a partner, you're taxed on your share of that income. It has been realized you just haven't gotten it yet. This is, by the way, very similar to the Moore situation. That money, that income was earned that just hasn't been distributed yet. And the question is the fact that they haven't distributed, does that mean they can't tax it? The odd thing is, is I think the Moores are going to lose the case. Moores will lose the battle and win the war. This is a small amount of money, right. So this is obviously the Moore is not trying to save money. There's way more money being spent on legal counsel than the tax.

 

Keith Weinhold (00:17:03) - So the Moores aren't doing this. This is people behind saying this is a good test case. We need to put a stop to the wealth tax conversation of Liz Warren and Bernie Sanders and Wade. And this is a case to do that. That's really what kind of the background is. That's all the background of this court case is what's really going on and what's really going on is the Ninth Circuit made it sound like any taxes find. And the Supreme Court said, well, we're going to take this up because I think a majority thinks we don't think any tax is fine because clearly under the Constitution, not any taxes. Fine. We're going to help define that. And so I think we're going to get some better clarity on what kind of taxes Congress can enact. Ultimately, I think the Morse will lose their case. Yes, the more clarity is good. I mean, the Supreme Court knows that this is a contentious issue, and I sure want any discussion to get shut down. It might lead to everyday investors and citizens paying tax unrealized gains.

 

Keith Weinhold (00:18:07) - I mean, with that example that I gave you of, say, a couple that owns a 500 K home and they want to keep living in it, but it just happened to go up to 550 K. I mean, where would they get the tax to pay on that. Well yeah. Well that's another problem. You can talk to any fixed income retiree and they'd have the same complaint about property tax. Sure. Yeah I don't know where this could go. I mean, what if you own rare furniture in your home? Okay. This furniture is worth more at the end of the year than it is at the beginning of the year. But yet you didn't sell it. You just continue to use your furniture. I mean, could that get taxed? It's a terrible slippery slope. And, you know, they talk about, well, don't give me I'm billionaires. I'm going okay. But let's face it, the income tax was only supposed to be on billionaires, okay. The equivalent of billionaires.

 

Keith Weinhold (00:18:51) - You had to make a lot of money to be subject to income tax in 1913. Yeah okay. So we know it's going to come down. It always does the tax law. You know politicians never like to give up any tax money. They always are trying to apply to more and more people more and more income. So it is problematic. You know, the idea of a wealth tax is very problematic. You know, several European countries have tried it and they've all failed. France tried it. And people like Gerard Depardieu, um, the actor, he just left France, you know, people leave now, what Bernie Sanders wants to do, this is fascinating. He wants to put an exit tax. So if you do leave, you still have to pay the tax. You actually have to pay a tax to leave. So basically what Trump is, he wants the Berlin Wall, but he wants an economic Berlin Wall. Right. That's what he wants. He wants an economic wall. He's going to complain about the wall bordering Mexico, but he's going to put an economic wall around everybody and not allow you to leave.

 

Keith Weinhold (00:19:50) - It'd be like somebody, California, putting a wall literal wall up and saying, you can't leave California, right. That's kind of the idea that. And if you do leave California now, California, in fact, they talked about it in 2023. And actually, interestingly, the governor defeated it. They talked about imposing an exit tax. So if you leave California, you have to pay a tax for leaving. And fortunately he defeated that. He crushed that. I mean, not sure why he did that, but he did understand the states have more power to tax than the federal government does. Federal government is limited in its taxing power, and it's really limited by the 16th amendment that allowed a pure income tax. The question and this is the argument that Sanders and Warren are making, is that it is income. And the reality is we do have billionaires who pay no tax. And the reason they pay no tax is because their stocks, which are public, go up in value. They're not required to sell them.

 

Keith Weinhold (00:20:51) - They can borrow against them and they never pay tax. So the argument is, well, wait a minute, that's not fair. That's a decent argument. Honestly. The challenge is yeah, if you could really say we're going to limit it to billionaires and we're going to limit it to publicly traded stock, you're fine. Not a big deal. But it never gets limited. And that's the problem. It never ever gets limited. Once the camel gets its nose under the tent it just right going on taxation all over the tent piling on and not get pulled away. They don't remove layers of taxation. It seems once the president is sent somewhere, it just seems like it continues to spread. Tom, if I could just give one last example on this. If this ever goes to where unrealized gains get taxed and how absurd this all is, just say you. Oh, gold and gold goes from $2000 to $5000. You don't sell it, you just keep holding on to it. And then you'd have to find the income to go ahead and pay the tax.

 

Keith Weinhold (00:21:48) - Well, you'd have to sell gold. And that's actually what they want. They actually want you to have to sell the gold. Oh, they would want gold to be sold to sell the gold. I want you to sell the stock. So the goal behind the wealth tax is to force you to sell these assets and pay the tax. Okay. Now we have a wealth tax. It's called an estate tax. That is a wealth tax. And there are businesses. There are families who have to sell their family home. They have to sell their family business. They have to sell their family farm because of the estate tax. And so this is another argument that the proponents of wealth tax are making is, wait a minute, we have a wealth tax already. It's called an estate tax. If we can have an estate tax, why can't we have a tax currently? Why do we have to wait until somebody dies to impose that tax? It's an interesting argument. I'm not a policy guy. I'm not one to make policy.

 

Keith Weinhold (00:22:43) - I want to explain policy. It is a question. If I can have a tax on wealth when you die, why can't I have a tax on wealth while you're alive? Sure. And I thought through the scenario as well. If the river is a tax on unrealized gains, whether that's your house going up in value or furniture or gold after you would pay this unrealized tax, then in the end, when you do want to sell it, what if you sold it for less than you thought it was worth? And then how the heck do you go back and adjust that for the tax that you are now in it? And it actually gets worse than that. Keith. Let's say we have a boom market this year and next year we have a recession. Are we going to get the money back? Exactly. And that's the hardest part because the answer is clearly, no, we're not. I mean, because think of it right now, we have a provision in the law that taxes capital gains.

 

Keith Weinhold (00:23:35) - There's an argument capital gains should never be taxed because especially at least if there are a capital gain because of inflation, they should never be taxed. If you actually went up in value, yes, they should be taxed. But if they're just inflated in value, why are you paying a tax on something that's not worth anymore than it was five years ago that got the same value? It's just got a different price. But we have a capital gains tax. But think about this. Let's say you have a year and you sell stocks and you have this big game. And the next year you have a loss because you sell stocks because everything went down well. You don't get to use those losses to offset your income. You have to carry those losses forward forever until you have gains again, you don't get go backwards with those losses and recapture the gains that you paid, you know, last year. So we already have this problem built into the system. And now all you'd be doing is exacerbating it. The other problem with, by the way, is that it's very regressive in that you're talking about people taxing their wealth.

 

Keith Weinhold (00:24:38) - Now, you can put limits, right, which is what you would have to do. And you say, well, look, your personal residence, we're not going to tax, you know, we're only going to tax the excess, which is, by the way, what income tax originally was. It was only excess investment income. You were never taxed on wages. When the 16th amendment was passed there was no tax on wages. We didn't get a tax on wages until 1944. You go, well, we'll exempt all these today. What about tomorrow? And that's always the issue. I'll tell you, the taxes just keep piling and piling on. We're going to talk more about taxation with Tom. We're right when we come back you're listening to University Kitchen. I'm your host Keith Reinhold. I render this a specific expert with income property you need. Ridge lending Group Nmls 42056. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's.

 

Keith Weinhold (00:25:39) - Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Tom Wheelwright (00:27:02) - Anybody? It's Robert Elms or the Real Estate Guys radio program. So glad you found Keith Reinhold and get rich education. Don't quit your day dream.

 

Keith Weinhold (00:27:19) - Welcome back to cash. We're talking with Tom Wheelwright, the author of the Mega-popular book Tax Free Wealth. He runs the terrific tax firm called Wealth Ability. Tom, you often like to talk about how really, in a lot of cases, tax laws can apply to everyone, but do business operate really under the same tax laws as a middle class or us in the middle class? Really take a page out of what billionaires are doing. How can we best do that? So we have a wonderful aspect of the Constitution, a clause called the Equal Protection Clause. And what it says is taxes have to be applied equally to everybody in the same situation. So what we're billionaires are different is they have better advisers. That's where they're different. So their advisors know all the rules of the tax law. They pay them hundreds of thousands, millions of dollars a year to make sure that they're paying the least amount of tax possible.

 

Keith Weinhold (00:28:14) - Presumably, all they're doing is following the law. Those same laws apply to you and me. So that's why, for example, somebody who owns a single family home that they rent out to an unrelated person is entitled to the same tax benefits as somebody who owns a 200 unit apartment complex or somebody who owns Trump Tower, as an example. Okay. You get the same tax benefits in the same situation. The challenge that, you know, the average person has is not enough access to those advisers and a misunderstanding of how the tax law works, because this whole idea will the billionaires get different tax than the average person is just false. That's just a falsehood that is propagated by a certain part of the public in a certain part of the administration that wants to add another tax to billionaires. The reality is we all get the same tax. The difference is, is that if you're a billionaire, let's say you made $1 billion a year and you paid $400 million in tax. You still have $600 million left over, which is more than 99.999999% of people have in a lifetime.

 

Keith Weinhold (00:29:25) - So it doesn't really hurt you. It doesn't change your lifestyle. Whereas if you put a 40% tax on somebody who makes $200,000 a year, now they're going from 200 to 120, and that has a major impact. And you're really just explain one reason why in the United States, we have tax tables set up that are what we would call progressive, where the more you make, the more you pay. But yeah, you're right, Tom. There are just there's such a knowledge gap out there. I have something happen to me. I bet it still happens to you a lot. Or I will talk to people and they say something like, well, I don't want to earn too much money this year. I'll go from the 24% tax bracket to the 30% tax bracket, and they act like all of their income is then going to be taxed at 30%. So they don't want to earn too much. So I'll tell you a funny story. Yeah. So I used to teach a class every month we'd have anywhere from 30 to 100 people in the class.

 

Keith Weinhold (00:30:15) - And I'd always do an example and I'd say, okay, let's say that you earn X amount of dollars and you get a $5,000 bonus. What's the cost of that $5,000 bonus from a tax standpoint? And I would say a good 40% of the class would come up with about $8,000. Was the cost of the $5,000 bonus, because just like you say, well, that puts me in a new bracket there for all my income is being taxed in the new bracket. No, it is progressive, meaning the last dollar you earn is taxed at the highest rate, but the first dollar you earn is taxed at the lowest rate. And that's important distinction because we're never taxed on more than right now. It's actually 40% because we have net investment income tax. So you're never taxed on more than 40% of your income by the federal government. You just can't be. So you can make whether you make a, you know, $1 million a year, $1 billion a year, $10 billion a year, your maximum tax rate is 40%.

 

Keith Weinhold (00:31:14) - That's an epiphany to some people to learn that tax rates are progressive, like you just explained with that $5,000 bonus example, why don't you tell us about another tactic or another example like that? We have a lot of savvy listeners. A lot of Marty realize that marginal example. Can you give us another one about how there's something relatively simple that can really elevate one's and lower their tax rate? Yeah. Let's go to the flip side of that. If the last dollar you earn is taxed at your highest rate, the first dollar you deduct is deducted at your highest rate. Great point. This is why, by the way, and if you read my book, The Windmill Strategy, I talk about this in chapter eight. I used to say for a long time that you never got a permanent tax benefit from putting your money in an IRA for one K and I ran the numbers and win win. And I was wrong. That's not true. And the reason is because let's say you put in $10,000 a year for 30 years, that deduction that you get for that $10,000 you put into your IRA for one K, you get a deduction at the highest tax bracket.

 

Keith Weinhold (00:32:17) - When you start pulling the money out, you're going to pull it out and you get all the tax brackets. So you put the money in, you get a deduction of the highest, you pull the money out, you get basically the combination of the different tax brackets. So you are actually better off. So for example, if somebody says I want all I investment to go on in the stock market, I would say you need A41K. That is the answer because self-directed would be best. Absolutely. Because you get a deduction now at your highest tax rate bracket. But down the road you're going to pull it out. Basically, even if you have the same income you can pull out a lower rate. Now that only applies if you're going to put the money in the stock market. If you're going to put the money into real estate for one, K is a terrible idea because real estate is a tax shelter and you lose all the tax benefits of a tax shelter. If you put it in an IRA, you actually take a tax shelter and make it a tax expense by putting it into an IRA for one K.

 

Keith Weinhold (00:33:14) - So there are certain things you would never do in an IRA. A reformed K real estate is one of those. Energy is one of those businesses. One agriculture. You'd never do those in an IRA or for one K, it's a terrible idea. But if you want to invest in the stock market, the bond market, things like that, IRAs make all the sense in the world. So really, that's why people ask me, well, should I do it for one K I'm going. I have no idea. What's your investment strategy? What's your wealth strategy? Where are you putting your money? People all the time. I have some imitators and they'll ask this question, well, how do you make your money? We can reduce your taxes. I'm going. That's the first question you have to ask. But I'm more interested in what are you going to do with your money? Because what you're going to do with your money has a much bigger impact on how we set things up from a tax side, how much money you're going to make, what kind of investments you're going to do, all that is impact by what you can do with your money.

 

Keith Weinhold (00:34:06) - That question about, you know, how do I make my money is a simple question that, frankly, I can do that kind of a tax strategy on stage in ten minutes. Well stated. That is a good point. Well, Tom, this has been great. You mentioned your latest book, the Win win. Well, strategy, but in one of your very well-known books, Tax Free Wealth, you've got another edition coming out. Tell us about that. Yeah, we have the third edition. So for the second edition we did that. When the Trump Tax Law 2017 was enacted, we needed to put in fact, we did a kind of in a rush. So we just added in things. Since 2017, we've had six major tax law changes, six major tax law changes during Covid. And so what we felt we want to do is let's roll it all in to a third edition will take the Trump tax law. Changes will roll those in. We'll take all the new tax law.

 

Keith Weinhold (00:34:57) - Changes will roll those in. So now tax free wealth is up to date. I think it's a better book. When I went through it of course I spent hours and hours and hours going through it. This is the best version of tax free wealth we've ever released. There are so many critical updates there. Again, the name of his book is Tax Free Wealth. I recommend checking that out. Tom. We're right. It's been informative. As always. Thanks so much for coming back out to the show. Thanks, Keith. Yeah. Sharp insights from Tom. As always, you can keep following along with the more versus United States case this year. Now, sometimes the wealthy, they will point something out that you've got to consider. It's got to give you a little pause. And that is actually should the wealthy get a tax rebate yet not get taxed more heavily because in the US see the top 1% pay about 42% of federal income taxes, and you might say, okay, well, that's the top 1%.

 

Keith Weinhold (00:36:03) - Why don't we bring in some of the middle class and revisit this? Well, the top 25% pay nearly 90% of the taxes. And that's all from a recent year per the Tax Foundation. Should the wealthy then get a tax rebate? Because you could say that they pay more than their fair share. Whatever fair share really means. Well, that is a valid question. Ask at the least. Well, today is the first time that we've had the marvelous, successful author, Tom. We're right on the show here in more than a year and a half. That's just a little unusual because he is the most recurrent guest here in history. And so therefore, for some more catch up coming down the road, Tom is going to return here to discuss a big question that I have for him. And in that future episode, Tom and I are going to discuss, should there even be such thing as a property tax, does it make more sense to say, abolish the property tax and then the government can get their revenue from somewhere else, as well as where that proposal might not be feasible? That should be super interesting.

 

Keith Weinhold (00:37:13) - Asking the question should there even be a property tax? In the meantime, check out Tom's third edition of his book Tax Free Wealth. It is a good read as far as tax reading goes. You're listening to episode 482 of the get Rich educational podcast. We have got a big year in store with plenty of original, groundbreaking content planned, including a memorable landmark episode 500 Coming Up, which will release on May 6th of this year. If you haven't already, I encourage you to subscribe to or follow the show here on your favorite podcasting device, or tell a friend about the show. I think they'll find it really valuable. Until next week, I'm your host, Keith Reinhold. Don't quit your day dream.

 

Speaker 4 (00:38:05) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 5 (00:38:33) - The preceding program was brought to you by your home for wealth building. Get rich education.com.





Direct download: GREepisode482_.mp3
Category:general -- posted at: 4:00am EDT

Is real estate cheap, adequately valued, or overpriced? I explore. 

Everything considered includes: inflation-adjusted price, affordability, quality, and other nations’ prices. 

Stadium trends are affecting urban real estate. More plan to move outside of downtowns.

I divide society into four groups of people. Then I discuss who is harmed by inflation and who benefits most:

1: The poor—lose

2: Paid-off homeowners—hedge

3: Mortgaged homeowners—hedge and profit

4: Mortgaged income property owners—hedge, profit, and increase income 

Learn how to talk to your tenant so that they never think “How the Rent Stole Christmas”. It’ll help ensure timely rent payments. Many tenants don’t understand that you have a mortgage to pay.

Finally, I reveal the exact percentage number that indicates GRE’s 2024 National Home Price Appreciation Forecast.

Timestamps:

Real Estate Valuation and Gold Ratio (00:02:53)

Explains the concept of using the home price to gold ratio as a measure of real estate value and compares it to the long-term average.

Global House Prices (00:05:28)

Discusses how US home prices are comparatively cheaper than those in other developed nations, such as Australia and Canada.

Impact of Quality on Real Estate Value (00:06:40)

Highlights the increase in home size, amenities, and safety features over time, suggesting that today's homes offer more value at a potentially lower inflation-adjusted price compared to the past.

The trend of sports complexes with casinos (00:12:15)

The speaker discusses the trend of building sports complexes with casinos, mentioning examples such as Mark Cuban's plan for a new Mavs arena and the proposed entertainment complex and casino next to Citi Field.

The necessity of a second job due to inflation (00:13:36)

The speaker explains why inflation makes a second job necessary, emphasizing the importance of investing money at a rate higher than inflation to maintain prosperity and quality of life.

The four groups and their relationship with inflation (00:14:46)

The speaker categorizes four groups of people based on their ownership of property and how they are affected by inflation, highlighting the benefits and disadvantages each group experiences.

The Landlord-Tenant Relationship (00:24:22)

Discussion on maintaining open lines of communication with tenants and addressing misconceptions about landlords being greedy.

Explaining Property Expenses (00:25:37)

Informing tenants about the various expenses that landlords have to cover, such as mortgage, insurance, taxes, and maintenance.

Forecasting Home Price Appreciation (00:29:04)

Discussing past predictions and forecasts for future home price appreciation, including insights from various agencies and factors influencing prices such as housing supply and interest rates.

Home price appreciation forecast (00:35:22)

Keith Weinhold discusses his forecast for home price appreciation for the next year, which he predicts to be 4%.

Investment decisions based on forecast (00:36:51)

Keith Weinhold mentions that people are increasingly making investment decisions based on forecasts, but reminds listeners that forecasts are not guarantees.

Resources mentioned:

Show Notes:

GetRichEducation.com/481

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

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Our YouTube Channel:

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Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold. Today is real estate underpriced, adequately priced or overpriced? All outline a hierarchy of winners and losers with inflation in real estate. How the rent stole Christmas. Then the verdict is in as I reveal GRE’s 2024 home price appreciation forecast all today on Get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text grey to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

 

Speaker 1 (00:01:18) - It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it. Text grey to 66866. Text grey 266866.

 

Speaker 2 (00:01:35) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Speaker 1 (00:01:51) - Welcome to GRE! From North Pole, New York, to North Pole, Alaska, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education on Christmas. Happy holidays. Today is real estate cheap? Adequately valued or overpriced? Well, to many it doesn't feel like a relative bargain today, when you see how much housing prices and payments have escalated these past three years. There are a lot of ways to approach the question about whether today's U.S. real estate is cheap, adequately priced, or overpriced, so let's approach them. But when you ponder that question, didn't dollars quickly come to mind? Well, the median home price is $431,000 today, depending on how you slice it. Let's not be quick to forget that when you're looking for a measuring stick to determine the value of real estate or anything, dollars are an exceedingly poor way to track value.

 

Speaker 1 (00:02:53) - Because also, starting about three years ago, their slow, steady debasement turned into a rapid debasement and dilution of purchasing power. Dollars keep getting so relentlessly debased that, well, of course, it would take substantially more of those dollars to buy most anything today than it did three years ago. Property included. And this is precisely why the car that you own today costs more dollars than your grandparents first home did. Okay, so let's cancel out dollars. For 5000 years, gold has had enduring value. It's been a loose barometer for inflation all that time. As the dollar goes down, it takes more of them to buy the same amount of gold. So rather than pricing the home in dollars, wouldn't it make more sense to use the home price to gold ratio? Yeah, that is just what it sounds like. Instead of comparing home prices to dollars, compare it to how many ounces of gold it takes to buy a home and track that over time. Well, we find out that today it only takes about half as many ounces of gold to buy a home today as the long term average.

 

Speaker 1 (00:04:12) - And that's dating all the way back to the year 1889, yet just half as many. Yeah, that is a data set in the past 130 plus years, when you take the long term average of how many ounces of gold it takes to buy a median single family home, realize how special this comparison is. You now see the value of two of the most popular real assets relative to each other. All right, so home prices now appear low since it takes just 50% as much gold to buy a home today. But isn't that measure right there in itself enough evidence to say that real estate is under priced? No, that's certainly not. But it is one powerful touch point. We need more than that. Consider global house prices. So much of the world is a renter nation compared to the US, because home prices are substantially higher in other developed nations, from Australia to Canada, Canadian home prices are still nearly double the price of the same US home. This is a second powerful measure that US home prices are cheap here in the middle of the 2020s decade.

 

Speaker 1 (00:05:28) - Well, let's add some more. Consider affordability. Can people afford homes? Well, there is wage growth, which often lags home price growth in, you know, your wage growth. It often lags inflation until the latter part of an inflationary cycle like where we could be now. But let's look at what really happens. Most people don't buy property based on its price as much as its monthly payment. It's the affordability of that payment that most people are looking at. Today's mortgage rates, though, they don't feel low because of where we were a few years ago. Like I mentioned here on the show before, mortgage rates are still below their long run average of 7.7%. This is another important measure of how real estate prices in America today are not overpriced. But what I'm going to do now is turn the prism in another direction here so that the sunlight strikes it differently. Let's shine the light somewhere else, because we still have not adjusted for something extremely important. When you're valuing real estate or anything for that matter.

 

Speaker 1 (00:06:40) - Let's look at the attribute of quality. Yes, we need to adjust for quality since 1889. And. An ounce of gold is just still that same ounce of gold. Its physical properties have not changed one bit since the year 1889, which is one reason why it's a good measuring stick and why I brought it up earlier. But in 1889, let's look at real estate. It has changed to an astounding degree. A new Victorian style home back then had sparse amenities and perhaps 950ft². And yet that was a normal sized home back in that era. In 2023, a home average 2415ft² in today's home has features that would be considered unthinkable luxuries yesteryear like air conditioning, multiple bathrooms, quartz kitchen countertops and closets vast enough that you could play pickleball inside them so you're getting more, more home today. Between today's home size, lot size, amenities, and safety features, you can make the case that you're getting five x more, or perhaps even ten x more home than you were in 1889. And you're getting that perhaps even at a lower inflation adjusted price.

 

Speaker 1 (00:08:13) - And the more you realize all of this, you can increasingly validate asking the question, why are homes still so cheap in America today? And there are some other factors too. But all things considered, one can surely make the case that today's US residential real estate is not overpriced. It's cheap. As we're talking about the relative valuation of homes today. Here's a hint this plays into when I'll reveal Gary's 2024 home price depreciation forecast at the end of the show today, where I will pin the projected appreciation number down to the nearest whole percent for you. That's how exact we're going to get before we talk about residential real estate again. When we discuss how the Reds stole Christmas, let's discuss a niche of the commercial real estate market here that we've never discussed that Gary, before. And it's so interesting whether you are a sports fan like me or you're not. And that is stadiums. Yes, sports stadiums have a lot to do with urban real estate dynamics, and they're even more important amidst this struggling office sector that's already hollowing out parts of some downtowns.

 

Speaker 1 (00:09:30) - Well, the reason that I'm telling you about this with stadiums is that it looks like a new trend now. About 30 years ago, there was a trend toward having urban stadiums beginning to use these great city skylines or old historic buildings as backdrops. Everyone points to Camden Yards in Baltimore in the 1990s as kicking off the urban real estate ballpark trend. All right, we'll fast forward 30 years to today. Earlier this month, Ted Leonsis, the owner of the NBA's Wizards basketball team and the NHL's capitals hockey team, both in Washington, DC. They announced the deal to move both teams from downtown D.C. across state lines to Alexandria, Virginia, although at last check no official documents had been signed. So, yes, moving them out of the central city, the move looks like a huge win for Virginia. By the way, it's the most populous state without any big league sports teams. That's where the two teams could play. At the heart of a new proposed $2 billion, 12 acre entertainment complex as soon as 2028.

 

Speaker 1 (00:10:46) - But it is a huge bummer for the nation's capital. Yes, Washington, D.C. it has one of the highest rates of people working remotely in the US, so that hollows out the urban core. DC's once buzzing downtown is still struggling to recover post-Covid. Now, DC Mayor Muriel Bowser, who has made a last minute offer to Leonsis to keep the teams right there in the city, faces the potential loss of two major fan bases and a sports hub. It's right there in the city's Chinatown area. Yeah, this could be a new trend in stadiums in shaping the complexion of urban real estate. Now Leonsis is playing for Virginia. That really places him, among other billionaire franchise owners that want to build these massive entertainment complexes near their teams in order to capitalize on this growing synergy between sporting events and other nightlife and entertainment, and part of what's really going on here. Is the legalization and the spreading of sports gambling. That's the big prize that some other franchise owners are chasing a casino as part of this complex next to the stadium, and oftentimes you're going to have to move the team out of the city center to build these big multi acre complexes that will surround the sports stadium.

 

Speaker 1 (00:12:15) - Earlier this month, Dallas Mavericks owner Mark Cuban he came one step closer to his dream of building a new Mavs arena in the middle of a resort and casino after he struck a deal to sell his majority stake of the team to a casino mogul named Miriam Adelson. In November, New York Mets owner Steve Cohen, along with hard Rock international, they proposed an $8 billion entertainment complex and casino to be built next to Citi Field. These are major urban projects, so this trend of sports complexes with casinos is really picking up in the nation, but not absolutely everywhere in Oklahoma City. There is an exception there. In OKC, voters approved a good old fashioned 1% sales tax for the next six years to fund the construction of a new downtown arena for the OKC Thunder, and with that agreement, the Thunder could stay in OKC through 2050. We're talking about how a trend worth tracking in urban real estate is stadiums leaving downtowns. Now, one reason that I often talk about the power of inflation ravaging most people's lives here on gray is because it's so bad that it means you need a second job.

 

Speaker 1 (00:13:36) - Yes, you do not in the traditional sense. But look, if you are, say, during the day, a corporate attorney or you're a financial systems analyst or you're a crab fisherman, why can't you just do a really good job at your day job in that position and then go home and at the end of the week, call it good enough? Why can't you just do that? Well, you cannot do that because if you're being paid in dollars, your second job is learning how to invest those dollars at a rate higher than inflation. Otherwise, your prosperity gets diminished in your one quality of life and one set of opportunities are going to suffer. That's why inflation makes a second job a necessity. So your second job is investing. The other reason that I often discuss this topic is because, as we know, real estate helps you profit from inflation three ways at the same time. Two weeks ago I told you that if you want to learn more about how that works with the Inflation Triple Crown, that you can go to get rich education.

 

Speaker 1 (00:14:46) - Com slash Triple Crown to watch my free three part video series, I did that because I've described the inflation Triple Crown here on the show before, and I don't want to be too repetitive, but seeing that it is an enduring great principle. I've got a new way to explain this to you. Whether you're a long time listener or a newer one, then you're going to get some perspective out of this. I think you're really going to like it. What we're going to do is let's look here at four groups of people and see how much they benefit from or lose to inflation. We're going to view this through a real estate lens. Let's go from the worst off group to the best off group. And then what you can do is see which one of these four groups you belong to. The first group are the poor. They don't own any property and therefore they don't benefit from inflation one bit. This first group, the poor, their grocery and energy expenses are exacerbated by inflation, but yet they have no assets to benefit from it if they have a job.

 

Speaker 1 (00:15:54) - But the poor tend to have the job type wage that lags inflation, so the poor lose to inflation. The second group. So getting a little better off as we move through here. They are the primary residence homeowner with a paid off mortgage. So they benefit from one crown of the inflation triple Crown, yet they are better off. Two of every five homeowners have a paid off mortgage, just like this second group does here. And if there's 10% inflation over, oh, a couple years, well then there are 500 K home price floats up to 550 K and now they got 10% more dollars. But each one's worth 10% less. So at least they didn't lose purchasing power. But they are right back where they started. So this homeowner with the paid off mortgage does not profit from inflation. They are merely hedged. Then we have the third group out of four. This third group is homeowners. Again, just primary residence owners with a mortgage. Yep. They're actually better off than Group two with the paid off mortgage.

 

Speaker 1 (00:17:04) - Just in terms of who benefits from inflation. So like the second group, 10% inflation makes this third group's 500 K home rise to 550 K. But this mortgaged homeowner has another benefit. There are 400 K mortgage on this property, gets water down to just 360 K of inflation adjusted debt. And that is because inflation makes salaries and wages and prices and rents float higher, making the debt easier to pay back over time. Banks and lenders don't ask you to repay them with inflation adjusted debt, they will accept your diluted future dollars. It's like they got you locked in to a contract that was good for you years earlier. That effect is called debt debasement. And this is why this third group now benefits from two crowns as primary residence homeowner with the mortgage. And then come on, you know who this fourth group is? The coup de gras landing, the deathblow to inflation because they really make out in profit, benefiting from all three crowns. This fourth group owns income property with a mortgage. If you listen to this show, you're constantly trying to add more income property with a mortgage.

 

Speaker 1 (00:18:30) - And that's precisely what we hope you do here in gray. And this fourth group has both asset inflation like the second group and the debt debasement benefit like the third group. And additionally the rent income will outpace inflation enriching them. Now listen to this part closely for just a minute or two because the math is simple. But there are a few numbers here. Say you begin with $2,000 of monthly rent income on your rental property, minus your $1,200 mortgage, -$600 of expenses. That's $200 a monthly positive cash flow left over. All right. We're going to add 10% inflation on all that. And this inflation could happen in one year or over a number of years like magic. Now you've got $2,200 of rent income up from 2000 minus that same $1,200 mortgage balance because it stays fixed, -$660 of expenses, up from 600. All right. You're now left with $340 of cash flow. That's up from 200 bucks before the inflation. Do you understand the significance of this? Do you see how you're really on the superhighway to financial freedom? This is big because the mortgage principal and interest payment stays fixed with just 10% inflation.

 

Speaker 1 (00:19:58) - You just saw the money you feel in your pocket each month skyrocket from $200 to $340. In that example, that's 70% more income, 70% more. Extrapolate that effect across your entire rental portfolio. Wow. That is called cash flow enhancement. The third and final crown of the inflation Triple Crown. You just won all three with a loan on an income property. And hey, congratulations. If you caught that and you would have had to skip back to listen again, you are really on your way to understanding a path for creating wealth in your life. Now. I sure kept that example general in order to simplify things. And also some people span multiple groups. For example, poor people in terms of income could still be homeowners. Let's review what you just learned there. With inflation in real estate, the poor lose paid off, homeowners hedge, mortgaged homeowners hedge in profit mortgages income property owners hedge profit and increase income. So look and this is kind of weird. Once you've got income property, you might notice that the price for a pound of salmon rises from 1599 up to 1899, or that a Ford F-150 truck price spikes from 50 K up to 55 K over time, these could actually be strangely positive signs.

 

Speaker 1 (00:21:40) - It's a soft indicator that your real estate wealth is growing, though people would think you're nuts. I mean, you might secretly start. Rooting for inflation as avidly as an NFL Philadelphia Eagles Tailgater. Now, I'm not really sure if you'll pump your fist after the first time that you pay 12 bucks for a gallon of gas. We'll see about that. Well, hey, now that you've done the hard learning coming up straight ahead, a little more entertaining here how the rent stole Christmas and the anticipated 2024 Jerry housing price appreciation forecast. I'm Keith Weiner. You're listening to episode 481 of get Rich education. Role under the specific expert with income property, you need Ridge lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com.

 

Speaker 1 (00:23:00) - You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains in your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Speaker 3 (00:24:04) - This is Ridge Lending Group's president, Shale Ridge. Listen to get Rich education with Keith Wine.

 

Speaker 3 (00:24:10) - Hold and remember don't quit your daydream.

 

Speaker 1 (00:24:22) - Welcome back to get Rich education. I'm your host, Keith Reinhold. Be friendly, not friends. Those four words are the best concise guidance for how a landlord should keep their relationship with tenants. But there's a persistent school of thought out there among some in the general public. And it is that landlords are greedy. Landlords like you even want rent on January 1st. Who do you think you are, the Grinch that stole Christmas? Well, as a landlord, of course, you should maintain open lines of communication with your tenants if you're also managing them. When it comes to things like those top priorities, I mean repair and maintenance issues. But when I've had conversations with tenants and by the way, I don't anymore, my property managers do. Let me share with you some pieces that I have gently inserted into my conversations with tenants in regard to rent collection. This has done a lot to ensure timely payments, and they've always known then that my intent is not to steal Christmas.

 

Speaker 1 (00:25:37) - I see a lot of tenants. They're smart people, but they just don't understand your situation as an income property owner, often with a mortgage on your rental property, many tenants think that you just take their rent payment of, say, $1,800 and that that money is all yours for, say, a big Hawaiian vacation. You and I both know that most of that rent income is spoken for and already passed along for your expenses. One thing that you can tell tenants is, I have a big mortgage on this property to pay every month. That's what you tell them. Younger tenants are less likely to know this at all. Another thing that you can say is 90 to 95% of the rent goes toward all the property expenses, which are always going up. Yeah. I mean, these are your mortgage, insurance, property tax, maintenance, repairs, turnover, utilities and more. That's what I've called mortgage plus vim. Tom expenses, vim Thomas vacancy insurance, maintenance, taxes, utilities and management. Yeah.

 

Speaker 1 (00:26:47) - Even with the decently cash flowing mortgage rental, this statement is true. 90 to 95% of that rent is gone. It's not yours. Another thing you can tell tenants is I'll be in debt all my life. That's another thing you can mention. And of course, you and I both know that that's good debt. Another thing that you can say to tenants, and really, this is just something else that could be said to broader society that thinks that landlords are greedy. And you can say this, I build up my credit score, made a big down payment and put my money at risk. That's what you say? Yep. Ian, you did all this to provide good housing to strangers. How is that greedy? You can also just simply say I don't have a 401 K, and the more you listen to this show, the more you would ask yourself, why would you want one? And I'll leave you with this last one. I must constantly maintain this property. That's what you say, and you should constantly maintain that property.

 

Speaker 1 (00:27:52) - Now, you probably only need to bring up 1 or 2 of those sentences with tenants. The best time for you to do it is actually. Just before they're officially attendants. Say those things right at the beginning of the relationship. When you're just reviewing the lease, when you're going over that with them and they're about to sign that initial lease. Or you could also mention this months later when they pay the ongoing rent. So this is about your ongoing tenant relations. So they understand your situation. They're going to know that you're a human and you have your own set of issues in financial obligations and you have to take care of. And it's always about telling the truth. Only a Grinch would lie during the holidays. So it's always about being honest and informative. And, you know, with all of that said, it is somewhat of a paradox that all of this can be true. And yet at the same time, strategically bought property is so profitable on your side and see with your tenants, this is not the optimum time to wax poetic about how financially free beats debt free.

 

Speaker 1 (00:29:04) - Yes, it's really remarkable that all these statements can be true, even if 90 to 95% of your written income goes toward your mortgage and operating expenses, all while real estate pays five ways at the same time. And now they'll know that the rent they pay is not the rent. It's still Christmas, and you sure are not the Grinch. Let me prepare you for Gary's National Home Price Appreciation Forecast for 2024. First things first how well have past predictions performed? Well, let's take a look at this using the Nars number of median existing single family home prices. Understand that the forecast that I make here is always made near the end of the year, prior to the year forecast. It's all done ahead of time and unlike a lot of agencies, we don't revise our forecast later. It's all set in stone before the forecast year begins in late 2021. Recall that we had just come off a year there, 2021, when national home prices were up 20%, and some people predicted that prices would fall in 2022.

 

Speaker 1 (00:30:12) - Oh no. I let you know in late 2021 that home prices were going to rise a healthy 9 to 10% for 2022. That was the forecasts made at the time, and the result was 10%. Then late last year, you had more agencies predict that prices would fall. I let you know. I did not see how with such low housing supply and some of the other reasons. So I forecast 0% for this year. Yeah. Forecast, no gain, no loss. And as far as the result there it is too early to know yet. The year isn't done. All right. We'll build some context here as I make the reveal the forecast for next year. How about other agencies. What are they forecasting for next year. At last check, the NBA mortgage Bankers Association says home prices will rise 4%. Fannie Mae 3%, Freddie Mac 3%. The HP's. That is the home price expectation survey. They forecast 2% appreciation. Goldman Sachs also 2%. The Na 1%. Zillow 0%. Realtor.com -2%.

 

Speaker 1 (00:31:23) - If you take all of those and average them, you get a forecast of about 1.5% appreciation for next year. I'll tell you as we lead up to our forecast here, I'll let you know that it is not that close to the 1.5% average from those agencies. And none of those figures understand, including mine, are inflation adjusted. So nominal prices. All right. Well let's look at what we use to determine the trajectory of home prices. How is housing supply looking. We know demand is strong. Well with the fed active listing count data that I usually use where the normal supply is 1.5 million units or more will. The current amount is about 750,000. So it has rebounded somewhat, but it's still less than half of what's needed. And this dearth of supply supports more upward prices. Let's look at interest rates. Recent developments from the last fed meeting show us that Jerome Powell does not plan to put a rate hike lump of coal in your Christmas stocking now or anytime soon. Everyone wants to talk about how far rates are going to fall next year.

 

Speaker 1 (00:32:40) - But here's the thing to remember. Like I've discussed before, mortgage rates hardly matter when it comes to prices. They don't have much to do with housing prices at all, and I've discussed why a few times before. In short, that is because when rates rise, yes, it hurts affordability, but rates also rise when the fed is trying to cool a hot economy in that hot economy is what helps prices. Conversely, when rates fall, it helps affordability. But unemployment is higher and we might be in a recession when rates are falling and that constrains upward prices. You know something even real estate agents in the certification course, they have to take in those ongoing agent continuing education classes. They're taught that higher mortgage rates mean falling prices, but yet in reality, they almost never do. Just look at history. She she don't have to look any further than the last few years. Rates tripled and prices rose anyway. So when an agent prepares a CMA, a comparative market analysis for a client, agents are taught to consider mortgage rates with CMAs because higher rates put downward pressure on house prices.

 

Speaker 1 (00:33:58) - Yeah. Agents are taught that mortgage rates determine buying power, but they aren't taught the entire economic picture like I just briefly explained. So the point is that the direction of mortgage rates are not completely, but they're actually largely irrelevant in forecasting prices. Four out of every ten homeowners in this nation are free and clear with no mortgage. And among those that do have a mortgage 62. None of them still have a rate under 4%. All right. So if mortgage rates do drop next year from 7% to 6%, it still doesn't become that attractive for those homeowners locked in at that really low rate to sell. And yet if rates do fall to 6%, you're going to have a larger buyer pool because more people can now qualify to buy a home. Looking at the broader economy. Jobs are still being added, but many are part time jobs and GDP growth is strong. Unemployment is under 4%, CPI inflation, that's near 3%. So I'm not going to be full speed ahead with a huge number for next year's appreciation rate, because the economy, it still has a pretty substantial chance of slowing down because all these pass rate increases, lag effects could show, but that won't totally break the economy.

 

Speaker 1 (00:35:22) - And note something Fannie, Freddie, and FHA, they all announced higher conforming loan limits for 2024, and that's because they expect that more home price appreciation is coming. And I do too. We're a show about rental income. So what do I forecast? Prices rather than rents anyway? Well, there's a few reasons rents are more stable, so there's not as much to talk about that 15% year over year rent increase from last year that is seriously atypical. Also, as you are leveraged, you're going to get more overall gain from price appreciation than you do rents. As everything that I discussed and more has been weighed and analyzed in sprinkling in the spice of my personal experience as a direct real estate investor, I am happy to report to you here on the last show of the year that my expected home price appreciation rate for next year is 4%. Yes, a pretty historically normal 4% for next year. As the forecasts for the previous couple years, they saw more anomalous numbers, of course. What's that mean to you, the savvy leveraged investor? If you make a 25% down payment on a property, meaning you're leveraged 4 to 1 as best I can see it, you will then have a 16% return on your invested capital.

 

Speaker 1 (00:36:51) - Just as one of up to five ways that you're simultaneously paid. Increasingly, people make investment decisions based on the forecast any reasonable person should know. But I then be remiss not to remind you that this is a forecast, not a guarantee. Is this is the last show of the year. I trust that you've got even more to be grateful for than the expected 4% home price appreciation. I am sincerely grateful to have you as a listener this week, every week, and for another year here, as I'm sure you'll understand that I recorded this episode a few days before Christmas so that I could have a free and clear holiday. Best wishes on the remainder of your holiday season. I'll be back next week. Right on cue to talk about investing in a new way that you've never thought about before. May all of your New Year's resolutions be as successful as the home price forecast. Uh, until then, happy holidays to you and yours. I'm Keith Reinhold. Don't quit your daydream.

 

Speaker 4 (00:37:56) - Nothing on this show should be considered specific, personal or professional advice.

 

Speaker 4 (00:38:00) - Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 1 (00:38:24) - The preceding program was brought to you by your home for wealth building. Get rich education.com.




Direct download: GREepisode481_.mp3
Category:general -- posted at: 4:00am EDT

Most people float through life without direction. You must get clarity of focus before you can even begin setting goals.

Robert Helms of The Real Estate Guys, a professional real estate investor, reveals a framework for goal-setting. 

Goals should be SMART—Specific, Measurable, Attainable, Relevant, and Time-Based.

I provide examples of two athletic goals that I failed to achieve this year.

It’s vital to surround yourself with the right people.

Goals should be written down. It helps to set intermediate benchmarks within the goal.

It’s difficult to stretch more than 50% from year-to-year. Keep the goal achievable.

Is your life destined or is your life made? Our recent Instagram Poll result is that 75% chose “destined”, 25% “made”.

You can attend the highly-rated Goals Retreat, hosted by Robert Helms, January 12th to 14th in Dallas, Texas.

You’ll learn how to get clear on who you really are and really want to be, then set goals.

Timestamps:

Setting Goals and Achieving Growth (00:02:40)

Keith Weinhold discusses the importance of setting clear goals and the need to step out of one's comfort zone for personal growth.

The Influence of Others on Goal Setting (00:08:01)

Robert Helms emphasizes the impact of surrounding oneself with the right people and being strategic about the influences in one's life.

The SMART Goal Framework (00:09:44)

Keith Weinhold mentions the SMART goal framework as a well-known framework for setting goals and achieving success.

Setting SMART Goals (00:10:03)

The speaker discusses the SMART goal framework and how it helps in setting specific, measurable, attainable, relevant, and time-based goals.

The Importance of Specific and Measurable Goals (00:11:08)

The speaker emphasizes that goals need to be specific and measurable in order to track progress and determine success.

Breaking Down Outcome Goals into Activity Goals (00:13:56)

The speaker explains the importance of breaking down outcome goals into specific steps or activity goals to make them more achievable and actionable.

Discover Your Destiny (00:19:40)

Discussion on the belief in destiny and the importance of clarity in goal setting.

Success Stories (00:21:14)

Examples of individuals who have achieved success and life satisfaction through goal setting and clarity.

The Importance of Clarity (00:26:30)

The significance of clarity in goal setting and the initial steps to take before setting goals.

The assessment of personal skills (00:28:38)

Discussion on the importance of assessing one's skills and areas for improvement in personal development.

The goals retreat (00:30:12)

Information about an in-person event called the goals retreat, where participants can focus on setting and achieving their goals.

The structure of the goals retreat (00:30:59)

Details about the schedule and activities of the goals retreat, including journaling, answering questions, and turning goals into action plans.

Resources mentioned:

Show Notes:

GetRichEducation.com/480

Attend the Jan. 12th-14th Goals Retreat:

GoalsRetreat.com

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

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GetRichEducation.com

Get our wealth-building newsletter free—

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Our YouTube Channel:

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Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Today's episode is rated PG for personal growth. Most people just float through life with hopes and wishes that are never realized, because they never turned those ambitions into concrete goals. How do you get clarity of mission, vision, and values before you set the right goals for yourself? It's a transformative episode today with a terrific guest on get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text grey to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

 

Keith Weinhold (00:01:18) - It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it. Text grey to 66866. Text grey 266866.

 

Corey Coates (00:01:36) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:52) - Welcome to GRE! From Toms River, New Jersey, to Hood River, Oregon, and across 188 nations worldwide. I'm Keith Weinhold and you are tuned in to get rich education. Now, why do you live the almost same routine that you live day in and day out? How are you spending your highest order in finite resource of your time? Maybe you're intentional, and maybe you don't really enjoy shoveling your snow or mowing your lawn all that much, but you do it just because it's the way that you've always done things, but at the cost of what higher order activities could you instead fill with that time? And that's exactly what a lot of people have never explored. I know that today's guest and I both admire the Robert Heinlein quote.

 

Keith Weinhold (00:02:40) - In the absence of clearly defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it. One other axiom that I find so frustratingly inconvenient, because it's simultaneously true, is that your growth happens outside of your comfort zone. So then you've got to get comfortable being uncomfortable. And once you do enough of that, you'll become so enamored of growth that you'll soon find yourself being uncomfortable when you get comfortable. The best version of you. It means constantly disrupting yourself. Well that's disruptive. Now, within real estate, I've had various goals, and you might too. If you work at a dissatisfying day job, you might have a passive cash flow goal through real estate so that you can replace your job income. That's a pretty common one. Now, when I made my first ever property, that first fourplex, I didn't have much of a financial goal then. I just knew that I was effectively living for free, supplemented by the other three rent incomes. And when I first bought that building, I didn't even know what cashflow meant.

 

Keith Weinhold (00:03:57) - But once I did snowballing my cash flows became a goal until I could use that to replace my day job. Once that was achieved, the goal became how many doors can I control? Because that's a measure of service and influence. And today, one strong real estate goal is reaching more people like you with this very show right here today, we're talking to an expert at setting goals and helping you live the life that you were meant to live. He has had a deep influence on me and my growth. In fact, if it weren't for him, Jerry might not even exist and you would not have even heard of me. That's how much. Let's talk about setting and achieving goals to get the outcome that you want for your life. Today's guest is a professional real estate investor with experience in nine states and six nations, and I have toured some of that property with him in person internationally. He is also taught real estate practices and appraisal at the college level, but you might know him as the host of the nationally syndicated radio show The Real Estate Guys, now in its 27th year of broadcast.

 

Keith Weinhold (00:05:10) - You know that I've recommended that show to you, the listener, today. It's great to give a warm welcome back to Robert Helms.

 

Robert Helms (00:05:19) - Hey, Keith. So good to see you.

 

Keith Weinhold (00:05:21) - Robert. It's good to see you too. But we're not here today to talk so much about real estate, because a lot of people use real estate to fuel their other goals in life outside the real estate world, you brought a keen awareness to the fact that most people just kind of go floating through life without any real direction. And I think we're all aware, Robert, that there is a gap between who we are and the most that we can be. So can you talk to us about how finding our trajectory can perhaps be an exercise in connecting these dots that we call goals?

 

Robert Helms (00:05:58) - Yeah, I love this topic, as you know, because if we're left to our own devices, human nature is we're just going to bounce from thing to thing, like a boat without a rudder. And we get excited about something and it's a shiny object and we go off and pursue that.

 

Robert Helms (00:06:11) - And maybe real estate is that thing for you. And then, you know, you've got all the rest of your life to contend with. And whether you're a full time real estate investor or a part time real estate investor, I've found that one of the great keys to be able to discipline yourself, to do the things necessary to get the results you want in your life, is to set goals. And goal setting is pretty simple, but at the same time, it's almost alarmingly simple because if it seems too easy, people don't do it right. And the crux of goal setting is to figure out what you want, and then put that down in a way that you can be driven towards the things you have to do to make those things happen.

 

Keith Weinhold (00:06:52) - Maybe before we talk more about ourselves and what each of us really wants, maybe we can talk about what we don't want. And so many of us, me included, are influenced in life by the people that we surround ourselves with. You and I are both familiar with the quote from the late business philosopher Jim Rohn.

 

Keith Weinhold (00:07:11) - You are the average of the five people that you spend the most time with. A lot of people probably wouldn't like to admit it, but the statistics are kind of alarming with how much time one spends around their co-workers versus how much time spends around their family and friends, and with influences from co-workers. And that temptation to maybe just go with the flow. You know, it's pretty interesting because your coworkers are not chosen by you. They're chosen by your employer. Now, maybe that's good because it opens you up to a new set of ideas and a new context for your life, and that might adjust the goals you set. But then on the other side, if you don't have that and you don't have those coworkers, maybe those coworkers can help keep you out of one think silo and just thinking all the same way. So you talk to us about the influences of other people in one's lives. As you think about the life that you want to create for yourself.

 

Robert Helms (00:08:01) - This is such an important topic. I'm glad you bring it up at the beginning here because it is subtle, right? We don't get shoved off course.

 

Robert Helms (00:08:10) - We get nudged off course little by little by little. One of those five people you spend the most time with says, hey, let's go out drinking Friday night. And you were thinking, well, I was going to work on a podcast or a chapter on my book, or I was going to, okay, I'll just go out drinking and before you know it, like, that's not a bad decision. You get to spend time hanging out and there's some time in your life you want to be able to hang out with friends. But I think it's important that you become very strategic about your time. Time is a zero sum game, and it's also the most interesting resource because once this minute is gone, it's never coming back. What we do with this minute, we get a chance to do once, whether that's an hour, a day, a week. But at the same time, what happens after this minute? Well, another one and another month and another week. And so time can get away from you.

 

Robert Helms (00:08:58) - And if you're strategic about it, this is the key to success. Just spending time with people that have you going places, having you looking at your future, excited about what's happening now, you know, you mentioned your coworkers and you don't get to pick them. And that's true. But that's true about your family too. So you don't want to just write off your family. But let's face it, we probably all have negative people in our lives, whether it's friends, lifelong friends, people from college, but sometimes people in our family. So it's not that you don't spend any time with those people. It's your strategic about how and where you spend time with those folks. And the influences in our life probably have more impact on how well we do in life than any other factor.

 

Keith Weinhold (00:09:44) - We talk about being strategic and intentional with goal setting. There isn't a have you here today is because you're an expert in helping people set goals and help define a mission for their life, so I'm sure a lot of people, Robert, have come to you with a pretty well known framework for setting goals, called the Smart Goal Framework.

 

Keith Weinhold (00:10:03) - That's an acronym that stands for the fact that goals should be specific, measurable, attainable, relevant, and time based. So now I do think about the Smart goal framework before I set a goal, but I'm sure not to muddy up goals with a mission and all personalizes for a moment to give a good example for the audience. Robert, you can let me know what you think about this. And this is something outside of real estate investing. But when it comes to physical training, I have this mission of longevity and lean musculature. But to me, that's only a mission because it's kind of fuzzy and hazy. And then I have goals within that. For example, I had a couple goals within that. This year. I failed at them both. By the way. One was to be under £180 by June 1st, and the other was to run uphill up this trail in under 40 minutes by the end of the season. To me, those two things were goals, the body weight in the running, both of which I failed at within this broader mission of longevity and lean musculature.

 

Keith Weinhold (00:11:02) - So what are your thoughts about the Smart Goal Framework? Does that help people set goals and get them where they want to be?

 

Robert Helms (00:11:08) - Yeah, 100%, because just wanting something like, I want to be healthier or I want to be richer, those are great sentiments, but those aren't goals. What makes it a goal is the things you mentioned in the Smart framework works great. There's kind of the 101, which is if you've never set goals before, there's three things to focus on. The first is that a goal has to be specific and measurable. If you can't measure it, you don't know whether or not you hit it. So when you talk about something like your health and being lean, well, there's a couple of metrics in there. Percentage of body fat is a number and it's measurable how much weight you want to gain or lose is a number. And it's measurable. So that will help you instead of just I want to be lean. It's how lean do I want to be. And of course you might seek some counsel in that regard, either from a trainer or a doctor or someone to say, what's a good, healthy weight for me and so on.

 

Robert Helms (00:12:00) - So that's the specific part, which is also measurable. I kind of put that in as one thing, and the second is having a time deadline, a time limit or a deadline. So the best way to think of those two things is how much buy win, and your example of being able to do a specific amount of time metric by a certain date. That's exactly right, specific and measurable and with a time limit. And then the third thing is that to be effective, goals have to be written down. If you don't write down your goals, they're worth the paper they're written on. And it's not just so you won't forget. It's that something magical happens when we take pen to paper and writing it down. Using your computer, keyboard or voice to text is not the same as getting a good old fashioned pen or pencil and writing out your goals. Now that's the 101 write to take it. Beyond that, there are some few things in the smart model. It's either attainable or achievable for the A, and what that means is it has to be somewhat realistic.

 

Robert Helms (00:13:03) - You don't want to put limits on yourself, but if you say, well, you know, Robert, I made $50,000 this year and next year I'm going to make 5 million. Okay, well that's possible. People do that. There are people that go from 50,000 to 5 million. It's just not very likely. So unless you have some information that would show why that would happen, a much better way to think about it is how much can I stretch and still make the goal? If you made $50,000 a year for the last three years, Zig Ziglar says you can stretch to about 50% $75,000. That's a stretch, but it's realistic. So that's the attainable part, and it is a great framework. Now the other part, which is awesome when you're talking about how do I affect what I'm going to do. This is the crux of golf setting. There are two types of goals. If we were to narrow it down, there are outcome goals. That's how it's going to be at the end.

 

Robert Helms (00:13:56) - And then an even more important there are activity goals. So let's say you're in real estate sales and you want to sell 20 houses in 2024. That's a great goal. That's an outcome goal. At the end of 2024, I want to have listed and sold 20 houses. Okay, so January 2nd, when you get back, you know from your celebrating January 1st, what do you do? It's nebulous to say, well, gosh, to get to 20 houses by the end of the year. So what you do is you break down those 20 houses, that outcome goal into the specific steps necessary, and it would be different depending on every goal, right? It would be different for health than it was for relationships, than it was for your income. But to use this example, you might say, well, in order to sell 20 houses. Maybe I have to list 30 houses. Okay. To list 30 houses, I have to talk to 60 people. Okay, well, to talk to 60 people, I got to get 200 people on my list and so on and so forth.

 

Robert Helms (00:14:56) - Until you break it down to the actual activity, you can do January 2nd. So it might look like this. On January 2nd, I have to talk to four new people. I have to send out emails or letters or postcards to ten new people. And if I do that, if I do those two things, following the numbers all the way to the end of the year, that should result in my 20 houses. Now, how do you know what those numbers are? That's from your practice. You've done this before. If you're brand new in the business, you would get counsel from folks that are already doing that. Back to the five people you spend the most time with, right? Surround yourself with folks that have already done what you want to do, and then break down the outcome goal into the activities necessary to achieve the goal.

 

Keith Weinhold (00:15:40) - Oh, this is great step by step guidance. After I knew I failed at those two goals I shared with you, Artemis tried to reassure myself and tell myself that, well, you know, a lot of people don't even set concrete goals, so I ought to be okay about it because I've definitely ended up more fit.

 

Keith Weinhold (00:15:54) - But then at the same time, I don't always want to be comparing myself to normalcy or that's just a recipe for mediocrity. But maybe just here, as the introductory beginner goal setter that I am, I would have been more successful had I written them down, and had I made more intermediate steps in order to reach those two goals that I told you about? So I learned a little something there. I'm your host, Keith Weinhold, with Robert Helms of the Real Estate Guys. More on goals when we come back. You're listening to get Rich education. Render this a specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four plex's. Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.

 

Keith Weinhold (00:17:22) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains and your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Robert Kiyosaki (00:18:09) - This is our rich dad. Poor dad. Author Robert Kiyosaki. Listen to get Rich education with Keith whine old Dot Prichard, Adrienne.

 

Keith Weinhold (00:18:27) - Welcome back to get Rich education. We're talking with Robert Helms of the Real Estate Guys about goals or not talking so much about real estate today because many people use real estate in order to fuel their other goals in life.

 

Keith Weinhold (00:18:40) - So many people just go floating through life without many goals. I could do a better job with my goal framework myself, as I think you just learned there, Robert. I think some people, they might be dismissive of goals because some people have the mindset where they're thinking, well, I'm just ordained to live a life like this, or I'm just destined to live a life like this. I don't know that our audience necessarily thinks that way, but I'd like to get your input on this. We recently had an Instagram poll over on our Instagram page, and the poll was simple are you destined or are you made? And 75% of respondents chose that they are made rather than that they are destined. So what are your thoughts with regard to that as we set goals for this trajectory in our life?

 

Robert Helms (00:19:28) - That is a world class question. We always say, if you want great answers, you have to ask great questions. And that's a great question and something people don't think about. There are folks that believe that they are completely self-made and that it's up to them.

 

Robert Helms (00:19:40) - If it's to be, it's up to me and I completely respect that. And then there are folks that believe that no something is written on my heart. Something tugs towards me. I have a destiny. I have a life work that I need to pursue, and I respect that as well. So we for years have done an annual goal setting retreat that we call Create Your Future. But people wrestle with this, and I kind of witnessed the same thing. About three quarters of the people resonate with Create Your Future. But the very first evening of the event, I also submit to the attendees that if you feel called, if you feel like I have a destiny, but I'm not clear about it, then I just suggest that they reframe the entire event by the original title we use, which was Discover Your Destiny. So whether you believe that there is a destiny, a calling for you, or you've got to figure it out, this process of thinking about your goals, breaking them down to action steps, making sure they're in alignment with your vision, having that mission that you talked about, right.

 

Robert Helms (00:20:45) - All those things will serve you kind of either way.

 

Keith Weinhold (00:20:49) - Yeah, that's a rather deep existential question that I think some people need to figure out, I would imagine, before they develop their goals. So now that we've talked about mission and goals somewhat, Robert, can you tell us about some of your more successful people and some real success cases you've seen with people that have actually achieved goals and gotten this life satisfaction about becoming the most that they can be?

 

Robert Helms (00:21:14) - I love that the reason I keep doing this part of my life is because of the results people get. It's absolutely astounding. We've watched people go from modest means to incredible success, and not just monetarily, although that certainly happened. One of my favorites is a young gentleman who was dragged along to this, the goal setting event we do every year by his dad. His dad had been through a four years, brought his son and his son was kind of lackadaisical, had a job that paid okay, but he was living in a home. He was £50 overweight, just kind of plodding through life.

 

Robert Helms (00:21:51) - After three years. This guy was a brand new guy and he has completely changed his life. He's fit as can be. He found the woman of his dreams, which was something he thought might never happen. He's no longer working at a job that he just deals with. He loves his career like everything has changed and he gives credit to that, to finding this clarity. So here's the essence of goal setting. Your two best friends are clarity and focus. You have to get clear on exactly specifically what you want and the steps to get there. Most people are not clear. They're vague, they're nebulous. They kind of know what they want to do, but they aren't sure. And so you need a process to help you uncover and get that clarity. And then once you have that clarity, focus, right? Tracy says. And this is a deep one. All of life is the study of attention. What you think about comes about, said Earl Nightingale. And so the point is, what if we focus on something? Think about in your life, you've had some experience that's been successful.

 

Robert Helms (00:22:59) - It's probably because you put a lot of focus into that, a lot of attention. Sure. I remember all those years ago when we were talking about, hey, you said, I'm thinking about starting a podcast, and I'm like, awesome, right? And I was encouraging of it. I was thrilled you'd thought you'd already recorded a couple episodes. Yeah. And so many guys or gals come up and say they want to start a podcast, and most never do. But because you had the passion for it and you were committed to it and you did all the hard work, right? Those first several episodes where you got six or 7 or 10 listeners, you can't get to the first million until you get to the first ten. And this is what life is. It's focusing on the things that you want in your life. Instead of spending our focused time on distractions, things that the advertisers in our life want us to do, things that those friends that maybe like us but don't necessarily have our best interests at heart.

 

Robert Helms (00:23:54) - They want us to come to you. So there's a lot to figuring out who you want to be when you grow up. But if you'll take the time to figure that out and then work towards it, it's extraordinary what can happen now as far as success stories, I'll tell one more story because this is a reality check. It's not all happy high notes four years ago. At the end of the Create Your Future Goals retreat, I had a gentleman come up to me, pretty well-known guy, and so I won't mention who it is. But he said, Robert, you don't know this about me, but you saved my marriage this weekend. He said, I came with my wife. She was really reluctant to come. We were on the verge of divorce and we spent our time to separate parts of the room. But as you recommended, we came together Saturday night for dinner and we just connected like we haven't in years. And I saw this guy a couple weeks ago thrilled with his marriage, with everything that's like, awesome.

 

Robert Helms (00:24:49) - Now, I have to tell you, the other part of the story, which is that same evening, I talked to another gentleman who came up to me and he said, I'd like to talk to you about something. My wife and I came to this event and we both played full out, and we took all the notes and we really got clear on on what we want to have and be and do in our lives. And we've made the decision that we're going to get a divorce. I'm like, wow. So here's my point. If that was in their trajectory, if the best thing for them really was to separate, like, how soon would you want to know that versus the other couple that for all those reasons, they have strife and challenges in their marriage, but when they really looked at who they were and who they were becoming, they figured out they were much stronger together. So all that to say that when you get into the tough stuff, right, that squishy part of your heart and your soul, that stuff will come up for you.

 

Robert Helms (00:25:42) - You know, at the event, we put Kleenex out everywhere and people are like, what is a cold going around? Like, no, you. May need this. You may not. But I will tell you most people, if to get it done right, you have to be emotional because emotion is what will create motion, and that motion in your life will change your life.

 

Keith Weinhold (00:26:01) - Well, you talked about how clarity is an early step and wow, that's astounding for a couple to get the clarity that they want, amend things or a couple to get the clarity that they should end things. So we talked about goals kind of the back end and everyone knows what goals are. But kind of on that front end in the clarity, in winnowing down toward your goals. Can you speak to us more about that clarity piece? Because really, I think that's what a lot of people lack, because it probably takes some real vision.

 

Robert Helms (00:26:30) - Boy sure does. And it's the part I think, that people don't teach.

 

Robert Helms (00:26:33) - So the simple part of goal setting, you know, the Smart goals that works, but it it assumes you already know what you want. And so at our workshop the first day, we don't spend a minute on goal setting. And people are like, isn't this a goal setting workshop? Yeah, there's a whole bunch of stuff you have to do before you can set goals, right? And so I'll give the listeners some nuggets. The first is to get clear on who you are. Now, that sounds too vague and too big of a question, but specifically your principles and values that govern your life. And I've discovered that most people have about a half a dozen. There's about a half a dozen things that you value that really, really matter to you. And I don't even want to prime the pump. I don't even want to put words out. So people jump into that. Oh yeah, that sounds good. Instead, you have to spend some time alone or with some awesome music, or how whatever's best for you to get in that state, and then really delve deep on to the things that matter in your life.

 

Robert Helms (00:27:36) - What principles guide your life? What's super important to you? If you could only have 2 or 3 things in your life, what would they be? And then you start to get clear on really what matters. Because most of us are busy. We're busy doing all kinds of different things. And busy is not necessarily the path to success. Sometimes you have to take things off your plate in order to do more. As we like to say, you have to say no to the good in order to say yes to the great right. And most busy people really need to do some changes in that regard. First, the things that maybe you've been doing but you really aren't suited to or you don't enjoy doing, you offload those things. You learn how to delegate some of that. And then if you can spend time thinking through what matters to you as a person independent of real estate or your career, or even your family life, just the values and principles that guide you now you start to open up to that clarity, and then we take you through a whole bunch of exercises to imagine what life would be.

 

Robert Helms (00:28:38) - And, you know, pay attention to things that you are good at. Most people don't give themselves enough credit for their skill sets, and there's two schools of thought in personal development getting better as a person. One is I'm going to do an assessment and this is really important, do an assessment of where you're at. And as Jim Collins said in his book, Good to Great, confront the Brutal facts. If you're messing up somewhere, admit it. This is just between you and yourself, right? So admit where things aren't going. So are where maybe you're not as skilled as you like to be, or you don't have the experience that you want. And then you take an assessment of the places that you're pretty good at. You know, we don't like to pat ourselves on the back publicly, but in the privacy of your own mind, figure out, hey, there are some things that I'm skilled at. Either I have learned and developed the skill. I'm naturally drawn towards a behavior that's positive, whatever that might be for you, and then school of thought number one is I'm going to look at all the things I'm not very good at and try to get better at them.

 

Robert Helms (00:29:37) - And if I do that, that'll make me a better person. And that's true. The second school of thought is I'm going to do the same exact assessment, except I'm going to look at the things that I'm really good at and I'm going to design my life. So that's what I spend my time doing and the things I'm not good at. I find out how to have somebody else do those things. You can probably tell from my energy that's the school of thought I subscribe to, but both will work. But if you will focus on your unique talents and gifts and those things you are destined to be, then that's how you become the next best version of you.

 

Keith Weinhold (00:30:12) - Oh, these are key pieces in finding the clarity that you need to go ahead and set goals. We all become victims of weapons of mass destruction. Robert. Oftentimes I joke about how I can't believe how much stuff I get done when my iPhone is over on the charger because I can't be on the iPhone at all. So every year you host the Goals Retreat, an in-person event so a person doesn't have weapons of mass destruction, and they can really be focused.

 

Keith Weinhold (00:30:40) - And it's important that this is done in person. It's a hands on workshop in a focused environment. You've got a lot of great testimonials about it, and even people that repeat and show up year after year, people that become teary eyed for what you brought out of them, people that say that their lives have been changed forever. So tell us about how one can attend your goals retreat.

 

Robert Helms (00:30:59) - What's coming up the second weekend of the new year. It's a great time to be thinking about your future as we're at the beginning of the year when 2024 is a blank canvas and it happens in Dallas, Texas, we picked a hotel that is really conducive to having little nooks and crannies and places that you could go because there is instruction, but there's also times where you're going to go journal and answer questions and think and be alone. And it's a beautiful place. So you get some inspiration in that regard. It takes two and a half days. So we started about 5:00 in the afternoon on Friday and go till 10 or 1030 that night.

 

Robert Helms (00:31:33) - A lot of people are traveling in a day, so that's about as much as we can get people to pay attention before they start to nod off. But then the next day, Saturday, it's all day from, you know, 730 breakfast till 1030 at night. And then Sunday kind of 8:00 in the morning for breakfast until 6:00 at night. And then we have our afterglow reception. And, you know, I used to do this, Keith, in three hours and in three hours I could teach a lot about how to set goals and how to ask those questions. But then I'd have to send you home to do it. And a few people would, and most people wouldn't. So now in the two and a half days, you will get a ton done. Your missions, your values, your purpose. You'll answer more than 250 questions, and you'll do it in writing and you'll get some great, great stuff. Some of it you'll go, yeah, of course. And other times you'll be absolutely surprised at what happened when you put pen to paper.

 

Robert Helms (00:32:27) - And then on Sunday, it's really a workshop to turn those goals into action plan. So you leave not confused, not vague, but crystal clear. You obviously can't get every single thing done on every goal. In two and a half days. There's some homework, but you're going to have enough done that you'll have that momentum. So if people are interested in that, that sounds interesting to you. All you have to do is go to Goals retreat.com goals retreat.com and you can learn all about the Create Your Future 2024 goals. Retreat.

 

Keith Weinhold (00:32:58) - Invest in future. You. You're worth it Robert. It's been valuable. Thanks so much for coming out to the show.

 

Robert Helms (00:33:05) - Great to see you, Keith. Thanks for having me. I wish everybody out there a wonderful 2024.

 

Keith Weinhold (00:33:16) - Oh yeah, great stuff from Robert Helms. As usual to review Smart goals are specific, measurable, attainable, relevant, and time based. Even if it's your personal goal and you know that you won't forget that goal, it has been shown to increase your success.

 

Keith Weinhold (00:33:33) - If you write down your goals old school style with a pen and paper, let's review a few other things that you learned there. When you set a goal, set intermediate benchmarks within it. That's something that I need to work on personally. But before you even set goals, you'd have to know that they are the right goals. And that means that you need to get clarity of vision first. That comes with understanding your principles and values, and then you can spend your life being in the lane that you enjoy because you've helped figure out what that was in our discussion about. Are you destined versus are you made? Earlier in my life, I believed I was destined and now I believe I am made. Back when my high school classmates voted me as the most quiet and shy student, and then later I'd go on to host basically a talk show here. Well, that was my pivot point. To know that you make yourself, if you're still wrestling with the you are destined versus you are made conundrum, perhaps you can adopt the belief that you were destined to make yourself the best you that you can be, and there you've got both in one, the real estate guys host a number of world class, in-person events.

 

Keith Weinhold (00:34:50) - I would know because I've attended a number of them myself, from a real estate syndication event to a summit cruise to real estate field trips. But among them, all their goals retreat is their highest rated event, and it's only held annually. If it sounds interesting to you again. Goals retreat.com major thanks to Robert Helms today. Next week here on gray. It's real estate investing content that you've probably never heard before when we do How the Rent Stole Christmas. And I'm also going to deliver Gre's big home price appreciation forecast for next year and more on top of that. That's all next week. Until then, I'm your host, Keith Reinhold. Happy holidays. Don't quit your daydream.

 

Speaker 5 (00:35:40) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 6 (00:36:08) - The preceding program was brought to you by your home for wealth building. Get rich education.com.





Direct download: GREepisode480_.mp3
Category:general -- posted at: 4:00am EDT

A crying, sniffling mother reveals how inflation is ravaging her family. Despite a two-parent income, she tells us that they're trending toward poverty due to wages that struggle to cover inflated prices.

For home prices to fall, many homeowners need to walk away. But if they tried that today, they’d have to pay more in rent than they would on their low mortgage payment.

It’s absurd to only have one source of income.

401(k)s are considered a scam by some. I explain. Plan participants buy an income stream “probably later”. Real assets that cash flow provide income “surely now”.

There’s no such thing as: rent inflation, food inflation, or energy inflation. Inflation comes from the central bank.

One dollar in 1776 has the purchasing power of $35.36 today.

The worst consequence of inflation is that one parent could work to be middle class in the 1950s. It became two by the 1990s. After the 2020s inflation wave, two parents might not be enough anymore.

I explain why the Fed should keep interest rates the same for at least one year. But I doubt that they will.

Resources mentioned:

Show Notes:

GetRichEducation.com/479

Terrific inflation resource, charts:

https://www.officialdata.org/us/inflation/1776

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode479_.mp3
Category:general -- posted at: 4:00am EDT

If you own a real estate entity (like an LLC), the new Corporate Transparency Act (CTA) must be complied with soon.

I have my own attorneys on the show to discuss this today, Garrett and Ted Sutton.

You must report ownership information to the federal government. It must only be done one-time, not annually.

The penalties for non-compliance with the CTA can be as high as $10,000 in fines or up to 2 years in jail. Those penalties would be for the most egregious acts.

The intent behind the CTA is to prevent money laundering and terrorist financing.

If you don’t own real estate in an LLC, you probably won’t need to comply. There are pros and cons of using LLCs, which I discuss.

For help complying with the CTA, you can contact Corporate Direct at CorporateDirect.com or (800) 600-1760.

Resources mentioned:

Show Notes:

GetRichEducation.com/478

Corporate Direct:

CorporateDirect.com

1-800-600-1760

Video platform with kids’ FinEd:

SunnStream.com/fivetricks

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text FAMILY to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode478_b.mp3
Category:general -- posted at: 4:00am EDT

Today's topics: Conventional financial advice is God-awful; tertiary real estate markets; I’ve got a solution to guilt tipping; whether or not the world is uncertain and unsafe.

Conventional financial advice is so bad. I attack the practices of setting budget alerts and paying off your smallest debts first. 

Don’t roll a debt snowball; roll a cash flow snowball.

In the past five years, tertiary markets are beginning to exhibit the rent stability of larger markets.

Guilt tipping is out of control. Learn my elegant solution. You’ll never pay a guilt tip again.

It seems like the world is increasingly uncertain and unsafe. It isn’t. I talk about why it only seems this way.

Timestamps:

The limitations of budgeting (00:02:43)

Discussion on the drawbacks of using budgeting platforms and how they reinforce scarcity thinking.

The debt snowball concept (00:05:09)

Explanation of the debt snowball method of debt paydown and why it is not aligned with an abundance mindset.

Investing in tertiary real estate markets (00:09:43)

Exploration of the emerging bullish case for investing in smaller, tertiary real estate markets and their stability compared to larger markets.

Tertiary Real Estate Markets (00:10:56)

Discussion of the advantages and objections to investing in smaller tertiary real estate markets.

Increasing Investor Appetite in Smaller Markets (00:12:02)

Exploration of the growing interest and sales volumes in tertiary real estate markets.

Guilt Tipping and a Solution (00:20:16)

Explanation of guilt tipping and a proposed solution to avoid feeling pressured to leave a tip when making digital payments.

Guilt Tipping and the Increasing Expectations (00:21:20)

Discussion on the rise of tipping expectations and the use of digital payment prompts to ask for tips.

The Problem with Guilt Tipping and the Inconvenience of Undoing Tips (00:23:45)

Exploration of the annoyance of guilt tipping and the difficulty of undoing tips after poor service.

The Solution: Paying Cash to Avoid Guilt Tipping (00:31:18)

Suggestion to pay with cash as an elegant solution to circumvent guilt tipping and ignore electronic payment terminals.

The Uncertainty of the World (00:32:25)

Discusses how uncertainty has always existed and how waiting for complete clarity can hinder investment decisions.

Disasters and Uncertainty (00:33:47)

Lists various disasters and events that have occurred in the US, highlighting the constant presence of uncertainty and the relative sense of certainty and safety today.

The Ultra Safety of American Society (00:36:13)

Examines how society has become ultra safe, discussing the term "safetyism" and providing examples of excessive safety measures.

Resources mentioned:

Show Notes:

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Complete Episode Transcript:

 

Keith Weinhold (00:00:01) - Welcome to I'm your host, Keith Weinhold, with a rant on how conventional financial advice is so terribly god awful an outlook for tertiary real estate markets, then? Are you getting worn down from guilt tipping? I've got a proven solution on how you'll never pay a guilt trip to a business again. And finally, how do you arrange your investing in personal finances in a world that's uncertain and unsafe? All today on get Rich education? When you want the best real estate and finance info, the modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers. Oh, at no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text to six, 6866.

 

Keith Weinhold (00:01:15) - And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it, text GRE to 66866. Text  GRE to 66866.

 

Speaker 2 (00:01:40) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Keith Weinhold (00:01:56) - Welcome from Los Angeles, California, to Las Cruces, New Mexico, and across 188 nations worldwide. I'm Keith Wayne holding. This is get rich education. When you pay for a low level service item like a Chipotle burrito, and another human is looking at you to see if you leave a 20% tip on a digital payment terminal, does that make you feel uncomfortable? Well, now you're being asked to. Guilt tip I've got a foolproof way on how to never get put in that situation again. That I'll share with you later here. You know, sometimes you just hear something that triggers a rant. I recently heard an ad for a digital platform that helps you manage your finances.

 

Keith Weinhold (00:02:43) - And what an awful, in scarcity minded way of thinking this reinforces. But this is actually what mainstream financial guidance looks like. All right, it was an ad for a digital platform trying to attract you there. And here's basically how it works. You set up your account. Then based on your income and expenses, you set up your budget. And as you know, that is a bad word around here, a budget. It's not how you want to live long term. All right. Then, when you're close to hitting your spending budget for the month or whatever, this platform triggers a budget alert. Are you kidding me? You get emailed a budget alert. How convenient. Oh, geez. So much for living an aspirational life by design. What a dreadful idea. Like someone that really wants more out of life would actually take effort to set up something like that. You would be building an architecture to establish life patterns that completely say, I think that money is a scarce resource. Now, in the short term, you've got to do what you've got to do, which might mean living below your means for a little while.

 

Keith Weinhold (00:03:55) - But in a world of abundance, delayed gratification should be a short term notion for you. I think that this type of platform that centered around stupid budget alerts is so limiting. Gosh, you've got to feel cheap just saying that out loud a budget alert. But anyway, that sounds conducive to this concept of scarcity based finance called a debt snowball that you can read about the debt snowball on Investopedia. But the debt snowball, that's basically how you pay off your debt with the smallest balance first, not the highest interest rate, but yes, the smallest principal balance it would have basically says is in the first step, what you're supposed to do is list your debts from smallest to largest, and that's regardless of interest rate, just smallest to largest based on the amount. And then the next step is that you make minimum payments on all of your debts except the smallest one, because you pay as much as possible on your smallest debt. And then the last step is you're supposed to just go ahead and repeat that until each debt is paid in full.

 

Keith Weinhold (00:05:09) - That's the debt snowball. So according to that, why do they say to disregard the interest rate, which is your cost of capital? Because they say that when you pay off the smallest debt super quick, that you're going to be jumping up and down with excitement, and that is going to motivate you to keep working hard to get debt free. They say that hope is more important than math. That's the school of thought. And along the way you should lower your expenses, cut spending, work hard and add a side hustle where you can. Oh my gosh, that is all congruent with this debt snowball concept that we sure do not endorse here at. I mean, that is 100% orthogonal to the world of abundance that we believe in. So often on your high interest rate debt. What you would do then is you'd make the minimum payments with this debt snowball, and then you focus it all on your smallest debt amount, regardless of interest rate. You've heard that right? And it even advocates that you stop investing and just focus on that smallest debt amount, even if it's a low interest rate.

 

Keith Weinhold (00:06:22) - That makes no sense. If you've decided that debt paydown is the best allocation of your first expendable dollar. All right, even if that were a yes, then in most cases you'd want to pay down the highest interest rate independent of the total principal balance on each of your debts. I mean, that's arbitrage, but they even bigger question for you, almost existential in nature is why is the best way to allocate your first expendable dollar on debt? Paydown. And. Any way it's or that. First, because one of the first places to look is how you can leverage that dollar 4 to 1 or 5 to 1 as long as you've controlled cash flows. Now, sometimes there are instances where you'd want to pay down debt before investing, certainly like a 20% Apr credit card debt, that could be one such place. So could retiring a debt to help your DTI, your debt to income ratio so that you can originate a new business loan or a new real estate loan first? All right, you might do thatrillionegardless of the interest rate on a loan.

 

Keith Weinhold (00:07:30) - But my gosh, if we want to stick with the snowball analogy, since we're a few days from December here, instead of trying to push a debt snowball up a hill to start rolling a cash flow snowball down a hill, when you buy an asset that pays you a monthly income stream to own it, that is constructive. Compounding your cash flows beats compounding your debt paid out. Instead of trying to push a debt snowball up a hill because you're cutting your one and only quality of life down. Instead, start rolling a cash flow snowball down a hill, and now you've got gravity working with you in the right way. That is the end of my rent. Hey, maybe I just feel like complaining a bit. My Jim was playing Phil Collins and Elton John all weekend, so maybe that's a kind of what in the world kind of mood that had generated in me, I don't know. And hey, nothing wrong with Phil Collins and Elton John. I mean, those guys are truly talented singers, 100%.

 

Keith Weinhold (00:08:28) - I just don't want to be working out to those guys. Michael Bolton, George Michael that's not motivating me to hit 20 burpees. Okay. Hey, well, I hope that you were set up for a great week. Be sure that part of it is that you are signed up for our live event tonight for 5.75% mortgage rates on Florida Income property@webinars.com. Now, whether you're looking at investment property in Florida or most any of the other 49 US states, there's a really nascent and interesting development that's been taking place for at least five years now. And that is what's happening in tertiary markets, smaller markets. I'll define tertiary a bit more shortly, but we're talking about metro statistical areas, MSAs that are probably not under 100,000 population, not that small. From a rent growth perspective. What's happened is that over the last five years, tertiary markets have had similar patterns to bigger markets. And historically, these smaller markets have been more erratic. But in rent growth terms, tertiary markets have stabilized. Now, a primary market is something like New York City or Chicago, a secondary market.

 

Keith Weinhold (00:09:43) - You might think of that as a little Rock, Arkansas, where it's under a million in size, and then a tertiary market that's going to be somewhat discretionary. But we're talking about a population of 100 K up to, say, 300 K. And what's noteworthy is that there are now more analysts and investors that are bullish on vibrant tertiary markets. So let's talk about why this is happening. I think there's an emerging bull case for overcoming some of the historical roadblocks to tertiary market investments in a diversified multifamily or single family rental portfolio. And one classical objection is that tertiary real estate markets are too volatile. Historically, we perceive smaller markets as more volatile. Yes, and some surely are. But over these last five years, markets outside the top 50 in size were regularly more consistent. Okay. They avoided rent cuts in 2020. They recorded sizable but less lawfully rent hikes in 2021 and 2022. And now they remain moderately positive in 2023, even as larger markets have kind of flattened out in the rent growth.

 

Keith Weinhold (00:10:56) - And of course, we're talking about a composite group of tertiary markets here. Some are more stable than others. You got to watch those local trends as always, of course. And you know, classically a second objection with these smaller markets is that, well, it's too easy to add a lot of supply. And yes, that is sometimes true and sometimes it's not. Indeed, there are a handful of small markets that are building like crazy, like Sioux Falls, South Dakota in Huntsville, Alabama. But as a group, the construction rate in what that is is the total units under construction divided by the total existing market, that is 5% in large markets versus the construction rate of just 4% in small markets. See, it can be harder to build in certain small markets due to NIMBYism or a lack of debt availability, especially if local banks aren't interested in the check size needed for construction loans. It can also be harder to build in certain small markets due to a lack. Of equity because it's a tougher sell to ask investors in a syndication to bet on a market that they don't have a lot of knowledge of.

 

Keith Weinhold (00:12:02) - Another objection to these tertiary markets is that small markets are not liquid. Since 2019, sales volumes in dollars going into tertiary markets has doubled. Investor appetite has definitely increased in smaller markets. And that's particularly true among these traditional regional investors that are looking for better yield as the larger cities got pricier. So good small markets, you know, a lot of them really are not secrets anymore. And there's only one more objection to these tertiary real estate markets and that it is harder to scale operations. And yes, there is always benefit in efficiency of scale. But, you know, it's certainly been getting easier with better technology today. Investors can always work with top local property managers. And for investment property owners or managers, they often target small markets adjacent to larger markets where they have a bigger presence. So some other considerations before you as an investor go deep in one of these smaller tertiary markets is you want to be choosy in your market and in your site selection. Look for small markets that have multiple drivers.

 

Keith Weinhold (00:13:13) - You don't just want these one trick ponies. You know, I've discussed with you before about how markets that are heavily focused on commodities or heavily focused on military, they are not favorable because those two sectors, for example, commodities and military, are just pretty volatile. Look for growth or steady markets, lots of small markets. They continue to grow at a pretty healthy clip. And you want to look for markets with an absence of new product. Now why don't I name a few tertiary markets so that you can get a better idea of this. So about 100 K to 300 K in population size. Not that these next ones are necessarily good or bad markets. It's just for size comparison. I'm thinking about Ocala, Florida and Shreveport, Louisiana. You know those two. They're almost getting too big. They're almost secondary markets Wilmington, North Carolina at 300 K. That's a tertiary market. So are Akron and Canton, Ohio Dayton. That's pretty tertiary, but it's also close to Cincinnati. So you got a little more safety in Dayton.

 

Keith Weinhold (00:14:20) - Toledo is secondary. Burlington, Vermont is tertiary. Bellingham, Washington is tertiary. Yuma and Flagstaff, Arizona are both tertiary. Yes. We're talking about the stability in rents in tertiary real estate markets. Conventionally. You know, in the past, I've said that MSAs of 500 K population or more, that's pretty much where you want to be. But anymore, with the rise of remote work after 2019, it's really making some of these smaller tertiary markets more palatable to real estate investors and something that you probably want to consider. So really, that's the takeaway for you here and say this is the kind of stuff that really plays into my interests as a geography guy. See, I'm a real estate guy, but I might be the most geography interested real estate guy out there. Geography is something that I really love, though I could I don't share too much geography here on a real estate show. Sometimes it's relevant because both geography and real estate are location, location, location, but sometimes it's less relevant.

 

Keith Weinhold (00:15:25) - For example, North America's longest river is not the Mississippi, it's the Missouri River. The New York City metro area is so populated that more than one in every 18 Americans live there. That's almost 6% of the entire American population. See, some of this is more trivial or of general interest than it is relevant to real estate. Although you could learn some geography from me. Do you know the closest US state to Africa? If you draw a straight line, the closest state to Africa is not Florida or North Carolina. It is Maine. Look on a globe. Part of the reason that Maine is the closest state is that Africa is primarily in the Northern Hemisphere, not the southern, contrary to popular belief, and to look at a different continent. The entirety of South America is east of Jacksonville, Florida. Here's one more piece of geography. Canada's beautiful and mountainous Yukon Territory is larger than California, yet California has more than 900 times the population of the entire Yukon. Yes, the giant Yukon has less than 45,000 people.

 

Keith Weinhold (00:16:39) - It is the practice of guilt tipping out of control. And how do you respond to our world that seems to be increasingly unsafe and uncertain. That's coming up next. They say, if you give a man a fish you have fed him for. Or a day. But if you teach them to fish, you have fed him for a lifetime. Well, here at gray, we do both. I'm not talking about both in terms of men and women, but we teach you how to fish and give you a fish. Get rich. Education is where we teach you how to fish. With this show, with our blog and newsletter and videos, we also give you a fish. That's it. Gray marketplace. It's one of the few places you'll find affordable, available properties that are good quality there at marketplace. They're all conducive to our strategy of real estate pays five ways I'm Keith Wild. You're listening to get Rich education. Jerry listeners can't stop talking about their service from Rich lending group and MLS. For 256.

 

Keith Weinhold (00:17:45) - They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your pre-qualification and you can chat with President Charlie Ridge. Personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income, and they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.

 

Keith Weinhold (00:18:55) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to 66866.

 

Speaker 3 (00:19:16) - This is real estate investment coach Naresh Vissa. Don't live below your means. Grow your needs. Listen to get rich education with Keith Weinhold.

 

Keith Weinhold (00:19:34) - Welcome back. I'm your host, Keith Weinhold. There will only ever be one great podcast. Episode 477. And you're listening to it perhaps on one third of our episodes. Throughout the show's history, there is no guest. It's 100% me, a slack jawed monologue like it is today, and lots of great Jerry episodes coming up in the future, including Robert Helms other real estate guys here soon as he runs alongside me for an episode as we discuss goals. If you get value from and you don't want to miss any future episodes, be sure to hit subscribe or follow on your favorite podcast platform so that you're sure to hear from me again after today.

 

Keith Weinhold (00:20:16) - Is guilt tipping out of control? We have all felt it now. Does this happen to you today when you're about to pay the Starbucks barista or for the subway sandwich and they spin the digital payment terminal around toward you and say, it's just going to ask you a question before you pay. And then they stand there and they look at you in the face and they watch what you choose. All right. Does that right there give you a tinge of anxiety or even stress you out? Well, if you give in to that, that is called guilt tipping. And you know what? I've got a solution to guilt tipping. A simple and elegant way that I'm going to share with you so that you never have to see a payment terminal like this in your face again, that asks you for a tip when you're out shopping or dining and paying for something. Yes, I've got a proven solution for how you'll never even be asked to leave a guilt tip again because I tested it and mastered it. It works.

 

Keith Weinhold (00:21:20) - We even have an unverified report on Reddit of a self-serve digital kiosk now even asking you for a tip. What? I mean, how far will this go? Yes, like a self-checkout for your own groceries at a supermarket like Giant or Safeway? First, let's get some context about why this is so important to you in the first place and how bad it's getting. It might even be worse than what you're thinking here. All right, a new study from Pew Research. It found that 72% of people said that the long standing practice of tipping is now expected in more places than it was five years ago. My reaction to that stat is what? How is it not 100% of people saying that it's happening all over the place, and consumers like you and I are increasingly getting tired of it? The way it works is that today's digital payment prompts, they allow businesses to preset suggested tip levels, so it's easier than ever for them to ask for tips and companies that have not done so in the past. They are definitely doing it now rather than giving employees a raise.

 

Keith Weinhold (00:22:35) - Instead, they're asking you to supplement the employee wage by asking you for tips where they didn't before. Must you fight back like David Horowitz, if you're uninitiated on that? I learned about a popular show that apparently ran on prime time network television in the 1980s. The show was called Fight Back with David Horowitz, and it advocated for how consumers can fight back against unscrupulous business practices. In fact, let's listen into the cornball intro of this show, which your parents might remember. It's something about fight back. Don't let businesses push you around.

 

Speaker UU (00:23:20) - But don't let anyone push you around. Fine, but stand up and hold your ground. I got. Someone tries to you in. Five spot. Just.

 

Speaker 4 (00:23:44) - Oh, jeez. Yeah.

 

Keith Weinhold (00:23:45) - Fight back against guilt tipping, I suppose. See, a few years back, the reason that you began getting asked to leave a tip in places you hadn't before. That's because it was a way for you to provide a gratuity for service workers. Because you were supposed to have appreciated that they showed up during the health crisis when a lot of workers did not want to show up.

 

Keith Weinhold (00:24:09) - But now that the crisis appears largely over with, the tip requests have not gone away. They've gotten worse because by now companies see what they can get away with. Now, look, people don't want to feel like a jerk or a cheapskate. You don't. I don't, but businesses are taking advantage of that fact by making bigger than usual tips. The default option on these payment terminals. It really that's the crux of the annoyance. Say that you're given choices of 20, 25, or 30% on a payment terminal just for someone handing you a pre-made sandwich that's already wrapped in cellophane. I've had it happen to me, and then hoping that you will just go ahead and pay the extra amount, rather than hassling with clicking custom tip and entering a smaller number like 10% or zero. Understand something here. The business call it a sandwich shop. They're not the ones that always decide what tip options you're presented with. Did you know that because the companies that own the payment systems, they can earn a cut of your money from each transaction? Those payment system companies, they also have an incentive to increase those amounts as much as possible, not just the sandwich shop, but they are both complicit in this scheme together.

 

Keith Weinhold (00:25:37) - But now sometimes you get asked to leave a tip beforehand before you're even delivered any good or service. And see, that's getting awkward too. And see the fear of that you and I should have. Now is that in this case, as the customer, as the client, you are going to get punished if you leave a low tip before they deliver the service to you. See, that's another big problem here with guilt tipping. Now, traditionally, tips were thought of as a way to reward good service after you already received what you paid for, right? That's how it works. You pay your server after a meal, you pay your valet. After they bring you your car. You pay the tour guide after your volcano hike or snorkel tour. If you thought that they did a good job. Now, just the other day at a chain fast casual Mexican restaurant that you've certainly heard of, I was being rung up about $35 for two double steak burritos, and there's a lower service level there than a full sit down restaurant.

 

Keith Weinhold (00:26:44) - But I left a 10% tip at the counter on that day. I thought they put lots of steak on them. And then I walked my burritos to the tables and the tables were messy. I could not find a clean table anywhere, but I had already left the tip. It was too late, so I left the tip and then only later did I discover the poor service, the messy tables. Oh gosh, I wasn't going to go back and try to undo the tip, huh? Before I tell you about my elegant solution so that you can forever avoid guilt tipping. So let's understand just where are Americans tipping today? The situations when people add a gratuity. You know, this really offers some insight into the new tipping landscape. And again, this is according to Pew Research for dining at sit down restaurants, 92% of people are tipping there. And of note, a majority said that they would tip 15% or less for an average sit down meal. That kind of surprised me, because etiquette experts say the tipping 20% at a full service restaurant is standard now, and that's what I do.

 

Keith Weinhold (00:27:48) - Okay, getting a haircut 78% of people tip today. Having food delivered 76% for those using a taxi or rideshare service like Uber, 61% of people said that they would tip. I tip for all those things. Buying coffee. Only 25% of people leave tips and eating at fast casual restaurants only 12%. So look, people are upset because we've had years of high consumer price inflation and service inflation on top of that. And then a tip on top of that. Yeah. So it's tip relation on top of inflation. And then there is this preponderance of restaurants especially. It suggests that you tip the post-tax amount. Have you noticed that that means that you're also paying a tip on the tax that you pay? So just pay attention to that next time you're at a sit down, full service restaurant, or really most any other place that suggests a tip amount. And yeah, that's annoying. And I really doubt that that business sends that extra revenue to the IRS where you're paying a tip to the tax amount.

 

Keith Weinhold (00:29:00) - Gosh. But it all comes back to tip and the influx of automatic prompts at businesses like coffee shops, it gives you more chances to tip, and it'll just wear you down and then wear you out, creating this sense of exhaustion thinking what is all this for? It is just wild. If supermarkets are asking you to leave a tip for self checkout, your supermarket wants to outsource their checkout duties from clerks and cashiers to you, asking you to scan your own groceries. By the way, that is an example of service inflation. And then they ask you for a tip. On top of this food inflation and service inflation, you're doing it all yourself. What is next? You're going to have to unload the store's delivery of food from the 18 Wheeler truck in the back, onto a forklift, and onto the shelves yourself. I kind of doubt that. But if grocery stores are convenience stores, self-serve kiosks, if they're requesting tips, then it's more likely that soon enough, your human checkout clerk is going to start requesting tips.

 

Keith Weinhold (00:30:09) - When you're checking out at Whole Foods or Publix or Wegmans or Safeway, that human checkout clerk that's going to appear as some sort of small luxury comparatively. I mean, I would expect that to come to your town next. Expect to see it if you haven't already. There used to be this general understanding of what different tip amounts convey to servers and workers. Now, decades ago, it used to be a 10% tip meant, all right, well, hey, it wasn't horrible, but it wasn't great either. A 15% tip was normal and 20%. That meant that person did an excellent job. But now those amounts have all become expected and they've all been bumped up 5% or more. All right, well, here's my solution to avoid guilt tipping the way to no longer see a digital payment terminal spun around put in your face. Putting you on the spot to make a nice tip is just this two word solution pay cash. Yes, when you pay cash, you don't have to see an electronic payment terminal at all.

 

Keith Weinhold (00:31:18) - And it's far easier for you to ignore a physical tip jar that's sitting on the counter over to the side of you. The elegant and simple solution to guilt tipping is to pay cash. Now go ahead and leave a tip for good service if you want to. I'm not here to suggest that you stop all tipping. It's about how you can make an elegant circumvention of guilt tipping. If you have an eight second long exchange where you ask for a cup of coffee and they turn around and pour it from a spout and hand it to you. And that's all they did. Well, that tips discretionary. The bottom line is that you don't have to tip every time you're prompted. And now go ahead and hit up that ATM with cash. You will be armed and you can avoid guilt tipping completely. And hey, can we say that you will be fighting back like David Horowitz? Tipping is fine, but guilt tipping is out of control. And hey, if you want to see more on guilt tipping, I really brought it to life on a video recently where I really broke it down.

 

Keith Weinhold (00:32:25) - That is on our YouTube channel. We are consistently branded as they say. Our YouTube channel is called get Rich education. So you can watch me talk about guilt tipping and show you more over there. Do you feel like the world that you're living in is increasingly uncertain and unsafe? And is that adversely affecting your investment decisions? That happens to some people and you can't make gains when you stay on the sidelines. I think some people make too much of uncertainty, even though it has always existed. Just look at the last about four years. You know, someone could have said, I am just paralyzed with inaction because of the pandemic. Oh, that's uncertain then the recession fears uncertain, then rising interest rates where they rose fast, uncertain. And today it might be wars uncertain. And you know, the same people that get paralyzed with uncertainty. They will soon say something next year like, well, it's a presidential election year. So. I think uncertainty is going to sideline me again. If you wait for uncertainty to abate, such as you have complete clarity or even great clarity, you're going to be waiting your entire life.

 

Keith Weinhold (00:33:47) - Uncertainty and an absence of complete safety that's existed in the world every single day since the day that you and I were born and before you and I were born. And it will exist after we're gone, too. I mean, really, just look at some of these disasters that have taken place just this century, and we're still in the first quarter of this century. And let's look here at some just in the US, not foreign crises. I'm thinking about the Y2K bug, the September 11th terrorist attacks on the World Trade Towers in the Pentagon, the Iraq war, the invasion into Afghanistan, Hurricane Katrina, where 1800 people were killed, the GREAtrillionECESSION, the Arab Spring, the surprise of Donald Trump becoming our president in 2016. Remember, that was a real upset over Hillary Clinton. How about the jarring events of January 6th of the Capitol less than three years ago, the eviction moratorium, the slow creep of climate change, the riots and civil unrest with the George Floyd protests, the wildflowers from California to Maui.

 

Keith Weinhold (00:35:00) - I mean, I could go on and on about how winners just keep thriving despite a world that's constantly uncertain and unsafe. And I'm only talking about things that involve the United States here, and I'm keeping it confined to this century just a little more than two decades. I mean, before that, we had World wars. We had the Dust Bowl, Cuba's Bay of pigs invasion in the Cuban Missile Crisis that could have led to a nuclear apocalypse that completely destroyed the entire world. There is relative clarity today compared to all that. How about an assassination attempt of our President Reagan? I mean, things are substantially more certain today in a lot of ways. And today, American employment is strong, GDP is growing. Our currency is fairly stable despite our problems, which will always exist. Today, the US economy is outperforming everybody in the world. And in a world that some feel is uncertain and unsafe, just consider the relative sense of certainty and safety you have today. Well, we discuss wars today. As bad as they are when they do happen, they're never on US soil.

 

Keith Weinhold (00:36:13) - Can you imagine an attack on American soil? How would that sound? Like? The enemy has destroyed and taken control of Charleston in Savannah. And next they're moving inland to take down Atlanta. I mean, that's so unlikely that your mind isn't even conditioned to think that way. But the reason that it seems, seems like your world is getting less certain and less safe is because of media. Media is more fractured than it's ever been. It wants your attention. So with more competition with everything from YouTube videos to TikTok clips now competing with legacy media, you get introduced to more fear in order to get your attention. My gosh. I mean, is American life safer than ever? You can make the case that it's become too safe even. I've talked to you before about how things could very well be in safety overboard mode in real estate. Now here we talk about providing clean, safe, affordable and functional housing. But she should need GFCI outlets all over the place in your property, and carbon monoxide detectors and fire rated doors, even when their improvement to your safety is negligible.

 

Keith Weinhold (00:37:32) - American society at large is so ultra safe and in fact, there's even a term for this now it's called safety ism. Yeah, look it up. It's how excessive safety is becoming harmful to society. When you are on your last passenger plane flight at night and you just wanted to take a nice nap, or you wanted to get some sleep, did the pilot come on to the intercom system and wake you up, telling you to sit down and put your seatbelt on every time? Just a small amount of turbulence was being felt. Oh, there are endless instances like that where society's gotten so safe that it's just annoying. The last time that I was shopping at Lowe's, the home improvement store, a forklift driver was slowly driving the aisles really carefully. And besides just the forklift driver sitting on the seat, there was a second man, a flagger, that was out in front of him, walking, holding two little flags. So the shopping customers knew that a forklift. This coming. Like, that's such a wild hazard to human safety.

 

Keith Weinhold (00:38:37) - I mean, gosh, the gross inefficiency of that just to improve safety ever so slightly. Construction workers that have to wear hard hats outdoors in an open field. I mean, our society has become Uber safe. Now, don't get me wrong, some measure of safety is definitely a good thing, but I'm underscoring the fact that historically, this world that you're living in is ultra safe and ultra certain. And then within our investing world, take a look around what can be said to be certain and uncertain. Apple. They're the world's largest company by market cap at about $3 trillion. And their risk is that eventually they might fail to keep innovating. How about Bitcoin? Bitcoin could have government crackdowns or some other lack of certainties, their money in the bank and owning Treasury bonds. All right. That's fairly safe and certain. But you aren't getting any real yield there. And in a world that feels more uncertain and unsafe than it really is, bring it back to the positive attributes of being a real estate investor here.

 

Keith Weinhold (00:39:46) - You know, monetary inflation is a near certainty, and so is the fact that people will pay you rent if you put a roof over their heads. Certainty. It helps to be mindful that safety is the opposite of freedom, and that having security is the opposite of having opportunity. Hey, well, speaking of opportunity, join our investment coach Norris for Grizz Live event that is to night. You can join from the comfort of your own home. You get to select from one of the two options for Florida Income property. You can select either a 5.75% mortgage rate or the 224 program, which means two years of free property management. 2% of the purchase price. In closing cost credit to you and a generous $4,000 lease up fee credit. Sign up. It's free. It's our live event tonight, the 27th at 8:30 p.m. eastern, 530 Pacific. If you're a few days late, be sure to watch the replay soon. register@webinars.com to have a chance at putting some new Build Florida Income property in your portfolio.

 

Keith Weinhold (00:41:00) - Until next week, I'm your host, Keith Winfield. Don't quit your day dream.

 

Speaker 5 (00:41:08) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Keith Weinhold (00:41:36) - The preceding program was brought to you by your home for wealth building. Get rich education.




Direct download: GREepisode477_.mp3
Category:general -- posted at: 4:00am EDT

Join our free Florida income properties webinar on Monday, November 27th for 5.75% mortgage rates at: GREwebinars.com

Home prices are up 4.5% annually through Q3. It’s the fastest growth rate in months.

Three out of ten renters are now age 55+, the most ever. Older renters are good for you: lower turnover, more quiet, more savings & income, and lower regulation compared to assisted living. 

Overall US population growth is slowing, from 1.2% a generation ago to 0.5% today. It’s expected to grow until 2080.

I discuss the DOJ crackdown on the NAR and real estate commissions. 1.6 million real estate agents could lose their jobs.

Apartment building rate caps have become super-expensive.

One of our real estate Investment Coaches, Naresh, joins us from Florida. 

Naresh tells us how to get 5.75% mortgage rates on new-build Florida income property at GREwebinars.com

Resources mentioned:

Show Notes:

GetRichEducation.com/476

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Timestamps:

 

The housing market stats (00:02:52)

Discussion about the current state of the housing market, including the 45% increase in home prices and the reasons for continued home price support.

 

Home price appreciation forecasts (00:05:28)

Talks about the predictions for future home price appreciation, with both CoreLogic and NAR expecting a 26% rise in home prices next year.

 

The impact of older renters (00:10:08)

Explains why older renters are desirable for property owners and landlords, highlighting their lower turnover rate and stability.

 

The Aging Population and Older Renters (00:11:15)

Discusses the benefits of older renters, such as lower mobility, more savings and income, and low regulation.

 

US Population Projection and Immigration (00:12:30)

Examines the projected population decline in the US by 2100 and the importance of immigration for continued growth.

 

Housing Demand and Household Size (00:17:12)

Explores the trend of fewer people living in each household and its impact on housing demand.

 

The timestamp's title (00:22:05)

Rising Costs of Rate Caps for Apartment Buildings

Discussion on how the cost of rate caps for larger apartment buildings has become prohibitively expensive.

 

The timestamp's title (00:25:23)

Real Estate Market Trends and Slowdown

Insights on the current state of the real estate market, including a slowdown in November and leveling off of home values and rents.

 

The timestamp's title (00:28:28)

Opportunity in Real Estate Market in 2024

Predictions for the real estate market in 2024, including a potential bottoming out of the market and a decrease in mortgage rates.

 

The decline in home values and the health of the economy (00:32:58)

Discussion on the decline in home values and the health of the economy, with reference to the 2008 financial crisis and current housing supply.

 

Short-term rentals and the potential for a decline (00:34:14)

Exploration of the decline in short-term rentals due to a decrease in travel and corporate expenses.

 

The impact of mortgage interest rates on home prices (00:35:19)

Analysis of the relationship between mortgage interest rates, economic slowdowns, and home prices, with a focus on potential rate cuts and their effects on the housing market.

 

The Florida In-Migration Stat (00:43:53)

Florida's astounding population growth and becoming the second most valuable property market in the US.

 

The Rate Buy Down Courtesy of the Builders (00:44:23)

Explaining the options of a 5.75% rate or the 2-2-4 program for property buyers in Florida.

 

Disclaimer and Closing (00:46:02)

A disclaimer about the show and a mention of the sponsor, Get Rich Education.

 

Complete Episode Transcript:

 

Speaker 1 (00:00:01) - Welcome to I'm your host Keith Weinhold told how price appreciation is up 4.5%, but there are signs that it is slowing down. Finally, learn more about our upcoming live event that you can join from the comfort of your own home today on get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers. Oh, at no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth.

 

Speaker 1 (00:01:17) - Make sure you read it text to 66866. Text 266866.

 

Speaker 2 (00:01:29) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Speaker 1 (00:01:45) - We're going to go from Roxbury, Connecticut to Roxbury, Wisconsin, and across 188 nations worldwide. This is get rich education. I'm Keith Weinhold, GRE founder host of this very show since 2014, longtime real estate investor and Forbes Real Estate Council member. In fact, check out my latest article in Forbes for my work in research on the housing market. What we do here is by investment property with the bank's money, pay the debt with the tenants money, and then well, that's about it. In a sense. We enjoy life mostly. There will be some bumps along the way. The devil is in the details. Yeah, all those sus vibes that you got from the housing price apocalypse, doomsday, YouTubers. All of those vibes you had are validated by now. Just in time for a sweater weather. Respected research firm CoreLogic released their report with end of quarter housing stats nationwide.

 

Speaker 1 (00:02:52) - Home prices still haven't fallen. There was a healthy 4.5% in September of this year compared to September of last year. Yes, these real estate numbers always run behind a little bit. Well, that 4.5% increase that even includes distressed sales. And that is the fastest growth rate in quite a few months. And again, this is primarily due to a robust job market spiked inflation and housing inventory lows that just keep scraping along the sea bottom floor. So these fundamental reasons for continued home price support, I mean, it's the same stuff I've emphasized for over two years, even as I stated prominently back on television in November of 2021. And although that was avant garde at the time, it's really not in my personality to get smug until the incessant rumors today I told you so or anything like that. Well, the highest price gains this past year. They were concentrated in places that had, I suppose, the best autumn foliage this year, that is, most northeastern states. They are the big gainers now. There were some price declines in a few places.

 

Speaker 1 (00:04:08) - They were felt in just four western states and D.C. the four western states were Utah, Idaho, Montana and Wyoming. Now, see, in the pandemic, those states prices, they stretched broader than basketball star Victor Wembanyama. And today they are mildly correcting. But back to the base case here. The 46 of 50 states which experienced appreciation oven mitts are needed to handle the three hottest states led by Maine 10%, Connecticut also at 10%, and new Jersey, with a 9% gain. And when you break that down in the metro area, it was Miami that led with soaring 8.5% appreciation. And it's interesting are core investment areas of the Midwest in southeast, which I call the stable markets. They lived up to that moniker again, they appreciated moderately during the pandemic and still appreciating moderately today. And as we approach winter, expect home price depreciation to have its seasonal slowdown. That's what tends to happen each year. In fact, there's a slowdown in sales of volume two. There are just so few homes on the market, but it has gotten really slow lately.

 

Speaker 1 (00:05:28) - Now, I do like CoreLogic, the supplier of this information. They contribute their single family rent index to our industry. And that's so valuable because most rent data that you find out there is about apartments. CoreLogic predicts further home price appreciation over the next year of 2.6%. And similarly, the Nar. They expect home prices to rise 2.6% next year. Now, next month, you will hear me. Release gives home price appreciation forecasts right here on the show, and you're also going to learn how accurate my forecast was for this year that I made last year. Now, just last month, I made an in-person field trip to Cash Flow Country, the Midwestern United States. You've got some income property providers there that are still steadily sourcing properties to investors like you. But, you know, there are a few now where they're not even doing that lately because some providers are having trouble making the numbers work for you, the investor. Like, for example, on a single family rental that was built in the 1960s.

 

Speaker 1 (00:06:40) - Right. A somewhat older property. Where it is commanding, say 1650 rent. And this is a real example of rehab property that I visited in the Midwest, 1650 REM. Well, these property providers can get, say, $230,000 for that property if they sell it to an owner occupant instead of an investor like you. Well, with higher interest rates on an older property, you know, 1650 rent on a 230 K purchase price. And it doesn't work so great for you as an investor, although it might on a newbuild property. So that's why a provider like that is selling to owner occupants instead of investors like you, an owner occupant, they'll pay 230 K because they don't have to make it cash flow. It's their home. So instead of selling it to an investor like you were, say 190 K is the most that it would make sense for you to pay. Well, then sure, that provider is going to get 230 K from an owner occupant, so it makes more sense for that provider to sell it to the owner occupant as well.

 

Speaker 1 (00:07:44) - Now, one income property company that has in-house management and all that. I mean, this is a company that then is set up to serve investors. What they've done though is currently they're selling about 80% to retail homeowners, owner occupants in just 20% to turnkey real estate investors. For just that reason, owner occupants can pay more for it because of what's going on in the cycle. So in that particular Midwestern market, either mortgage interest rates must come down or rents must rise in order for it to make sense to you as an investor again. Now, later in the show today, you'll soon see that we've effectively found a way to make interest rates go back in time a couple of years when they were low, and how you can apply them to new Build income property. Today you'll learn exactly what that rate is, and this is fairly exciting. But yes, everyone wants to know where are mortgage rates going to go. And no one I mean absolutely no one knows where rates will go. Not your mortgage loan officer, not Janet Yellen, not your property provider.

 

Speaker 1 (00:08:55) - They don't know where mortgage rates are going to go, not the president of the United States, not Charlie Ridge, not a real estate agent, not Ron DeSantis and not me. No one knows where rates are going, of course. But we did learn something just about ten days ago. Fed Chair Jerome Powell said he's not confident. Those were his words in quotes, not confident that policymakers have done enough to curb inflation. Well, that right there. That is what is known as a hawkish comment in fed vernacular. If they haven't done enough to curb inflation, then that is what has renewed fears of more interest rate increases. Now your investment properties next tenant might be a grandparent with a flip phone. Roughly three out of ten renter households are now headed by people age 55 plus. After bottoming out in 2004, older renters have become a major share of the tenant population today, and I share this with you recently. If you're a reader of Art, Don't Quit Your Day Dream letter. And by the way, welcome to all of our new letter readers.

 

Speaker 1 (00:10:08) - We recently had a few thousand new Don't Quit Your Adrian Letter subscribers, our weekly email newsletter. Welcome here to the podcast. Now as I'll explain why in a moment you should like and embrace older renters. Now, first things first. Understand that as a property owner or landlord, you cannot age discriminate in your advertising or in your tenant screening. But all right, once you're done poking fun at their jitterbug or their track phone, understand that older renters, they are desirable. And by the way, our jitter, bugs and track phones still made us think that at least one of those two phone models is still made. At least one of them is a flip phone. Not completely sure, but anyway, yes, now that we know that there are more older renters here, about 3 in 10 American renters now age 55 plus, okay, older renters, hey, they really are desirable for a bunch of reasons. You're going to have lower turnover. Okay? Older people tend to stay put. There's a low transient rate.

 

Speaker 1 (00:11:15) - They have a low mobility rate. That's another way to say it. Also all the renters, they tend to be more quiet. They're less likely to throw three keg ragers no beer pong, no headbutt dents in the drywall. And when it comes to savings and income, they have more of it and expect low regulation. Unlike something like assisted living, there is no special government permitting or any specialized staff that's needed. So. There are some big reasons why this growing group of older renters that is good for you as an income property owner. So to review what you've learned, that's due to lower mobility. They're more quiet, they have more savings in income and there's low regulation. And I'm going to say that personally, I've come to appreciate my older friends more as time goes on. And I recently realized that I have some of my best conversations with them. But they won't talk me into the jitterbug. They can't talk me into giving up my life without Instagram on an iPhone. Many older adults, they don't want the hassle of homeownership and others they are just feeling the weight of dreadful homebuyer affordability, just like everyone else.

 

Speaker 1 (00:12:30) - And one major reason for why there are more older renters. If you're trying to find a reason why it's not due to some seismic behavioral shift, it's just the simple fact that the American population keeps getting older overall. Overall, we have an aging population. And by the way, is 55 that old? I mean, the 55 plus age group, that can mean a lot of things. And 85 year old and 55 year old lived very different lives with different activity levels, of course. But is 55 that old? I don't know, I know that you only need to be age 50 to be an AARP member. I guess 55 sounds old, because you can say that you're pretty likely to be in the second half of your life, but maybe if you divide life up into thirds, you could say then that 55 is in the middle third, and then therefore 55 could be seen as middle aged and not old, I suppose. And for some reason, it's systemic in American culture that people don't seem to want to be called old for whatever reason.

 

Speaker 1 (00:13:35) - It has a mildly pejorative connotation, but it is a group of people with their own separate habits, and these people are more likely to be using trekking poles when they go hiking, I guess. And I don't agree that age is just a number. I mean, come on, age means something in 85 year old men. They are not going to qualify to play in the NBA All-Star game. They're not going to be the most agile defensive back on an NFL field. So that takeaway here is that more renters are older. Embrace it. It's good if you're a listener but still don't have our valuable don't quit your day dream letter, which wires your mind for wealth, and it updates you on real estate trends. You can get it for free right now. Just text message group to 66866. That's green to 66866. We've been talking about the aging population here on get Rich education episode 476. All right. But how about the overall US population trend. This is something that you might have seen elsewhere since it transcends real estate.

 

Speaker 1 (00:14:46) - But I'll give you my real estate take on it too. All right. So the latest Census Bureau figures, they show that the US population is projected to contract to shrink by the year 2100, which would be only the second decline in the nation's history. And the other decline occurred in the 1918 Spanish flu and World War one. For those reasons, annual population growth rates, they have dropped from about 1.2% a generation ago to just one half of 1% today, and the culprits are declining birth rates and that aforementioned aging population. All right. The US has the world's third biggest population, and it could be demoted to fourth or fifth by Pakistan or Nigeria as soon as the middle of this century. So this anticipated population contraction, that means that immigration could become vital for any hopes of continued growth. And yet understand the US is still growing faster than a lot of other high income nations like Japan and Italy, that are already losing population. All right, so the US population is projected to shrink by 2100.

 

Speaker 1 (00:16:02) - The more important thing for you to remember as a real estate investor that's going to need a population to drive demand, is that our population is still expected to grow every year until about the year 2080 by most every model out there. So still 50 to 60 years of population growth. And then it isn't until later 2100 that is expected to decline. And of course, birth rates and immigration rates are bigger unknowns than the death rate out there in the future. Just estimating how soon our population is going to peak, but it's going to be a. While many decades. And then, of course, even in 50, 60 years, if the overall American population stops growing. All right, well, it'll probably still grow in some regions. And, you know, I wonder if Florida will still be growing late this century. It seems like it never stops there with population growth. And also it's not just about overall population growth when it comes to housing demand. It's how people choose to live within a certain population growth rate.

 

Speaker 1 (00:17:12) - Okay, with a population of 100, if there are two people per household, well, they can be housed with 50 homes, but if there is just one person per household, well then it's going to take 100 homes to house those same 100 people, no longer 50 homes. All right. And one trend that's made for surging American housing demand is that you have fewer people living in each household. That's how people choose to live today. So keep that in mind. You see a small half of 1% annual growth rate in more recent years, but there are a lot of numbers behind the numbers. Now, you might wonder what I think about the federal jury that recently found the National Association of Realtors and large brokerages, and how they conspire to keep commissions artificially high. What's that really mean? Well, what it means is more flexibility for buyers. I mean, under the current system, sellers pay their own agents commission of roughly 5 to 6%, and then that 5 to 6% that's shared with the buyer's agent.

 

Speaker 1 (00:18:18) - Well, if sellers now get billion from paying buyer's agents, well, then buyers would have to start to pay their own agent if they choose to use one. And a buyer could do that at either a flat rate or an hourly rate. But first time homebuyers, they could really feel the crunch, or that could become a bigger issue for those wannabe first time homebuyers that are having a hard time amassing the savings to pay for an agent on top of their down payment and their closing costs. Just another whammy for those wannabe first time homebuyers. They keep getting beaten down, and that's what could put some upward pressure on rents. But I don't think it would really be much as a result of that alone. And another consequence of this is that there would be less commission paid by sellers. I mean, the way it works is that in order to advertise a listing on the database, the MLS, the Multiple Listing Service, are that MLS that populates real estate websites like Zillow and Redfin? Well, in order for that to happen, sellers in most markets they have to agree to pay the buyer's agent's commission as well as their own sellers agents commission.

 

Speaker 1 (00:19:31) - Well, that's the practice that could be scrapped and that could spell trouble for real estate agents. A lot of people have estimated that $30 billion could potentially leave the industry, and some estimate that 1.6 million agents could lose their jobs. See, the way that the system had worked in the past is that one reason that the seller pays the entire 5 to 6% commission for both sides is because it's usually easy for them to do that, since sellers are the ones that have the equity in their property and the buyers often don't. So this could make homeownership even more difficult to qualify for. I mean, if first time homebuyers already had to jump over a four foot hurdle, now it's perhaps a five foot hurdle if this all happens. But there are still legal battles ongoing there in the real estate agent commissions case. Now, as I've talked about before, with this American housing shortage, it's the affordable housing segment that has high demand and is so drastically undersupplied. Now just get this understand that from 2019 until today, the price of a new car rose 22%, the price of a median home rose 42%.

 

Speaker 1 (00:20:54) - And the mobile home price, which is about the most affordable option for housing that rose by a giant 58%. I mean, wow, that is a testament to the major housing shortage at the affordable price points. That really, really spells it out. And if you're confident that the long term play is to provide good, affordable housing like we are here at, you know, there are more reasons to look at loading up on properties like duplexes and triplexes. And for plex's where you can get fixed rates now. And if you wanted to, you could refinance to long term fixed rates later. Now to buy a rate cap for a larger apartment building. That has just balloon in expense for you? Yes, a rate cap buying the what's basically like insurance you buy that puts a ceiling on how high your interest rate can go on larger apartment buildings. You don't have to do that with 1 to 4 unit property. You can just get fixed rate certainty. Now, a couple years ago, rate caps for large apartment buildings, they were pretty affordable.

 

Speaker 1 (00:22:05) - They were inexpensive. It took 40 K, 50 or 100 K to ensure that your rate wouldn't adjust too high. And then once it did, of course the rate cap insurance would kick in. But that same rate cap this year could be nearly $1 million. Yeah. See, a couple years ago, the $10 million loan, you could have bought a 2% rate cap for 60 to 75 K in three years coverage. Well, if you'd want to extend that this year, just a one year renewal, you could probably spend 350 K. Well, that has become prohibitively expensive for a lot of larger apartment buildings. And coming up, one of our in-house investment coaches in the race is going to be joining us from Florida, where they're building new construction duplexes and for plex's affordably. And they're selling them to investors like us at just a 5.75% interest rate. That's straight ahead. I'm Keith Winfield, you're listening to get Rich education. Jerry, listeners can't stop talking about their service from Ridge Lending Group and MLS.

 

Speaker 1 (00:23:18) - 42056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Charlie Ridge. Personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.

 

Speaker 1 (00:24:29) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six. This is Rich dad advisor Tom Wheelwright. Listen to get Rich education with Keith Reinhold and don't quit your daydream. It's always valuable for you, the listener and me as well. To have a market discussion with one of our in-house investment coaches were doing that today. Naresh, welcome back onto the show.

 

Speaker 3 (00:25:23) - Is Keith looking forward to talking?

 

Speaker 1 (00:25:26) - Let us know what's happening from your view. I mean, give us your perspective on the real estate market today and any drivers or trends.

 

Speaker 3 (00:25:35) - Look, Keith, I've been working as a real estate investment coach for about four and a half years now. I've been a real estate investor for about six and a half years. I've been working with for two years now, and it's great because it's almost like I'm a leading indicator on what's going on with inflation, what's going on with the housing market, because I see it in front of my eyes in real time.

 

Speaker 3 (00:26:02) - I have it on my spreadsheets that are in front of me. Of all the different properties that were sold or inquiries that we get from clients right now, I am actually seeing a slowdown this month of November compared to the first ten days or the first 20 days of the previous month. There's definitely somewhat of a slowdown. We're getting more complaints or nagging from clients saying, oh, I'm not able to rent out my property for as much as I thought I'd be able to, or my property's been vacant for longer than usual. What this is telling me key is, at least in my state, look, home values vary based on geography. We know that home values are like the weather. The weather is not the same everywhere. For the most part, I think you're going to see that national home values peaked a month or two ago. Rents certainly peaked about two months ago. What I mean by that is we saw rents go up precipitous just going up, up, up since January 2021 nonstop. And they finally peaked.

 

Speaker 3 (00:27:17) - And when I say peak home values, peak rents don't mean that they've crashed. I don't mean that they've gone down. They've just peaked and leveled off. So I haven't seen a decline in rents. I haven't seen a decline in home values from two months ago. I'm just saying they've leveled off. And so I actually expect this inflation or I expect inflation CPI moving forward to go back down. I know that we did see a blip up for a few months, but I think we're going to start seeing things go back down as the fed old rate study appears. They're done raising for good, and they're just going to ride it out with how it is currently. And then once unemployment crosses, probably 4.5%, if at all, that does cross 4.5%, that's when they're going to start cutting. If unemployment crosses 4%, then they're probably just going to wait it out until inflation hits that 2% target. And so what does this all mean for real estate. What does this mean for interest rates. Low interest rates I've talked about peaks.

 

Speaker 3 (00:28:28) - We saw peak mortgage rates. Also it looks like mortgage rates peaked. And they've slowly crept back down not significantly to a point where as an investor you're like, oh let me jump in. No. But think we saw mortgage rates as well. So again, what does this all mean. This means 2024. We're almost a month away from 2024. I think it's going to be a great opportunity to jump in, because you'll be able to catch the real estate market that's going to hit some type of bottom in 2024. You're going to see mortgage rates go back down in 2024. That also means today because remember, Keith, I've come on your show before talking about incentives that providers who we work with, partners who we know personally and who we've worked with for many, many years, we've been offering incentives that make up for this high inflation, that make up for the higher interest rates. And those incentives are very likely going to be gone in 2024 as mortgage rates go back down, as the home values maybe decline slightly.

 

Speaker 1 (00:29:39) - We want to talk about some of those incentives later, about how providers are buying down the interest rate for you on rental property, but rates, I think perhaps the most interesting thing you said, the thing that I didn't expect is that you're talking to some investors out there where they're telling you about how they have more or longer vacancies than they had expected. I didn't think that I would hear that from you. Is that a pretty small sample size, or is that passed by apartments versus single family homes or entry level versus luxury or anything else?

 

Speaker 3 (00:30:13) - I'm talking about single homes, so can't speak for apartments. I'm talking about cookie cutter, entry level, single family homes. This is in multiple different markets. So not just in one city. This is in multiple cities states. We're seeing vacancies. We're seeing, like I said, the rent growth rate that was previously being used six months ago, eight months ago, the property managers have had to use a lower rate because there's been a decline. So it's not surprising.

 

Speaker 3 (00:30:44) - There's just no way that the country would would have been able to survive with rents going up the way they were going up with home values going up the way that we're going up. So there was bound to be a stoppage. And so we've seen that stoppage in home values, we've seen that stoppage in rents. And when I say stoppage again, not a decline in rents, not a significant decline in home values. But they leveled off from their peaks. And that's just how the business cycle works. Every 30 years or so when we see super high inflation, it's not surprising that I'm seeing this. But this is what's going on in the market right now, from Florida to Tennessee and Alabama to Ohio, in Missouri, Kansas City.

 

Speaker 1 (00:31:31) - For about five months in a row now, we have seen wages be higher than inflation. But of course that's just stated CPI inflation. And then there is quite a lag effect there too. If wages do exceed inflation, when will that eventually catch up to higher rents? We don't really know.

 

Speaker 1 (00:31:50) - But one thing we do know over the long term is rents are historically very, very stable, even more stable than home prices. It was so unusual when rents were up about 15% year over year, a year or two ago. You don't typically see that rents tend to stay stable, and they sure are stabilizing lately. What do you have any other thoughts as you look around the market and race? Because you often talk to our followers in there, they get a hold of you for you to help lead them through contracts and connect them with the right properties and providers that can meet their goals. So what are our followers asking about?

 

Speaker 3 (00:32:27) - Our followers right now are fearful, which is very common. Fear always rules people's minds and they're fearful of a crash. And look, there are certain real estate asset classes, commercial real estate, which you've talked about for a while, is going through a decline right now and could be going through a major crash as many of these commercial real estate owners default on their mortgages or their loans, their commercial loans, there is a concern that there could be a crash in the housing market.

 

Speaker 3 (00:32:58) - Meredith Whitney, who really famous real estate banker, I believe the only woman to call the 2008 financial crisis. She called it back in seven. Meredith Whitney came out a couple of weeks ago and said, there's going to be a decline in home values, and I'm here to tell you that there has been a classic line on values. And will that continue? It could continue where there's a, again, a slight decline. So don't see a crash coming. The reason is because I feel like the economy, the banks are much healthier today than they were. And let's say at 2007, the people who have been laid off, we're going to see unemployment continue to go up. It's not the 10% plus that we saw during the pandemic or the really we reached close to that 2008, 2009 or so. I just don't see something systemic to where there's going to be a housing market crash. And it's all about supply. Housing supply is still very low. So until the supply catches up to the demand, think the real estate market is going to stay healthy.

 

Speaker 3 (00:34:14) - And if you're looking to buy an old over a 30 year period, if you're looking to buy and rent for cashflow, it's still a great time. Right now, there's just certain asset classes. Like I said, commercial real estate. Maybe wait for the crash. They're short term rentals. The worst time to get into short term rentals would have been a year or one and a half years ago, 18 to 20 months ago. That space has declined because there has been a decline in travel, leisure, airfare, corporate expenses, the corporate trips. There has been a decline. So we don't promote those often. They're available. What? We don't promote them often, but that's another asset class that could be ripe for, I want to say, a crash, but a big decline when it comes to cookie cutter, entry level Single-Family homes. I just don't see this huge crash that people have been waiting for over the last 15 years.

 

Speaker 1 (00:35:13) - Right. As you know, I've talked extensively about how it's virtually impossible for that to happen.

 

Speaker 1 (00:35:19) - And yes, everyone wants to know what's coming. It surely has been a consensus among analysts and others that mortgage interest rates have peaked and or the fed funds rate is done increasing in this cycle. Many seem to think that next year, if rates come down, that that is really going to push home prices through the roof. I don't know if that's necessarily true, because typically a cutting of rates coincides with an economic slowdown or a recession. So I think a cutting of rates next year that could result in a moderate price increase. But of course, we have to remember that some of that supply is going to come once rates go down, you will have a few more people motivated to sell. You also have a lot more people motivated to buy and that can qualify as well. But the rates think a lot of people really in this cycle lately, when they've seen higher mortgage interest rates maybe than some people have seen in their entire investment life, you know, they feel like they kind of want to get some sort of break, but they sort of want to wait and see what happens with the market.

 

Speaker 1 (00:36:20) - But we actually have something to talk about here where they can get a break. They don't have to wait and see with what's going on in the market. And that's with what is taking place in Florida.

 

Speaker 3 (00:36:33) - That's exactly what's taking place in Florida. We work with a provider who is going to be on with us. We're hosting a webinar with them about a special 5.75% interest rate. The lowest interest rate that we see across the board with any provider we work with from Alabama to Texas, etcetera. So they're coming on our webinar. They're going to promote and discuss that 5.75% program that they have, as well as a 2 to 4 program. That's two years of free property management, 2% closing cost credit into $4,000 release fee. You might say, well, why do I need a $4,000 release a credit? Because their best properties or highest cash flowing properties. Highest returning properties are quads and duplexes. So these are huge breaks that will reduce the amount of money you need to bring to close and look. If you're a high net worth or if you're a high income earner sucking it up and paying the 9% interest rate today.

 

Speaker 3 (00:37:37) - If that's what you decide to opt for with the 224 program, 9% interest rate, or 8% interest rate today, it'll save you on your taxes, the mortgage interest tax deductible, and in 5 or 6 years, you can just refinance, most likely at an ultra low rate, maybe even sooner than that. So still, there are some really good deals. If you work through us, then we can help you find some really, really good programs and incentives so that it's like going back to 2020 or 2021, when interest rates were super low, or when there was less cash that you had for bringing to the same level. So we have that definitely recommend that people check out this webinar. It's great webinars. Com you can register for it over there. webinars.com. I'm going to be on it's Monday November 27th. That's Monday, November 27th at 8:30 p.m. Eastern Time. So people on the West Coast can finish up work, attend the event. People on the East Coast can finish up dinner, put their kids to sleep and attend the event.

 

Speaker 3 (00:38:43) - So I look forward to seeing everybody there. It's a special, special webinar, special deals, special promotions only through the average education.

 

Speaker 1 (00:38:54) - So the 5.75% rate, if I remember from previously narration, it's a ten year fixed rate and a 30 year amortization at those terms. And then is one choosing between the 5.75 rate and the 224 plan that you described. Is it one or the other? Can you get.

 

Speaker 3 (00:39:12) - One or the other? It's one or the other. Because to get that 5.75% rate, yeah, the builder is paying the lender a lot of money. And to lower those points, they're buying points to to get you the investor that rate. So it's one or the other. And by the way, that 224 program the purchase price is negotiable. So that's also why I like that 2 to 4 program. Because you can go back and forth and I can help you out negotiate the price, maybe shape 10 to 15 maybe $20,000 if it's a high ticket item off the purchase price. So makes the numbers look even better.

 

Speaker 3 (00:39:54) - That's my favorite program, the 5.75% program. That might be right for some other people, so that's fair to.

 

Speaker 1 (00:40:02) - Else about the property prices and types.

 

Speaker 3 (00:40:06) - So this provider we work with has single families, duplexes, four plex quads all available. The price points are anywhere from $250,000 to $800,000. Everything is new construction. That's also in flux, as in the single family is just cash flowing much. So I would say go for a duplex or a quad. Duplexes are around $400,000, give or take 20,000 over under, and quads are somewhere between 650 to $800,000.

 

Speaker 1 (00:40:45) - Okay, so these are brand new build properties in Florida. So yeah we're talking about entry level rental homes here. The asset type that seems to have the greatest dearth of supply in housing, entry level single family homes. You just have such a good chance to own an in-demand asset that everyone is going to want over time here. Do you have any last thoughts about this webinar trace, which you're going to help put on for people? That way the participants can ask you questions.

 

Speaker 1 (00:41:16) - They can ask the provider questions, any question they want to, things about the physical property, things about just how they bought down your rate to 5.75% for you, or how they can do the 224 program for you. Those are some of the benefits of attending. You can have your question answered in real time there with narration. Do you have any last thoughts about this event that's taking place on Monday? The 27?

 

Speaker 3 (00:41:39) - Well, you definitely want to register at Jerry webinars. Jerry webinars. We already have more than 50 people registered and now this episode is out. I'm sure we're going to get another 100 or so. Like you said, people can come on and ask some questions, actually talk to us, interact with us. Last time they wanted to these webinars, it went like 2.5 hours. People were having such a great time. We went into the wee hours of the night just talking to all sorts of folks, answering questions. It's super interactive, really educational. The best part is completely free and you get goodies and perks and incentives back in return for ten.

 

Speaker 1 (00:42:17) - Now, look, I know that some of these incentives have got to sound terrific to you, the listener and viewer here. I just want to pull back and take a look at things. More fundamentally. This is truly investing. This is not speculating. You own a piece of Florida land in a house constructed of commodities. On top of that land, from wood to steel to concrete. You already know about Florida's In-migration. We've talked about that at nauseam on the show here, and it's not speculative because you're purchasing something for rent production, not a speculative endeavor. Over the long term, people will pay you in order to live in a property that you provide to them. I mean, this is the sort of thing where you could even if say, you have a spouse or a mother that has nothing to do with real estate knowledge, they don't know anything about it. You can explain this to your spouse or your mother and they would understand. So it's easy to understand where your income comes from.

 

Speaker 1 (00:43:12) - It's really fundamental. I don't know how long the 5.75% rates are going to last, because this same provider had a lower rate a few months ago. I told you then I didn't know how long it was going to last and it didn't last. Now it's 5.75%, which is still a great rate. I really encourage you. Sign up. It's free. It's our live event next Monday night, the 27th at 8:30 p.m. eastern, 530 Pacific. Again, you can register@webinars.com. What a great update in race. Thanks so much for coming back into the show.

 

Speaker 3 (00:43:46) - Thanks, skeet.

 

Speaker 1 (00:43:53) - If you're unsure about making it on the live event on the 27th, but it interests you, sign up and we might be able to get you access to the replay, but you want to watch it soon because the properties available are limited. And again, I don't know how long the 5.75% rate will last. You think you've heard every amazing Florida In-migration stat by now? Well perhaps not. In the latest year over year, Florida saw 740,000 people moved there.

 

Speaker 1 (00:44:23) - Yeah, basically three quarters of a million in just one year. That is truly astounding. That's clearly the most of any state in the country. And with all the growth, Florida's property market became recently the second most valuable in the US last year that bumped New York down to third place. That's according to Zillow. So this population growth is leading to a prosperity increase in the value of Florida property. So I think a lot of people get focused on these things, like wondering if the fed will raise rates another quarter point at their next meeting, and if that's going to show up in mortgage rates. And they wonder about the mortgage market in the future, and it feels like something that you cannot control. But now you can with this rate, buy down courtesy of the builders. So joining us on the webinar to learn all about it. Again, it's all new build and we make that really clear and spell it out for you. In next week's live event, you get to select from one of the two options.

 

Speaker 1 (00:45:29) - To make it clear here, either a 5.75% rate or the 224 program, which means two years of free property management, 2% of the purchase price and closing cost credit, and a $4,000 lease up fee credit. Sign up. It's free. It's our live event next Monday night, the 27th at 8:30 p.m. eastern at 530 Pacific. Register at GRC webinars dot com. Until next week. I'm your host, Keith Weinhold. Don't quit your day. Great.

 

Speaker 4 (00:46:02) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.

 

Speaker 1 (00:46:30) - The preceding program was brought to you by your home for wealth building. Get rich education.




Direct download: GREepisode476_.mp3
Category:general -- posted at: 4:00am EDT

I don’t keep much money in a savings account, money market account, or treasury bonds. They only pay 5% interest.

Instead, I get 10-12% cash returns and semi-liquidity by private lending on real estate and operations with Freedom Family Investments.

My guest, the company CEO, Dani Lynn Robison and I discuss how it works. They’re a family of 7 real estate-centric companies.

They pay me 10-12% on a loan that I make to them that funds their real estate and business operations. You can too. It’s called their Master Note. 

Text FAMILY to 66866.

These private lending programs have just a $25K minimum, accredited and non-accredited, returns up to 12%.

Rather than getting in on the equity side here, which is usual, you’re getting in on the debt side. This way, you’re more liquid than when you buy property yourself.

We discuss 3 vital investor questions: Who do you trust? Where do you begin? What’s the best path for you?

Dani Lynn & I discuss a good investor outcome. We also discuss how when things went wrong, the investor/lender still got completely repaid.

I can personally tell you that they’ve always paid me on-time and in full.

Some people don’t like to share where they personally invest, but this could really help you.

Vocabulary terms explained: financial runway, demand depositor, time depositor, vertical integration.

If a high-yield passive return of 10-12% sounds interesting to you, text FAMILY to 66866.

Resources mentioned:

Show Notes:

GetRichEducation.com/475

For 10-12% returns with Master Notes with 

Freedom Family Investments:

Text “FAMILY” to 66866

Dani Lynn Robinon’s book, “Get Real”:

https://www.amazon.com/Get-Real-Understand-Estate-Investing/dp/B0BZF99S5K

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. 

You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

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Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Timestamps:

 

The importance of increasing income (00:01:28)

The speaker emphasizes the importance of increasing income rather than cutting expenses and discusses the concept of a financial runway.

 

The need for liquidity in real estate investing (00:04:05)

The speaker explains the need for liquidity in real estate investing and recommends having 3 to 5% of the total value of a real estate portfolio in liquid funds.

 

Investing in residential real estate for strong returns (00:06:44)

The speaker discusses the benefits of lending to the long-term stability of residential real estate and related businesses, highlighting the potential for strong returns.

 

The acquisition and growth of Freedom Family Investments (00:11:35)

This topic covers the growth of Freedom Family Investments, including the number of units acquired, funds raised, and the value of their portfolio.

 

The concept of vertical integration in real estate (00:12:38)

This topic explains the concept of vertical integration in the business world, specifically in the context of real estate companies. It discusses how vertically integrated companies have more control over their supply chain.

 

The Master Note Program by Freedom Family Investments (00:15:45)

This topic introduces the Master Note Program, a lending program offered by Freedom Family Investments. It explains the program's features, including high yield returns, liquidity, and the option to compound interest.

 

Private Money Lending and Investing in Materials (00:20:57)

Danny explains the process of private money lending and how investors can invest in materials for discounted prices.

 

Expansion of Opportunities for Passive and Active Investors (00:23:34)

Danny discusses the various opportunities available for passive and active investors, including turnkey real estate, private money lending, and funds.

 

Minimum Investments and Accredited vs Non-Accredited Investors (00:26:22)

Danny explains the minimum investment amounts and the options for accredited and non-accredited investors, as well as the different investment opportunities available for each category.

 

The trust question (00:30:14)

Importance of trust in investment, transparency, and how to choose trustworthy partners.

 

The worst deal (00:32:21)

A story about a bad investment deal, the importance of honoring commitments, and how volume can mitigate risks.

 

Get Real (00:35:28)

Introduction to the "Get Real" book series, the importance of authenticity and transparency in real estate investing, and the power of sharing failures.

 

Time Deposit Accounts and Demand Deposit Accounts (00:38:36)

Explanation of the differences between time deposit accounts (like CDs) and demand deposit accounts (like checking and savings accounts).

 

Vertical Integration in Business Strategy (00:38:36)

Definition and explanation of vertical integration as a business strategy where a company takes ownership of multiple stages of its supply chain.

 

Financial Runway (00:38:36)

Definition of financial runway as the amount of time one can maintain their lifestyle without the need for a paycheck.

 

Complete Episode Transcript:

 

Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Why settle for growing your money at a 5% interest rate in a savings account, money market account, or treasury bonds? You could earn double that or more. In fact, we're talking about exactly where I invest my more liquid dollars myself, often with a real estate centric backing. Today on get Rich education.

 

Speaker 2 (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Speaker 1 (00:00:51) - We're going from Hartford, England, to Hartford, Connecticut, and across 188 nations worldwide. I'm Keith Weinhold, you're listening to episode 475 of the Get Rich Education Podcast, the Voice of real estate investing since 2014. Don't live below your means. Grow your means. It's in your genes. Most people tie up so much life energy in their job, and they're scared to death of losing their job because it provides everything to them, not just their salary, but their health care, their retirement, and even who they are.

 

Speaker 1 (00:01:28) - And then even their very identity is in their job now. So that might be okay, especially if you truly get a deep existential meaning from your job and you get that sense. In fact, in that case, thank you. You're probably serving society, and I might be a beneficiary of that. But now we isolate the fine part of your job. It is a real mystery to me how so many study, how work works, so few study how money works. And yet money is the main reason that people go to work. In the personal finance world, it's more important to increase your income, then cut your expenses. Spend more time building a cash flow statement. See that's constructive to your standard of living, not a budget which is destructive to your quality of life. Think of residual income in terms of what I'd like to call your financial runway. Your financial runway. Yeah, it is that amount of time you can maintain your lifestyle without the need for a paycheck. So the length of your financial runway is measured in time, and it is critical for you to lengthen this runway if you hope to retire early and it can dramatically reduce your stress.

 

Speaker 1 (00:02:49) - Level two well, that can create outcomes so that you can say, go on a super long vacation and make your ostentatious display of time wealth as it is now. At some point in your life you probably listen to and had. The real estate pays five ways epiphany. And it is really compelling to then keep the majority of your capital invested there, for sure. But you likely don't want to keep absolutely 100% of your dollars there because you need some liquidity to fund the operations of your daily life. In fact, you can make the case that you need more liquidity than a non real estate investor does. Now, a six month emergency fund is the rule of thumb for laypeople, but on top of that is real estate investor. It's also a good idea to have 3 to 5% of the total value of your real estate portfolio in liquid funds. Now, a lot of people hold liquidity in a bank, and you do that as either a demand depositor or a time deposit. In fact, in banking vernacular, do you know the difference between demand deposits and time deposits? Well, demand deposit accounts, they include things like checking accounts, savings accounts and money market accounts.

 

Speaker 1 (00:04:05) - And they're called demand deposits because they allow you to withdraw your money from the account whenever you want to. That is different from time deposit accounts, like a CD, which requires you to deposit your money for a specific length of time. So that's the difference between a demand deposit and a time deposit. So time deposits like a CDS certificate of deposit. Therefore they pay you a high your rate of interest in exchange for your reduced liquidity. Now with that understanding, let's take a time out here to remind ourselves of something. When money flees the stock market, which it often does, it usually ends up in bonds as demand for bonds goes up, their interest rates go down. Then, as bond interest rates go down, investors go back to stocks in pursuit of yield and everything reverses. So that is an ebb and flow of funds, which creates a degree of equilibrium. But it also moderates your return. And you're also never going to get in and out at just the right time trying to time those markets.

 

Speaker 1 (00:05:22) - So when it comes to your dollars that you don't have being actively leveraging real estate, you know you can't hit every note in the symphony yourself with just one investment vehicle. It takes an orchestra full of your prosperity, all your dollars, all playing their notes boldly to help you hear the complexity of the. Position. Well, when you park money at an everyday bank or a treasury bond. Either way, you're now making a loan and oftentimes the exact way that that loan is backed your collateral that's actually unknown to you. Well, instead of that, what we're talking about today is that you can lend to the long term stability of residential real estate and related businesses and still get a strong return. And yes, I'm focused on the resilience of residential, just like we have here at from day one. Now, when it comes to something more precarious, really touchy section like office real estate. We work. They're expected to seek chapter 11 bankruptcy protection after that embattled office space company missed interest payments that it owed to its bondholders.

 

Speaker 1 (00:06:44) - So instead, you can keep your more liquid and semi liquid dollars working for you as a loan to someone else in residential, and enjoy some of the condensation on that pipe with returns that are about double what you can get on a 5% savings account today. Now, today it is the right time to talk about returns of 10% plus, because just a year or two ago, we were in this inversion where inflation was higher than interest rates. That's atypical. In fact, in June of last year, CPI inflation peaked just over 9%. And you got to ask yourself, how attractive is a 10% return on your liquid dollars? If inflation is 9%, well, that's not attractive to you at all because you real rate of return would only be 1% in that case. But now with inflation down, you can get a higher real return again. Today, interest rates are higher than stated CPI inflation and even the true rate of inflation. If you know where to look for that and you have a sense for what that is today, I'll help you know where to look, because it's exactly where I invest my liquidity today.

 

Speaker 1 (00:08:02) - See, in order to do this, it's really investing like a billionaire. And you don't need to have some wealthy sounding name like Brandon Meriweather, Rudiger, Bertram Lawrence, Perry Bottom or Carruthers Davenport. You don't need any names like that. You just need the knowledge. No, I guess I won't call you Carruthers if you preferred, but I think you'd sound like a guy that blows rings of smoke into people's faces. And I don't think that's a good look for you. We'll talk to the custodian of my funds here shortly. I make private loans to her company. She and I both serve on the Forbes Real Estate Council. She is a strong visionary, and she's not afraid to discuss problems either. That's something I really like. In fact, I'll be sure that comes up. This could really help you today. That's next. I'm Keith Weinhold in your listening to get Rich education. Diary listeners can't stop talking about their service from Ridge Lending Group and MLS. 42056. They've provided our tribe with more loans than anyone.

 

Speaker 1 (00:09:10) - They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Caeli Ridge personally, or even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866.

 

Speaker 1 (00:10:27) - Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.

 

Speaker 3 (00:10:39) - This is Hal Elrod, author of The Miracle Morning and listen to get Rich education with Keith Weinhold and Don't Quit Your Daydreams.

 

Speaker 1 (00:10:56) - Okay. I'd like to welcome back onto the show today, the co-founder and CEO of the whole operation Freedom of Family Investments. There's seven real estate centric companies based in Centerville, Ohio. By the way, the other co-founder is her husband, Philip, whom you've heard on the show before. Hey, we are graced with the presence of Dani Lynn Robison.

 

Speaker 4 (00:11:15) - Hello, Keith. I'm so happy to be here.

 

Speaker 1 (00:11:18) - So good to see you again. I've got to congratulate you on your success. You've got 62 team members. They're now in your vertically integrated companies. And by the way, that's a term vertically integrated that might throw some listeners off. I'm going to come back and explain just what that term means. They've done over 1500 deals now.

 

Speaker 1 (00:11:35) - They've acquired 600 plus units since 2020, and they've raised more than $20 million through podcasts and word of mouth. And they now have a portfolio valued at $32 million. Plus, they've been in real estate since 2008. And they'll tell you that they have a perfect track record of always returning investor capital, including to me, I'm one of their investors and paying 100% of the returns as promised, even if they themselves lost money on a deal. We'll talk about what losing money on a deal looks like in a moment. And in fact, you, the listener, you've probably heard me talk about how I personally participate for a high yield return with them myself, with Danny Lin's company backing me near the middle of Gary. Episodes like this right here. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.

 

Speaker 1 (00:12:38) - Well with having. Listen to that. Danny, I want to ask you about your master note program shortly. But first, since this is get rich education, emphasizing the education part here, I think the term vertically integrated, that might throw some people off. It sounds like a mouthful. And. And what is that, Danny Lynn seven syllables. But it is a term that you, the listener, you see that and hear that across the entire business world, vertically integrated. That's a term for a business strategy where a company takes ownership of two or more stages of its supply chain. So, for example, a vertically integrated automaker, they might produce automobile components and vehicles and also sell directly to customers. All right. That's ownership of multiple stages of a supply chain. So to me it comes down to vertically integrated. It means that you now have more control. So Danny tell me about how that vertical integration applies to your seven real estate companies.

 

Speaker 4 (00:13:41) - You nailed it. As far as the definition and really why we created all of the companies when we first initially created our turnkey real estate company, we hadn't had the intention of bringing everything in-house.

 

Speaker 4 (00:13:54) - But as we outsource different pieces of the renovation or the property management, we found that the lack of control that we had was hurting us and hurting our investors. And so one by one, we would bring in a company. So first was renovations. Because of all the contractor nightmares that many fix and flippers have experienced themselves. We had them too, and in spades because we were doing volume. So we brought that in-house first so that we can control the subcontractors and the project management and the scopes of work and how we paid our contractors. The next thing we brought in house was property management. And then we had a brokerage so that we could just list our properties on the MLS internally and keep that in house as well, since we had to have a broker anyway. And then acquisitions got brought in-house because the wholesalers were buying all of our deals from went dry with deals and we're like, hey, we need deals. And so we brought the marketing in-house and started doing acquisitions. And then I've told this story of drugs, thugs and bugs many times about our 56 unit apartment complex.

 

Speaker 4 (00:14:54) - That led to company number six, which is our funding syndication company. That was a really great company because it allowed our private money lenders to be able to start putting their money to use 24 over seven instead of going in and out of deals. And then company number seven is going to be a hard money lending company, because as we've raised all of this capital, we found that there's times we have excess capital and we don't want to say no to incoming investors. So we started using that to network with our mastermind groups and saying, hey, let us know if you've got a deal going on. We'll underwrite it. And if we feel like it's a good deal, we'll go ahead and lend on that deal for you. And it allowed us to keep putting that money to work for our investors. So it's been really fantastic. Help us as an internal company, helped our investors be able to earn more returns and helped other our entire network just do more things with us.

 

Speaker 1 (00:15:41) - That's a vertical integration. And like that it hadn't heard that before.

 

Speaker 1 (00:15:45) - Drugs, thugs and bugs can lead to an epiphany that creates a new company bringing more in-house. So you have to listen to the least you need to remember is vertical integration. That means control. And one of your company's vertically integrated into that, Danny, is something that can benefit the listener here, and that is your lending arm. Now, your most popular program for giving everyday investors high yield returns is your master note program. That's actually a common program in the private lending industry, but some might not know about it. So go ahead and talk to us about what your master node program is.

 

Speaker 4 (00:16:25) - So this was brought to us by an investor who was working with us and said, hey, I love your private money lending program. You know, I've researched you. He actually found us on Forbes and came to our office and visited and said, I would really love to lend, but I don't necessarily want to keep going in and out of deals. And so we worked with an attorney and said, hey, what can we do in order to keep an investor's money at work? And so he talked with us and we explored different ideas, and we kind of went back and forth between us and the investor and the attorney and ultimately created this program called the Master Note Program, which offers investors 10 to 12% returns.

 

Speaker 4 (00:17:03) - It offers them liquidity so they can get cash out at any year that they want. So they'll invest in every single year they have the opportunity to say, hey, I'm going to go ahead and give you 180 days notice to get my cash back. So the liquidity piece has been really, really powerful, especially for private money lenders, because they reason that private money lenders like that program is because they know that, that they're going to get their capital back in 12 months or less. And at that point in time, they're going to say, hey, do I want to invest again? Yes, okay, I do. Or hey, I could use this money for something else that I was waiting for. And in the meantime, it was earning interest while I was waiting to use it for this other avenue. So the master note program was really just meant to have flexibility and to be able to customize the program based on the investor's goals. So what we've done is created a five year auto renewing note.

 

Speaker 4 (00:17:55) - So that way these investors can say, hey Danny, I've got $100,000. I'd like to invest that with you. And at that $100,000 level, that is 12% interest. And so they put the money in, and they know that every single year it's either going to auto renew or they're going to say, hey, I'm ready for the money to come back to me. And it also allows us to give them compound interest. I would say over half of our investors are not investing with us for distributions or cash flow. They actually are investing with us because they trust us and they trust our track record, and they want their money to grow. And so they actually choose to compound instead of taking the distributions, which allows for faster growth.

 

Speaker 1 (00:18:39) - Your master note program 10 to 12% returns. I know it's just that 25 K minimum. So it's really available to investors. So okay. Unlike an all say five year certificate of deposit from a bank that might only pay you 5%. Plus you're illiquid for five years.

 

Speaker 1 (00:19:00) - With a conventional instrument like that, you can cash out your master note any year, or you can just keep rolling it over. You have the option.

 

Speaker 4 (00:19:09) - Exactly right. And so what's interesting is we all like liquidity. I know Philip and I like liquidity. It's nice that you got this peace of mind that you can access your capital if you choose to do so, but in reality, most of us leave the money exactly where it's at. We like to see the growth. We like to see, you know, the returns that we're getting. And we get excited and we're like, where else am I going to put this money? So I love having the ability to get it back. But I would say 95% of the people in our master program and even our funds, after they get to the period in which they committed to, whether that be a year or three years, just depends on the vehicle that they're using. They stay there like, I love this, this is fantastic. You can keep my money and just keep it growing.

 

Speaker 1 (00:19:51) - Real estate is largely thought of as an equity based investment. You're the listener, putting 20 to 25% down and borrowing the rest. That's great. We talk about the virtues of doing that all the time, but you are not very liquid when you do that. Here. We're getting on the opposite side rather than being on the equity side. You're on the debt side, you're making a loan and you have higher liquidity this way.

 

Speaker 4 (00:20:18) - Exactly right. And so with our master Note program, the way that we worked it out with the attorney is it's used for both deals and our business growth. So that's really important that I think that we talk about because the private money lending. Let me give an example. Private money lending. You are going to maybe loan a $70,000 and that's going to cover an acquisition and rehab of a property. But maybe you had $100,000 available. Now your $70,000 is backed by a lien on that property. And then once we're done with the rehab and once we resell the property, then we're going to give you all of your capital back, plus the interest that you were owed for the time that we borrowed your money.

 

Speaker 4 (00:20:57) - Now, this is where our private money lender said, Danny. Danny, will you keep my money? And if you're a private money lender, I have to say no, I can't. I have to give you back your money because you have to sign a release of mortgage. There's a lean on that property. You have to sign the release that you got your capital back, and then we can give you another deal. And that might take two weeks or two months. What the most master program provided for investors was allowing them to invest with us still being used on deals, but for our protection, if we didn't have a deal to put money into, then we can use it for the growth of the company. So right now we're actually partnering with another investor who is out of Columbus, and we are creating a home supply company of materials. We have this opportunity to buy materials at huge, huge, massive discounts. And so we're working on acquiring the office space that we're in, which has 20,000ft² of warehouse right next to us, and we're going to buy in bulk all of these materials.

 

Speaker 4 (00:21:54) - And not only is that reducing the cost of our business and our rehabs, but now we can help other investors in the local area save money. And we have created a revenue stream. As a result, the growth of all the companies has been a result of working with investors exactly like this. So now the investor gets to say, hey, Danny, I'm going to give you $100,000 and I'm going to invest it in this master note program. Now they got to use $30,000 or more of their capital, as opposed to the $70,000 example I use for private money lending, so they can put all the capital they want to use. And then me, if I have a $70,000 deal, that I'm still going to use it on that same deal, and it's owned by our company, and then that other $30,000, then I can use it for things like we're buying materials in bulk, and it's allowing us to save money on those rehabs. It's allowing us to create another revenue stream. So it allows us to have a little bit of flexibility, and it allows the investors to have a higher return, still have that liquidity piece and still have it backed by real estate and or our business.

 

Speaker 1 (00:22:59) - Well, what an explanation. And you know what's interesting, Danny Lee, and listening back to that is the realization that most bank depositors don't have any idea how that bank is investing their money. They don't know how their deposit is backed at all. But with an explanation like that, that's substantive, we really do hear. So it's really an interesting contrast. We discussed the details of your master note program, including where you can get up to a 12% return. Tell us about the other opportunities that you have besides your master Note program.

 

Speaker 4 (00:23:34) - Because of our vertical integration, we have many different things that we can offer. If you're a passive investor, we have turnkey real estate. We do have private money lending, the master node program. We have funds that also provide great returns. And one of them we're getting ready to launch in the next couple of weeks, is offering even more liquidity, allowing people to get in and out in 90 days. So for those who don't want to wait a full year, maybe they just want it.

 

Speaker 4 (00:23:59) - Hey, I just want to put my money to use and I want to have this access to it every 90 days. We're now allowing people to have that option, and that is really a reflection of our conversations with investors in seeing what they want based on today's market, today's economy, what they feel comfortable investing in. So that's some of the passive investor opportunities for our active investors. We don't typically serve them. But I thought, hey, you know what? We are buying all of these deals and we're getting all of these leads, some of the deals we don't want, maybe because we have enough and we don't want to buy another one because our rehab team is stretched and we don't want to have a house sitting for a couple of months for our rehab team to be able to get to it sometimes. There's other reasons. So now we are starting to wholesale properties to investors who are active, that are wanting to flip the properties themselves for a higher profit. And because we are vertically integrated, we said, hey, if you want to buy one of these wholesale properties that we're not buying ourselves, we have a renovations department, we have a property management department, we have a brokerage.

 

Speaker 4 (00:24:58) - So if you're an out-of-state investor, you've got an entire team you can leverage through us to be able to buy a property as is, get it renovated, and then either sell it on the market or hold it and have our property management company look after it. So we're just continually trying to expand what we can do in service of other investors.

 

Speaker 1 (00:25:18) - I love that we can let the term vertically integrated just roll off our tongue. Now that everyone knows that, it means having control of multiple portions of the supply chain of their business, a real estate business. In this case, again, we're talking with Danny Lynn. She is the co-founder and the CEO of Freedom Family Investments. You deal with investors on both the more active side and the passive side smartly. I know, Danny Lin, that you don't call turnkey real estate investing passive, even though it's mostly passive. It's not completely passive. You have both passive and active sides. You know what investors want. You know the pallet of items to offer them with what interests them.

 

Speaker 1 (00:26:00) - So with that in mind, tell us just a bit more on the landscape overall in just how you serve people. I know a lot of them. For example, they might wonder, do I need to be accredited or do I need to be non accredited? And tell us more about the minimum investments amounts kind of that bar to clear in order to participate with you, just like I am myself.

 

Speaker 4 (00:26:22) - For the minimum investments, it's $25,000. That's typical for turnkey properties. That's typical for our master node program, and then $50,000 for some of our funds, also our private money lending program. And then for the accredited versus non-accredited, we have both options. So there are rules as to when we can offer certain investment opportunities if you're non accredited. So things like private money lending, turnkey investing, master node program those are all opportunities for non accredited investors. And then for our accredited investors we have funds that are it's 506 C. It's a little bit technical but it's the way the SEC says hey you can talk about this.

 

Speaker 4 (00:27:01) - You can advertise it but you can only allow accredited investors inside. So as we work with our attorney we are like, okay, we don't want to serve just accredited investors. So how do we make sure that we're serving both at the same time? And so we've made sure to just really have a variety of offerings. And I talked to people a lot about what you said about active versus passive. I think that's a really, really important conversation because many people who are getting into the real estate game, they don't know whether they want to be active or passive, and so many of them end up being active first, only to realize they just created another job for themselves. And then they go, okay, I don't want to do this anymore. I actually want to live a quality life. I want to spend time traveling. I want to spend time with my spouse or my kids and just enjoy life. And I didn't mean to create another job, even though it is building wealth. And then they move to the passive side so that they can get mailbox money or have their money working for them while they sleep, or while you are traveling like you just got back from traveling.

 

Speaker 4 (00:28:05) - Keith and I loved watching your Facebook post, right? I love having that educational piece of really talking to somebody about what their goals are, what the quality of life is that they want, so they don't make a mistake of going active, only to feel like they lost some time because the active journey is difficult, like it's not been easy to build seven real estate companies, and we've got two more in the wings that we're getting ready to launch that we talked about even the the home supply company. It's not an easy road. You make a lot of mistakes, you lose a lot of money. And so when somebody has capital to invest in, their goal is to grow their wealth, build wealth, have a legacy, be able to retire and not worry about money. Going the active route may seem like I'm going to make more money because I'm going to get the big chunk of equity, but it ends up being something where they learn the hard lessons themselves and then usually waste a lot of time and energy and frustration, only to realize that they probably could have made equal, if not more on the passive side and not had all the stress.

 

Speaker 4 (00:29:06) - So I love really having that conversation with everybody. I love active and passive investors alike. It's just making sure that they truly know what journey they want to be on.

 

Speaker 1 (00:29:16) - In my mind, the term ROI return on investment is more active and a term that I've talked about wrote I return on time invested with that being considered that falls more on the passive side with you guys experience and understanding, you're surely quite cognizant of that. Why don't you talk to us about some of the other questions that you get from new investors, things that really they want to know about before going ahead and making a loan and participating in a lending opportunity with you.

 

Speaker 4 (00:29:49) - So the top three questions that we get is where do I start? Which path is right for me and who do I trust? And I actually talked to one of our investors who has grown his seed capital of $100,000 into $2.5 million with us over the course of four years that he's been investing. Every time he has capital, he's like, what opportunities do you have and where can I put my money? And again, we talk about compound.

 

Speaker 4 (00:30:14) - He has been compounding since day one with us and is really allowed his capital to grow extensively. I was interviewing him to tell his story about his journey with us and his experience. He actually said, you know, those questions are funny, Dannielynn. I would tell you that you should ask them in the opposite order. You should say, who do I trust? And then once you know who to trust, then ask, where do I start and which path is right for me? And I do agree that the trust question is the most critical piece of the puzzle, right? So many times I get on the phone and I talk to investors who have lost money working with somebody else, and so they've maybe heard me on your podcast or seen me somewhere else and heard me say over and over, private money lenders, our investors are our number one priority. I am never going to put myself in a position where they're not receiving their full capital back, receiving every single penny owed for the interest of the time that I was using their capital.

 

Speaker 4 (00:31:11) - And I'll allow myself to lose money to make sure that they get paid. And that's so important to me that I tell people very often they said, you want to work with people that will be transparent enough to say, this is my worst deal, this is what happened. And what you're going to get by asking that question is a revealing of their character. Yeah, who they are. How did they treat that situation? How was the investor treated in that situation and what happened? Did they tuck tail and run? Do they walk away, which many investors do? They get frustrated and they're like, oh my gosh, I lost all this money. What am I going to do? And they just they stop answering their phone. They stop answering emails. And then the investors are stuck with the house. I think the questions like that are really important. Looking at track records and just asking the hard stuff, understanding the true nature of a person. And then lastly, the which path is right for me is a question of really understanding that active and passive piece, and then understanding your goals when it comes to money, is it cash flow, is it growth? Is it tax benefits? Is it liquidity? What are the things diversification.

 

Speaker 4 (00:32:11) - There's so many goals you can have in investing. And if you don't know the questions to ask, then you might not be hitting the goals that you truly desire in life.

 

Speaker 1 (00:32:21) - We learned about a really good investor outcome there. How about a bad outcome or a worst deal? And then how did you cover that to make sure the investor is made whole?

 

Speaker 4 (00:32:33) - Our worst deal is a duplex in Dayton. And what happened was one of the reasons we brought our renovations company in-house, because we had a project manager, we had a runner, and one of the processes that we have is when the contractors are rehabbing a property, then the runner will go to the properties and just double check that what their invoice is saying, that they actually did the work and then we will pay them. So the project manager is trusting the runner. The runner is saying he went to the houses and we're paying this contractor. And it turns out one of the contractors had not done anything. The pictures that they were submitting to us was from another property they were rehabbing, so it looked like he was doing the work.

 

Speaker 4 (00:33:12) - The runner? Yep. The runner was relying on those pictures as his proof instead of actually going to the property and physically seeing the work being done. And we were paying them as a result of this hierarchy of process that we had. So we ended up having a property where none of it got rehabbed, and we paid the full amount of rehab to that contractor. So we had to pay for the rehab twice. So in this situation, we lost over $50,000. Our investor didn't even know what happened. And I say that not because we weren't being transparent, it's because we were going to do exactly what we said we were going to do. They were going to get all of their capital back, and they were going to get every single penny of interest owed. We ended up asking them at the end of 12 months, do you mind extending on this loan? We're still working on it. It's okay if you don't want to. We will still get you paid back, plus all interest, and we'll replace your loan with another private money lender.

 

Speaker 4 (00:34:06) - They said no, it's no problem. Absolutely. You can extend. So by the time it was all done we actually had the house fully rehabbed. We had lost a lot of capital. The reason that we can cover situations like that and make sure that we're honoring our word to our investors is because we do volume. When you do volume, I tell people, this is what I say. If you've been in real estate long enough, you understand you're going to lose money. You're understand that you're going to pull back walls and find things that you did not anticipate. So doing volume was our way of mitigating that risk. If we're doing ten deals a month and two of them go bad, well, we've got eight others that are covering the two that went bad. And so it's a numbers game for us knowing that we're going to find some duds, we're going to make some mistakes. And that's okay because we're playing the volume game.

 

Speaker 1 (00:34:53) - Ah, that harrowing story about the contractor and the rudder that comes back to the old Ronald Reagan trust, but verify they're right.

 

Speaker 1 (00:35:01) - So. Right. Well, thanks for sharing a more difficult story with us like that. Well, Danny, as we're winding down here, you do a lot of things there at Freedom Family Investments because you have this big holistic picture. Since you are vertically integrated company, and that's given you the experience and the wisdom. Do a lot of things. I know you have a book published and you're speaking at events around the theme get real. I own your book. Get Real. Can you quickly tell us more about it?

 

Speaker 4 (00:35:28) - So our very first book was Get Real, understand Real Estate Investing before it's too late. And it was just our first book. And it's going to be a series of Get Real Books was our first book to really introduce people that were new to real estate. What is it? Why do we love it? Why do we have such a passion for building real estate businesses and love that we can not only grow wealth for ourselves, but we can help other investors do the same? And then the get real part of it.

 

Speaker 4 (00:35:52) - The reason that we love this is actually one of my marketing team members, actually, you know him, Matthew. He's the one that came up with a Get Real brand. And it's really become something that people say, hey, Flip and Dani, you guys are so down to earth, like, I feel like I can talk to you about anything and you're so transparent. You tell us the ups and the downs and the crazy roller coaster rides, and there's so many people that are on social media or on podcast that will just tell you the rosy rainbows and sunshine stories, you know, as if nothing goes wrong. And I think reality is, is people want to work with people that are just more authentic, that are willing to share, hey, I'm human, I'm not perfect. We're going to make mistakes, but watch how we correct those mistakes, watch how we act during those situations. I think if you can do that, you actually gain more trust. And that's something that surprises a lot of the masterminds that I'm in.

 

Speaker 4 (00:36:43) - When I say they say, how do you have so many investors? How do you raise so much capital? I'm just like, I'm just authentic and transparent about everything that we do. And that garners a lot of trust in the people, because not a lot of people are willing to talk about their failures. That $50,000 loss on a duplex. And I don't know why, but it builds trust instead of loses it. And their jaw drops to the ground going, oh my goodness, I can talk about my failures. And I'm like, yes, start. People want to know that you're real. So I think that that get real concept is important. So we're going to keep on building creating some more books. We have investors that are giving us ideas of, hey, write a book about this. So we're going to keep on releasing them. And we're also speaking in events nationwide and just really just getting down to earth for people and letting them know, hey, stop telling yourself your can't. Anybody can build wealth.

 

Speaker 4 (00:37:32) - If you run a great podcast, you have so many loyal listeners and we love talking to them, and you have helped educate people for years and years and years, and we just need more people out there doing that.

 

Speaker 1 (00:37:45) - Well, thanks. The name of the platform and book is Get Real, Danny. Dannielynn, in closing, why don't you let our audience know about the best way to reach out to you and learn more about your private lending programs, including your Master Note program? Because for you, the listener, if this sounds interesting, here you go. Mean this is where I tie up a lot of my liquid funds for a high return. Let our audience know how they can learn more.

 

Speaker 4 (00:38:11) - All you have to do is text family to 6686, six.

 

Speaker 1 (00:38:17) - Dani Lynn, it's been valuable. As always. Thanks so much for coming back onto the show.

 

Speaker 4 (00:38:21) - Thank you so much, Keith. It's an honor.

 

Speaker 1 (00:38:29) - Yeah, good stuff from Dani Lynn Robison of Freedom Family Investments. Today, let's review what we've learned.

 

Speaker 1 (00:38:36) - Demand deposit accounts, which include things like checking accounts, savings accounts and money market accounts. They allow you to withdraw money from the account whenever you want, whereas time deposit accounts like CDs require you to deposit your money for a specific length of time. Vertical integration that's a term for a business strategy, where a company takes ownership of multiple stages of its supply chain and the term financial runway. That is, the amount of time you can maintain your lifestyle without the need for a paycheck. As you know, I often like to leave you with something actionable. Their Master Note program offers 10 to 12% returns, some liquidity, and just a 25 K minimum. And another way to think about it is that, in fact, then that is a 10 to 12% cash on cash return. And if you're interested in being more nimble than that, there are other lending programs where you can get a strong return with just 90 day liquidity. And to get started on any of them, or simply learn more. Text family to 66866.

 

Speaker 1 (00:39:45) - Until next week where we've got a great show for you. I'm your host, Keith Weinhold. Don't quit your daydream.

 

Speaker 5 (00:39:55) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:40:23) - The preceding program was brought to you by your home for wealth building. Get Rich Education.com.



Direct download: GREepisode475_b.mp3
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Will higher interest rates and inflation persist for a decade?

An upcoming recession always seems to be perpetually just around the corner. Learn when it should finally happen.

Macroeconomist Richard Duncan joins me. I tell you a funny story about when he was GRE’s first-ever guest in 2014.

Currency is now being destroyed—called Quantitative Tightening.

Negatives for future asset prices: QT, higher rates, student loan debt repayment, stronger dollar, asset prices already inflated, high personal asset-to-income ratios, higher oil prices, looming government shutdown.

Positives for future asset prices: monetary stimulus hangover, high employment, CHIPS and Science Act, Inflation Reduction Act, The AI Revolution, prospect of lower future inflation and interest rates. 

Richard provides his opinion and insight on today’s real estate market.

If inflation-adjusted credit growth is less than 2%, expect a recession. If it goes negative, expect a depression.

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Resources mentioned:

Show Notes:

GetRichEducation.com/474

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Direct download: GREepisode474_.mp3
Category:general -- posted at: 3:00am EDT

Failed deals. Capital calls. Lost investor money. A dreadful and sobering conversation ensues for many in some commercial real estate sectors.

Residential (1-4 unit) and commercial (5+ unit) real estate fortunes are decoupling. 

Multifamily commercial loans are at the mercy of interest rate resets.

Residential is stable due to low supply and sustained demand.

Neal Bawa from MultifamilyU and I outline the multifamily problem. Values have plummeted 25%. 

The magnitude of the multifamily problem is about 1/80th of the 2008 Global Financial Crisis.

There are two reasons for the office apocalypse—both declining income and increasing expenses.

Only 3% of office buildings in downtown cores have a floor plan that can be converted to residential. Dreadful. 

There will be possible discounts in the hotel industry due to a lack of funding and loans.

Retail has surprising bright spots.

We discuss the future of rents through 2026.

Will multifamily problems create contagion into 1-4 unit residential? We discuss. 

Timestamps:

Multifamily industry changes and challenges [00:00:46]

Discussion on the new difficulties faced in multifamily, such as failed deals, capital calls, and banking industry challenges.

Opportunity arising in the multifamily market [00:01:12]

Exploration of the current opportunity in the multifamily market due to a 25% reduction in prices from the peak, caused by distressed transactions and high interest costs.

Anatomy of the problem with floating rate debt [00:05:57]

Explanation of the issues faced by apartment building owners or syndicators when they have floating rate debt without rate caps, leading to potential deal blow-ups.

The rate cap issue [00:08:29]

Discussion on operators neglecting to buy a rate cap or buying a rate cap set too high, leading to negative cash flow.

Magnitude of the multifamily reset problem [00:09:47]

Comparison of the current multifamily reset problem to the global financial crisis, highlighting the challenges faced by operators.

Challenges in refinancing properties [00:12:10]

Explanation of the challenges faced by properties in refinancing due to decreased net operating income and increased mortgage costs, leading to potential loss of investor money.

The availability of multifamily loans [00:16:50]

Neil discusses the availability of commercial real estate loans, particularly in the multifamily space, and how it differs from other asset classes.

Lending challenges in the commercial real estate space [00:18:03]

Neil talks about the severe lending challenges faced by asset classes like office, retail, and self-storage, while expressing confidence in the stability of multifamily lending.

Contagion and the impact on the 1 to 4 unit space [00:20:56]

Neil discusses the limited level of contagion that could affect the 1 to 4 unit space due to problems in the multifamily market, highlighting the healthiness of the single-family market and institutional interest in it.

The Troubled Office Sector [00:25:35]

The speaker discusses how the office sector is facing a long-term demand crisis due to the decrease in office occupancy and the challenges of converting office buildings into residential units.

The Ten-Year Problem in the Office Sector [00:27:06]

The speaker explains that the office sector is about to face a ten-year problem, with defaults and declining values affecting the downtown core and other assets.

Bright Spots in Retail and Hotels [00:29:21]

The speaker highlights that retail occupancy is higher than multifamily occupancy, and despite the Amazon effect, retail is doing well. They also mention that hotels have seen strong recovery post-pandemic.

Hotels and Multifamily Discounts [00:32:55]

Discussion on the current cash flow opportunities in hotels and multifamily properties, potential discounts in the next 12 months.

Retail Reinvention and Rents in a Recession [00:33:57]

Exploration of how retail can sustain itself through experiential offerings, the resilience of rents in past recessions.

Artificial Recession and Rent Growth [00:35:33]

Analysis of the possibility of a recession and its impact on rents, the strength of the US economy, and the expected short duration of the recession.

The recession and its frequency [00:40:56]

Discussion on the frequency of recessions and how they are a normal part of the business cycle.

Learning opportunities at MultifamilyU.com [00:41:31]

Information on the webinars offered by multifamily ewcom, covering various topics including single-family and multifamily projects.

Appreciation for Neil Bawa's insights [00:42:22]

The host expresses gratitude for Neil Bawa's informative contributions and welcomes him back on the show.

Resources mentioned:

Show Notes:

GetRichEducation.com/473

Neal Bawa:

MultiFamilyU.com and Grocapitus.com

For access to properties or free help with a

GRE’s Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Speaker 1: Today's guest is well known as the mad Scientist of multifamily. He's a data guru, self-described self-described process freak, and an outsourcing expert. He's a ten figure man with his billion dollar plus multifamily portfolio and his 900 plus investors. He's also the CEO at a multifamily education company because he's a really good teacher. It's been about a year and a half since you were first here. Welcome back to Neal Bawa.

 

Speaker 1 (00:00:40) - Well, thanks for having me back on. It's it's a delight to be back. Had a fantastic conversation with you last time. So I'm looking forward to this one. We did.

 

Speaker 2 (00:00:46) - The last one was so fun and spirited. But my gosh, since then, Neal, about a year and a half ago, so much has changed in the multifamily industry. We know that a lot of new difficulties have come into multifamily, like failed deals and capital calls and the need to raise bridge debt and banking industry challenges.

 

Speaker 2 (00:01:06) - So where would you like to start to help give us some perspective on all that?

 

Speaker 1 (00:01:12) - Well, think opportunity is finally here. You know, when when we talked a year and a half ago, I was I said things like, well, prices are too high. I said things like, I don't know where the margins are. I don't know how people make deals work. I don't know how they make them pencil out. Right. Um, in some ways, I'm still saying some of those things, but it's certainly not because of pricing anymore. So, you know, the single family market is a perfect sort of benchmark for the world that live in multifamily. As far as I know, in the last 12 months, single family prices have either been flat or up 1% or down 1%, depending upon which analyst you pick. But it's certainly been an extremely, extraordinarily stable market in terms of prices, where it's it's you know, the volume, of course, has cratered. It's down a ridiculous percentage.

 

Speaker 1 (00:02:00) - Whereas multifamily was an industry that has hurt more because of the portion of multifamily that was purchased or traded in the 2020, 2021 and 2022 time frame. Almost all of those trades happened using bridge loans which were floating, whereas almost all single family transactions were 30 year fixed loans. Right. So so two completely different things have happened. Normally the single family and multifamily market tend to be in lockstep. And that's certainly been the case for ten years. But over the last 18 months, single family and multifamily have separated from each other. And the big reason for that is almost all of the distressed transactions that you're talking about, that you're alluding to all of those cash calls. They are related to bridge loans, which had floating debt. And that floating debt has gone from, you know, 6% to ten, eight, you know, 11%, even for for some of these, these operators making it extremely difficult to make numbers work, making it very difficult to pencil. But on the good side, we've now seen compared to the peak, which was probably about 20, 21 months ago, we've seen a 25% reduction in prices, which is huge because we mean multifamily usually as an asset class, doesn't go down 25% simply because it its value is based on rents, you know, and rents rarely go down.

 

Speaker 1 (00:03:22) - They hardly went down for 6 or 7 months in 2008, so we didn't see much of a decline there in 2008, simply because, you know, the, the, the income was strong, but this time, the much, much higher cost of interest means that our overall post mortgage income is down. And that's why prices are down 25%. So both opportunity and distress in the multifamily space.

 

Speaker 2 (00:03:46) - That's such a staggering number. So let's frame that. Multifamily prices down 25% since their peak or year over year. And then just to be clear, we're talking about five plus unit residential apartment buildings with that figure.

 

Speaker 1 (00:04:01) - Yes, I'm glad you asked the question that way because I do need to qualify a few things. So so first thing is down from peak and depending upon different markets, the peak was either the last quarter of 2021 or the first quarter of 2022. And in a couple of markets, even the second quarter of 2022. So it's I'm not saying year over year, it's basically they're down 25% in the last 18 or 20 months.

 

Speaker 1 (00:04:25) - Um, so the second piece is that the down 25% is predominantly, let's call it hotter markets in the United States. So if we're talking about a steady Midwest market like Kansas City or Indianapolis, then you're probably seeing a decline of half that amount. So maybe 12.5, 13, 14%, where if you're talking about a very fast growing market, you know, all the Texan markets, the Floridian markets, then you might be seeing declines of that 25% level, since a lot of the transactions that did happen in the last two years were in the faster growing markets, that 25% number is still reasonable. And some people listening to this show might say, no, I don't think 25% is right. It's more like 20, it's more like 18. So I'll. Be at that by saying it's a pretty wide range. We're seeing as little as 18% in some of these fast growing markets, you know, hot markets. And we're also seeing markets like Phoenix, where we're seeing 27, 28% declines in price.

 

Speaker 1 (00:05:23) - Also, the the range is dependent on the number of units. We are seeing smaller declines if you've got less than 100 units. Right. So smaller properties, we're seeing a smaller decline maybe 15%. And then when we are seeing properties that are 300 units or more, just the whoppers, we're seeing 30% declines in those assets. So so a lot of it is really dependent upon, you know, because the bigger the size, the harder it is to finance it these days, the less the banks want to take a risk on it. So the bigger the property, the harder, harder it's hit at this point of time.

 

Speaker 2 (00:05:57) - The bigger the property, the less liquidity. So maybe, Neil, to help the listener get a full understanding, maybe you can take us through the anatomy of where a common problem is with what happens to an apartment building owner or syndicator when they got this floating rate debt and they didn't get a rate cap and rates spiked? What exactly happens that makes these deals blow up?

 

Speaker 1 (00:06:24) - Right? First, want to, you know, set the size of the of the problem.

 

Speaker 1 (00:06:28) - Right. So when you compare it to 2008, it's not comparable in 2008, the total size of distress or you know, potential distress was 8000 billion or $8 trillion. So it was it was a it was an absolutely staggering event. Luckily, not a lot of that distress actually happened. So that was good. But the the total size of distress was in that $8 trillion or $8000 billion range, the total size of distress in the multifamily market appears to be in the $100 billion range, so about 1/80 of the size of the distress in 2008. So keep that in mind. Also, as a percentage of the overall multifamily industry, there's about 100,000 multifamily properties in the United States that are on the bigger size. Let's call them more than 50 units. There's 20 million apartment units total. 100,000 are the bigger properties. Of those 100,000, the distressed portion of the portfolios is about, from what I can tell, about 3000 properties. Maybe it could be as much as 4000, but 3000 is a very common number.

 

Speaker 1 (00:07:30) - So about 3% of the properties are distressed. And why are they distressed? Multifamily has been doing incredibly well. Rent growth has been phenomenal, especially in 2021 where it was 15%. Just so you know, they the 50 year average is about 2% rent growth. So 15% is you know, champagne time. So so we've certainly had positive trends. And we continue to see positive trends. You know there's there's less and less people can afford a mortgage. So there's basically a you know brand new renters being created every day because of mortgage rates being this high. But the, the the downside was that a portion of those 100,000 properties were purchased in late 2020, 2021 and then, you know, 2022, and they were purchased using floating debt. And the the so we're talking about those 3000 properties. Those 3000 properties either didn't have a rate cap. So when when you you're purchasing using, you know, bridge debt or floating debt, you want to buy a rate cap. So if rates do go up they hit that cap.

 

Speaker 1 (00:08:29) - And then anything above that cap is something that the rate, you know, cap selling company reimburses to you. So that way you're not affected by but by going above that, well, some of these operators neglected to buy a rate cap, which was a really bad thing to do. But then there were others that other operators that bought a rate cap, but their rate cap was set too high. So, you know, they basically didn't think that rates would go up. So they did put a rate cap in. But instead of buying a rate cap at 6% or 7%, they may be bought a rate cap at 8 or 9. They were basically looking for the worst case scenario, and so they bought the cheapest rate cap that they could find. And now, you know, rates have gone up and they've already hit that rate cap. Maybe it's eight and a half or 9% and it had eight and a half or 9%. That mortgage is still too high for that property to cash flow. So now the property has negative cash flow.

 

Speaker 1 (00:09:18) - So there's I personally know of a few dozen properties where the negative cash flow is between 20,000 and $200,000 a month. And that negative cash flow means that the syndicators, the the general partners are basically putting that money in themselves, or they're taking short term loans and they are now looking for a solution there and their solutions are limited. I can give you a list of those, but their solutions are limited because the property is is negative cash flow and nobody wants to touch a property that's negative cash flow.

 

Speaker 2 (00:09:47) - Did we say that he's a data driven guy or what? That was some great perspective that the magnitude here of the multifamily reset problem has been about 1/80 of what the problem was in real estate during the global financial crisis. That was a great way to put things in perspective. Yeah, Neal, you know, it's such an interesting mindset that an operator would have the awareness to buy a rate cap with their floating rate debt, but yet not have the cap be low enough in order to keep them out of trouble.

 

Speaker 2 (00:10:20) - That's really unusual to me. Do you have any idea what percent of operators have bought a rate cap with their floating rate debt?

 

Speaker 1 (00:10:30) - I think a majority of them have. So I'd say more than 50% of the properties that were purchased during this time did have caps, but a lot of the caps were set high. So that that was a very common thing, where the caps were set to 8% or higher, as opposed to them being set at, you know, 6 or 6.5%. So it's more of a high cap issue rather than a no cap issue. And I think the bigger the secondary challenges, let's say let's say they had a good rate cap, right? So I bought it. Let's say you bought a property in the, um, let's call it the final quarter of 2020. And you bought a two year rate cap. And the rate cap was good. It was 6.5%. Yeah. Good for you. Right. But that rate cap was a two year rate cap. So now it expired basically last year.

 

Speaker 1 (00:11:14) - And so since last year you're now up at 10 or 11%. And, you know, a year's gone by. Your property is bleeding. Maybe it was doing well, but now that it's been bleeding for a year and you've been paying all of that bleed out of your operating expenses, now you're in trouble. And maybe you bought it. Three rate cap. Well, if you bought the property in the final quarter of 2020, then in about a month or two months from now, we're in the final quarter of 2023. Well, that rate cap is going to be gone. And then maybe in the next three, 4 or 5, six, seven months, all of your operating budget, all of your operating, you know, fund is going to be, you know, gone because you have this much higher mortgage. So what's happening is that this is one of those situations where there isn't a trigger on any one particular day, and a huge number of properties come to market. There were a lot of properties purchased in the final quarter of 2020, all four quarters of 2021 and the first three quarters of 2022.

 

Speaker 1 (00:12:10) - Right. So you're looking at a total of eight quarters. So each quarter, a certain percentage of those properties get to the point where either their rate cap is gone. Right. So it's finished because you bought a one year or two year rate cap, or they're they're at the point where even without the rate cap, their loan is expiring. So a lot of these bridge loans were two year loans and three year loans. And so the vast majority of the challenges that the multifamily industry is going to face are going to be in 2024, because that's when a vast majority of either rate caps or mortgages expire. And because because the net operating income of these properties has gone down and the and the mortgage cost has gone up, most of these properties cannot be refinanced. So I'd say out of the 3000 properties, you could probably refinance using some mechanism, a thousand of them, maybe a third of them. And that could be, you know, do a cash call, get, you know, money from your investors.

 

Speaker 1 (00:13:07) - Or you could do what is known as a pref lending, where you basically take money from an outside party and that outside that extra money helps you refinance into into perm debt. So those are your options. And the third option, which is likely to be most common, is that you go out and sell your property. But from what I'm seeing, the vast majority of these properties that don't get refinanced. So out of 3000, the 2000 that don't get refinanced are likely to come to market, and the vast majority of them will end up losing all of their investor money or a majority of their investor money. And so you, you know, if it's a $100 billion problem, that's, you know, we're talking about 30 to $40 billion of investor money, and a majority of that 30 to $40 billion could be lost.

 

Speaker 2 (00:13:48) - Yeah, that is troubling and really concerning as far as those LPs, those limited partners, those investors in someone else's syndication, hopefully that syndicator, that operator is communicating with their investors.

 

Speaker 2 (00:14:03) - But for investors, is there anything they can do to identify cracks in the arm or where they might be losing their deal, where they might be losing their money, where they might be throwing good money after bad if a capital call is requested?

 

Speaker 1 (00:14:18) - I think it's a very difficult thing to do for a limited partner because you have, you know, you have more, you have much more exposure to the deal than you would when you invest in the stock market, where you know, there's almost no exposure unless it's a public company. Um, but and these are all private syndications. But I think that a lot of investors simply don't know how to read the, the budgets versus actuals. They don't necessarily know how to read the Performa. So it's it's challenging. So if you're somebody that is. Comfortable doing that. I suggest you dive in and basically ask a lot of the questions of the syndicators. I have one such property, so, you know, I was lucky in that during that time a lot of my colleagues had I have people who I know colleagues that bought 10 to 12 properties during that time frame.

 

Speaker 1 (00:15:02) - It was very normal. I bought one and a half. So one of those properties was my own property, exited one of my partners. So I call it a half a property because it was already mine. Um, and then I bought purchased one other property in a military metro. So I was able to get it for a lower price because it was a military metro. And usually the prices are lower for, for for military towns and, and that property, you know, I'm having the same challenges that I've described. So, you know, the the rate cap issues and the fact that basically prices have gone down by 25%. And I'm dealing with it by constantly communicating with my investors, giving them, you know, options. You know, here's, you know, how when, when we were when we were all selling these these shares to investors, we gave them a, um, a sensitivity analysis showing them, you know, worst case scenario, best case scenario, you know, in a middle case scenario.

 

Speaker 1 (00:15:55) - And so now we're basically doing a sensitivity analysis based on what we are seeing in the marketplace today. And and giving them feedback on what our options are and think a lot of it comes down from the the general partners communicating with the limited partners. And if the your general partner is not very communicative, is not giving you information, ask for one on one meetings, ask for you know, more information in their webinar or in their updates. I think this is a time for limited partners to be vocal.

 

Speaker 2 (00:16:25) - You've learned about the problem in the larger apartment space. You've learned about how operators and apartment syndicators are dealing with the problem. And then, Neil, where do you think that we're going next and think maybe we should ask and look at it through the lens of where do you think we're going next with the availability of multifamily loans, could this help the source of capital dry up?

 

Speaker 1 (00:16:50) - And so I think the answer is we are going to a very dark place with availability of commercial real, you know, loans.

 

Speaker 1 (00:16:57) - Multifamily is in a privileged asset class. So, you know, the the term commercial real estate is sometimes meant to include multifamily, sometimes not. So I'll assume that multifamily is part of commercial real estate, but there are many other asset classes. So there's office which is the next biggest asset class. There's retail hotels, there's self-storage, you know, and and a few others like mixed use. And of those commercial real estate asset class, there's only one that's privileged and that's multifamily because there are not one, not two, but three lenders who are government or quasi government organizations whose only job it is to keep lending in the multifamily space liquid, and also the single family space liquid. And they are Fannie Mae and Freddie Mac and hard. Right. So Housing and Development Authority. So these three lenders right now are extremely, extremely active. And what has happened is that in in good times, call it 20 early 2022. You had life companies. You had all these private, you know, bridge capital, you had all kinds of capital that was lending to the multifamily space.

 

Speaker 1 (00:18:03) - Now some of that capital has backed off. There's still a huge percentage, I'd say probably 40, 50% of all loans that are being done today are these kinds of private, you know, groups. But think the government or quasi government groups are much more active today and their lending. So I don't think multifamily lending dries up at all. I don't think that that's the case. I think it dries up for the non privileged asset classes, hotel, retail, self-storage, office. These are the classes that are likely to see, you know, near lending dry up especially because on a fundamentals basis there's absolutely nothing wrong with multifamily. In fact as I mentioned I think we're a lot better off than 2019 to 2023 given that home prices have gone up 40%, incomes are only gone up 15%. So there's a very large number of Americans that simply cannot qualify for a single family home anymore. And so those people have to go to apartments. So the the fundamentals are really good for apartments. That is not true of office.

 

Speaker 1 (00:19:02) - So office is an asset class that is experiencing the worst fundamentals it has seen in its entire history. And so I do think that there's going to be very severe lending challenges in the commercial real estate space. But I haven't really seen that multifamily, and I don't anticipate seeing it in the future as well.

 

Speaker 2 (00:19:20) - Well, I don't know if any of that could have as much fun as last time. There were rather gloomy subjects to discuss here with Neal and come back. Can this problem in the multifamily space create contagion for the 1 to 4 unit space? And like with what Neil touched on, what about other commercial sectors like office and retail? How troubled are they when we come back? This is get recession. I'm your host, Keith Weinhold. 

 

Speaker 2 (00:20:14) - Welcome back to Get Rich Education. We're talking with the mad scientist of multifamily, a big brained visionary. He's also an excellent teacher. I'm sure you can tell as you're listening to him here. And if you're listening in the audio only Bawa is spelled b a w a new. Here on this show, we talk an awful lot about investing in the 1 to 4 unit space and the advantage of the 30 year fixed that long term fixed interest rate debt. Do you see any areas for contagion with problems in the multifamily five plus unit space bleeding over into the 1 to 4 unit space?

 

Speaker 1 (00:20:56) - Yes, but to a limited level, I think that the the 1 to 4 unit space is the healthiest that I've seen in a very long time.

 

Speaker 1 (00:21:05) - And there's reasons for that. One of the biggest reasons is multifamily, which is the most well sought after asset class for institutional investors who don't typically don't usually like the 1 to 4 unit space. There's a few companies in that space, let's call them half a dozen, but there's several thousand companies that invest in the multifamily space. Some of them are right now looking at single family as a, you know, as a, you know, safe haven to park some of their money. Right? So there's, you know, more institutional level interest in the single family space because of its access to those, you know, those those 30 year fixed loans. So there's and the fact that single family prices basically haven't declined. So I think that there's there's a lot of interest in the single family space. Um, keep in mind that millennials are reaching their peak years of household formation. So they started in 2019. So until 2025. So from 19 to 2025, those are the peak years of household formation for millennials.

 

Speaker 1 (00:22:01) - And that's also putting a cushion under the single family space there. Contagion is some form of contagion is inevitable. I think that the office market is going to see spectacular levels of contagion, similar to 2008. I think that the other associated markets, like hotel and retail, are going to see some level of contagion, though I certainly don't expect it to be as bad as office. And then multifamily is going to see some contagion, as we mentioned, because of these 2 or 3000 properties that have to be basically sold into the marketplace and prices are down, which always creates contagion. Why? Because think about it. You're a mid-level bank. So a mid-level bank in the US is $250 billion or less in assets. Well, a lot of these assets are these banks are the ones that loaned out money to multifamily and retail and hotel and in office, and now are being forced by the Federal Reserve through a process known as mark to market. They're being forced to write down the value of these assets because these assets, you know, there's still you know, there's still active loans, but maybe they they loan $20 million.

 

Speaker 1 (00:23:00) - And now basically they're $20 million is only worth 18 or 16 or 15. And so now the fed is saying, hey, you know, you got to mark these assets down in value. And as they mark them down to value, that can lead to the banks becoming or mid-sized banks becoming less stable. I don't think this affects any of the large banks in the US, but the midsize ones are affected. And some of those mid-sized banks do lend to the single family space, but not a lot. I find that the single family space, when I look at their source of lending, not a lot of those mid-sized banks are involved. There's a little bit they do some brokerage work, but then they're selling those loans back to Fannie Mae and Freddie Mac and a bunch of other, you know, governmental type organizations. So I don't see a sense of contagion in the single family space. I do see potentials of some price declines because until about two months ago, mortgages were predominantly in the sixes. They, you know, they spiked up once to the sevens and then they pulled back into the sixes.

 

Speaker 1 (00:23:56) - Now they've gone into the sevens and they may stay in the sevens for a substantial amount of time. When that happens, that can affect the single family market as well, simply because, you know, you can get to the point where supply is higher than, than demand. So I wouldn't be surprised if there's a pullback in single family prices. Let's call it 5%. But I'm not predicting the kind of challenges where the office market think we could see 40% declines in prices from peak, whereas single family you might see 5%. I think that's still an incredible outcome for the single family market compared, you know, just looking at the outrageous increases in prices since Covid don't I don't think that's a even a pullback. I would just say that's a balancing out.

 

Speaker 2 (00:24:44) - Who know the residential housing market. Really, it's something that's non-discretionary on a human need basis. Everyone needs to live somewhere and they will either own rent or be homeless. And you talked about some of those affordability challenges before. The lower the homeownership rate gets, the more renters you have.

 

Speaker 2 (00:25:05) - So long term, we will have some demand baseline for both multifamily and properties in the 1 to 4 unit space, of course, but the same thing cannot be said about some of these other commercial sectors, especially the troubled office sector space, where you have more and more abandoned buildings downtown. And a lot of these office buildings cannot be easily converted from offices to residential units. So why don't you talk to us about some of those other troubled commercial sectors, starting with office.

 

Speaker 1 (00:25:35) - Office is in a apocalypse. I think that this is far, far worse than 2008 and far, far worse than than 2001, because 2008 and 2001, they were liquidity crisis. They were short term, you know, demand crisis. This is a long term demand crisis because, you know, I read very important documents from companies that are in the key swiping business. You know, when you enter an office in a downtown core, you're swiping your card. And so those companies actually have phenomenal day by day data of how many people are actually going into offices today.

 

Speaker 1 (00:26:11) - It's been more than a year since companies started calling back, you know, people to the office and think that by now every company, whether you know, they're they're forcing five days back to the office or four days or three days or two days, everyone's sort of, you know, put their line in the sand. And we're at the point where, you know, this, this is what offices look like going forward. And if I'm right and this is what it looks like going forward, it is simply catastrophic for the office market in the United States, because we're still seeing key swipes at 50 to 60% of the people that used to swipe in before Covid. And that number is staggeringly, staggeringly low. And if this is what it settles at, you know, some companies are two days, some three, some four. I think we're in for a world of pain for the office market. You also, you know, there's a lot of people that in these podcasts basically will often say something like, no, the office stuff will get converted into residential.

 

Speaker 1 (00:27:06) - And I have news for you, only 3% of office buildings in office in downtown course have the floor plate, the floor plate necessary for residential conversion. Why? Because residential conversion by law requires that every every single room have a window. So what is happening is most of the time you basically can only convert the buildings on the edge, the, the square footage on the edge of a building, but that's central core but then becomes worthless. And if you don't have a use for it, then you still have to buy that office building to convert and you have to buy it at a reasonable price. The math doesn't work. I mean, you'd you'd need to see office values down 80% for, for, you know, a somebody who's converting to multifamily to say, fine, I'll just leave the 60% in the middle empty and I'll just convert the size. So 80% declines in value are needed for that kind of conversion to happen. So we are about to see a ten year problem in the office sector.

 

Speaker 1 (00:28:03) - And it's also dragging down all of the other assets in the downtown core. So we are seeing we just saw a $727 million default on two hotels in San Francisco. We saw a $558 million mall default. Also in San Francisco, we're seeing defaults across the board in New York, Boston, Seattle, San Diego, Miami, sort of heavy markets where this these challenges are happening. We're seeing a lot of these and it's happening in a very, very slow way. Keith. And the reason for that is the office market, their average lease is, you know, five years long. Some leases are ten years long, and a lot of these companies haven't gone out of business. So if the company is in the lease, they're continuing to pay even though the office is empty. But the moment that lease comes up for renewal, either the company doesn't renew it or they renew maybe half the space. Right. And so we we already know that this is an incredible debacle, but it doesn't seem like it at any given point of time because it's happening in a very slow motion way.

 

Speaker 2 (00:29:02) - Well, that's such a good point about how there will be this slow drain, this slow leak when these office leases expire over time. What about other areas of the commercial space, any other particularly troubled areas or bright spots that you see going forward?

 

Speaker 1 (00:29:21) - Ironically bright spots. And this is where I've been proven wrong in the past. You know, I've often maybe 4 or 5 years ago talked about the retail apocalypse, right, where Amazon would basically, you know, lead the retail market to become illiquid. Well, none of those things have happened because of two reasons. One is the retail apocalypse with people like me, you know, being on on 200 podcasts, talking about it, a lot of development of retail that was scheduled to happen simply didn't happen. So the very.

 

Speaker 2 (00:29:48) - Late podcast, people lost confidence. No. They were invested in retail.

 

Speaker 1 (00:29:52) - Exactly right. So so, you know, I fulfilled that prophecy. Think. But bottom line is that there's there's been very responsible levels of new construction in retail.

 

Speaker 1 (00:30:02) - So, you know, they haven't built a lot. Very few models have been built in the United States in the last few years. And even some of the malls that have been repurposed, some of their square footage is being used up for, for multifamily. And so that was one. The second reason is that retail is being very careful with pricing. So, you know, over, over the last 5 or 6 years, the retail market has adjusted to new forms of pricing, where, you know, you go into a mall and you see a gym where before the pricing of that mall never really allowed for a gym to be in a mall. It just gyms, you know, they want, you know, a lower price per square foot. And so malls have adjusted, strip malls have adjusted. And so today we have a surprising event where retail occupancy in the United States is higher than multifamily. This is the first time ever that multifamily is about a little under 95%. Now it's 94% occupied.

 

Speaker 1 (00:30:52) - Retail is 96 or 97% occupied, which never happens, right? Normal. Normally retail is right around 90%, 88%, something like that. But the high level of occupancy shows that that retail is doing well. Now, having said that. So so on the occupancy side, they're doing really well. There's there's really no pullback in terms of demand. But on the other side, because of the fact that interest rates are so high, retail cap rates are very high, which means prices are low. So prices are very reasonable there for retail. And so I think that real opportunity that I'm seeing I wouldn't invest in office at this point, Keith, because you don't know the end of this process. You don't know how long it takes. I think it takes a decade. So I might get 50% off in office and I don't want it. I just don't want to touch that asset class. It's tainted. Now, if I get 40% off in retail, I think I'm interested because fundamentally I don't see a demand issue if this is the highest occupancy that retail has seen ever.

 

Speaker 1 (00:31:53) - And at the same time, I'm getting a 40 or 50% discount simply because of lack of lending. Well, that is to me a classic opportunity to look at because once again, fundamentally, nothing is wrong with demand. And I realize that the Amazon effect is extremely real. But what I'm seeing is that that people want that experience of shopping. And so even amongst the young people, sure, each year Amazon, you know, goes up a little bit. But now Amazon's growth is no longer a hockey puck. Amazon's growth is sort of like this. You know they're growing by 10%, 15% a year, which is still great for Amazon. But I think when you when you project that across a 300 million person market that the US is retail no longer has to fear for an apocalypse. So this is actually a pretty good time to take advantage of the 40% discounts that I think will happen in 2024 for retail. Same thing. Everything I just said also applies to hotels. Hotels came out of the pandemic very strong, with huge increases in ADR or average daily rates and huge, huge increases in occupancy.

 

Speaker 1 (00:32:55) - So hotels right now are a very robust cash flowing business. If you've got good hotels and good locations, you're making a lot of money. They're cash flowing like crazy because their orders have gone up and their occupancy has gone up. So they've taken two positive hits. But once again, I expect there to be discounts simply because of a lack of funding, a lack of loans. And you can you might we might easily see 30%, maybe not 40, but 30% discounts in hotels in the next 12 months. So think both of those are really good opportunities, along with multifamily discounts at 25%. So this is an opportunity. This is a case of distress creating unusual levels of opportunity. I don't think we're quite there yet, Keith. We're beginning to see some distress in multifamily. We're certainly seeing distress in office. We haven't heard anything about the distress in retail or hotels yet. That's because a lot of their their loans don't don't trigger until 2024. Right. So that's we'll see what happens next year when these loans start to trigger and you can't really refinance them.

 

Speaker 2 (00:33:57) - I completely believe that inflation has thoroughly soaked in to hotels. You talk about their ADR, their average daily rate. I've recently stayed at hotels in Denver, Omaha, Chicago, Toledo and Boston, so I've gotten a pretty good sample size and sure feel the hit there. And interestingly, the last time I shopped at a mall, it was the biggest mall in this city, and I noticed a bowling alley that I had not noticed there before. And I went bowling and noticed an ice skating rink was there. So I just wonder how much retail can reinvent itself if it tilts enough into the experiential part, rather than just buying items off a shelf at a store, maybe that can help sustain that retail sector, to your point. Well, Neil, maybe we should wrap up really on what supports an awful lot of values in multifamily, and that is rents and the direction of rents, especially if we have almost hate to say this. R-word, a different R-word, a recession, because it seems like this thing has been around the corner forever.

 

Speaker 2 (00:35:03) - I know historically that rents are quite resilient in a recession, something that you touched on earlier back even during the 2008 global financial crisis, when I was a landlord, I owned fourplex buildings. Then I noticed that I had a pretty good steady stream of renters. My rents didn't really go up much, but they were really resilient. They didn't go down, and that's because people couldn't get a loan. So that was an affordability problem. Then we have another affordability problem now. But if we do tilt into recession, what do you think that is going to do to rents?

 

Speaker 1 (00:35:33) - I think we are going to see a decline in rents if a recession happens. Now, that's a question. By the way, six months ago, if you told me, you know, a recession wasn't going to happen, I'd say, no, that's not possible. We are going to go into a recession. However, I must admit that the US economy has truly, truly, truly outperformed beyond anyone else, beyond anyone's imagination.

 

Speaker 1 (00:35:54) - So today, the chances of a recession are certainly not 100%. Might be 50%. But let's assume that it happens and a recession happens. I think what is very, very likely is that this recession will be very short. So once again, if you're not paying attention to to to what's happening in the marketplace, this is a time that, you know, I was born in India and this is my adopted country. I feel very proud of the US economy today. If I compare the US economy to the Canadian, the eurozone, the Germans, the Japanese, we are outperforming every one of those economies. We're at the point where we're outperforming China, which almost never happens, by the way. And so we have an extraordinarily resilient and strong economy at this point. So if it falls into a recession just because the fed keeps hitting it over the head with this interest rate hammer, I think that recession will be fairly short, because as soon as the economy does go into a recession, the fed usually figures that out within a few months.

 

Speaker 1 (00:36:47) - Then they can stop hitting us with a hammer. I'm not saying that they'll just cut interest rates back to zero, but they certainly will provide some cushion. Maybe they cut rates by one one time, two times, just to make the market breathe a little bit easier. Because this is an artificial recession, there is no shortage of demand in the US economy. There's an incredible number of open jobs. There were as many as 11 million jobs now. Now there's about 9 million open. So there's there's a and wage growth has been so strong. Right. Because we have so many people retiring that at this point, for the first time since the early 60s, I believe, or late 60s, we actually have pricing power. So anyone who wants to be employed can ask for more money and get it. And so wage growth has been about four, 4.5%, which is really good for rents, by the way. It's phenomenal news because we needed wage growth for future rent growth. So we have a artificial recession if it does happen.

 

Speaker 1 (00:37:38) - And that artificial recession is being caused by the fed because they want that wage growth to come closer to 2% from the 4% that it's at, because everything else has come down. Right. So commodities have come down with the exception of oil, and so has, you know, so have the supply chain issues are gone, rents are down. So in the US the last 12 months, rents were flat and in some markets they might be down 1% or 2%. Austin I think was the only market that was down a lot. But most other markets were down very, very small amounts. So rents have been flat, which is, I think, really credible because if you look at rents over the last two years, they're up 16%. So in 2022 they were up 16%. In 2023 they were up basically zero. So if you average that out now you're looking at 8% rent growth, which is phenomenal compared to the long term average of 2.5%. So we've been outperforming on rent and we needed to take a breather in the last 12 months have been that breather.

 

Speaker 1 (00:38:32) - Now, if the recession happens, I do expect rents to go down, but not normally they don't. So in a in a in a six month, three month or six month average recession, you know, the average US recession is two quarters. So six months normally you don't get rent drops. You might get, you know, the rents plateau out. Or maybe their rent growth drops from 3% to 1%. That's that's much more common this time. We might see rent growth in a short recession drop by maybe 1% or 2%. And the biggest reason for that is supply. The largest supply of apartments in the history of the country is delivering, starting basically the beginning of 2023 until the end of 2024. So these two years, 2023 and 2024 are massive apartment supply years. And obviously, as you supply 500,000 apartments into an economy that overall is not outperforming, is is doing okay, but and it starts to go into a recession, then you're going to see some concessions. And that concession drives down the price of multifamily, which then drives down the price of single family rentals.

 

Speaker 1 (00:39:36) - So we could see a decline in rents. I'd say probably 1% to 2% is is possible, but that decline is likely to be short. So I think let's assume that the recession starts in the final quarter of 2023, which might not happen. I think it's more of a Q1 and Q2 of next year. If the recession does happen, those are the two most likely quarters. As soon as the economy rebounds and becomes positive, we should see very strong and stable rent growth. Well, I would say stable rent growth for the rest of 2024 by 2025, a lot of that incoming supply is done. So now supply supply and demand are in balance. So in 2025 I expect strong rent growth as much as 4 or 5%. And in 2026 I expect very, very strong rent growth. We might we might see 6% rent growth in 2026. So 2024 is that year where rent growth is a little bit shaky because of this. Word, the recession word. And, you know, whether it happens or not is we don't know.

 

Speaker 1 (00:40:37) - And when it happens, we don't know how long it lasts. But I think because it's an artificially induced recession, it's likely to be the vanilla US six month recession, which basically drives wages closer to that 2% target for the fed, and gives the fed the room to start easing up on interest rates.

 

Speaker 2 (00:40:56) - Recessions are not good. Perhaps the one positive about a recession is that then we can all stop talking about and speculating upon when does eventually happen, because on average, it does happen every five years. It's just a normal part of the business cycle. Well, Neal, this has been very informative around the multifamily world and beyond, including projections for the future. You've always got such great insight in stats on the pulse of the market. If someone wants to learn more about you and your resources, what's the best way for them to do that?

 

Speaker 1 (00:41:31) - Come join us at multifamily. That's multifamily, followed by the letter EW.com we get about 20,000 registrations in our webinars. We do about a dozen webinars each year.

 

Speaker 1 (00:41:41) - We do them on single family multifamily. We do them on other asset classes like office. We just did one on on on the office apocalypse and people like that because there's no education fee, there's no subscription, there's no upsell. People come join us. They learn a lot. And occasionally during one of these webinars, if you have a multifamily project that we are doing, we mention it for about 30s. And if that sounds like it's interesting, you can, you know, jump in and you know and participate. But otherwise, you know, there's a lot of tens of thousands of people that have never participated with us in any of our projects that come and join us at this ecosystem of learning called multifamily EW.com.

 

Speaker 2 (00:42:22) - Neal Bawa, Gro Capital and multifamily EW.com. It's been informative, just like it was the last time you were here. It's been great having you back on the show.

 

Speaker 1 (00:42:32) - Thanks for having me on, Keith.

 

 

Direct download: GREepisode473_.mp3
Category:general -- posted at: 4:00am EDT

Before our PA Governor-appointed public official guest joins us, I discuss how autonomous cars expect to change real estate.

Richard Vague, Pennsylvania’s Secretary of Banking and Securities from 2020-2023 joins us. We’re in the state capital of Harrisburg, PA.

We discuss America’s beginnings in real estate and banking from around 1800.

He tells us about the health of banks in the wake of recent failures due to higher interest rates.

I ask Richard about full reserve banks vs. fractional lending banks.

Great Britain prohibited colonists from owning land west of the Appalachians. 

The basis of early land wealth were crops grown on the land—wheat, corn, tobacco, indigo, and rice.

Mortgages around 1800 were often 50% LTV and 6% interest rates.

Here in the 2020s, Richard believes that private sector debt is a larger problem than public debt.

Wherever debt growth is most rapid are where the economic cracks exist.

Inflation benefits the Top 10% of the economic strata.

Private debt becomes unsustainable around 225% of GDP. In the US, it’s currently 160%.

You become insolvent when you cannot make interest-only payments. That’s true for you as an individual, or a nation.

If these topics interest you, check out Richard’s new book, “The Paradox of Debt” at ParadoxOfDebt.com.

Timestamps:

America's beginnings with banking, real estate, and debt [00:00:01]

Discussion on the historical influence of Pennsylvania banking on the formation of US banking, including figures like Robert Morris and Alexander Hamilton.

The impact of autonomous vehicles on real estate [00:02:54]

Exploration of the potential effects of autonomous vehicles on real estate, including reduced need for parking and changes in commuting patterns.

The role of the Secretary of Banking and Securities in Pennsylvania [00:09:20]

Insight into the responsibilities of the Secretary of Banking and Securities in Pennsylvania, including oversight of banks and consumer protections.

The fractional reserve lending system [00:10:44]

Explanation of how banks operate through fractional reserve lending and the possibility of full reserve banks.

The origins of the US banking system and the role of Thomas Willing [00:12:06]

Discussion on the founding of the US banking system and the involvement of Thomas Willing, the first banker in the United States.

The land crisis of 1796-1797 and its impact on Robert Morris [00:14:14]

Exploration of the financial crisis caused by land speculation and how it led to Robert Morris, a prominent figure in credit ratings, ending up in debtor's prison.

The formation of the nation and its intersection with banking [00:21:50]

Discussion on the short-term loans and interest rates during the formation of the United States and the role of debt in the westward expansion.

Private sector debt and its growth [00:25:30]

Exploration of the significant increase in private sector debt since World War II and the focus on the potential issues associated with it.

Debt growth as an indicator of economic crises [00:28:23]

Insight into how rapid debt growth, particularly in the private sector, can serve as a predictor of economic crises and the shortcomings of economic models that exclude debt as a factor.

The paradox of debt [00:31:47]

Debt creates wealth, using leverage and appreciation to generate wealth.

The end game of private debt [00:33:29]

When the requirement to service debt slows the economy down to near zero.

Inflation profiting with real estate [00:37:42]

Real estate is not just an inflation hedging vehicle, but an inflation profiting vehicle due to fixed interest rate debt and rising rents.

Resources mentioned:

Show Notes:

GetRichEducation.com/472

Richard Vague’s new book:

ParadoxOfDebt.com

For access to properties or free help with a

GRE’s Investment Coach, start here:

GREmarketplace.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

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Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. I'm sitting down in Pennsylvania with the governor's appointed state secretary of banking and securities. What were America's beginnings with banking, real estate and debt? Learn how this affects you as an investor today. And what does America's day of debt reckoning look like today on Get Rich Education?

 

Speaker 2 (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Speaker 1 (00:00:44) - Welcome from Harrisburg, Pennsylvania, to Harrisonburg, Virginia, and across 188 nations worldwide. I'm Keith Weinhold and you're listening to Get Rich. Education has been the Keystone state of Pennsylvania this week. In just a few minutes, you'll hear my sit down with secretary of banking and Securities for this great state of Pennsylvania from 2020 to 2023. The rather distinguished guest also sits on the Ivy League University of Pennsylvania's Board of Trustees. And before we're done, I'll be sure he understands at least one core principle here and get his opinion on that. Yeah, I visited seven US states so far here in the past month and I'll continue to visit so much of the United States.

 

Speaker 1 (00:01:28) - In fact, I might have done more driving this past month than at any time in my life. Now. Some people are really car people. We have this kind of car culture in the United States for some evidence that younger people aren't as interested in that is older people. I mean, some people, they get really excited about new car features or new dashboard interfaces or hybrids or EVs and charging stations. You know, none of that is really that interesting to me. However, you know, the one new car feature that I actually really care about and I'm waiting to go more mainstream. Any idea the one game changing car feature that I really can't wait to get here because it's really going to improve your quality of life. And mine and I talked about this way back in Get Rich Education Episode 13 in the year 2015 is something that is still expected to have substantial ramifications for real estate, and that feature is autonomous vehicles, also known as driverless cars. I mean, as much of the world that's automated these days and digitize, it feels like something is out of whack to have all of this technology that you have in your car today.

 

Speaker 1 (00:02:54) - Yet even if you're on cruise control out on Interstate 80, like I have been a lot lately, you've mostly got to keep your eyes glued to the car bumper in front of you. Yes. And the car that reliably drives itself. That's the new feature that I really want. I mean, imagine for you to be able to get some sleep or scroll your phone or I know that it sounds funny, even exercise while your car drives itself. And of course this still pretends to have a real impact on real estate. Cars will really need to be owned. It's just the subscription service that you order. A car comes to pick you up and then it drops you off where you need to go. So these cars just continue to stay in motion out there. You don't need a garage so much. And this means that cities won't need nearly as much parking. So parking lots are less important, parking garages are less important. And since you can be more productive while you're a passenger in the car drives itself, well, therefore, those neighborhoods that are say no one hour outside of the center or metro area, well, those areas won't have as much of a price discount because autonomous cars lower your time expense in commuting.

 

Speaker 1 (00:04:16) - But autonomous car adoption has been slower to develop than a lot of people, including me, expected. I mean, there have been a lot of experiments, But see, what happens is an experimental autonomous car crash that just makes more news than a human created car crash. And that has really slowed adoption. So yeah, I'm not so into cars. The only feature that's on the horizon that really gets me interested is winning back some of my time with autonomous cars. Hey, we have a ton of great podcast episodes lined up here at some of the most brilliant minds in the real estate and money world. Continue to join me coming up soon. Here on the show is the return of a really dynamic guest. He goes by the nickname the mad scientist of multifamily in the industry. Some call the amount of multifamily, mobile home parks self in other commercial real estate investors that have these floating interest rates, the amount of those people, it's almost insane. Higher rates are going to bring those deals down and investors will keep losing money in those deals.

 

Speaker 1 (00:05:27) - That's what the mad scientist of multifamily and I are going to focus on them. Yes, these people that learn how to perhaps do syndications through TikTok videos, they are losing their deals. Isn't that really is too bad because that reputation seriously that. The good operator, so we're going to sort that out for you. Then on a later episode here, one of the sharpest economic minds in the entire world joins us to discuss why the recession didn't happen as soon as he and a lot of others thought and what that means for the future of stocks and real estate and commodity prices. All of that is in the near future here on the show. But today I'm visiting my home state of Pennsylvania, where I've lived most of my life. It is the fifth most populous state, despite not being that large by area and despite the fact there are still a ton of rural areas in Pennsylvania, and of the five biggest states, Pennsylvania may very well have the deepest history. So we'll dig into some real history today.

 

Speaker 1 (00:06:31) - Pennsylvania banking was influential on the formation of United States banking, including that of Robert Morris. He's a pretty well known name, but he was succeeded by a better no name. Right after Robert Morse, we had Alexander Hamilton in that banking role. But yeah, Pennsylvania Robert Morris, he is known as the very financier of the American Revolutionary War. As we're about to discuss the nation's beginnings, America's formative years in land and real estate hundreds of years ago. Look, if a hundred years ago, a colonist or an early American, if he or she said this, I'm going to buy a piece of property and develop it. Okay. What do you think that meant when they said that today? If you said, I'm going to buy a piece of property and develop it, well, most people would think that you're going to build a housing development. But back then it probably meant that you were going to clear your land of trees and planted for agriculture and you're going to grow wheat or corn or tobacco.

 

Speaker 1 (00:07:37) - That was the discussion you were having then. What crop are you developing on your real estate? It sure wasn't. Are you going to develop apartments or condos or single family homes? That's how it might sound today. In fact, the 1790 census that shows that roughly 90% of the American population was employed in agriculture. 90%. So your real estate income was largely derived on your crop yield, which you might use to pay your debt on your land. Let's start this interview that I expect to be wide ranging as we'll take it from yesteryear up to the present day. This week's guest has served as secretary of banking and securities for the great state of Pennsylvania from 2020 to 2023. It is a cabinet level agency here in the state capital of Harrisburg. He was appointed to that position by Pennsylvania Governor Tom Wolf today. He is managing partner of Gabriel Investments as well based in Philadelphia. And today he's the author of an interesting new book. It's titled The Paradox of Debt A New Path to Prosperity Without Crisis. Welcome to Richard Vague.

 

Speaker 3 (00:08:53) - Thank you so much for having me.

 

Speaker 1 (00:08:55) - It's good to have you. For those of you listening in, the audio only vague is spelled vague. You and Richard, as Pennsylvania's secretary of banking and Securities, I know that you have various deputy secretaries that assist you. Tell me. I'm going to venture to guess that that role includes acts like the oversight of banks and various consumer protections. Are they important parts of that role?

 

Speaker 3 (00:09:20) - Without question. The fundamental job is looking to the safety and soundness of the banks chartered here in Pennsylvania to make sure they don't fail. And we all saw the importance of that recently. Silicon Valley bank failed in California. And I think if we'd had the caliber of examiners out in California that the folks here in Pennsylvania or that might not have happened.

 

Speaker 1 (00:09:44) - That's a nice compliment to those that have that oversight here in state, Richard. It sure has been interesting with interest rates actually not being historically high, but at the rate that they change and the rate that they spiked, making some things break everything else to tell us about that role with the oversight that you had of banks and consumer protections in Pennsylvania and really what everyday depositors are concerned with.

 

Speaker 3 (00:10:10) - Everyday depositors are concerned with getting the highest yield they can. Sure. And certainly they've been rewarded more lately than they have been over the last, let's say, ten years prior to that. But they also should be concerned about the safety and soundness of the bank they deposit with. And I think a lot of folks forgot that lesson. You know, a few years passed from a crisis and folks aren't worried about whether their bank's going to be around so much anymore. I'm really pleased to report the banks here in Pennsylvania are in really good shape.

 

Speaker 1 (00:10:44) - Richard, I don't even think that everyday depositors understand the fractional reserve lending institution system, which is really how most banks operate, and that is when a depositor gives the bank money or the money goes ahead and lends that out, that difference, that spread being their arbitrage, which is how they stay in business. I've got a rather interesting question, perhaps are full oil reserve banks feasible as the norm? And what I'm talking about there is banks that can't lend depositors money out and instead that bank needs to profit by charging fees to depositors.

 

Speaker 1 (00:11:23) - Now, I know everyone likes to get something for free, but would that be a more responsible system? Are full reserve banks feasible at all?

 

Speaker 3 (00:11:31) - If you did that. You know, that's something I've studied quite a bit, and that was a very active question, by the way. Yeah. In the founding of our banking system here in Pennsylvania in 1781, it's a question that's been around forever. Any economy needs to have money created in order to grow, and the banking system is what does that now. But if you banned that in the banking system, it would just have to happen somewhere else.

 

Speaker 1 (00:11:58) - Were there any prominent names that were involved with the setup of banking in Pennsylvania?

 

Speaker 3 (00:12:06) - The name that you hear the most is the guy named Robert Morris, who was the head of it was in effect, the secretary of the Treasury during the Revolutionary War. But his senior partner was the original banker in the United States, and his name was Thomas Willing in history has more or less forgotten him. And that's, by the way, the subject of my next book.

 

Speaker 3 (00:12:30) - I'm in the Middle of writing a biography of the origins of the US banking system and our first banker, Thomas Wells.

 

Speaker 1 (00:12:38) - There is a Robert Morris University in Pennsylvania, of course, and we're talking about history here, Richard. And I know that you have an excellent sense of history about the nation's beginnings in land and in real estate. Can you speak to that?

 

Speaker 3 (00:12:55) - The United States was all about land from the very beginning. You had massive land grants like to William Penn to found the state in the first place. But almost immediately after the founding of the country, you know, one of the reasons we had the American Revolution is because Great Britain prohibited colonists for owning land west of the Appalachian Mountains. And that was very frustrating to people like George Washington and others who had surveyed really lush pieces of land in the Ohio Valley. Immediately after the success of the revolution, the wealthy investors in America began buying millions and millions of acres towards the west, in the Ohio Valley, in Kentucky, in New York, in western Pennsylvania and the like, and got into trouble and brought the first financial crisis in US history, the land crisis of 1796 and 1797, because they were buying all that land on credit, either from the landholder, the private landholder or the the state or commonwealth that the land was in.

 

Speaker 3 (00:14:14) - They bought this under the presumption that the value of real estate would always go up and of course it just didn't go up fast enough. And Robert Morris to speak of someone actually ended up in debtor's prison because he overextended himself, which is somewhat ironic since he's something of a icon for credit ratings and credit prudence. And yet he was very much of a wild speculator and ended up in prison destitute.

 

Speaker 1 (00:14:45) - This is really interesting. Okay. And nefarious character early on in America's private real estate development, when the Appalachian mountain range in the late 1700s was deemed as the frontier to a lot of people.

 

Speaker 3 (00:14:59) - Absolutely. Everybody was looking west of there for the big games and the big opportunities.

 

Speaker 1 (00:15:06) - I mean, this is part of Manifest Destiny and the American Dream. So can you tell us more about a lot of that land in the early days west of the Appalachian Mountains? How much did the government claim is theirs and sell to private landowners on credit? And then how much were private landowners taking and were they allowed to make land claims and then sell it to someone else? Or tell us more about those early beginnings of that real estate setup?

 

Speaker 3 (00:15:34) - Well, that's exactly right.

 

Speaker 3 (00:15:35) - Most of that land was owned by the colonies, which in 1776 became states. The states own that land. The states all incurred massive debts in prosecuting the revolution itself. So by the time you get to 1783, 1787 states are deeply in debt and bondholders of state debt are not getting paid interest. And one way to alleviate that crisis was to sell land and selling it an acre here, an acre. There wasn't going to do you any good. So the states were selling land of 100,000 acre parcel a year, a million acre parcel there. Now, the guys that bought that, at first they were thinking, we'll do it, we'll develop towns, will lay out the towns, will survey them, will sell them, will attract settlers into this realm, will sell it plot buy plot to these settlers. But it was pretty clear that was a pretty slow way to make your money back. So they started looking to the wealthy in Europe and started sending brochures and agents to Europe to in essence, be able to flip their land in Early on, they were very successful at that.

 

Speaker 3 (00:16:54) - Guys like William Bingham, who was the richest man in America, and Robert Morris, who was one of the richest, would make, you know, 100,000 here and 100,000 there, which is tantamount to making tens of millions. Now that ended. They started doing bigger speculations. There weren't the settlers to buy it. The Europeans got a little bit smarter. You had a major national financial crisis, including, by the way, it wasn't just those Western lands. One of the biggest parts of the financial calamity was in the new town of Washington, DC, where they were moving the government, and people came in, including Robert Morris, thinking it's the seat of government where this is going to be a boomtown. And a lot of folks got into deep trouble speculating on plots in Washington DC.

 

Speaker 1 (00:17:42) - And if you're the listener, think that this sounds rather unorganized and free wheeling. Of course, we just need to think back a little bit earlier as to what happened when we as colonists went ahead and wrested the land away from the natives as well, of course.

 

Speaker 1 (00:17:57) - But yeah, Richard, you talked about some of the draw and the appeal to some of the land around Washington, D.C. there along the Potomac River. But just generally overall, in a lot of cases, this new American government, who were the land sellers trying to attract or were they trying to attract them to do, for example, was it to only and to set up a farm for agriculture or was it for trapping or what attracted people to this new land grab, if you will?

 

Speaker 3 (00:18:24) - The basis of wealth early on in the United States was the crops that we grew. And that obviously, first and foremost was wheat and the biggest supplier of wheat, not just in the United States, but to Europe was Pennsylvania. That's why Philadelphia became the largest city in the United States. Then just south of US and Maryland and Virginia. You had tobacco, which was our number one crop, but it was our number one export. South of that, you had indigo and rice. The further north you got, there really wasn't a lot of arable land.

 

Speaker 3 (00:19:03) - And that's why, you know, places like Massachusetts had to turn the manufacturing so heavily. It was really that. And fishing for cod were the only thing they could do. So, yeah, absolutely. We were a breadbasket for not just the country, but the world almost from the beginning.

 

Speaker 1 (00:19:21) - You talk early on about the extension of credit and how that enabled settlers to go ahead and own some of this new land? Is this sort of the early formation of long term mortgages? When did that.

 

Speaker 4 (00:19:35) - Occur?

 

Speaker 3 (00:19:36) - Well, absolutely. You know, really from well before independence. One of the problems you had is that there wasn't enough currency to really facilitate economic growth. So they began issuing paper currency in various forms. And a lot of these were very successful. This was done at the state level. And what they would do is they would create land banks. And so you would go in and take your land as a farmer. You would take it to the land bank and you could get currency up to half the value of your land and you'd pay interest on it.

 

Speaker 3 (00:20:14) - So it was really was a de facto mortgage, a.

 

Speaker 1 (00:20:18) - 50% mortgage, a.

 

Speaker 3 (00:20:19) - 50% mortgage, and you could spend that currency. They were well managed early on. Most of these didn't work, failed. And the first real commercial bank was Thomas Williams Bank in 1781 and Philadelphia.

 

Speaker 1 (00:20:35) - What were interest rates like at this time in these formative years of our nation.

 

Speaker 3 (00:20:40) - For bigger transactions, the range was really just 5 to 6%. It might get down to four, might get up to seven. Interest rates in the U.K. were closer to five and us, they were closer to six. There were breakdowns by a slice of an interest rate, so there wasn't an interest of 5.1% or 5.2%. And for high risk transactions, you could easily get into the same interest rate realm that some of our usurious lenders do today. Yeah, you see situations where folks in dire straits would borrow for an interest rate of 5% a month. A lot of loans in those days were very, very short term. There were the land loans that were long term.

 

Speaker 3 (00:21:28) - Most commercial banks made loans for 30 to 90 days, and they really were meant to bridge the period from when you, as a merchandiser bought your wholesale supplies to when you sold them as goods to the folks in your town. You could roll those loans over. But they were very short term back in those days.

 

Speaker 1 (00:21:50) - That is interesting. Those are really short term loans. And this is pretty parallel with what I've read around that time, that interest rates seem to be about 5%, something like that. We're talking about the formation of this nation, its beginnings in land, in real estate, and how that intersects with banking and the mortgage market and really part of the manifest destiny in the westward expansion of the United States. Yes, we are talking about a popular four letter word debt, and that word debt has only become more popular in America with consumerism here in past decades. So when Richard and I come back, we're going to talk more about debt today in the United States. In his new book, The Paradox of Debt, you can get that at Paradox of Debt.

 

Speaker 1 (00:22:35) - More we come back with Richard. I'm your host Keith Wayne hold you're listening to Get Rich Education. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Charlie Ridge personally, though even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited. For some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income.

 

Speaker 1 (00:23:48) - And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866. This is author Jim Rickards.

 

Speaker 4 (00:24:22) - Listen to Get Rich Education with Keith Reinhold and Don't Quit Your Day Dream.

 

Speaker 1 (00:24:37) - Welcome back to Get Rich Education. We're talking with the guest that served as the secretary of banking and securities for the great state of Pennsylvania since 2020. Today, he's the author of an interesting new book. It's titled The Paradox of Debt A New Path to Prosperity Without Crisis. His name is Richard Vig. He's joining us from here in Pennsylvania, where we are together today. And Richard, I know that you have a lot of commentary about modern debt and what we can do about today's debt and how debt really seems to have expanded a lot since Nixon pegged us from the last vestige of the gold standard back in 1971.

 

Speaker 1 (00:25:14) - I guess really the preeminent question, Richard, is should debt be a concern? We read all these stories about unrelatable numbers, about how the United States has $33 trillion of stated public debt. What's problematic?

 

Speaker 3 (00:25:30) - There's a lot more private sector debt than public debt. And I think private sector debt is the area where we need to focus and where our concern needs to be. Private debt has increased since World War two from 35% of GDP to 160% of GDP. Wow. So it's almost quintupled. There's about $41 trillion worth of private sector debt. That's a bigger number than the government debt number, and that's globally as well. There's about a $150 trillion worth of private sector debt and only about $90 trillion worth of government debt.

 

Speaker 1 (00:26:09) - And what is private sector debt? Are we talking about automobile loans, credit card loans, student loans?

 

Speaker 3 (00:26:14) - It's roughly divided between business and household debt. So if we've got 40 trillion in debt, it's about 20 business and 20 households. And within both of those categories, the single biggest type of debt is real estate by far.

 

Speaker 3 (00:26:31) - So within household debt, it's about 20 trillion. Almost 14 trillion of that is mortgage debt. On the business side, it's about 20 trillion. About 6 trillion of that is commercial real estate debt. So there's never been a time where real estate debt, household and commercial has not been really kind of the driving force of the economy.

 

Speaker 1 (00:26:57) - You got public sector debt and you got private sector debt. And, you know, it's kind of funny, Richard, if someone asked me what the difference between those two is, there's a few different directions you could go. What I like to tell some people is, well, the government can just print dollars, okay? Everyday consumers in businesses, they don't have that handle. So the government can print dollars and they can call that whatever name they want to quantitative easing. Maybe they want to call it currency creation. But over here, if the individual tries to do something like that, it's called counterfeiting. So, yes, it can be more problematic. Individuals cannot print their own dollars at home.

 

Speaker 3 (00:27:32) - That's exactly right. And that's why private debt is the area that we should focus more on. If you think about the great financial crisis of 2008, mortgage debt in 2002 was $5 trillion. By 2007, it was $10 trillion. It had doubled in less than five years. And we all now know that was millions of mortgages that it should never have been made. That was mortgages where the individuals had no income, no job, no assets. Those were homes that stood empty for years. And in many cases, they had to get torn down.

 

Speaker 4 (00:28:10) - Yeah.

 

Speaker 3 (00:28:11) - If you want to look out for trouble, the place to look is in the private sector debt. And the way to detect it is wherever it's growing very, very rapidly, that's where you're going to have a problem.

 

Speaker 1 (00:28:23) - So that's therefore a way to help predict economic crises. It's debt growth or I guess you could really call it credit growth as well, right? I mean, both credit and debt are basically the same terms for the different side of a transaction wherever the growth in that is most rapid is really where the economic cracks are.

 

Speaker 3 (00:28:43) - That's exactly right. And the fact that the Federal Reserve did not spot that in 2005 and six is one of the great stories of our time. They build economic models that don't even include debt as a factor whatsoever. Everybody finds that very surprising. It's called the DSG model, and it models the future of the economy without taking into consideration anything about debt.

 

Speaker 1 (00:29:12) - Why is that excluded? Mean, I'm a bit taken aback by what you just told me. Think you can tell.

 

Speaker 3 (00:29:18) - It's the fact. And economists got so theoretical going back a couple of decades that they started separating out financial economy from what they call the real economy. And they just stopped studying the financial economy as kind of a secondary matter to the real economy. The real economy would be, you know, the wheat and the automobile that gets manufactured and so forth and so on. My argument is those two things are inseparable. You shouldn't and cannot consider one without the other. And that's a huge blind spot in our Orthodox economics profession.

 

Speaker 1 (00:30:01) - Tell us more about how what we've discussed ties in to the thesis of your book.

 

Speaker 1 (00:30:06) - Richard The Paradox of Debt. What's the paradox?

 

Speaker 3 (00:30:10) - Paradox is that debt creates wealth, but it also creates calamity. So, for example, in the pandemic, 20 through 22, government debt alone increased by $8 trillion. Household wealth increased by $30 trillion. So the money the government spends does not disappear. It actually goes into the checking accounts of households. So at the end of that three year period, households had 8 trillion more in deposits in their checking accounts. And the flood of new money had pushed up real estate and stock values. So cash in bank accounts increased by 8 trillion, and the value of real estate and stocks increased by 20 something trillion. So households were $30 trillion better off at the end of 22 than they had been at the end of 19. However, most of that, like 80% of that benefit, went to the top 10% of the population. And that's for the very simple reason that most assets, most stocks and real estate are held by the top 10%, like 65% of all the stock in real estate in the country is held by the top 10%.

 

Speaker 3 (00:31:32) - The bottom 60%, six 0%, only hold about 14% of the stocks in real estate. So for real estate and stock values go up, it's the most well-to-do that get the benefit.

 

Speaker 1 (00:31:47) - That's right. And it's really the listeners on this show that we want to help take from poor or middle class and help them understand something you said in just a couple of minutes ago, that debt creates wealth, which is a paradox to many. The title of your book is The Paradox of Debt. So here what we often do is get 75 to 80% loans on an income producing property where the rent income meets or exceeds all of the expenses. And this is creating wealth. How is that wealth generated debt? A 75 to 80% loan debt is leverage and leverage appreciation actually makes compound interest look pretty slow. So a very concrete example in a sense of the paradox of debt that we're using right here at Get Rich education. Richard.

 

Speaker 3 (00:32:31) - You have described something that is not just true about real estate transactions, but it's true about the economy as a whole.

 

Speaker 3 (00:32:40) - That's the essential analysis. Yeah. And to put some macro numbers on it, in 1980, total debt in the economy, government plus household was 125% of GDP. Today it's 260% of GDP. Yeah. Yeah. And that exact same time span, household wealth, net of debt went from 352% of GDP to 600% of GDP. Debt created. Well.

 

Speaker 1 (00:33:12) - Yes, those are some astonishing figures. I guess as we're winding down here, Richard, one might wonder, well, where is the ceiling? When is the day of reckoning? When do we reach a calamity? How do we know that there's too much private debt and how does that actually look?

 

Speaker 3 (00:33:29) - We have a chapter on that very subject in the book there. It's pretty easy to see that there's an end game on the private sector side. And right now we're at about 160% of GDP. We think that that's probably somewhere in the 225% of GDP range here in the United States when there's so much debt that the requirement to service that debt slows the economy down to near zero.

 

Speaker 3 (00:34:00) - On the government debt, for the very reason you suggested that limitation doesn't really exist, the government could refinance its debt in perpetuity. As we said a moment ago, that ends up in the bank accounts of households anyway. So the thing I look to and I'm concerned about is private debt. Even though if you go flip on the cable news channels, you would think the world's about to end because of our government debt.

 

Speaker 1 (00:34:26) - Now tell me, am I oversimplifying things here, at least with private debtors, everyday Americans, when an interest only payment on your debt exceeds your ability to service it each month? Is that the path to bankruptcy right there?

 

Speaker 3 (00:34:42) - You got it. And whatever you say about an individual, you can say about the economy as a whole, because GDP is really just the sum of the individuals and businesses in the US. So if all the individuals and businesses are approaching this, the circumstance you just described, economy is not going to grow well there.

 

Speaker 1 (00:35:03) - Any last things that you would like to tell us about you very well received book because again, it's called The Paradox of Debt in the subtitle is A New Path to Prosperity Without Crisis.

 

Speaker 3 (00:35:14) - We cover the same material for the other six largest countries in the world. So if you read the book, you're not just going to learn about the US, you're going to learn about China, Japan, Germany, France, England and India. And I think it gives you the kind of fulsome grounding you need to better understand the news stories that we get such a barrage of every day.

 

Speaker 1 (00:35:38) - That's right. We need a frame of reference and putting our own more domestic debt into perspective here. Well, Richard, if someone wants to get a hold of the book, remind them of how they can best do that.

 

Speaker 3 (00:35:49) - Thank you so much. Go to Paradox of Debt or go to Amazon or Barnes and Noble and just search for that and it'll be right there.

 

Speaker 1 (00:35:58) - Oh, Richard, you've helped expand our debt mindset somewhat here on the show today. It's been great having you here.

 

Speaker 3 (00:36:05) - It's been such a privilege. Thank you for having me.

 

Speaker 1 (00:36:14) - A lot of interesting history with Richard Vig today, this great state of Pennsylvania's secretary of banking and securities.

 

Speaker 1 (00:36:20) - One concept that really hasn't changed throughout history that we discussed there is that inflation mostly benefits those at the top. Again, check out Richard's book at Paradox of debt.com. But yes, real estate, it is still known as an inflation hedge. You still hear that term thrown around a lot but I really try to use a different term not hedge I don't like hedge. Okay. In the investing world, the word hedge means something that you do to offset risks. I don't like that word used with real estate. So therefore, the word hedge that really correlates with a defensive strategy. I mean, hedge, that's probably a better term for gold. Gold is a hedge against inflation. That makes sense to me. But where I draw the distinction is that investment property bought with a loan is not merely a hedge against inflation. That's why when I coined the real estate pays five ways back in 2015, the fifth benefit, it's not called inflation hedging. It is called inflation profiting. Now, if you're only looking at the overall capital price of your real estate, even your own home, well then it's dollar denominated price alone.

 

Speaker 1 (00:37:42) - Well, that could be a hedge against inflation. But that's only the beginning, because when you get the fixed interest rate debt with it, now you're profiting because inflation debases your debt while the tenant makes all of the payments. And then as your rents rise with inflation, the reason that your monthly profit, your cash flow rises faster than inflation is, of course, due to the fact that your principal and interest payment stays fixed and feels really low over time. That's the inflation Triple Crown that I just described right there. And that's why when you buy investment property, REIT real estate is not just an inflation hedging vehicle, it is an inflation profiting vehicle. And today real estate isn't just scarce. It is still about 60% below the needed supply. And then amidst that, within that, single family homes are even more scarce. And then entry level homes that make the best rentals are even more scarce than that. But here on the show, we connect you with those builders and providers that are making the most in-demand properties available.

 

Speaker 1 (00:38:59) - Oftentimes these single family homes that are entry level. So therefore, in this environment, if you can get a hold of those, you are going to own a scarce asset that everyone wants. That's what we help you do here. But mortgage rates have been a hindrance for adding investments. But with our referral network here, we have largely solved that problem for you. We have providers that offer 5.75% mortgage rates because they buy down your rate for you less. We're going to show you've heard how a Marketplace income property provider is offering an astounding 4.75% mortgage rate. And although it has some shortcomings, there are also 2.99% seller financed investment properties that you can tie up. Yes. Today. So profit from a scarce asset that everyone wants and benefits from higher inflation. And today it really tilts toward you, often giving more consideration to new build properties because builders, they're the ones that are aggressively buying down your rate for you today. And new builds also have lower insurance rates last year. To make it easier for you, we started our free investment coaching service so contact your investment coach to help get you started.

 

Speaker 1 (00:40:19) - Some of our more popular markets lately are in Ohio, Indiana, Missouri, Tennessee, Alabama, Florida, Georgia in summer. So whether you like to connect with the provider on your own, if that's what you like to do or if you don't, you can then just utilize our service free of charge investment coaching. You can do all of that at GREmarketplace.com thanks to Richard Vague today until next week I'm your host Keith Weinhold. Don't quit your daydream!

 

Speaker 5 (00:40:57) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:41:25) - The preceding program was brought to you by your home for wealth building. Get rich education.

 

 

Direct download: GREepisode472_.mp3
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At age 20, you’re actually happy to trade your time for money. 

At 30, many have realized that they don’t want to work at their job for the rest of their lives. 

At 40, if you have collected things that pay you to own them, you’re financially-free.

Instead, by age 50, corporate ladder-climbers often realize that their ladder was leaning up against the wrong building.

Most people play the wrong financial game all their life. You want to get financially-free first. You can get debt-free later.

“The Debt Decamillionaire” concept is revisited.

Learn how to get 4.75% mortgage rates for Florida income property with what is known as a “builder-forward commitment”. Start here

What about hotly spiking Florida property insurance? We discuss how premiums have been kept in-check with post-2004 built property and more.

Expect $3,200 rents on a new-build $474K duplex with 4.75% mortgage rates in Southwest Florida.

SFRs are available too. Start here

There’s free PM for the first year too. 

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Monologue transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Financially, you need to play a game worth winning. It’s not about being debt-free. Instead, I discuss how at each age-when you’re 20, 30, 40, 50 and beyond, it’s about being financially-free.

 

Then, in an era where mortgage rates are 7 to 8%, we go straight to the source, in Florida, on how to get 4¾% mortgage rates on new-build property. Today, on Get Rich Education.

___________

 

Welcome to GRE! From Framingham, MA to Dillingham, AK and across 188 nations worldwide, yeah, you & I are back together here on Episode 471 of Get Rich Education. I’m your host, Keith Weinhold. 

 

You’ve got to play a game worth winning - with your personal finances. Most play the wrong game. 

 

Now, you’re already initiated on this. Debt-free just means that you don’t owe anyone anything. FF means that you’ve got enough passive income that you can do what you want to do, when you want to do it. FF is the flex.

 

Now, when you’re around age 20 - you might be new to full-time employment. 

And you know what, it actually can feel kinda good when you’re in your early twenties are you’re being paid what feels like a respectable income for the first time in your life.

 

Now, ten years go by, and by the time that you’re 30, you know, I think that a lot of work-a-day job types - you might tell yourself, ya know, making money is alright at this point. But I really don't want to do this for the rest of life.

 

Maybe around age 30, you pursue alternative avenues of more RESIDUAL income. 

 

But some people just keep plowing ahead hating big chunks of their life and devoting energy at a full-time job, because somehow, you feel like you HAVE to.

 

Others, though it’s a minority, it’s you. Because, instead, maybe around age 30, you tell yourself that you’d rather start building things that pay you to own them.

 

The mindset supersedes the grindset.

 

And by age 40, you’re out. You’re out of that soul-sucking job and you’re living that life that you’ve always dreamed of living already. It sure could happen earlier.

 

And by age 50, you’re so glad that you chose the financially free financial track in life - rather than the debt-free track.

 

Back on the slow, scarce debt-free track - the people that mistakenly think that debt-free is the game worth winning - they’re still losing their zero-sum, non-replenishable resource of time in their 30s and 40s and 50s and 60s and maybe 70s. 

 

Perhaps somewhere around 30, abundantly-minded, aware people like you developed your divergent, not-running-with-the-herd FF path instead. 

 

You believe that money is an abundant resource - because you start having it all around you. 

 

You built a financial windfall for yourself with simultaneous RE cash flow, leverage, and arbitrage while you’re young enough to enjoy it.

 

Instead, the “work at a soulless job” type tries to get debt-free, climb the corporate ladder, and believes that money is a scarce resource (which is why they think they need to be debt-free). They defer their life and get eaten up by inflation and zero passive cash flow.

 

THAT person, by age 50, is asking themselves where all the time went. It went to a job that you’re not passionate about - and you can’t change history. All those time chapters of your life… are… gone. 

 

And you begin to realize that the corporate ladder that you climbed… was leaning up against the wronggggg building for decades.

 

Those are two paths of those in their productive working years - the “there’s never enough” debt-free world vs. the “money is abundant” FF world.

 

If you retire debt, like paying off a mortgage early, all those dollars are gone, when they could have been leveraging, say, 5 properties at once.

 

Now, if you’re late to realize this, like you didn’t have the FF epiphany by 30 or whatever. It’s not too late.

 

You’ll remember that in recent months here, we had two GRE listeners come on the show for two different episodes - Scott Saunders and then Shawn Finnegan. 

 

Shawn - you might remember that was the inventor of a home gym system - he didn’t hear this show & start until he was 52 and he’s gotten to his first $2,000 of passive cash flow fairly quickly. 

 

FF beats DF. And FF is the game worth winning.

 

Retiring debt early means your dollars can't be employed in true wealth-building activities. 

 

Now, look. You might call me old-fashioned on this. But I like the integrity of doing what I say that I’m going to do, following through, and following up.

 

We check back at the end of the year to see how GRE’s housing price appreciation forecast from the previous year actually went.

 

Back in January, we had the return of an agricultural RE principal where the cash flows DIDN’T hit what were targeteded, so we followed through and discussed why THAT happened.

 

And now…

 

You might remember that a few years ago, here on the show, I introduced you to the novel concept of being the Debt Decamillionaire. 

 

That means that you’ve achieved $10M in debt - which doesn’t sound like an achievement to most people. That’s the Debt Decamillionaire. I recommended this as a desirable path for you - though many could deem it iconoclastic or even heretical. 

 

If the only thing that I knew about you is that, say, you had $10M in real estate debt, I’d know that the chances are good that you’re a financial WINNER. 

 

Yep, it’s actually unlikely that $10M in debt would make you a loser.

 

Not only would you have to be creditworthy to even get $10M of debt… just think about if you would have tied up that much debt, say, five years ago.

 

Well, how has it actually gone for the person with $10M in income property debt over the past 5 years? 

 

We've had perhaps… 25% cumulative inflation since then - with higher wages, prices, salaries, and rents.

 

So then, your $10M debt is whittled down to just $7½M of inflation-adjusted debt. 

 

So inflation passively beat down your debt for you, plus your tenants would have paid it down to somewhere below $7M.

 

So now, you’d be $3M wealthier, just off the debt debasement alone. 

 

Meanwhile, over on the asset side, your property value that you borrowed against might have gone from something like $12M up to $18M… and all

 

While it created ALL that leverage plus some cash flow and tax benefit for you at the same time.

 

If you only managed to tie up $1M in investment property debt, then just take 10% of all those numbers. 

 

And pat yourself on the back for being a debt MILLIONAIRE. Ha! Not Debt Decamillionaire.

 

Instead, high inflation made the debt-free approach hurt - really sting over the last five years. The opportunity lost!

 

DF is playing small ball, saying money is a scarce resource, and it even correlates more with people being addicted to a paycheck. 

 

There’s a benefit to a paycheck. But is the trade-off worse? Paycheck dependence is like you being addicted to a TIME thief. 

 

That is, unless you get an unusually extraordinary amount of meaning from your work. In that case, great. 

 

Now, a high interest rate environment could narrow the gap between how much better FF is than DF. But we’re not in one of those. We’re in a historically average interest rate environment.

 

But in just a few minutes here, we’ll bring in a prominent American homebuilder of BTR homes that’ll tell you how to still get mortgage rates as low as 4¾%. 

 

In fact, the time in the market cycle is really right for talking about this. You’ll remember that last month, Housing Intelligence Analyst Rick Sharga & I discussed why today’s market is a good opportunity for residential REIs.

 

It’s a bad market for primary residence HBs

It’s a bad market for flippers

 

It’s a bad market for real estate agents - with lower sales volume.

 

And it’s a… decent market for many homebuilders. 

 

I am in Chicago today. 

 

Next week, I’ll be in - my home state - the Keystone State of PA. I’ll Sit down with Richard Vague, the Secretary of Banking and Securities for the great Commonwealth of PA from 2020 to 2023, there in the state capital, Harrisburg. 

 

It is a cabinet-level agency.

 

He was appointed to that position by PA’s Governor.

He also sits on the Ivy League University of Pennsylvania Board of Trustees.

 

I’ll be sure he understands some core GRE principles here and get HIS opinion on those. That should be a really interesting episode next week. I don’t know what kind of turn that’s going to take.

 

To review what you’re learned so far, I think you already know that FF beats DF. 

 

Rushing to be debt-free exacts an opportunity cost on you. It postpones what you really want - Financial Freedom… and once you get FF, if you do desire to be debt-free then, hey, great! 

 

Let’s discuss how to get lower Florida insurance premiums, 4¾% mortgage rates and a free year of property management. 

 

A lot of our listeners have acted on this. And I don’t want you to miss out because I don’t know how long it can last.

___________

 

Usually, you see fewer investors that want to exchange their properties in a higher interest rate environment, because you’re trading in a lower rate property for a higher rate property. 

 

But here, 1031s look more attractive because we’ve bent that back with rates down to 4.75% + lower insurance premiums on post-2004-built Florida property plus 1 year of free PM.

 

So many of you have been acting here on this - either by yourself at GRE Marketplace, or working through one of our free Investment Coaches. So, if it can help you, don’t miss out. This won’t last forever.

 

You can get started at: GREmarketplace.com/Southeast

 

Until next week, I’m your host, Keith Weinhold. DQYD!

Direct download: GREepisode471_.mp3
Category:general -- posted at: 4:00am EDT

Crime, homelessness, poverty, immorality, theft and urban decay. What are US cities turning into?

NYC Mayor Eric Adams has said that 100,000 new migrants will destroy his city.

With business and residents moving out of many urban cores, property tax revenues decline. 

San Francisco’s Union Square neighborhood has been especially hard hit. 60,000 people left SF county from 2020 to 2022. There’s homelessness, crime, higher housing costs and more remote work. There are now shuttered storefronts. Nordstrom and Whole Foods closed there.

Vacant office buildings often can’t be turned into residential housing. This accelerates decay and urban stagnation.

Author Doug Casey joins the discussion.

We discuss the “Defund the Police” movement.

The fall of Rome and Babylon are compared.

Learn what other nations think about America today. If America is so bad, why are migrants attracted to it?

We need to be mindful that nations, states, and cities all vary substantially by crime and demographics within them.

Resources mentioned:

Show Notes:

GetRichEducation.com/470

Doug Casey’s website:

InternationalMan.com

Doug Casey’s YouTube:

Doug Casey’s Take

If you’d like help with one of 

GRE’s Investment Coaches (free), start here:

GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode470_.mp3
Category:general -- posted at: 4:00am EDT

Learn how to permanently reduce your tax burden. The greatest tax breaks for real estate investors are revealed.

But first, home prices are permanently elevated because they’re larger and with more amenities than they had in the 1970s. 

Today’s homes have vaulted ceilings, multiple fireplaces, granite countertops and more square footage. I describe.

John Hyre, the Tax Reduction Lawyer, joins us for the first time.

The top federal income tax rate is 37%. Learn where it’s headed next.

On your short-term rentals (like Airbnbs), sometimes you can reduce your taxes by legally stating that it’s a “hotel”.

Your rent income is taxed at less than your day job (W-2) income. Rent income is not burdened with social security and self-employment tax.

Learn exactly how tax depreciation lowers taxable income for real estate investors.

You’ll legally never pay any capital gains tax with a 1031 Exchange. We review how.

Will the 1031 Exchange go away?

John tells us how to get $100K tax-free out of your property—without doing an exchange.

Timestamps:

The direction of the marginal income tax rate [00:08:19]

Discussion about the current marginal income tax rate and the potential for changes in the future.

Tax changes under the Trump administration [00:09:22]

Explanation of the Trump tax changes and the potential impact of those changes on real estate investors.

Taxation of rental income [00:10:08]

Explanation of how rental income is taxed differently from regular job income, specifically regarding self-employment and social security taxes.

Opportunity and traps of Airbnb rentals [00:10:25]

Discussion on the potential to convert Airbnb income into losses and the tax implications of Airbnb rentals.

Making an Airbnb an active trade or business [00:11:41]

Exploring the distinction between treating an Airbnb as rental income or hotel income for self-employment purposes.

Accelerating depreciation with cost segregation study [00:14:17]

Explanation of cost segregation study and how it can help real estate investors lower their taxable income by depreciating certain assets more aggressively.

Tax Depreciation and its Benefits [00:21:34]

Explanation of how tax depreciation works in real estate investing and its value in reducing taxable income.

The Basics of 1031 Exchange [00:26:13]

Overview of the 1031 exchange, a tax-deferred exchange that allows real estate investors to swap properties without paying capital gains tax.

The Long-Term Benefits of 1031 Exchange [00:28:37]

Discussion on the strategy of using 1031 exchanges until death to maximize tax deferral and potentially convert it into tax-free gains for heirs.

The 1031 Exchange Trick [00:30:36]

Speaker 3 explains a trick to maximize the benefits of a 1031 exchange by utilizing passive activity losses.

The Pass-Through Deduction [00:33:21]

Speaker 3 discusses the concept of the pass-through deduction and its application to rentals, providing insights on how to maximize the deduction.

Future Tax Policies [00:36:15]

The potential tax policies of Democratic and Republican presidential candidates are discussed, with an emphasis on their stance towards real estate and taxes.

The 1031 tax deferred exchange [00:40:03]

Explanation of the 1031 tax deferred exchange and its potential benefits for real estate investors.

Disclaimer and advice [00:40:36]

Disclaimer about the show not providing specific personal or professional advice, and the need to consult appropriate professionals for individualized advice.

Sponsorship message [00:41:04]

Acknowledgment of the show's sponsor, getricheducation.com, as a platform for wealth building.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/469

Learn more about John Hyre:

www.TaxReductionLawyer.com

If you’d like help with one of 

GRE’s Investment Coaches (free), start here:

GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Real estate investors get tax breaks like you'll find absolutely nowhere else in the entire tax code that can help you legally work the tax system like you're a billionaire and actually work your way toward becoming a billionaire. Today on Get Rich Education.

 

Speaker 2 (00:00:22) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Speaker 1 (00:00:38) - Welcome from Belgrade, Serbia, to Bellingham, Washington, and across 188 nations worldwide with 5.2 million listener downloads. I'm your host Keith Weinhold and this is Get Rich education. Yeah, you're back at that abundant place and you gotta be because the scarcity mentality is abundant in the abundance mentality is scarce so be frugal with your time, not your money. You can afford to be because you live by the mantra that financially free beats debt free. Throughout our nine years of weekly shows here, Waiting in the Wings is just the third ever expert tax guest we've had on the show. The other two are Tom Wheelwright and Kristen Tate.

 

Speaker 1 (00:01:18) - You meet the third one in a few minutes. Here I am sitting the first half of this month in Denver, Omaha and then Chicago checking out real estate markets and more. Before we talk taxes. All prices have risen this year, just like they do most years, and they expect to stay elevated. I've talked before about all those reasons why demographic and supply demand and all of that, but why else are houses permanently more expensive today than they were decades ago, even when adjusted for inflation in some cases? Well, it's not all the dollars given to people during Covid or anything like that. It's just the fact that houses are bigger and more complicated than they were in the 1970s and 1980s. I mean, they used to build houses that were just 1000 or 1500 square feet. I mean, often it would be like a three bed, one bath house with a one car garage that used to be sort of the suburban staple. Well, today it'll often be four bed, three bath, three car garage with things that didn't exist in yesteryear.

 

Speaker 1 (00:02:26) - I mean, today you have things like multiple fireplaces and vaulted ceilings and more overall size and more amenities that would have just been considered a luxury home like 50 years ago. So the home quality is better and you also have more strict building codes that leads to things like more insulation or egress windows or different roofs or wiring or Hvac and plumbing in that courts are going to countertops, even in rentals. That was an unthinkable luxury 50 plus years ago. And also today, it's just more expensive to develop land. It takes years to get approvals for drainage and utilities and roads and environmental requirements. And after all that, all those factors that make us real estate more expensive. The US still has some of the most affordable property prices in the entire world. Now those changes that I talked about aren't bad. It just makes real estate more expensive. And a lot of times those changes are actually good. It means we have a higher and better standard of living now and now seemingly everyone from Warren Buffett, with his big investment in home builders to shark tanks, Barbara Corcoran's bullishness, I mean, all these people have made either bullish bets or bullish remarks on real estate, all these prominent figures.

 

Speaker 1 (00:03:52) - And we are to, in future episodes of the show here, someone who admits that he's a gloomier guest. He and I are going to produce a fascinating episode on the collapse of American cities, what's happening in some of our inner cities, How bad is it and how bad will it get? Yeah, we're talking about the collapse of American cities in that episode. And also in a few weeks, I will be in the Keystone state of Pennsylvania for a different, fascinating episode. That's what I'm going to sit down with. The Honorable Secretary of Banking and Securities for the great state of Pennsylvania. He's in that role from 2020 to 2023. That's a cabinet level agency there in the state capital of Harrisburg. And my guest for that show there, yes, he was appointed to that position by Pennsylvania's governor. And he also sits on the board of trustees for an Ivy League university. That is Penn there in Philadelphia. And I'll be sure that the secretary of banking and securities for Pennsylvania that he understands some core principles here and get his opinion on those.

 

Speaker 1 (00:04:58) - So, again, that's the secretary of banking and securities for the great state of Pennsylvania appointed by the governor. Coming up here on Gray. Now, when we look down the road into the more distant future here on the show in, well, I guess, 31 weeks on Monday, May 6th, 2024, do you have any idea what that day is? That day is episode 500 of the Get Rich Education podcast, and I'm going to take you on an abundance mindset journey then that I hope you'll never forget for episode 500. That's on May 6th of next year. So many other great episodes are in the works here for the show. The housing market has momentum. I have a lot of great material that I want to share directly with you, and we really have some of the top guests in the industry. And I guess they're attracted here because they know that they'll reach a large, passionate, actionable audience and that's what you are. So if you're new here to the podcast, I invite you come along with me.

 

Speaker 1 (00:06:01) - I think you'll find it valuable. If you immerse yourself, you'll find it life changing and everything that we do and offer here is free. This show reliably recurs in your life every single week without any exceptions, just like it has since 2014. And we have never replayed an old show. I am here for you. I'm inviting you. Be sure to subscribe or follow in your favorite pod catcher. And the reason that I tell you about the Get Rich Education mobile app is that if you have someone in your life whose life would like to be changed by real estate investing or could be changed by real estate investing but doesn't know about podcasts that way. For iOS and Android, you can just have them grab the Get Rich Education mobile app. We are in Q4 and it is time to think about your taxes before the year ends. Today's expert tax guest is brilliant and understands nuances about the tax code that I sure don't. This centers on the US tax code. But you know what? If you're outside the United States, many nations provide similar incentives to the United States.

 

Speaker 1 (00:07:08) - Now, I don't know about you, but in my opinion, tax talk, you know, if one isn't careful, it can quickly feel like an abstraction which can make it hard to understand. We are get rich education. I'm here to help you understand things. So what I'd like to do to help aid in your comprehension is jump in and use concrete examples during our interview here. And then after the interview, I'm also going to review what you learned. Hey, today's guest is making his debut. He's a tax reduction professional. He caters real estate investors and small businesses. In fact, he is pretty well known as the tax reduction lawyer. Hey, welcome on to John Hiatt. Thanks for having me.

 

Speaker 3 (00:07:57) - Glad to be here from Argentina.

 

Speaker 1 (00:08:00) - Yeah, you're joining me from a most interesting place today, a place with high inflation and tasty steaks and a lot of other things going on in Argentina today. But back here in the United States, where so much of our listenership is, I want to get into the real estate part and how real estate investors can lower their tax burden shortly.

 

Speaker 1 (00:08:19) - But first of all, just in general, John, every one of us that has an income pays an income tax. Now, Obama had the highest marginal income tax rate of 39.6% under the Trump administration. That was soon lowered from 39.6 down to 37 when the Biden administration came into power. A lot of people felt like that 37% rate was going to be raised back up to 39.6, but it was not, and it's still at 37%. So with that context, can you talk to us more about the direction of the marginal income tax rate?

 

Speaker 3 (00:08:55) - Gridlock, glorious, wonderful gridlock, when those people in DC are unable to, quote unquote do anything mean? I'm happy in one sense. I get a lot of opportunities to make content when the law changes. But in terms of the good of the country, when very little is changing in DC, yeah, usually I'm a happy camper and right now with the gridlock and they're not agreeing on things, I would say the most that's likely to happen, I don't think marginal tax rates will change.

 

Speaker 3 (00:09:22) - There is some negotiation on some of the Trump tax changes, which were almost all very positive, are fading out. For example, bonus depreciation is dropping by 20% per year. Right? So the Republicans are trying to keep it at 100%. The Democrats want more spending. That's the polite term. Let's leave it at spending. And so there is some discussion going. We'll see if they can agree or not. But I don't see any massive changes coming given the gridlock.

 

Speaker 1 (00:09:51) - Now as real estate investors and we think about the income tax, one often wonders, even when someone's been a real estate investor for a little while, John, I don't quite think they understand how the rent income is taxed differently than their daily job income. Can you tell us about that?

 

Speaker 3 (00:10:08) - Yeah, really important in two contexts. I'm going to give you the straight rentals on straight rentals. The rental income had schedule E instead of schedule C or some other schedule. So like W-2 income, the extent it's tax, there's no self-employment or Social Security.

 

Speaker 3 (00:10:25) - So that is a positive. Also, with things like depreciation, you have a lot greater opportunity to zero out the income or even convert it into losses. Now, if you manage to convert it into losses, we have a separate struggle which is making those losses useful. In other words, they're not being passive losses which we can have a discussion on. Another up and coming area is short term rentals. I'll just call it Airbnbs generically, even though there are a lot of other systems, it's really important to understand there's opportunity here, but there also traps. Airbnbs can be taxed as rental income or hotel income. And which one do you want? Well, the lawyer answer, of course, is always it depends. Usually we want it taxed as rental income for self-employment purposes. In other words, your Airbnb normally belongs on schedule E, not schedule C, which is good because you avoid self-employment tax. Most CPAs don't understand that. Second, from a passive loss standpoint, in other words, converting these passive bad losses into good losses that might offset your W-2.

 

Speaker 3 (00:11:36) - You want the Airbnb treated from that standpoint as a hotel.

 

Speaker 1 (00:11:41) - And when John's using the word hotel, he's using his fingers to make little, quote, signs around the word hotel.

 

Speaker 3 (00:11:48) - Yes, because hotels are considered not rentals. It's an active trade or business. And the definition is different. So we have the code might take the same word and define it 15 different ways depending on which part of the code you're playing with here. That helps us real brief one your audience, A lot of them have a day job. A lot of them would have a hard time becoming real estate professionals, which would allow them to take passive losses on rentals. Right. Well, for those who happen to be in Airbnbs or even just temporarily want to get into Airbnbs to get a loss, here's a classic strategy for people who have a W-2 job or otherwise have too much work time outside of real estate. They cannot ever be a real estate professional. It's just not going to happen. And again, the impact of that means passive rental losses stay passive.

 

Speaker 3 (00:12:40) - They. On the return. They don't help you in the present. A way to wake up those losses and make them active is the first year you have a rental for passive loss purposes. Make it an Airbnb and be personally involved with it. So let's talk about that. How do you make it an Airbnb for passive loss purposes? There are a number of ways because I can talk for hours and you don't want that. The most common way to make something into an Airbnb for passive loss purposes is on average rented for seven days or less. If you rent it for seven days or less, it still goes on schedule. E No social security tax. But instead of rental passive loss rules, you deal with the normal ones. What does that mean If you spend 100 hours or more and by the way, you means you and your spouse, if you're filing married, filing jointly, your hours both count so you can split the burden. If your hands on renting the Airbnb, let's say you buy it late in the year so you don't have to run it all year and you spend 100 or more hours on it between the two of you and no other human spends more time than you, then it is considered active.

 

Speaker 3 (00:13:51) - People will want to rewind and listen to that because it's a great strategy for in the first year you own something going to be a rental, maybe buy it towards the end of the year, run it as an Airbnb for the end of the year. Not a big time commitment. 100 plus hours. Take the cost segregation study, write that all off and use it. It's actually will lower your W-2 income. It's useful. And then in year two, if you want to go back to it being a normal rent.

 

Speaker 1 (00:14:17) - So we're talking about accelerating your depreciation and therefore decreasing the amount of your taxable income with this strategy.

 

Speaker 3 (00:14:27) - Yep. So the cost segregation study where the basics of cost segregation, when you hear the term, first of all, you only use it if you can use the loss. But if the loss is going to be passive, don't add cost, it's going to cost you money and get you not. But if you can use the law, what is cost? Segregation? We depreciate more aggressively.

 

Speaker 3 (00:14:46) - A very brief description. Everything outdoors that God did not put there. Fences, sidewalks, decks, landscaping. It was put there by builders like the oak tree that the squirrel put there. We give God credit for that one. But if the builder actually planted a row of trees, they get the credit. All these things that God did not put outdoors can be depreciated very rapidly and get you a much larger write off. And then all personal property which we define as anything a tenant can steal without using power tools. So furniture, some of the carpeting, maybe some of the cupboards, window treatments, etcetera. That's a cost seg study that will draw your income. Usually it produces a loss. And then we have to ask, can you use the loss?

 

Speaker 1 (00:15:33) - We hit on a very specific and valuable strategy there for reducing you, the real estate investors, taxable income. But just pulling back to something more basic, you said something important in the beginning there when asked about how rental income is taxed differently than the bank.

 

Speaker 1 (00:15:50) - You did let us know that rental income is not subject to self-employment tax and Social Security tax. And I know it's difficult to do 1 to 1 because certainly it depends. But oh, if one is in the 24% tax bracket, so therefore they're $1 from their job, that really only resulted in them getting $0.76 if they get $1 from rental income, just roughly or perhaps give us a range as to how much after tax income they get from that dollar of rent income.

 

Speaker 3 (00:16:19) - Classic Lawyer Answer It depends. Here's a rough rule of thumb. So self-employment and Social Security tax are pretty much the same thing.

 

Speaker 1 (00:16:26) - And how much percentage are they alone?

 

Speaker 3 (00:16:28) - So here's how the bracket work. That's the reverse of the normal bracket. It gets lower. The more you make. Roughly speaking, I'm just rounding here. If you have 150 gram of Social Security or self-employment taxable income, for example, your W-2, this is per person, not per couple. If you have 150 up to 150, your Social Security tax bracket is roughly 15%.

 

Speaker 3 (00:16:52) - Then it drops after that 150 grand to right around 3 to 5%, depending on factors you don't want to know. So it depends on your total income. For example, if you have a $200,000 W-2 and you run out and have a side business that generates self-employment tax, your self-employment tax is probably only 3 to 5%. So it depends on how much you're making that is self-employment taxable.

 

Speaker 1 (00:17:18) - Right. So we're talking about how you will have a chance to keep more of your $1 of rent income than you would from your $1 of day job income. And that's interesting with the Social Security tax, I actually didn't realize that, therefore, Social Security tax is a regressive tax policy. With increasing income, you pay a lower tax rate where generally overall in the United States, we would have with the income tax what's called a progressive tax policy, where you pay a higher tax rate with increasing income.

 

Speaker 3 (00:17:47) - Correct. And here's the theory to make it pass politically. Back when they did this in the 30s, they had to sell it as it's insurance and we're going to cap out your insurance, but we're also going to cap out your benefits.

 

Speaker 3 (00:17:59) - And so if you look in that regard, it's not really regressive because your benefits are also capped out. Now, what's one of the proposals? Let's make it flat so that people who make more subsidizing, those who make less, making it functionally progressive because you don't get any more benefits past a certain level.

 

Speaker 1 (00:18:17) - You're listening to get raises occasionally. We're talking with the tax reduction lawyer, John. Here we come back, we're going to talk about some more of those real estate tax advantages and get into the nuances of some things that people don't understand that well, like tax depreciation and the 1031 exchange. More with John. I'm your host, Keith Reinhold. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's. So start your pre-qualification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio.

 

Speaker 1 (00:19:04) - Start at Ridge Lending Group. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25. K. You don't even need to be accredited. For some of them, it's all backed by real estate and I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866.

 

Speaker 4 (00:20:15) - This is author Kristen Tait. Listen to Get Rich Education with Keith Reinhold and don't Quit Your Day dream.

 

Speaker 1 (00:20:32) - Welcome back to Get Rich. Okay. So we're talking with John here. The tax reduction lawyer is how he's known. You can learn more about him at tax reduction, lawyer John's real estate investors. We get some of the very best tax breaks anywhere. In fact, they're so generous that I consider it to be a profit source. And I don't know that you can really say that about taxes in all contexts. I talk about how real estate actually pays you five way simultaneously appreciation cash flow, loan pay down made by the tenant. Fourthly, is that generous basket of tax benefits that we'll discuss. And then fifthly, is the inflation profiting benefit that you get on the long term fixed interest rate debt? But coming back to the fourth one, the tax advantages, really the two big ones that I predominantly think of, the quickly come to mind for a lot of us are tax depreciation, which is a deduction that reduces the investor's taxable income and the 1031 exchange, meaning that we can defer all of our capital gains tax all of our lives, which is incredible.

 

Speaker 1 (00:21:34) - But do you want to touch on the tax depreciation portion first, John, and tell us why that's so integral and valuable to real estate investors? Sure. When you buy stock.

 

Speaker 3 (00:21:43) - For example, on the market, it does not produce any paper deductions. Basically, you get the stock, whatever you paid for, it is your tax cost, your basis, and when you sell it, you just look, what did I sell it for, minus the tax cost. That's my gain. There are no benefits in the intervening time. You just sit and hold it. Nothing really happens. Real estate is different and that you get a paper deduction. Why Congress said so. You get something called depreciation and it's formulaic. You take the cost that you have in the property, what you have invested, and you multiply it by some number. Now that's where the cost segregation gets interesting because we debate which number. But for the moment, let's just pick a number. The most typical one is 3.6%. Multiply the building by 0.036 of what you have invested in it.

 

Speaker 3 (00:22:33) - And annually that's a deduction you get because and so that goes a long way when you add it to other expenses to reducing your income to zero. So the so if you have the income tax rate is much lower.

 

Speaker 1 (00:22:45) - So if you have a $1 million building, we're not talking about the value of the land with the building, just a $1 million building. Therefore you'd have about $36,000 each year that you do not get taxed on. That $36,000 is deducted from your rent income.

 

Speaker 3 (00:23:03) - Exactly. Try that with stock or mean you can. So that was a hypothetical non suggestion. Yeah, but that's one of the big benefits of depreciation. Now what's the downside? Because there's always strings attached. It drops your tax calls. So if I bought for a million, I took 36,000. Now my tax cost is 964,000. And so when I sell, if I sell will get into that, I have a larger gain. So there's a trade off. Now, in fairness, one of the other benefits of rental real estate is if you do sell for cash and you choose to pay taxes, we're going to talk about an alternative.

 

Speaker 3 (00:23:39) - If you choose to pay taxes, the tax rate on selling real estate are almost always 98% of the time lower than your normal tax bracket. So even if you sell after getting this depreciation benefit, the bracket is almost always considerably lower than your normal income, which is nice.

 

Speaker 1 (00:23:59) - I don't want this point to be lost on people. With that example I give of the $1 million building that you buy and the fact that say you get $100,000 of rent income from that, you'd only be taxed on $64,000 worth because you're able to deduct 3.6% of the value of the million dollar building against your rent income. And that $36,000 deduction typically with a lot of other investments, in order to get that deduction, you would have to make a $36,000 expense, like, for example, buying a new heating system for the building. But no, you don't have to buy a new $36,000 heating system for the building where you might qualify for that deduction. It's just the magic of appreciation. You can just take this $36,000 deduction out of thin air because the tax code says that you can.

 

Speaker 3 (00:24:47) - Yep, it's pretty much automatic. In fact, the code says you have to take it.

 

Speaker 1 (00:24:51) - That's right. I have learned that the tax code actually says you must take this benefit. And who wouldn't want to do that? Would there be any situation in which someone would not want to do that job?

 

Speaker 3 (00:25:02) - Yes. If they're going to sell later on or if they're going to sell in the comparatively near future, let's say they're going to buy and hold rent for three years and they're going to sell after three years taking the depreciation if it did not help them, let's say, created a passive loss, raises their bracket a little bit when they sell in three years. Now it's still lower than your normal bracket. It's just not as. Much lower as you would like. So yeah, there are a few spots where people resisting depreciation. It's pretty rare, but it happens.

 

Speaker 1 (00:25:32) - So you must take that depreciation, which is going to be a benefit to most investors in most cases down the road when it comes time to sell this million dollar building, oh, say ten years later, you wanted to sell this million dollar building for $2 million.

 

Speaker 1 (00:25:47) - Oh, I'm certainly oversimplifying here, but say that gave you $1 million gain because you bought it for 1 million and you're selling it for $2 million down the road. We have something known as the 1031 exchange. It's called the light kind exchange. It's also known as a tax deferred exchange. Tell us more about the 1031 exchange when it comes to selling this example, building ten years down the road for $1 million more than what you bought it for.

 

Speaker 3 (00:26:13) - You want to avoid paying tax. Here's the basics and then we'll get into a little bit of the process. The basics are you're swapping one house for another, but you don't have to direct swap. It's not barter. You don't have to go find someone who wants your house and you happen to want their house. That's just not practical. Rather, you sell your house, the money goes into the hands. This is really important of what's called a qualified intermediary. There are tons of them and that's pretty much a commodity at this point. So they're not that expensive.

 

Speaker 3 (00:26:39) - The money has to go in their hands. If you touch the money with your hands, it becomes dirty money and it's taxable, which sells. It goes straight from closing to the qualified intermediary. And you have certain deadlines, 45 days to find properties that you want and 180 days total from the sale date close, which kind of can help you time, especially if you have a cooperative buyer helps you. You need a time. For example, maybe I want to find the property I want sooner and then get out and sell the one I've got and you can do it in reverse order. You can go buy a property and then sell something afterwards and say to the government, Listen, I want the funds from this later sale to apply to this prior purchase. A reverse reverse fixture. Yeah, reverse exchange. And there are some creative games we can play with reverse exchanges. They're looser rule wise than the normal ones. I enjoy those 1031 exchange.

 

Speaker 1 (00:27:36) - Such a benefit where you can defer your capital gains tax.

 

Speaker 1 (00:27:40) - Hey, in this example you had $1 million then that would be subject to the capital gains tax, which is going to be a rate of 15% or more. And if you don't do a 1031 exchange, you have to pay back to the government all at once that tax depreciation that we discussed earlier. So there are actually consequences. It's going to feel like there are consequences to not doing a 1031 exchange. So you kind of get your money trapped in this real estate game. It might be the best place to have it, but that's something that I think investors need to understand for the long term.

 

Speaker 3 (00:28:12) - And it's the classic strategy. 1031 Until you die. Now, what typically occurs with investors and then life cycle, they want a little more time, so they start 1030, letting in some more passive type investments, whether it's with a management company or a property that by its nature tends to be a little bit more passive, but the object is to die and not sell. I'm not suggesting everyone go out and die right away.

 

Speaker 3 (00:28:37) - That's great tax planning. But in terms of reality, it's not so great. But if you. 1031 let's give an example. You bought for a million, many years later it's worth 10 million. Your basis in the property is 100,000. You've depreciated it. So if you sell, there's a huge gain, you die. Whoever inherits is going to love you. At least we hope they will, because when they inherit the property that's worth 10 million, their tax cost, their basis at law is 10 million. They can sell the next day with no gain. That's the infamous step up in basis. And the object is to convert the deferral into tax free. If you defer long enough, it becomes tax free. That's the goal.

 

Speaker 1 (00:29:18) - And John touched on it. There is no limit to the number of times that you can do the 1031 tax deferred exchange. As a real estate investor, you can trade up from a $1 million property to a $2 million property. Ten more years go by to a $4 million property.

 

Speaker 1 (00:29:33) - Ten more years go by to an $8 million property. Now I'm certainly oversimplifying this, but at each step you don't owe any capital gains tax. So because you can defer it endlessly, you really never have to pay it and effectively becomes tax free with that step up and basis to your heirs like John just described. John, I'd like to know your thoughts. You know, it seems a few different presidents lately. I know Biden, at least he threatened to do away with the 1031 exchange. I just wonder if the 1031 exchange is ever going to get precarious. I think some people, though, don't understand that the 1031 tax deferred exchange has been around for more than a hundred years.

 

Speaker 3 (00:30:12) - They've been talking about getting rid of the 1031 since the 1930, and Democratic administrations have threatened to do it since the 1930. They've never had the supermajority they need to actually get away with it. And even then they've come close to it. And even then, some of the lobbyists on the Democratic side said, listen, this is not a good idea, freezes up capital.

 

Speaker 3 (00:30:36) - We want people to be able to buy and sell and not be frozen into a property because of tax reasons. So, look, could it happen? Sure. We live in a crazy world, but the probability of the 1031 going away I think is pretty darn low. Let me give one real quick trick that's going to help. Some people won't help very many, but the ones that helps it help big time for you. 1031 A property. Ask your accountant. Do I have any passive losses tied up in the property? They're going to know there's going to be a form on your larger tax return. There are different versions of your return. The big thick one is not. The one that goes to the government. Ask them how much passive activity loss you have in the building. Whatever that is in a 1031. Take out the cash. It's tax free and in fact, it's tax arbitrage. To give you an example. We are selling a property. You had a million and you're selling for 2 million.

 

Speaker 3 (00:31:29) - Let's say you had 100,000 of passive losses tied up in it. Go ahead and take out 100,000 cash from the exchange. Go ahead, ask double check with the 1031 intermediary because they know the rules. But go ahead and take out the 100,000. What happens? You get the 100,000 tax free because your passive losses that were hibernating on the return are now activated and wipe out. Normally when you pull cash out of a 1031, there's gains. Normally we don't do that. But here the losses are activated. They not only offset the 100 you pulled out, they drop your tax bracket because you're getting a capital gains tax bracket offset by a normal loss that was now brought out of hibernation. So just a little trick for those of you always before 1031, always ask your CPA, what's my passive activity loss? And think about taking out exactly that amount of cash, tax rate, tax arbitrage.

 

Speaker 1 (00:32:28) - I just learned something as well. I've got a number of 1031 exchanges in my life and that's one tip that I sure didn't know about.

 

Speaker 1 (00:32:35) - So thanks for that. And if you, the listener, if you want to learn the nuances of the 1031 exchange, which John and I aren't going to do here, because that really goes a mile deep with the three properties rule and the 200% rule and all of that. You can listen to episode 143 where that entire episode is dedicated to the 1031 tax deferred exchange and just how you can best pull it off for maximum tax efficiency so that you can then go ahead and re leverage those dollars into a larger property later. Well, John, that was very helpful on both tax depreciation and the 1031 exchange. Do you have any last things to share with us? Any last strategies so that a real estate investor can pay less in tax or anything that's particularly helpful?

 

Speaker 3 (00:33:21) - Yes. There's this concept of the Trump tax law called the pass through deduction or qualified business income tax code, Section 199 Capital A First of all, it applies to all rentals. Unless they're triple net least. A lot of accountants still don't get that.

 

Speaker 3 (00:33:38) - You have to have a trade or business that's tax term trade or business rentals that are not triple net leased are a trade or business, which is a good thing under the code. So there's this deduction. It's large. If you're showing that income even after depreciation and everything you buy is typically 20% of the net income. So if I'm showing 100 grand of net income, I get a $20,000 deduction because Congress said so. Protect that. In particular, if you make roughly I'm rounding here 164 grand total taxable income on your 1040 single and roughly 370 filing joint, there are special things you need to do to maximize the QBI and you need to do it before the end of the year. Nothing pains me more than to see high income people who benefit the most from this deduction because of their high bracket and they're in these high brackets. And if they would have done a little bit of talking to their CPA, hey, I think I'm going to make married filing jointly 370 or more for the year. It's going to cut my QBI based on the mechanical rules.

 

Speaker 3 (00:34:41) - What can I do to preserve my qualified business? Income tax deduction might pass their tax deduction. To do that, you need a really good set of books and returns. You have to have good books in the knowledge of your income so your accountant can look and say, Hey, here's how much we think you're going to make. B Here's what we can do to preserve this deduction. That is the number one easy pick up by C in tax returns. I review for planning purposes that people missed in prior years and we tell them going forward, please, please towards the end of the year, start thinking about if you're going to show gain. Doesn't matter if you're showing a loss, but if you're going to show gain in any business, not just rentals, please look at the deduction. Please make sure you're getting the full 20%.

 

Speaker 1 (00:35:25) - John is an expert at looking at your recent tax returns and pointing it to one area and saying, hey, there's a quick ROI for you if we change this. And right over there is another quick ROI for you if we change this.

 

Speaker 1 (00:35:37) - Well, John, that's been great with what we can do with the existing tax code to help optimize our situation. But wrapping up here, a lot of people are interested in what's coming down the road in the future. It can be a little bit speculative, but it also can be a proxy for how people and politicians are thinking. And that's. Is there anything that the presidential candidates are offering tax wise? It's very interesting whether that be an RFK Jr or a Ron DeSantis or a Vivek Ramaswamy or Nikki Haley or anyone else with this potential future direction of where an influential candidate wants to take taxes.

 

Speaker 3 (00:36:15) - I think the parties are pretty consistent regardless of candidate. Now they each have their subgenre of flavor, right? Do you like your chocolate? Dark or milk chocolate or with or without salt, but it's still milk chocolate. So likewise, the Democratic presidential candidates are going to be looking to increase taxes, get rid of what they view as loopholes, and they are aware of real estate having a lot of special benefits and they don't care for it.

 

Speaker 3 (00:36:41) - The Republicans, by contrast, are going to be more for lowering taxes. They are not hostile to real estate. They're generally pro-business, especially pro small business. And I think that's consistent across the board. I don't think there's a lot of deviation there with either party. The specific proposals will vary. For example, the Kennedy candidate strikes me as less hardcore left wing and a little more common sensical than maybe some of the more progressive sorts and might not be as harsh in that regard.

 

Speaker 1 (00:37:13) - Well, that's helpful in knowing what future policy might be and that might affect the way that you want to vote. This has been really helpful, particularly to real estate investors and small business owners. You are the tax reduction lawyer, so if our audience wants to connect with you and learn more about what you can do for them, what's the best way for them to do that?

 

Speaker 3 (00:37:33) - Not coincidentally, tax reduction lawyer.com and I put out a ton of content. I take a few clients but it's really getting more and more content based.

 

Speaker 3 (00:37:43) - So if you like what you heard, you might hear more.

 

Speaker 1 (00:37:47) - Sometimes in the video, hear you and the audio only might not be able to see that. For example, when John was using the word loopholes, he was using his fingers as air quotes. He understands that these are intentional incentives that help direct behavior because the government knows that society is generally better off when the private sector and the mom and pop investor are the ones providing good housing for society. A lot of public housing projects really haven't fared so well. So that's what John is here to help you do provide clean, safe, affordable, functional housing for others and get all the tax benefits that come along with that. Hey, John. Hi. It's been great having you here on the show.

 

Speaker 3 (00:38:26) - It has been an absolute pleasure. Thanks for having me.

 

Speaker 1 (00:38:35) - Oh, yeah. Nice clear breakdowns from the tax reduction lawyer John Heyer. I was talking with John Moore outside of our show. He read the entire some 1000 page long inflation reduction act that was passed last year.

 

Speaker 1 (00:38:51) - He did that to try to help understand its tax implications for his clients and was kind of impressed that he had the endurance, I suppose, to read all of it. And I asked him how many members of Congress he thinks read it and we both answer the question at the same time. Zero To achieve one looks like the top 1%. You must act like the top 1% does. And that might include tapping the expertise of a pro like John to review what you've learned today with our expert guest John. No changes to federal income tax rates are expected. There are ways to lighten the tax burden on your short term rentals, which you might not be aware of. Your dollar of day job income that's taxed at a higher rate than your dollar of rent income. Because on your day job income, you must pay Social Security and self-employment tax. You don't pay those tax types on your rent income. Real estate tax depreciation is kind of like magic. It means that you can write off a portion of your rent income each year, meaning that you can make it non-taxable even if you don't have a real expense associated with doing that.

 

Speaker 1 (00:40:03) - You learn more about the 1031 tax deferred exchange and the fact that it will persist as a benefit for real estate investors is highly likely. Again, if you like what you learn each week on the Gerry podcast, I invite you to subscribe or follow within your favorite podcasting device. For those non podcast listener friends you might have, they can try the Get Rich Education mobile app. Everything that we do is free until next week. We'll all be back to help you build your wealth. I'm your host, Keith Wild. Don't quit your day dream.

 

Speaker 5 (00:40:36) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:41:04) - The preceding program was brought to you by your home for wealth building Get rich education.com.



Direct download: GREepisode469_.mp3
Category:general -- posted at: 4:00am EDT

With skyrocketing property insurance costs, more homeowners are skipping insurance altogether. That proportion is estimated at 12% per the WSJ.

Single-family rents are up 6.5% annually.

Next, we discuss what might be America’s best cash flowing real estate market.

Home prices are up this year for four main reasons: large Millennial demand, scarce supply, mostly healthy economy, interest rate levels that are actually normal.

As we discuss one of America’s best cash flowing markets, it’s in a state that has strong legal protections for landlords.

The cost of living there is 17% below the national average. Unemployment is 2%, according to the provider.

Single-family rents are $1,200 to $1,500; prices are $115,000 to $140,000. 

You can own a freshly renovated property, complete with granite countertops. Average tenant duration is 3-4 years.

With higher interest rates, more buyers in this market are paying all-cash or making a larger down payment.

Contact your GRE Investment Coach, a free service, if you consider purchasing property in this investor-advantaged market.

Timestamps:

National home prices and insurance costs [00:00:01]

Discussion on the increase in national home prices and the impact of rising insurance costs on homeowners.

Rise in single-family rent growth [00:04:04]

Exploration of the increase in single-family rent growth and its implications for the rental housing market.

America's best cash flow real estate market [00:07:54]

Introduction to an area with low property prices and potential for cash flow, including its job growth and investor advantages.

The lost luggage incident [00:11:27]

Keith shares his memory of his luggage arriving late during a trip to Little Rock and going for a run in street shoes.

Little Rock's recognition as a top place for young professionals [00:13:15]

Forbes Advisor ranks Little Rock, North Little Rock, and Conway as top ten places for young professionals to live, highlighting employment opportunities and affordability.

Growth and economic drivers in central Arkansas [00:15:20]

Discussion on population growth, job creation, and economic drivers in central Arkansas, including the presence of distribution hubs, major retailers, tech companies, and government and medical sectors.

The demand for single family rentals [00:20:40]

The speaker discusses the shift in multifamily housing, the increase in demand for single family rentals, and the lack of new construction in this sector.

Arkansas as a landlord-friendly state [00:21:42]

The speaker explains that Arkansas has landlord-friendly laws and a simple eviction process, with evictions typically taking 30 days or less and costing less than $1000.

Criteria for properties in the investor market [00:24:59]

The speaker talks about the areas and property types that fit their buy box, focusing on working-class tenants and B-class properties in the Little Rock metro area.

The availability of properties in Little Rock [00:30:51]

The speaker discusses the current tight inventory in the Little Rock market and how it affects both homeowners and tenants. Demand is high, but there are fewer places to rent or buy.

Interest rates and cash buyers [00:31:52]

The speaker talks about the impact of higher interest rates on investors and the increase in cash buyers. Some investors are willing to pay all cash now with the intention of refinancing later when interest rates come down.

Advantages of investing in Little Rock [00:33:48]

Resources mentioned:

Show Notes:

www.GetRichEducation.com/468

Get access to Little Rock properties:

GREmarketplace.com/LittleRock

If you’d like help with one of 

GRE’s Investment Coaches (free), start here:

GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

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Our YouTube Channel:

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. National home prices continue to increase for at least four big reasons. There's also a hindrance that's getting so bad that it could keep more price growth in check. We look at why single-family rent growth is increasing. Then we focus on one particular metro area that could be America's best cash flow real estate market and why today on Get Rich education.

 

Speaker 2 (00:00:30) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Speaker 1 (00:00:53) - Walking from Whitney Island to Mt. Whitney, California, and across 188 nations worldwide. I'm your host, Keith Weinhold. And this is Get Rich. Education, National home prices continue to increase and no one knows what mortgage rates are going to do. There's one factor that could slow the home price growth party down. It could be impeded a little by these rising insurance costs. Now, in years past, do you know how many American homeowners decided that they were just going to skip insurance and not buy it so that they don't have to pay the premium? Any idea what percent? Well, the longer term norm is that 5 to 8% of homeowners skipped insurance.

 

Speaker 1 (00:01:38) - They just said we'll handle any risk and not buy it. Hm. Maybe that's sort of like not using a case for your phone, perhaps, which I don't actually. I never use a case for my phone, but I do have insurance on all of my properties. Well, The Wall Street Journal was just reporting that the number of homeowners that have decided to forego insurance has increased. Okay. The longer term historic number is 5 to 8%. That decided to skip insurance. And now amidst insurance premiums that in a lot of places have risen faster than inflation, that proportion of those that skip homeowners insurance is now from 5 to 8%, up to 12%. Yeah, 12% of homeowners electing to skip insurance. And they're going to be those people that are free and clear of a mortgage. And if you have a mortgage, you must have property insurance. The Wall Street Journal also found that it's mostly lower income people that forgo it, lower income people that skip the insurance. Now, of course, homeowner borrowers, you have to eat that premium increase if you're a homeowner, borrower, they have to eat that.

 

Speaker 1 (00:02:53) - You're going to remember that just seven episodes ago on Episode 461, I went into a lot of detail on the areas of the nation that do have skyrocketing insurance premiums. And if you're a landlord in any of those markets, you can pass along the hot potato because you can raise your rents in order to offset that. But primary residence homeowners, they cannot do that. They cannot pass along the hot potato. Homeowners have to eat the hot potato. And sometimes that hot potato can burn the roof of your mouth. That's why the proportion of those that skip insurance has about doubled. And also some areas have become uninsurable. If you want a new policy, think of some of the forest fire prone areas out west and you know, the eastern half of the nation, they can get forest fires, too, of course, But east of the Mississippi, it stays more humid and you get more rain. That's why it's just not as much of a problem in the eastern half of the US. Well, you've taken my guidance to heart and you sure are passing along the insurance hot potato, raising the rent on your tenants.

 

Speaker 1 (00:04:04) - Here's some evidence because John Burns, real estate and consulting shows us that in the latest stats, single family rents are up 6.5% year over year. Yeah, single family rentals are also seeing higher occupancy and lower vacancy, and that's 6.5% annual growth rate in single family. So that's worth watching if you forecast inflation because of course that does make up part of the CPI like Rick and I recently discussed. Now single family rentals. They are roughly one quarter of America's rental housing stock. And this differs, by the way, from the rent growth on larger apartment buildings. Apartment building rent growth is slow due to so much new construction of larger apartment buildings where they're just still not building enough single family rentals in so many markets. So with this low, really just awful affordability for wannabe homeowners, what's happening in this area is that single families, they're attracting quality tenants. As this affordability worsens, the quality of the single family tenant is therefore increasing. The Fred charts tell us that the median sales price of the new build home is now $437,000 for 37.

 

Speaker 1 (00:05:31) - Note that that's for a new build, not existing. And home prices are up, up, up for four big reasons. It's really for major reasons that home prices are up. There is high home demand from the large millennial generation, this astoundingly scarce supply. Thirdly, there is a still pretty strong economy and. And then fourthly, believe it or not, if you're new to real estate, fourthly is, yes, historically normal mortgage interest rate levels. All these things are supporting these higher and higher prices and this scarce housing supply. That is a genuine American problem that we have here. Now, President Biden, he's tried to address it with a five year plan that he announced last year. And in just two days, Republican presidential candidates are going to take the stage in California for the second GOP primary debate. And the presidential candidates, they should be asked, what would you do about the housing shortage? That question was not asked in the first presidential debate. If I could ask them one question, yeah, it would be about housing and our next president matters whether Biden wins reelection or whether it's someone else.

 

Speaker 1 (00:06:44) - But my gosh, America spends too much time wrapped up in all this debate posturing and all this media hype over the positioning of the candidates. I mean, this is already been going on for months and months. Trump, Haley Pence, Ramaswamy DeSantis. Yes, the primaries are sooner, but the presidential election is still more than a full year into the future, even from this point. And this has already been going on for this long. I mean, virtually no other nation in the world drags it out for this long. It's almost a two year cycle of vetting these presidential candidates with two years. That's half of a presidential term right there. My goodness. Next week, as I'll be leaning on my team for a makeshift studio, I'll be joining you from Chicago, Illinois. And I will be checking out the sites and also the real estate opportunities there and those still in Chicago land. It's typically on the Indiana side of the Illinois Indiana line, where you'll tend to find the better real estate deals and the lower taxes is back to this week's show.

 

Speaker 1 (00:07:54) - We're not talking about Chicago today. Straight ahead, is this America's best cash flow real estate market? It's an area that has population and job growth, but it's slow growth. You'll be surprised with how low the property prices are. I mean, they're often below replacement cost, which is remarkable. But what that means is with today's high materials and labor and regulatory costs, it would pay more to build a new home on that site than what you can buy that completed existing for home today that was built decades ago. And I've walked these very neighborhoods. A lot of them are nice. They're not in war zone areas. The city has a great base of distribution jobs. It says sector where it's hard to outsource distribution jobs over to a less developed nations because those jobs need to be fixed right there where you need to move the goods. So in this city, they are building fulfillment centers. That's warehousing in this highly investor advantaged place is also a state capital. So they have another base of government jobs that are not going away.

 

Speaker 1 (00:08:58) - I'm talking to an experienced principal in this market that offers freshly renovated property to out of market investors like you. That's next. I'm Keith Windell you're listening to Get Rich Education. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your pre-qualification and you can chat with President Charlie Ridge personally, though even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited. For some of them. It's all backed by real estate.

 

Speaker 1 (00:10:10) - And I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866. This is Perrin Life's Patrick Donahoe. Listen to Get Rich Education with Keith Wayne Mold. And don't quit your day dream. Hey, well, I'd like to welcome in one of our marketplace providers in such in Investor advantage geography, that is in Little Rock, Arkansas. Brian, we're going to be listening to one of the voices of Marketplace today. Hey, thanks so much for being here. Hey, thank you, Keith. Appreciate being here for the second time. This is great. Great catching up with you.

 

Speaker 1 (00:11:27) - Well, that's right. Now, it's been a few years since you and I got together in person in Little Rock, Arkansas, and we toured the market. If we walked the number of properties. But I think the thing that stands out most to me with that trip to Little Rock, where I spent the day with you, is that my baggage arrived late. Now, we had good accommodations at the Capitol Hotel, kind of the stately nice hotel right in the center of downtown. But my luggage to Little Rock arrived about 20 hours late. I've had really good luck with luggage all my life, but didn't this time. And my most enduring memory maybe, is that I had to go running in street shoes. And I still remember near the end of my run, I was running over the bridge that spans the Arkansas River between North Little Rock and Little Rock. Looking down while I was running at these slightly dressy black shoes on my feet, thinking, My gosh, it's a miracle that my feet don't hurt me.

 

Speaker 1 (00:12:24) - Yeah, that's exactly what I remember, Keith. I remember piecing it together. So you didn't come right out and just tell me you'd mention your bag had been lost. And then you mentioned that you went for a run that morning and thought, What did you run? So, yeah, you described basically running in your loafers from the day before. So I was like, This guy's a real machine from the north, the Great North down here. So I was impressed. Yes. And you're probably also wondering, did you really have to go running it? Right? That's the other thing. Well, right. Hey, you and I were just discussing this great media clip that we watched there from the local news there in Little Rock. This tells us quite a bit about the economic drivers in Little Rock as well as the low median home price there in the Little Rock area. Let's listen to this together. This is about two minutes in length and then we'll come back to comment.

 

Speaker 3 (00:13:15) - We turn now to the national recognition that three communities in central Arkansas are receiving.

 

Speaker 3 (00:13:20) - Little Rock North, Little Rock and Conway ranked in the top ten places for young professionals to live by for.

 

Speaker 1 (00:13:27) - Some great news channel. Seven's Brenda Lipinski is on your side tonight. She joins us now live in our studio. Brenda, tell us a little bit about these rankings.

 

Speaker 3 (00:13:34) - Yes, Chris. So Forbes advisor analyzed 99 of 100 largest cities and found that Little Rock North, Little Rock and Conway had great opportunities for young people. Little Rock North, Little Rock and Conway named Top ten Best Places for Young Professionals to Live by Forbes Advisor. And some agree. I think that there's no no doubt here in Arkansas, central Arkansas that we foster some of the greatest minds in talent. The criteria for the ranking included employment and pay, housing affordability, lifestyle and cost of living. North Little Rock Chamber of Commerce saying investment in young people is crucial for the area.

 

Speaker 1 (00:14:11) - They're the next leaders. So we need to make sure that we can continue to recruit them and develop them because they're going to be the next people on our board of directors are going to be the next city council members.

 

Speaker 3 (00:14:19) - Mayor Frank Scott Junior, who's a millennial, says good public education and jobs are a must.

 

Speaker 1 (00:14:25) - We've seen historic job growth for close to 10,000 new jobs.

 

Speaker 3 (00:14:28) - Young professionals saying there's a ton of reasons why they like the area, the community affordability.

 

Speaker 1 (00:14:34) - Every single time I connect with someone and I'm I'm able to find a new opportunity, whether it be inside of work and with my career or outside of work with just having fun.

 

Speaker 3 (00:14:44) - And for the future. So I'm hoping the state will create policy that will continue to attract more young people and think about the ways that we can continue to attract diverse professionals and how policy can impact people's image of the state and of the area specifically. Now, Forbes advisor also says that the areas are evolving into an entrepreneurial and innovation hub, which may also attract young professionals on your side. I'm Brenda Lipinski.

 

Speaker 1 (00:15:09) - Okay, Brenda, thanks so much. Forbes also likes the cost of living in central Arkansas, where the median home price is about $200,000. Right. So that's what the media is reporting.

 

Speaker 1 (00:15:20) - But you're right there, you're the boots on the ground. So tell us more about population growth and job creation and just overall the market vibe in the drivers there in central Arkansas. We have continued to see growth here. You know, I think it was mentioned that over 10,000 jobs created in just the last five years. One of the things that stands out here, too, is really driving that growth is that we're kind of known as a distribution hub or an upcoming distribution hub. A lot of that has to do with our geography and where we're located very centrally in the United States. And we're at the crossroads of two major interstates, I-40 and I-30. And so we've seen in just the last five years a very large Amazon facility put in actually three different fulfillment centers put in. So that's said to have brought in around 2000 jobs just right there. Then we've seen other big retailers come in like Lowe's and Ace Hardware and Dollar General, and they've all built distribution fulfillment centers here as well. And then even still we seeing growth with manufacturing moving into our river port here.

 

Speaker 1 (00:16:26) - It was just announced this year that a big Trex facility, they manufacture decking materials and from environmentally friendly sources and they're putting a major operation here. And they were drawn here for the location in proximity to the interstate. So those things really are driving us right now. A lot of our growth is accelerated by this sort of fulfillment warehousing distribution space. We have other drivers, too, and just the last few years, very diverse in the economy here. But we have a large tech company here called Apta. G. They were created right here in Little Rock and have really accelerated their growth. I believe they're said to get up to around 800 jobs. And those are all young professionals that could be working in Silicon Valley if they wanted to. Very diverse. We have aerospace here with Disso Falcon Jet, and then we have lots of government jobs here. We are the state capital. So we have all of our state government here. We're also a major medical center. So all of our medical professionals train here.

 

Speaker 1 (00:17:24) - Our medical school for the state is here in Little Rock. So all of our large hospitals there's on that note, things that we have coming now, they're announced they're building a new dental school here in Little Rock. So there's not a dental school in Arkansas currently. Also building a veterinarian school here in Little Rock. These are both going to be attached to another college that's here in Arkansas. So starting on a good foundation for those two schools. But that's another exciting move for Little Rock. So all these things are driving the workforce and bringing in younger workers, generating out workers from the medical school, for example, putting them out into the marketplace here. So we have a lot of young professionals, and I think that's why Forbes ranked us in the top ten of places for young professionals to live being the state capital there. Yes, you have that base of government jobs, some of the private sector jobs you mentioned you mentioned the expansion of medical. You know, these are two areas, government and medical that rarely contract very much, especially with the medical often growing and then with the government jobs, with the state capital being there in Little Rock, those just aren't the type of jobs that are going to be outsourced.

 

Speaker 1 (00:18:32) - And they're also not going to move the capital from little Rock to Pine Bluff, Arkansas, anytime soon either. So you do have that base there. And Brian, you and I were looking at different media articles recently and studying more statistics. No one area has it all. Little Rock has a lot of advantageous drivers, especially a high ratio of rent income to purchase price for investors. And we'll get into that later. But really with one of the statistics that we were consuming together, basically, if you think of it as gradients in an area's population growth and job growth, maybe let's think of five of them. There's high growth, there's slower growth, there's no change, there's slow decline or there's fast decline. And of those five, it seemed to be pointing to that second one, slow growth for the area. Yes, I mean, we're a very linear market here. Our growth is consistent. We haven't had a major increase or a major dip. We're just very consistent in linear in our growth.

 

Speaker 1 (00:19:32) - But it is continuous. We've seen that happen with even with housing, we've seen a lot of permits increase in the last few years, more multifamily permits even than single family permits. And it kind of tells you that the demand that's there for housing that rises along with the growth we are in that category, I would say, yeah, that's right. When we think about slow population growth, obviously those people need to be housed somewhere. And in the past decade you touched on it. To your point, both Little Rock and North Little Rock have had more multifamily built than they've had single family homes built. And nationally we are just so undersupplied depending on what numbers you look at. Were millions of housing units undersupplied nationally? How does that translate to the local picture there in central Arkansas, including Little Rock as far as being oversupplied, adequately supplied or undersupplied with housing? Well, I think we're undersupplied with single family housing first, and there's a real demand there. And there has been an increase in multifamily and most of that multifamily increase is at the top of the market.

 

Speaker 1 (00:20:40) - So there's been a real shift in multifamily. And what maybe used to be an A-class multifamily building is now A, B or a C because new A-class has been built to replace it. So we've seen some shift there. But where the majority of the housing stock is coming from is the multifamily sector and that puts more demand on the single family rentals. I mean, that is still a very desirable place. I think most anyone who lives in an apartment or has lived in apartment aspire to eventually have their own home or be within their own four walls in a yard that, you know, they belong to them or they control or rent or whatever else and have their own piece. So their demand stays there for single family rental, but there's not as much being built. So we've really seen an increase in our single family rental rates. I know there's been increases across the country in rental rates, but usually it's linear here. But you know, we've with not a great big jump, but we've really experienced a significant jump over the last few years.

 

Speaker 1 (00:21:42) - And I think a lot of it is driven with the demand for the single family and there's just only so much of it Now. We think about investors. Of course, most of the investors that you provide product for come from out of state. They live in areas that aren't nearly as investor advantaged as Littlerock is, but that's about more than the numbers. Oftentimes it's about that local landlord tenant law. I've got to say, it's been a while since I've consumed any material about this, but I remember in the past reading for years that oftentimes Arkansas comes in as one of the most landlord friendly states. That's correct. And it's been that way for a long time here. Our process is very simple and it's very much in favor of the landlord. But here an average eviction, if you get to that point of having to evict, typically it takes 30 days or less to actually get the tenant that's fast and less than $1,000 and that's hiring an attorney. So you're hiring an attorney? We have several that specialize here in the Little Rock area, for example.

 

Speaker 1 (00:22:45) - They can turn this thing around in about 30 days. And the process is it goes to an unlawful detainer if you filed for eviction and the tenant hasn't followed the eviction process and hasn't followed the proper notices and the proper days to get out, then the legally you can follow a unlawful detainer. And once that process gets moving and it moves pretty fast, a writ of possession is issued. And so at that point, the tenant is actually served by a police officer and they don't it's not a harsh dragging out with handcuffs, but they show up and generally escort them out of the place. It's pretty quick process overall and it's backed up by law enforcement. So but in no means is it a bullying or a brutal process or anything like that. And most residents here in Little Rock in Arkansas in general, that's the way it's been forever. They understand it. And usually when you serve an eviction notice, it means business. And most tenants know it means business and they just abide by it. So really, we don't have to enforce all that many evictions all the way through other than that, we serve, so we serve evictions and they generally just get out.

 

Speaker 1 (00:23:51) - That's sort of the process in Arkansas is known as to being one of the most landlord friendly states, and it's been that way for quite a long time. Of course, we're highly interested in that long history of the law reinforcing landlord interests more so than tenant interests, since we are interested in being long term investors. And when we talk about a metro area there in and around Little Rock, including their MSA, which includes North Little Rock and Conway, and we sometimes want to think about, all right, now, what parts of town would fit ones by box? Because even in an investor advantaged place, you probably don't want class A+, single family homes because of those higher price points. Rents don't keep up proportionally. And then we also typically want to avoid class areas. Those properties are shabby. They can't attract a rent paying tenant and properties don't typically appreciate very well on those low end class properties. So tell us about those areas in the criteria that fit your buy box that you know that investors want to put in their portfolio? Yeah, that's correct.

 

Speaker 1 (00:24:59) - I mean, we really stick a lot into the space. We're looking for kind of that working class tenant. They've got a good job. They are, you know, blue collar. They're hardworking people. Generally it's a family. Those are the areas where we're focused on and we're not exclusively in Little Rock. As you mentioned, the metro area is about a 55 mile radius. There's about a million people within that radius, the metro area. And that encompasses other areas around us other than Little Rock. So the city of Little Rock. There's the city of North Little Rock, which is actually not just the north side of Little Rock. It's a separate city from Little Rock and the other side of the Sherwood, Cabot, Jacksonville, Conway, Benton, Bryant. All of these are communities, cities around us enjoying Little Rock. We find rentals in those areas, too. We target specific areas within those different cities where really that B-class property in that B-class tenant is looking to live. And so we're not just in Little Rock.

 

Speaker 1 (00:25:56) - We do venture out into some of these other areas and we're talking about the Little Rock, Arkansas, and the investor market there and its growth story. However, a slow growth story, perhaps it's not growing as fast as some Floridian counties are, where you have a lot of foreign in-migration, you're going to have less foreign in-migration, for example, in Little Rock as compared to a lot of other places. We think about where the tenant income stream is going to come from. We've talked about that. All of those market drivers there, we start to think about, all right, what are the properties like in the prices in the rents? So can you tell us about the property types and then get into some of the important numbers for investors, Brian, And tell us about the quality of the renovation you do to get that property ready and make it effectively turnkey for investors. Tell us about the properties, the prices in the rents. We try to target mostly single family and we do come across and dabble in some multifamily as well, and it's mostly smaller multifamily.

 

Speaker 1 (00:26:58) - So you know, anywhere from a duplex up to maybe a 20 or 30 unit complex and fits within our box. But mostly we're focused on single family rentals. Our criteria is a three bedroom. Obviously it's going to have a bath, but three bedroom, two bath is what we like. We do come across a lot of three bedroom, one and a half baths. A lot of these homes were built in the 1960s, 1970s. Those homes are going to have some of the more modern things, sheetrock versus plaster wire versus knob and tube. So, you know, those are reasons why we want to focus on those 1960s, 1970s homes. Again, most of them are three bedroom, one into two baths. Most of them are around 1200 square feet. And we do a fairly extensive remodel. We have a lot of boxes to check. But I would say our average home ends up with a new roof, new Hvac, new hot water heater, almost all new flooring. We always put in granite countertops.

 

Speaker 1 (00:27:53) - It's a staple in Little Rock. We find that that just is a little bit of a wow factor compared to some other competitors out there and what they're offering as a result. So we pay attention to the finishes. We want all the hardware to match, we want all the light kits to match. We want everything to feel uniform. And our whole philosophy is we're trying to attract best quality tenants we can, but we want this to be it. Hope this is the best rental property they've ever had as well. We want them to really fall in love with the property and our number one goal is to retain tenants for as long as possible because one of our biggest killers is turnover cost. So, you know, if you lose a tenant, you've got to get that thing rent ready and put it back out on the market. And you've got to go through the whole process of finding a new tenant. So what we find is by providing a better product, it equals longevity of the tenant and then staying with us for a long time.

 

Speaker 1 (00:28:46) - And we typically start with an 18 month lease with escalators there with rent increases built in. But we find that we keep tenants for three and four years. Really good success with that. And think a lot of it is due to the areas we pick and then the product that we put out in the market. That's an excellent tenancy duration between 3 and 4 years with what you just laid out and describe there with these fresh rehabs and even granite countertops in your single family homes, it kind of feels like your own. So therefore you want to be a tenant longer. And I think that tenant duration, as long as mortgage interest rates stay high, really is set up to lengthen because it's that much more difficult for a renter to go out and be a first time homebuyer. So therefore, if you put them in a rental that they're really happy in and get that right right from the beginning that you guys do, it's unlikely that they're going to move into another rental because it's hard to do better than that.

 

Speaker 1 (00:29:40) - And it's also difficult for them to buy their own home due to this affordability constraint with the higher mortgage rates and higher prices. And when it comes to property prices, we listen to that media piece earlier where it was stated that the average or median home price, whatever it was, is about 200 K. So tell us about what rent we would see with what price for one of your typical properties there that you prepare for investors? Long var properties once they'd gone through the full turnkey renovation process and have been rented, they fall somewhere in a price range of 115 to say $140,000. Maybe our average sweet spot there. And those rents range anywhere from 1200 to $1500 a month, just sort of depending again on the location where it is and that sort of thing. So that medium may be up there in the 200 range. But again, we're sort of focusing on the B-class areas. And so that's where our price points tend to fall, that sort of like 120 to 140 price range. And if you're new to the show and you're a listener in Brooklyn, New York or Burbank, California, we're not talking about the 20% down payment amount here.

 

Speaker 1 (00:30:51) - We're talking about the complete purchase price amount with what we've discussed there. Tell us about your availability just in general over time. The inventory here, not unlike a lot of places around the country, is very tight right now. I mean, a lot of people are staying in homes and real estate just isn't moving like it was. So we're still finding opportunities, but not like we were. And that goes all the way down to home owner occupants. They're having a hard time finding places to buy because the sellers aren't selling. And that I think, trickles down to tenants as well. They're just fewer places to rent. That's what we're seeing. There is less supply than demand. And when something is coming on the market, I mean, it's getting gobbled up pretty quick, be it a rental or a property to buy. So the demand is still very strong and inventory is low. No, I'm curious, with prices that low, 150 K or less now that mortgage interest rates are higher, I think you know that I'm a leverage fan and we have ratios like that.

 

Speaker 1 (00:31:52) - You might be able to pay a higher interest rate yet still have cash flow but with higher interest rates. Brian Have you seen it where anyone is interested in making an all cash payment, a greater proportion of those people than there used to be? Yeah, absolutely. I mean, we're seeing people bring more money to the table for the down payment. We've seen quite a few cash buyers that we didn't normally see before. So yeah, people are just, you know, using their resources to write some of these things out or there's understanding to that this interest rate level is probably short term. And so they're like, you know, hey, let me go ahead and get this great property and hold on to it. Now, put a little bit more money into it. I'll refinance it later. So we are seeing a lot of people think more with that type of strategy in mind. I guess one approach is paying all cash now and then mortgage rates come down to a level where an investor is comfortable.

 

Speaker 1 (00:32:40) - They could maybe do an 80% cash out refinance. In my experience. What I've found, though, is that usually when someone pays for a property, all cash, no matter what mortgage rates do, they don't go back and get a mortgage on it. They just leave it paid all cash. That's what I always tend to see happen. Absolutely. And that's not a wrong way to go at all. I'll tell you what. And with appreciation built in and then, you know, all the other benefit tax write off benefits and those types of things. I mean, it ends up being a great place to put your cash if you had your cash, if you look at the full picture of the return. So to your point, people who go there temporarily end up staying there, right? Yeah, it goes from temporary to permanent and keep that paid off condition, even though it probably doesn't make a lot of financial sense. But it can depend on what situation. Well, in conclusion here, is there just anything else that an investor should know in general about the Little Rock market or Little Rock property or the particular renovations that you make to the property there? One thing just to point out kind of from an earlier part of our conversation about why, you know, the city is great for young professionals and had that Forbes ranking.

 

Speaker 1 (00:33:48) - And, you know, our cost of living here in Little Rock is 17% below the national average. So your money just goes further here. I believe. And I think that translates out right. And you know, at our unemployment is around 2%. So it's a very low unemployment rate. So the cost of living is lower your dollars go farther. Your tenants here tend to be more stable. There's job opportunities for them. So I think all of that builds into why Little Rock is a great investment market and why we see tenants stay in units for longer than their lease periods. As far as availability and quality of renovations, I mean, we certainly have availability. We have deals popping up all the time. I mean, we're known for our renovations and being at the top end of our renovations and a lot of our tenants come to us almost word of mouth. They've been in one of our rentals before with a friend or neighbor, and a lot of times they are knocking on our doors as we're renovating, asking when is this going to be available for rent? So a lot of it is reputation of product out there, even among the tenant population, not just the buyers out there.

 

Speaker 1 (00:34:53) - So I think those are some of the things we have going for us here. We continue on our our journey here. We've been investing in Little Rock since 1997, so we've got a great track record here and a lot of great experience. Yeah, Your volume of repeat investors that want to keep buying there is really a testimony to what you're doing. Well, thank you so much for sharing this. It's really an opportunity a lot of people don't know about or a lot of people don't think about. It's hard to find a more investor advantaged place than Little Rock, Arkansas, and surrounding central Arkansas. There for you, the listener from Marketplace, you'll see our little rock provider there or contact your investment coach If you don't have an investment coach yet, you can visit Marketplace com slash coach and pick your coach It's been great chatting about Little Rock. Oh yeah, a great chat about Little Rock. You know, one of the things that I visited while in Little Rock, it was the Clinton Presidential Library.

 

Speaker 1 (00:35:56) - It's worth checking out. But, you know, the one thing that I did not see, despite all the memorabilia and historic tributes to Bill Clinton there, there was not one mention, nothing about Monica Lewinsky. I could not find one in the whole place. I guess it's his library and he'll be remembered how he wants to be. But yeah, these numbers really work for investors 1200 to $1500 rent renovations like what we discussed in purchase prices of 115 to 140 K, So you can start with one of those properties or get a pack of these smaller sized single family rentals and then they can manage them all for you long term. They seek tenants for life there, quote unquote. So we're talking about working class, stable families now here in central Arkansas that should not be confused with higher priced areas out in northwest Arkansas. Okay. The provider and I were talking off air about a story that's emblematic of that area, Northwest Arkansas, a schoolteacher priced out of Bentonville. She couldn't find housing there. So she lives in a Fayetteville rental and commutes into Bentonville.

 

Speaker 1 (00:37:12) - Okay. Those are both northwest Arkansas cities. Of course, Bentonville is famously known as the Walmart headquarters. So we're not talking about northwest Arkansas here, which is an area that just doesn't work as well for long term rentals as Little Rock, central Arkansas. Forbes Even highlighting that Little Rock ranks as one of the top ten places for young professionals to live in, pointing out those super low house prices, Little Rock should be considered to see if it fits into your portfolio as a stable place with some of America's very best cash flows, which you can do is from Marketplace. You'll see our little rock provider there. If you want to connect with the provider yourself, you can also go directly to Marketplace slash Little Rock or if you prefer, contact your investment coach. It is free and Jerry marketplace slash coach until next week when I'll be back to help you build real estate wealth. I'm your host, Keith Winfield. Don't quit your day dream.

 

Speaker 4 (00:38:16) - Nothing on this show should be considered specific, personal or professional advice.

 

Speaker 4 (00:38:20) - Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:38:44) - The preceding program was brought to you by your home for wealth building. Get rich education.

 

Direct download: GREepisode468_.mp3
Category:general -- posted at: 4:00am EDT

The Fed can raise interest rates, but they cannot create housing supply. 

Housing intelligence analyst Rick Sharga joins us for the second week in a row.

This housing market is awful for primary residence homebuyers. But at GRE Marketplace, you can still buy income properties with rates as low as 4.75%.

Rick tells us that the most prosperous markets now favor the: Midwest and Southeast, single-family homes, rental property investors with buy-and-hold strategies.

National home prices are appreciating modestly. Home sales volume is still down.

Investors now account for more than one-quarter of property purchases.

Mortgage delinquencies are near an all-time low.

Rick and I discuss why this market is so bad for flippers. 

High homeowner equity positions ($300K+) support this housing market. 

Timestamps:

The impact of rising mortgage rates [00:02:37]

Discussion on how the Federal Reserve's raising of short-term rates has caused mortgage rates to go up, affecting the housing market.

The affordability challenge [00:03:38]

Exploration of the impact of higher mortgage rates on homebuyers, particularly first-time buyers, and the decrease in affordability.

Low supply of homes [00:08:48]

Analysis of the low inventory of homes for sale, with a decrease of 9% from the previous year and 47% from 2019, leading to a challenging market.

The mortgage rate lock in effect [00:11:05]

Discussion on how the mortgage rate lock in effect can crimp demand but cannot create supply.

Hottest markets in the Midwest and Southeast [00:11:05]

Analysis of the hottest real estate markets in the Midwest and Southeast regions of the United States.

Positive turn in home price appreciation [00:13:06]

Explanation of how home price appreciation went down but has recently turned positive again.

Housing Permits, Starts, and Construction [00:21:24]

Discussion on the trends and levels of housing permits, starts, and construction, and the need for builders to increase production.

Investor Activity in the Residential Market [00:22:28]

Exploration of the percentage of home purchases made by investors, with a focus on small and medium-sized investors and the misconception of institutional investors dominating the market.

Delinquencies and Foreclosures [00:24:36]

Analysis of mortgage delinquency rates, foreclosure activity, and homeowner equity, highlighting the low delinquency rates, the presence of equity in foreclosed homes, and the importance of early-stage foreclosure sales.

The future direction of rents [00:32:00]

Discussion on the potential upward pressure on rents due to low affordability and high homeownership rate.

Inventory coming to the market [00:33:03]

Exploration of the impact of expensive inventory coming to the market and its effect on rent prices.

The overall economy and housing market [00:34:03]

Consideration of the possibility of a recession, unemployment spike, and foreclosures affecting the housing market.

The coach's role in finding real estate deals [00:43:06]

Explanation of how an investment coach can help you find the best real estate deals in the marketplace.

Advantages of buying properties from marketplace [00:44:20]

Reasons why buying properties from marketplace can lead to good deals, including lower prices and absence of emotional seller involvement.

Resources mentioned:

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(00:00:01) - Welcome to. I'm your host, Keith Weinhold. Hold a terrific discussion today on the direction of the housing market, including lessons that you can learn for all time plummeting home sales volume and direly low home inventory. Why home price appreciation is taking place now. Could the government soon penalize you for owning too many rental properties? What's the best place for a real estate investor to position themselves in this era? And more today on Get Rich Education.

 

(00:00:33) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

(00:00:56) - Walking from Horseheads, New York to Nags Head, North Carolina, and across 188 nations worldwide. I'm Keith Weinhold. And you're listening. To get rich education, you are going to get a fantastic market update today. And along the way, you'll also learn lessons if you're consuming this 5 or 10 years from now. Our expert guest was with us last week to discuss the economy. This week, it's episode two of two as we discuss the real estate market.

 

(00:01:25) - He has been the executive VP of markets at some of America's leading housing intelligence firms, and today he's the founder and CEO of Patrick Company, either a market intelligence firm for the real estate and mortgage markets. And he has 20 plus years of experience in those industries. It's the return of Rick Saga Part two of two. It's not imperative that you listen to last week's Part one of two that we can help you see the big picture. Enjoy this long, unbroken interview and then after the break, I'll come back to close it. Just you and I. We're talking with Rick Sagar, expert housing analyst, previously. We talked about the general condition of the economy. And now Rick and I are going to break down the housing market with what's happening there. There's so definitively connected. Keith One of the things to that the Federal Reserve has done by raising those short term rates is caused mortgage rates to go up, right? Mortgage rates tend to run loosely in line with the yields on the ten year US Treasury bonds that we talked about at the end of the first segment.

 

(00:02:37) - Those are now up around 4%. And typically a 30 year fixed rate mortgage will be between one and a half and two percentage points higher than that yield. So in a normal market, we'd be looking at a mortgage rate today of about five and a half to 6%. Instead because of the risk and the volatility that the market is pricing in because they're not sure what the Federal Reserve is going to do next. We're looking at mortgage rates for a 30 year fixed rate loan of over 7%. The most recent numbers from last week from Freddie Mac, we were at almost 7.2% on that average, 30 year fixed rate loan and 6.5% on a 15 year fixed rate loan. You and I were talking before the show and and you know, historically speaking, if we keep these things in context, we're still actually below the 25 year average, which was 8%. But we have a whole generation of homebuyers who've come of age during the period of the lowest mortgage rates in the history of the country. They got spoiled, they got spoiled.

 

(00:03:38) - And to be clear, it's one of the reasons that home prices rose as rapidly as they did and got as high as they are is because you could afford to make monthly payments with a two and a half, three, 3.5% mortgage. Now, you still have home prices about as high as they were then, and you have a mortgage rate that's doubled. And for most home buyers, particularly first time home buyers that make your monthly mortgage payment was going to go up by 45 to 60%. And most of us didn't get that 45 to 60% raise last year. It really had a huge impact on affordability. In fact, this is such an unusual occurrence that according to Freddie Mac, it's the only time in US history when mortgage rates doubled during a calendar year and they didn't just double in a calendar year. Keith They doubled in the space in a few months. It was that kind of systemic shock to the system that really hit the housing market as hard as it did. Right. And they've also nearly tripled in a pretty short period of time.

 

(00:04:35) - Yeah, they really have. And again, going back historically speaking and and get this from Gen Z folks and millennials, when I talk about, you know, the old days of mortgage and I do remember my first mortgage had two numbers to the left of the decimal point. I forget if it was 11 or 12%, but it was something like that. And they basically say, okay, Boomer, but that 11% mortgage was on your $70,000 house, Right. And not, you know, today's median priced home of $430,000 or whatever it is. So it's a fair point. Mortgage rates are not high, historically speaking, but that monthly cost, because of the combination of home prices and higher interest rates, is choking some people and making affordability a problem. And because of that, one of the forward looking metrics that I take a look at is the purchase loan mortgage application index from the Mortgage Bankers Association. So this is the number of people that are applying for loans with the purpose of buying a house.

 

(00:05:35) - They're off almost 30% on a year over year basis right now. You can see without straining your eyes at all the impact that these higher mortgage rates are having on the housing market. And we had almost record numbers of purchase loan applications from the time people who are allowed out of their house during the pandemic until these mortgage rates doubled from 2020 through the early part of 2022, mortgage rates were in the threes and fours and sometimes even in the twos. Yeah, everyone wants to talk about mortgage rates and it is an important discussion to have here at Marketplace with our investment coaches. Rick Some builders, as you know, they commonly offer rate buy down incentives to buyers of new homes. And what some of our providers are doing here, Rick, is we have one builder where if you use their preferred lender, they're buying down your income property's mortgage rate to 5.75%. And we have another builder where if you use their preferred lender, they're still buying down your mortgage rate to 4.75%. And of course, with Non-owner occupied property here, you know, previously you had talked about mortgage rates in excess of seven.

 

(00:06:47) - They might normally be about 8% for non owner occupied property, but you're able to buy them down to five and three quarters or even four and three quarters with one of our providers for new builds right now, that's a great deal and your listener should really be taking advantage of those opportunities. We'll get into new homes in a few minutes and what we're seeing builders do for consumers, But have to tell you, those numbers are better deals than consumers are getting right now. And you're being generous when you're talking about private lending rates right now. Most of the lenders I'm familiar with are nine, ten, 11%, depending on the nature of your investment. So your folks are getting a great deal with those rates. We talked about purchase loan applications. The other advanced predictor I look at is pending home sales. These are people that are entering into contracts. The deal hasn't been closed yet. Has it been recorded yet? This comes out from the National Association of Realtors. And those numbers are down on a year over year basis as well.

 

(00:07:42) - There's a lot of rate sensitivity in the market, though, Keith. And if you go back to March when rates went down just a fraction of a percent, we saw more purchase loan applications. We saw more pending home sales. But as rates have climbed back up over seven, we've seen both of these metrics go down. Yeah. So we're talking about pending home sales. We're talking about sales volume that's down in this discussion, not sales price. And anyone might be hard to say, but when you see sales volume that's down, including pending sales, how often is that due to worse affordability and how often is that due to low supply of homes? Why don't we jump right into that? Keith That's a great segue. And this is a very difficult time in the housing market because it has both of the factors that you just mentioned, two very difficult headwinds for the market to try and overcome. And and we'll get into details on both of those in just a minute. Because of that, existing home sales were down in July and they were down pretty significantly on a year over year basis, about 16%.

 

(00:08:48) - And that's the 23rd consecutive month where existing home sales were lower than they were the prior year. January was the lowest month of sales this month, and it broke a streak we started this year. I was forecasting that we'd see between 4.3 and 4.4 existing home sales. That's down from about 5.2 last year in about 6.1 million the year before. Right now, we're trending at a little over 4 million existing home sales for the year. So even my relatively low forecast for the year may have been overly optimistic. You mentioned inventory and inventory is a huge headwind for the market. Inventory of homes for sale today is down about 9% from where it was a year ago. It's down 47% from where we were in 2019, which was probably the last normal year we've had in the housing market. In a normal year, we would be looking at about a six month supply of homes available for sale. That's what economists or housing market analysts will look at as a balanced market balance between supply and demand. We're at about two and a half months supply right now nationally and in many states it's much lower than that.

 

(00:09:56) - So there's just not much out here. And the only reason the inventory number looks as good as it looks and it doesn't look very good is because it's taking a little longer to sell properties once they hit the market. If you were looking at new listing data, it's even worse. There's very little inventory coming to market in the way of new listings, and that's because of the rate increases we talked about a minute ago. 90% of borrowers with a mortgage have an interest rate on that mortgage of 6% or less. 70% have an interest rate of 4% or less. If you're sitting on a mortgage rate of 3.5% and you sell your house and buy a house at the same exact price with a 7% mortgage, you've just doubled your monthly mortgage payment. It's not that people psychologically don't want to trade a low rate for a high rate. There's a financial penalty for them doing so. And until we see mortgage rates come down a bit, probably into the fives, we're just not going to see a lot of inventory coming to market except for homeowners who need to sell or have so much equity and maybe you're going to downsize into a smaller property that they don't care about that kind of shift.

 

(00:11:05) - Yeah, that is the mortgage rate lock in effect. Perfectly explain. And the Fed with the raising rates, they can crimp demand. But one thing that the Fed cannot do is create supply. As much as you might like to see Jerome Powell in work boots with a nail gun, that just doesn't happen. There's an image for you, for your listeners. Yeah, and I'm not sure I'd want to. I'd want to live in that house. That's not Chairman Powell building, but inspection. Yeah. Good economist. Maybe not a carpenter. We were talking about this a little bit earlier, too. And if you're an investor, this is probably worth noting, whether you're a fix and flip investor or investor who's buying properties to rent out a lot of the interest. This is from the sharing some data from Realtor.com and they've taken a look at where people are searching for properties and where transactions are taking place and they're finding that Midwest Southeast are really the hottest markets, places that are a little off the beaten path, you know, places in New Hampshire and Connecticut and Maine and Ohio and Wisconsin.

 

(00:12:06) - But interestingly, some of the markets that had been suffering a little bit, they're starting to see a little more interest in whether it's California, but off the coast or markets in Colorado or Washington state. But clearly, a lot of the activity, a lot of the money is moving into the Midwest, in southeast. That's right. With the work from anywhere trend, you might see this small flattening and not as much of a disparity in home prices between markets. You're certainly still going to see that, but that can just help create a mild flattening when it doesn't matter where you live anymore and you can go ahead and purchase in lower cost markets. Yeah, and what I'm sharing now is national home prices, home price. And I'm glad you mentioned what you just did, Keith, because the fact of the matter is this has been a very localized correction. And if you're in San Francisco or San Jose, if you're in Seattle, if you're in Austin, if you're in Phoenix, you're in markets where prices are off 10% or more from peak.

 

(00:13:06) - If you're in Boise, Idaho, you're off more than 10% from peak of Boise had oil prices go up by 47% in a single year, a year or so ago. So he just overshot the mark. One of the reasons the national numbers don't show more volatility is because of what Keith just mentioned. It's because people are trading in where they are in a high price, high tax state moving into a lower price state and candidly outbidding local buyers and probably overpaying a little bit for those properties. So you're seeing home prices go up in some of those less expensive markets much more rapidly than they would under normal circumstances. And what we're talking about here is national home prices that are appreciating at a modest rate now. Yeah, and they are. So if you look at whether you're looking at the Case-Shiller index, it gets published monthly or the National Association of Realtors data. We saw home price appreciation start to go down last year. It was still positive but going down and that was true until pretty much the end of the first quarter this year when the data went negative for the first time in years.

 

(00:14:15) - So we were seeing on both a month over month and year over year basis home prices go down and that happened until June, June, things flatlined in July. Prices actually went up ah, year over year. So if you're looking at the median home price compared to the peak price a year ago, it's actually up about 1% from where we were last year, which is kind of amazing. The Case-Shiller index is a little bit of a lagging indicator and it rolls three months together, but it also started to turn the corner with its July report. So after almost a full year of price appreciation coming down and prices in decline, we've seen both of these indexes turn and are starting to go positive. It does show you that there continues to be demand for properties that are brought to market. And while home price appreciation certainly isn't soaring by any means, it's back in positive territory now. And that's something that a lot of people hadn't predicted this year. When the supply of homes is this low, it keeps generating a few bids for any available home.

 

(00:15:21) - Now, not as many bids as it did back in 2021. But besides generating bids, you have these huge population cohorts of millennials and Gen Zers that are growing, and they're in their prime homebuyer years moving through the system to go ahead and place those bids and keep just modest home price appreciation here lately. That's sort of how I see it. Rick If you want to add any color or thoughts to that, I think you're spot on. Keith It's the largest cohort of young adults between the ages of 25 and 34 in US history. That's prime age for forming a household. 33 to 34 is the average age of a first time buyer right now. And so these people would like to buy a house. And for people who are investing in single family rental properties in particular, at least short term, the affordability issue is something that definitely works in your favor. If somebody was looking to buy a house, they might prefer to rent a house rather than rent an apartment. I've read research that shows somewhere between 20 and 30% of people who had planned to buy have decided to rent for the next year or two while market conditions settle down or while they can put aside more money for a down payment.

 

(00:16:27) - These market conditions are playing in favor of people who have rental properties to offer. One other metric I'd like to share in terms of home prices, Keith is the FHFa puts out its own index. FHFa is the government entity that controls Fannie Mae and Freddie Mac. So these are your conventional bread and butter, vanilla kind of 30 year fixed rate loans. If you look at their portfolio, home prices are actually up 3.1% year over year. And every sector of the country is showing positive rice appreciation except for the Pacific states and the mountain states. And those are some of the markets we talked about earlier. And even those are very close to breaking even at this point. So HFA breaks it into about ten regions, nine of those ten currently appreciating year over year. Yep, something like that important for you to know again as an investor as to what's happening in your region. Again, whether you're you're planning to sell the property or rent it out. You talked about what builders are doing for your investor folks.

 

(00:17:28) - Yeah, we're seeing new home sales actually improving to consumers as well for a lot of the same reasons, incentives. So a lot of builders are coming to the closing table with cash. They're paying points on mortgages and getting those rates down where they're short term or long term. They're offering discounts, they're offering upgrades to properties. And so new home sales are still down, but just slightly on a year over year basis and have actually been beating last year's numbers for the last four months. My original estimate for new home sales this year was about 600,000. I think we're going to probably coming closer to 675,000 this year. And the only reason we won't sell more is because the builders aren't building that fast enough. But one of the reasons people are buying these new homes is because that's what's on the market today. People would have bought an existing home, can't find one. Here's the other factor. New home prices are down 16.4% from last year's peak. Now, this is informative. Think this would surprise a lot of people? Well, it surprises me.

 

(00:18:28) - It should surprise people because new home prices almost always go up, right? This does not mean builders are discounting homes 16.4%. What's happening is they are building less expensive homes, They're less expensive per square foot, and they're building smaller homes. And they're doing that in acknowledgement of the higher cost of financing. That also, by the way, is in sending people to look at these properties as either a starter home or a minor move up kind of property. But it is one of the reasons why new home sales are doing better than existing home sales right now on a percentage basis. That's an interesting number, Rick. A few weeks ago, I shared with our newsletter audience that builders are building homes smaller and closer together, which might be reflected in lower prices, but just didn't think it would be 16.4% lower from peak. Now, if you're doing year over year, it's probably not that big of a drop, but from the peak price we are off. And it is to your point, it's a pretty significant number.

 

(00:19:26) - It would be a problematic number if it was the existing home market, right, because then you'd be looking at the same property being worth 16% less. But a builder can kind of play with those numbers a little bit. Single family housing starts after falling for quite a while, are now back going back up only slightly from where they were a year ago, but they are moving in the right direction. Multifamily starts have actually tailed off a little bit after reaching record high numbers. There could be as many as a million apartment units coming to market this year. Yeah, which would be an all time record. So we've seen building on those multifamily units slow down a little bit. If you look at at new home starts for single family properties still below where they were a year ago. But again, for the first time in quite a few months, starting to trend up. A couple of things to share with your viewers here, Keith. In terms of construction, we're seeing construction continue to grow in the multifamily market because of all the starts we saw previously.

 

(00:20:23) - We are seeing single family construction slowed down, but that's because the builders are working their way through a glut of homes that was under construction. So we had a really weird happenstance about a year ago, a little over year, we had the highest number of homes under construction ever. And this data goes back to the early 1970s, and we had the lowest number of completed properties available for sale ever. And a lot of that was due to supply chain delays and to labor shortages. And over the last year to 15 months, the builders have gradually begun working through this glut of homes that were started but not finished. And we've seen the number of completed homes go up a little bit, almost back to normal levels, not quite there. One of the reasons they're not quite there is people are buying these homes before they're completed. They're working with the builder. Buying a home is it's almost ready to go, but still under construction. What's been encouraging, looking into the future is that permitting has increased a bit over the last two quarters.

 

(00:21:24) - We know builders are betting on the future. They're not necessarily breaking ground on all these properties they have permits for because they don't want to oversaturate either. And they're being very judicious with their building because they got caught with a ton of inventory during the Great Recession that they wound up selling at fire sale prices. But the trends are long term, looking like they're going in the right direction right now for new homes. So to help the viewer and listeners chronologically, we're talking about housing permits followed by housing starts. And then finally, housing construction. Right? Permits are up, starts are up recently, but down year over year. And the construction numbers are getting back close to normal levels. And we need the builders to build more because even before the rate lock effect took effect and existing home inventory got so scarce we didn't have enough housing in the works, we were depending on whose numbers you believe, somewhere between 2 and 6 million units short. We need the builders to come back to market. Note for your folks.

 

(00:22:28) - Keith Investors continue to account for a fairly significant amount of activity in the residential market. Over a quarter of home purchases 26% in June, which is the most recent data we have, were made by investors and believe this number actually under reports the number of investor purchases because it's from a company called CoreLogic, it's accurate data for what they count, but they only count investor purchases where the buying entity has an LLC and LP Corp kind of entity. And we know that a lot of buyers don't do that who are investors. So it probably understates it. But the fact of the matter is that historically speaking, 26% of residential purchases being done by investors is pretty high number. That's a pretty high number and as you alluded to, is probably actually higher than 26% of home purchases being made by investors. And so the headlines will breathlessly tell you that Main Street is being gobbled up by Wall Street. Oh, I know. And those institutional investors are evil people. They're buying everything that the truth is is completely the opposite.

 

(00:23:31) - If you look at investors who are buying properties, it's really the small investors who are buying about 46% of those investor purchases and medium sized investors about 35%. If you're looking at the biggest of the big investors, they're buying less than 10% of what's going out today. And they still own collectively about 3% of the single family rental stock. It's the mom and pop investor who continues to drive the market. Yeah, I'm glad you bring this up, Rick, because there seems to be this outsized perception that institutional money through someone like, say, in Invitation homes is just gobbling up all the good investor homes. And and they're really not. It's mom and pop investors that rule. In fact, there's some legislation pending in D.C. right now that's aimed to keep these institutional investors from doing what they're already not doing and have some tax penalties for anybody who owns. Here's the number that's important. More than 50 properties well, Invitation Homes owns significantly more than 50 properties. I know a lot of medium sized investors who own more than 50 properties.

 

(00:24:36) - Yeah, they're certainly not institutional investors. They certainly don't have a hedge fund behind them. Important again, for folks in this market to be in touch with their legislators and let them know what's really going on in the marketplace so we don't get this kind of bad legislation. It makes it tough for the average investor to really take full advantage of the opportunities that are out there. 100%. Mom and pop investors might need more than 50 units to obtain financial freedom. Yep. Just to wrap up, Keith, a couple of points on delinquencies and foreclosures. I know a lot of investors got into the business, you know, a decade or so ago and there was just a rash of foreclosure activity and you could buy a distressed property by just walking down the street and knocking on doors. It's a little different these days because of that strong economy we talked about earlier. In that low unemployment rate. Mortgage delinquencies are at an all time low. Mortgage Bankers Association reported that the midpoint of this year, at the end of the second quarter, the total delinquency rate was 3.37%.

 

(00:25:36) - To put that in context, historically the number is somewhere between 4 and 5%. So not only are we not seeing a lot of delinquencies, we're seeing less than we would see normally as seriously delinquent loans. The ones that are 90 days plus past due is as low as we've seen it in probably the last 6 or 7 years. That's really interesting. So not very many homeowners are in trouble with making their payments, which to some people might seem like a conflict with what we described back in the earlier part of the chat about low savings and higher credit card debt. So many of these homeowners are locked in to these really low payments where they got low mortgage interest rates. Plus inflation cannot touch those fixed rate payments. And that's an important point for those people that are in these homes. It would be more expensive for them to go rent right now, probably because they got such a good deal on the mortgage rate. There's usually a pretty strong correlation between unemployment rates and mortgage delinquency rates. So I mentioned that the most recent report had unemployment at 3.8%.

 

(00:26:37) - I think at the end of June it was a 3.5%. So we might see delinquency rates tick up a little bit. There was also some really bad social media memeing going on during the government's mortgage forbearance program. There was even an economist who predicted that almost everybody who got a forbearance was going to go into default and that would have been a catastrophe. If you look back a little over a year ago, actually more like two years ago when there was there were a lot of people in forbearance. You saw delinquency rates very high, but that was because people were allowed to miss payments. They were just being counted by the industry as delinquent. The fact is that less than a half of a percent, less than one half of 1% of the borrowers who were in forbearance and there were 8.5 million of them have defaulted on their loans. The overwhelming majority have done very, very well with that program. So it really didn't contribute to any kind of delinquency or default activity. So strong economy, extremely high, low quality because lenders really haven't been making many risky loans since the Great Recession.

 

(00:27:40) - The record amount of of homeowner equity that's out there. Yeah. Is keeping this market pretty solid to the point where foreclosure activity today is still running at a little bit less than 60% of pre-pandemic levels. So in a normal market, about 1 to 1.5% of loans are in some state of foreclosure. In today's market, it's about a half a percent. So we're just not seeing much go into foreclosure and the properties that go into foreclosure. The homeowners have a significant amount of equity. 92% of borrowers in foreclosure have equity in their homes, which is wildly different from where we were during the great financial crisis, when a third of all homeowners were underwater on their loans. At just about everybody in foreclosure was upside down. And people push back at me when I'm out talking at conferences about this. Keith Oh, yeah, they have equity, but they don't have enough equity to make a difference. Oh, yes, they do. 88% of the borrowers in foreclosure have more than 20% equity. That's typically the magic number that a realtor will tell you you need in order to sell your property and avoid any other kind of complications with one of these foreclosures, preventing any sort of fire sale and lowering of prices that makes all home prices go down in a neighborhood where not anywhere near that.

 

(00:28:57) - No, not at all. And in fact, some other data that I'll share with you and your listeners is that about 62% of the distressed property sales we see right now are properties in the early stage of foreclosure prior to the foreclosure auction, which means these distressed homeowners are protecting their equity by selling the property before it gets sold at a foreclosure sale. And so they're protecting the vast amount of this equity. But if you're an investor in today's market, there's some really important information in what I just gave you. You can't wait for the bank repossession. In this cycle, bank repossessions are running 70% below where they were prior to the pandemic, so there's fewer properties getting to auction because 67% of these distressed property sales are prior to the auction. Properties that get to auction are selling through at about 60% rate. So there's nothing going back to the lenders. So if you want to buy a property in some stage of foreclosure, your best bet in today's market is to get a list of people in the early stages of foreclosure and reach out directly to them.

 

(00:30:01) - Your second best bet is to get to that foreclosure auction. Be ready to move at the auction, and your worst bet is to wait for the lender to repossess the property. And in fact, I've seen anecdotal data that suggests that those properties are actually more expensive than the ones you could buy from the homeowner or at the auction because the lenders are fixing them up and selling them at full market price. Good guidance for those chasing distressed properties. So that's what's going on in the foreclosure market. I don't see foreclosure activity being back to normal levels until sometime next year. And I don't see activity bank repossessions being back to normal levels even next year. It's a very different marketplace. This is what I was just talking about. Keith If you were to break up what selling and what stage of the foreclosure process right now, about 64% of distressed sales are taking place prior to the foreclosure auction and less than 20%. Distressed sales today are those background properties. So it's a very different world than what a lot of investors grew up in.

 

(00:31:03) - Rick is about to share his summary with us, his closing thoughts. Before he does that, I've got two questions for you, Rick. I hear some people out there, it seems to be oftentimes the real estate agent type, maybe that's trying to be a big cheerleader for the market. And I hear a few of them say something like, hey, you know what? You better buy now, because when mortgage rates fall, home prices are really going to shoot through the roof. I don't really know that that necessarily happens because when mortgage rates fall, okay, that might increase demand of capable homebuyers, but it should also increase supply. Now, the mortgage rate lock in effect, goes away and more people will want to bring supply onto the market. And I also like to think about what happens when rates are falling. Typically, that means the economy needs help and unemployment might be a little higher. So my thoughts, Rick, are if mortgage rates do fall substantially, that might help home price appreciation a little bit, but I don't see it as any sure thing that that would make home prices go through the roof.

 

(00:32:00) - What are your thoughts? It's a great question. You make a very logical argument. A lot of it comes down to supply. And that's where I would hedge my bets. I don't think we see a ton of supply come back to market until rates are back in the low fives. So there's a point and a half of interest going from little over seven to maybe 5.5%, where we're probably going to see more buyers come to market than we're going to see inventory come to the market. My other thought we touched on it earlier is with rents. Talk to me about the future direction of rents. They were horribly hot a year or two ago, up 15% year over year. Rents have moderated substantially. But with this really lousy home affordability and a high homeownership rate, it seems like with this low affordability, we're set up for the homeownership rate to go lower in the proportion that rent go higher, which could put upward pressure on rents over time here. What are your thoughts with rents? Yeah, offsetting what you just said is a record number of apartment units coming to market this year.

 

(00:33:03) - There are likely to be some markets across the country that wind up oversupplied because of the amount of inventory coming to market. Now, don't get me wrong, the inventory coming to market is going to tend to be expensive inventory. And so that in and of itself could make rent prices come up a bit. I do believe in the short term I would tend to agree with you that the lack of housing stock available for people who would like to buy is going to play in the benefit of the folks who own properties to rent. And that will, I believe, be particularly true for people that own single family residential units that are like houses to rent. I guess we're going to split the difference on these two questions. I'm going to mostly agree with you on the second one. I do believe there's a chance prices will go up a little bit more than you think as mortgage rates come down until we get down to about 5.5%, mortgage rates are lower when we see more of that inventory coming to market. And what is the real wild card in all of this, of course, is what happens with the overall economy.

 

(00:34:03) - Do we enter a recession? Does unemployment spike? If that's the case, that should weaken, demand a bit and you could have a little bit of an uptick in foreclosures, which will weaken the market as well. So a lot of different components at play. And I think what people ask you questions like that, Keith, about, you know, mortgage rates come down, is this going to happen? They kind of oversimplify the equation quite a bit. There are a lot of other variables that go into it. 100%. Why don't you go ahead and share your closing thoughts with us? A lot of stuff we covered, so I won't dwell on too much of this very long. But from my perspective, a recession is still a real possibility. Probably not until next year if we have one. And if we do, it's likely to be pretty mild and fairly short and we shouldn't see a huge, huge spike in unemployment. I do believe that as the Fed decides it's done raising the Fed funds rate and announces that we'll see mortgage rates gradually decline back toward 6% by the end of this year.

 

(00:34:57) - And we'll be back in the fives next year. And by the way, historically, every time the Fed has stopped raising the Fed funds rate, we have seen mortgage rates come back down. Existing home sales right now are on pace for their lowest number since 2009. Likely, we're going to see somewhere in the neighborhood of 4.2 million existing home sales. But we're likely to see more new home sales than a lot of people had forecast beginning of this year, maybe 650, 675,000 of those sales in 2023. And we've seen prices decline in the new home market, but they might have bottomed out in the existing home market because of the supply and demand thing that Keith and I have kind of beaten to death during this podcast. Again, importantly for this audience, investors continue to account for a very large percentage of residential purchases and a lot of you seem to be shifting toward buy and hold strategies, which again makes ultimately good sense in a market like today's. And then that anticipated wave of foreclosures that all those folks on YouTube were trying to sell you courses to figure out how to maximize never materialized.

 

(00:35:57) - And at least during this cycle, not likely to any time soon. Probably won't. Yes, A lot of people a couple of years ago, especially on YouTube, were talking about a certain price collapse is coming and it never happened. And I never saw how it would have happened and I never made those sort of dire predictions. Well, Rick, this was a great chat about the overall economy, the housing market and what investors need with the housing market. I'm sure our audience learned an awful lot. It was a terrific update. If our audience wants to learn more about you and kind of wish this chat would just go on and they could learn more about you and engage with your resources. What's the best way for them to do that? Well, you can certainly follow me on social media. I refuse to say my Twitter handle is just Rick Saga. I'm on LinkedIn to hard to find there. You can also check out my website which is Patrick. Com. Enjoy doing these conversations with you Keith.

 

(00:36:51) - Think the first time we talked you reached out because I had come down like the wrath of God on somebody who was predicting a housing price crash because I didn't see one coming either and thought he was doing investors a disservice. So keep the faith and keep the good fight going. Keith And I'll be here whenever you want to talk. Jerry Listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's. So start your pre-qualification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. Com. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with freedom family investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%.

 

(00:38:00) - Their minimums are as low as 25. K. You don't even need to be accredited. For some of them, it's all backed by real estate and I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to six six, eight six, six. Hi, this is Russell Gray, co-host of the Real Estate Guy's radio show. And you're listening to Get Rich Education with Keith Reinhold. Don't Quit Your Day dream. Yeah, terrific insight from Rick, as usual. It's remarkable how much this interview is aligned with what we're doing here. As Rick discussed how, though, it's a tough environment for homebuyers, it's better for investors, especially for single family rentals and especially in the Midwest and South are core areas.

 

(00:39:23) - It's a better market for the buy and hold investor than it is for flippers. It's a tough chase for flippers. Sometimes you don't flip the house, the house flips you. There are still so few homeowners in delinquency and foreclosure. Rick believes that when lower mortgage rates come, home, prices could appreciate more than I tend to think. We'll see how that turns out. And, you know, historically here, as we talk about the direction of home prices and the direction of rent growth Now with respect to home prices, when I provided you with the home price appreciation forecast, I keep somewhat undershooting. The market appreciation tends to outperform what I think by just a bit. Back in 2018, 2019, home price appreciation rates, they were just kind of bumping along at 4 or 5%. Back then, interest rates were super low, housing supply was more balanced. And I said right here on this show then about five years ago, that I don't see what will make home price growth like really accelerate or shoot up from here.

 

(00:40:32) - Well, then we had the pandemic, something that no one saw coming when the pandemic fog cleared. You remember that all here on the show in late 2021, I forecast 9 to 10% home price appreciation for the coming year, which back then I was talking about 2022. And then that appreciation rate for 2022 came in at 10.2%. Although I was close, I shot just a touch low. Now at the end of 2022, well, about nine months ago, I predicted zero home price appreciation for this year. As we near the fourth quarter, it looks like we'll get low single digit appreciation, but that remains to be seen. However, I've long been undershooting the market just a bit, though. Close and mortgage rates. No, don't even ask me. I don't try I don't make mortgage forecast. That is too hard to do. Making a mortgage rate prediction is almost like a certain way to be wrong. Although Rick and I talked about how this is a good market for investors, to my point from last week, in some markets, cash flow has become an endangered species with some of these increasing expenses for investors.

 

(00:41:46) - And again, I have some really good news for you here. We have largely solved that problem here at Gray of higher mortgage rates, hurting your cash flow. And that's why investors like you are still snapping up rental properties from Marketplace right now because of the strength of our marketplace network and relationships. Here we have a new build provider offering a mortgage rate to investors of 5.75%. Yes, they will see that your rate is bought down to 5.75%. In today's environment, another new build investment property provider is offering a rate buy down to 4.75%. Yes, you heard THAtrillionIGHT? And we have another builder provider where our investment coaches have been sharing with you a 2.99% seller financing option. There is more to it than that. And these builders, though they are in business to move property. So take advantage of it where you can. And besides buying down your mortgage rate for you like that, some are even waiving their property management fee for you for the first year. In addition to buying down the rate. I don't know how long all that's going to last, so this can be a really good time for you to contact your in investment coach.

 

(00:43:06) - Your coach will help you shop the marketplace properties, tell you where the real deals are and tell you how to get those improbably low mortgage rates for income properties. Today, your coach guides you and makes it easy for you If you don't have an investment coach yet, just go to Marketplace. Com slash coach and they're there to help you out. And marketplace properties they are often less expensive than elsewhere in addition to the low rates from some of the providers. But now you might wonder why often are the prices not always, but often, why are they lower? Well, first of all, investor advantage markets just intrinsically have lower prices than the national median. And secondly, there is no real estate agent to compensate with the traditional 6% commission, you are buying more directly. Thirdly, these property providers, they are not. And pop flippers that provide investors like you and other people where they just flip like one home a year instead. These are builders and renovation and management companies in business to do this at scale so they get to buy their materials in bulk, keeping the price lower for you.

 

(00:44:20) - And another reason that you tend to find good deals at Marketplace is that you aren't buying properties from owner occupants where their emotions get involved and they get irrational over there on the seller side. So you can go ahead and get started with off market deals at GRI, marketplace.com. If you'd like the free coaching from our investment coaches, then contact your coach. And if you don't have one yet again you can do that straight at GRI marketplace.com/coach that's an action item for you this week that your future self should thank you for until next week. I'm your host Keith Winfield. Don't quit your day dream.

 

(00:45:04) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

(00:45:32) - The preceding program was brought to you by your home for wealth building get rich education.




Direct download: GREepisode467_.mp3
Category:general -- posted at: 4:00am EDT

In many world nations, if you’re born poor, you stay poor. I discuss how in America, you can be upwardly mobile.

Back in 2010, real estate prices had fallen, but rents had not. This created years of cash flow. Today, as prices have outpaced rents, cash flow keeps shrinking.

Our Investment Coaches have access to income properties with 4.75% and 5.75% mortgage interest rates. It's a way to "bring back cash flow". Get started at GREmarketplace.com/Coach

Terrific housing intelligence analyst Rick Sharga joins us for the first of two consecutive episodes.

Rick & I discuss the condition of the American consumer, inflation and interest rates, concerns about a potential economic downturn, the housing market, the impact of consumer confidence on spending, and the actions taken by the Federal Reserve to control inflation. 

There’s flagging consumer confidence and a yield curve inversion. Are these finally harbingers of an economic recession?

Rick’s informal survey of economists find that there’s a 50-50 chance of a recession this cycle. Earlier this year, 80% of economists felt that a recession was imminent.

If there is a recession this cycle, Rick thinks there’s a probability that it will be mild.

Average hourly wages are $28-29 / hour. Wage growth is 4-5%. Wages are finally running higher than home price appreciation.

Timestamps:

The Future of Real Estate Investing [00:01:33]

Discusses how owning real estate can help individuals move into a different wealth class and the benefits of owning rental properties.

Changes in the Real Estate Market [00:04:06]

Explains how the real estate market has changed over the years, with property prices catching up to rents and the decrease in cash flow opportunities.

Taking Advantage of Low Mortgage Rates [00:07:53]

Highlights the opportunity for investors to take advantage of low mortgage rates offered by builders and the benefits of using their preferred lenders. (Yes, even here in 2023. We have 4.75% and 5.75% rates that builders buy down.)

The housing market correction [00:11:31]

Discussion on the correction in the housing market and its localized impact on different regions.

Economic landscape of the United States [00:16:09]

Overview of the US economy, including GDP growth and the strength of consumer spending.

Wage growth and home price appreciation [00:20:16]

Comparison of wage growth outpacing home price growth, impacting housing market affordability.

Consumer Confidence and Spending [00:21:24]

The correlation between consumer confidence and spending during the pandemic, the impact of subsequent waves of COVID, and the role of pent-up consumer demand and government stimulus.

Red Flags in Consumer Spending [00:22:25]

The disconnect between consumer spending and low confidence scores, the record level of consumer credit card use, and the decrease in personal savings rates.

Inflation and the Federal Reserve [00:25:44]

The high inflation rate in 40 years, the actions taken by the Federal Reserve to control inflation, the impact on housing costs, and the potential for a recession.

Yield Curve Inversion and Recession Predictions [00:31:07]

Discussion on the yield curve inversion and its historical correlation with recessions.

Impact of Recession on the Housing Market [00:32:04]

Exploration of the potential impact of a recession on the housing market.

Part Two: State of the Housing Market and Future of Investment Real Estate [00:33:03]

Teaser for the next episode, which will analyze the state of the housing market and the future of investment real estate.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/466

Rick Sharga on X (Twitter):

@RickSharga

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

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Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Keith Weinhold (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Today, it's part one of two of my exclusive interview with one of the nation's foremost housing intelligence analysts. How's the condition of today's American consumer? What's the future of inflation, the Fed interest rates? And should you really be concerned about a downturn today on get rich education?

 

Corey Coates (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Keith Weinhold (00:00:51) - Welcome from Orange County, Florida, to Orange County, California, and across 188 nations worldwide. You're listening to one America's longest running and most listened to shows on real estate. With nearly nine years of weekly episodes. You're listening to Get Rich Education. I'm your host, Keith Wine expert, housing and mortgage analyst Rick Sugar is back and he is figuratively waiting in the wings. Here to give us an update on the economy shortly. In many nations of the world, if you are born poor, you stay poor. It's really hard to change wealth classes because you can't own anything in so many world places.

 

Keith Weinhold (00:01:33) - If you're born middle class, you also stay middle class. There's no way out of that. Owning real estate is the number one way to move yourself into a different wealth class. Owning your own business is another way, but with owning real estate, it's quite easy to follow a template and do what someone else has already done. Within a proven system. You don't have to have a new out-of-the-box business idea. For example, in the US, if you start collecting assets that pay you each month, you can quickly become upwardly mobile. In America, even if you were born into poverty and have a long line of impoverishment in your family, you can own your own home and that can help you go from poor to middle class. You can add rental properties and go from poor or middle class to wealthy because if you're in the US you are allowed to own things. Yeah, keep accumulating properties and keep getting rent money from tenants. In so many nations of the world. If you come from modest means, you just cannot get dozens of people or hundreds of people to pay you one third of their income every month.

 

Keith Weinhold (00:02:52) - But here you can get all these tenants to pay you one third of their salary in rent so you can close that class divide. It's up to you. That's what makes the US great. You can move into a different wealth class, the GSEs, the government sponsored enterprises. They will even give you backing on a bank loan so that you can do this. They're really encouraging this and enticing you to do this with as little as a 3% down payment on your primary residence or 20% down on rental properties. It's like they're almost forcing you to succeed. And there's even a 1% down program for primary residences now available in some places. So the bank gives you the loan, the tenant pays you the rent, and the government gives you the tax break. Like I say, that right there is using other people's money three ways at the same time, the bank, the tenant and the government, it all sort of falls in your lap if you want it to, but you do have to ask for it and you do have to do some arranging and you need to be diligent and attentive to.

 

Keith Weinhold (00:04:06) - But most Americans, they just aren't wise to this. Now, the real estate market, it has changed from a few years ago. It was spring of 2020 where we had that big inflection point, as you know, because I often discuss it. That was that supply crash. And since that time, home prices have run up faster than rents. But I'd like to give you some broader perspective here. There's something important with real estate investing that you may not have realized coming out of the global financial crisis 2008, 2009, 2010. At 2010, when we really started to lift up out of the rubble because by 2010, property prices were still down low. They were near the rock bottom. They're even lower than replacement costs in a lot of markets, which was artificially low. But see, rents didn't really fall much in the GFC. Rents stayed the same. So you know what happened in 2010 and all the years following it will cash flow began. And that's because all over America you then had these high rents and low purchase prices that had been beaten down by the GFC.

 

Keith Weinhold (00:05:18) - Cash flow like that wasn't really normal, but by now property prices have caught up to rents and even surpassed them. So besides investors being used to low mortgage rates, these ultra low rates, they also got used to this ultra high ratio of rent income to purchase price. That's just not there like it used to be. So today, in more places, you can't expect much of anything for cash flow now with a few years of. Income property ownership. Say if you bought something late this year, a few years later, now you shouldn't count on it. But rents, as we know, historically rise to then start providing you with cash flow to complement the other four ways that you're simultaneously paid. So my point is that today the deals aren't as good as they were ten years ago and five years ago, and that is all part of the provenance and perspective that I'm sharing with you from the real estate investing landscape starting from back around 15 years ago. But today I posit that it is still difficult to find a better place to invest a dollar than with a loan on carefully bought income property.

 

Keith Weinhold (00:06:31) - And I have some really good news for you here. All right. We know higher mortgage rates. They're not just a pain point for first time homebuyers and second time homebuyers for that matter, but they're a pain point for you, the investor. Well, if you didn't already know, we have largely sort of that problem here at Gray. And that is why investors like you are still snapping up rental properties fast. From Marketplace today, owner occupied mortgage rates are about 7% in income. Property rates are about 8%. But because of the strength of our marketplace networks and relationships here we have one new build provider offering a mortgage rate of 5.75%. Yes, they will see that your mortgage rate is bought down to 5.75% for your purchase. Yes, right here in today's environment, another new build investment property provider is offering a buy down to 4.75%. Yes, you heard that right. And we have another builder provider where our investment coaches have been sharing with you a 2.99% seller financing option. So is cash flow back? Yes, a lot of times it is.

 

Keith Weinhold (00:07:53) - The builders know that it's a pain point for buyers and our coaches and I hear a Gary know it too, So we have rubbed salve on the wound here, I suppose. 5.75% interest rates, 4.75 or even 2.99. At times you'll have to use the builders preferred lender to get those terms. Otherwise I like to use Ridge lending Group because they specialize in income property loans. There is even more to it. These builders are in business to move property, so take advantage of it. And besides buying down your mortgage rate for you like that, some are even waiving their property management fee for you for the first year, in addition to buying down the rate and don't know how long all this is going to last. So this could be a really good time for you to contact your investment coach. Your coach will help you shop the marketplace properties, tell you where the real deals are and tell you how to get those improbably low mortgage rates for income properties. Your coach guides you and makes it easy for you If you don't have an investment coach yet, just go to Marketplace slash coach and they're there to help you out.

 

Keith Weinhold (00:09:11) - Hey, it's really great to have the savvy and the experience of Rick Shaka back on the show today. His mind is always in the market. He's often doing these public speaking appearances informing audiences about it. He's been the executive vice president of markets at some of America's leading housing intelligence firms. We have so much to discuss that Today's episode is part one of two back to back episodes with Rick. This week, we'll discuss the direction of the economy. Next week, we'll go deep on the housing market. But even our discussion on the economy today is probably going to be viewed through the lens of having real estate investors in mind. So this intelligence is fresh and it is timely here in fall of 2023. But even if you're listening to this, a decade from now, in 2033, you are going to get lessons for all time. It's the economy this week and the real estate market next week. It could be a day or two until we have today's episode on Get Rich Education YouTube. But you can watch us there as well if you want the visuals and charts that complement our discussion.

 

Keith Weinhold (00:10:19) - Many of the sources that he cites today will be from Trading economics in the US Bureau of Economic Analysis. What's the present and future of the economy, especially as it pertains to real estate investor interest with Rick and I straight ahead. I'm Keith Reinhold in this is get rich education. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They've provided our tribe with more lows than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's So start your prequalification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25.

 

Keith Weinhold (00:11:31) - K. You don't even need to be accredited. For some of them, it's all backed by real estate and I kind of love how the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660, and this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866. This is real estate investment cogeneration. Listen to get Rich education with Keith Reinhold and don't quit your day dream. And you're going to get a fantastic market update today. And you're also going to learn lessons even if you're consuming this 5 or 10 years from now. Our expert guest was first with us here six months ago. He's been the executive VP of markets at some of America's leading housing intelligence firms. He was twice named to the Inman News Inman 100 most influential real estate leaders.

 

Keith Weinhold (00:12:54) - He is one of the country's most frequently quoted sources on real estate, mortgage and foreclosure markets. You've seen him seemingly everywhere CNBC, CBS News, NBC News, CNN, ABC News, Fox, Bloomberg in NPR got about just every letter of the alphabet in there on that one. Today, he's the founder and CEO of J. Patrick Company. They're a market intelligence firm for the real estate and mortgage markets. He has 20 plus years of experience in those industries. Hey, welcome back to Rick Saga. Thank you for having me, Keith. Happy to be here. It's an interesting time. Rick. I think some people are rather confused because you have such unusually low housing supply still. You have higher mortgage rates and we're careful not to call them high mortgage rates because we know historically they're pretty normal. And you have what I would characterize is a rather distinct regional variation in home price appreciation. So we're going to get some clarity today from that confusion. Now, if you're listening on audio only, Rick will describe the charts in a way that gives you a good experience.

 

Keith Weinhold (00:14:03) - If you're watching this on YouTube, go ahead and give us a like. So we really anticipate, Rick, your take on both the broader economy first and then the real estate market. That's exactly what we're going to go over today. And before we get started, I think you said something I'd like to emphasize a little bit. And this is something we talked about. I believe the last time we chatted is I've been saying all along that we were not going to see a housing market crash. We were going to see a correction of sorts and that the correction was going to be very, very localized. That the results you see in coastal California, in the Pacific Northwest, in markets that were overpriced, like Boise and Salt Lake City and Phoenix and Austin, we're going to be very different than what you saw on the East Coast, particularly the southeastern states, places like Tennessee and Florida and the Carolinas and virtually everywhere else in Texas other than Austin. So it's really worked out that way. There are some markets where we're seeing double digit price declines and other markets where prices continue to go up.

 

Keith Weinhold (00:15:05) - And we'll get into the national trends in a minute. But thought that was a really important point. Keith Yeah, Thank you for adding that, at least for a while there. Rick. It was one of the most unusual home price appreciation maps I have ever seen. There were some exceptions, but generally the nation east of the Mississippi River, you had rising home prices and recently west of the Mississippi River, you had falling home prices like a river divided it. It was really weird. To your point, it's normalized a little bit. I live in California. Speaking of weird and the pricing out here, the month over month prices and year over year prices went down for the first time in quite a while for about four consecutive months before normalizing in July. Now, even within California, you see different price trends depending on where you are in the state. But the point is really important for investors to remember that you almost threw the national numbers out, that they're important from a trend perspective, but you really need to become an expert in whatever market you happen to be investing in because the local conditions really determine how successful you're going to be.

 

Keith Weinhold (00:16:09) - Like the national outdoor temperature average is pretty useless, almost somewhat like the national home price average is. I guess the national home price average Still has some meaning to it though. Yeah, and you don't find quite as much variation in home price trends as you do in temperatures, but your points well taken. And again, it's important to be looking for economic trends. It's important to be looking for housing market trends and the markets that you're interested in investing in because that makes all the difference. So we're just going to talk about the general economic landscape of the United States, and then we're going to pivot into real estate and just what's going on with the housing market and getting the latest there. Yeah, why don't we jump right into it at this point, Keith, We're going to do a fall update on the housing market for this year. We're going to take a look at the economy. We'll take a look at what's going on in housing. I have a few slides to share on what's going on to delinquencies and defaults because I know a lot of investors are interested in foreclosure properties.

 

Keith Weinhold (00:17:11) - And then we'll have some closing thoughts and then you can chat a little bit more about some of the observations we're making in the market today. Let's start talking about that economy, including that part where some people anymore, year after year, they're always predicting this recession that never quite seems to happen. Well, we have predictions of a recession that are very much like predictions of a housing crash. And if you keep predicting that terrible thing long enough, someday you'll probably be right. It'll be right eventually. Just like a broken clock is right. Broken clock. It's right twice a day. So the GDP, the gross domestic product is the way that that most economists measure the strength of the economy. And the second quarter, this number was just adjusted downward a little bit, but we still had over 2% growth for the second quarter of 2023. That was a higher number than most economists had forecast. It was certainly a higher number than what the Federal Reserve was expecting. But it really shows you the strength of the US consumer.

 

Keith Weinhold (00:18:09) - A lot of people probably don't realize that almost two thirds of the GDP is comprised of consumer spending. There's other factors that go into it business spending, government spending, productivity, trade and the like. But two thirds of it is consumer spending. So when you see the GDP showing strong numbers, it typically means that the consumer is doing pretty well. And that's an important consideration as we move forward. Yeah, that's right. One of those reasons consumers are spending is because we're in this economy where pretty much if you want to have a job, then you've got a job. Yeah. The headlines read about tech companies doing layoffs and mortgage companies doing layoffs. Bottom line is the most recent unemployment numbers we saw were 3.8%. I think we're getting a little spoiled by some of these low unemployment rates because people forget historically, anytime you were under 5% unemployment, it was considered full employment. And the fact of the matter is there's still more jobs open than there are people looking for work. There's about 9.5 million open jobs in about 6 million people who are looking for work.

 

Keith Weinhold (00:19:11) - So employers have to compete with each other for those employees. And so these low unemployment levels are actually one of the things that's causing wages to go up, which continues to stoke inflation when there are more open jobs than there even are workers that makes employers want to entice employees with higher pay. Yeah, they need to do that to keep employees on the payrolls and they need to do that to hire new employees. So whether you look at hourly wages, which at the moment are up around 28, $29 an hour, or you're looking at annual wage growth, which is running around 4 to 5% a year. Wages are very strong right now. And this is the first time, Keith, in many years that I've been able to tell people that wage growth actually is running higher than home price appreciation for well over a decade. We saw home prices appreciate much more rapidly than we saw wages. And this is the first time in a while where that situation has been reversed. That's a really interesting takeaway, Rick.

 

Keith Weinhold (00:20:16) - Wage growth that's outstripping home price growth and that's going to be important going forward because one of the big headwinds that the housing market faces today is affordability. Despite what we just talked about, home prices nationally are running at all time high levels. We're going to talk about the cost of financing be much higher than it was just a year ago. And wage growth is the one positive in that category. As wages continue to grow and if home prices settled out a little bit, affordability ultimately will be a little bit better for potential homebuyers. Average wages at 28 to $29 an hour, Americans are basically making a dollar every two minutes now yet could be worse. And that varies, again, market to market, shock to job, but it shows you what's going on on average, partly because of this, consumer spending continues to be very strong. But one of the the real unusual situations we're looking at today is that there's usually a direct correlation between consumer confidence and consumer spending. And the more confident consumers feel about things, the more willing they are to spend money, particularly on big ticket items like cars and houses.

 

Keith Weinhold (00:21:24) - And that was all true. And the correlation held true until we hit the pandemic. And as we started to come out of the first wave of Covid, you saw consumer confidence start to go up, but then it came back down as we had subsequent waves of Covid. Then we had the war in Ukraine that we had high inflation and all sorts of other odds and ends. And consumer confidence has really never recovered back to pre-pandemic levels while consumer spending has continued to go up. And part of that is pent up consumer demand. We still hear people talking about supply chain delays, trying to order appliances and the like and having to wait for months. Part of it is all the stimulus money that the government poured into the economy during the pandemic and probably overstimulated the economy to a certain extent. One of my economist friends refers to what the government did in terms of stimulus, is trying to stuff $15 trillion into a $3 trillion hole. And the numbers may be a little lost. But think the visuals is image is kind of good.

 

Keith Weinhold (00:22:25) - But this disconnect we're seeing between. How much money consumers are spending and their relative low confidence scores is a red flag of sorts in a couple of ways. It's a red flag, among other ways, in that if consumer confidence doesn't recover, consumers ultimately could pull back on spending, and that really could ultimately lead us into a recession. Consumer spending outpacing consumer confidence. There are other two other red flags with this consumer spending, and we'll cover them pretty quickly. What is that? Consumer credit card use is at an all time high in the last quarter. For the first time ever, consumer credit card use topped $1 trillion. And the concern here is that consumers in a high cost of living environment may be tapping into credit cards to make ends meet. That's not a good scenario and ultimately is not a scenario that would end well. So part of what we're seeing kind of backstopping or enabling consumer spending is an increased amount of credit card use. The other red flag, Keith, is that consumer personal savings rates have gone down below historic averages.

 

Keith Weinhold (00:23:33) - So we hit an all time high in savings rates during the pandemic when the government sent out stimulus checks and unemployment benefits were enhanced. And candidly, there wasn't a lot consumers could buy. So they socked away a lot of this money post-pandemic. We saw savings rates drop down to almost historically low levels and they haven't come back much up from that. So the two red flags that we really are looking at right now, that could be indicators of trouble ahead for the economy are record level credit card use and lower than average savings rates. And again, both of those suggest that families who are sort of on the margins financially might be tapping into credit cards, might be tapping into their savings to make ends meet. In fact, I read some recent research that suggests that on average, most households have higher credit card debt than they have savings. It's not a great scenario, and this is consistent with many sources citing the fact that between 60 and 70% of Americans live paycheck to paycheck. Yeah, and it almost doesn't matter how high that paycheck is, which is a little bit counterintuitive.

 

Keith Weinhold (00:24:43) - I remember doing an interview on CNN years ago when Evander Holyfield mansion was being foreclosed on. It was a $30 million mansion outside of Georgia with two bowling alleys, swimming pool, indoor boxing rinks, basketball courts, the whole nine yards. I had to explain to the reporter that just because you're wealthy doesn't mean you're not living paycheck to paycheck. It's just sometimes there's more zeros to the left of the decimal point. Their cost of living tends to be much higher. So expenses are keeping up with income. All right, Expenses keep up with income. What's been going on in terms of consumer spending, in terms of wage growth, in terms of the GDP being strong has all contributed to inflation. And we had the highest inflation rate in 40 years. Not too long ago, we were up over 9% inflation year over year. And the Federal Reserve has taken very aggressive actions to try and get inflation under control. The primary tool they use is raising the Fed funds rate, which is basically what sets the rates on all short term interest.

 

Keith Weinhold (00:25:44) - And they've raised it more rapidly and higher than it pretty much any time in history. If you go back to the 80s, they actually raised the Fed funds rate higher because inflation was completely out of control then, but not as quickly as they did this time. So typically what you see is something more like what the Fed did say back in the 2015, 2016 period, where inflation ticked up a little bit. So they raise the Fed funds rate a little and they waited a while to see what kind of impact it would have. Then they raise it a little bit more and it's kind of a step by step process until they feel that inflation is peaked and they can then drop off the Fed funds rate. This time they raised it at higher increments they'd ever done before and much more rapidly. The good news is it does seem to be having its effect. The most recent inflation numbers are around 3% year over year, which is close to the Fed's target rate of 2% year over year. And a lot of the inflation rate that is reported on is housing costs.

 

Keith Weinhold (00:26:42) - And most of the housing costs are actually rental rates or what the Fed refers to is the rental equivalency. If you have a mortgage. And what we have seen is rental rates have gone back down from ridiculously high, asking prices. A year or so ago, it wasn't unusual to see an asking rent 15% higher than the prior rent rate. And that's in a market where the usual increase is 1 to 4%. So it was just completely off the charts. Those numbers have all come back to normal. And in some markets, we're actually seeing slight declines in year over year rental asking prices. The reason the Ric is bringing rents into the inflation discussion here is because rent and something called owners equivalent rent are a substantial contributor to the. They comprise more than a third of the CPI basket. Exactly right, Keith. And thank you for reminding me why I started this dissertation. The fact is that that decrease in rental costs has not hit the Fed's inflation numbers yet. There's about a full year lag in the housing numbers that the Fed uses in its CPI analysis and what's going on in the real market.

 

Keith Weinhold (00:27:52) - So if the Federal Reserve does nothing else, these housing costs get caught up. We will see inflation come down a little bit more. A lot of us are hoping that the Fed is done with its increases because of what's happened historically. Historically speaking, if you go all the way back to World War Two, the Federal Reserve not counting this cycle, has raised the Fed funds rate 11 times to get inflation under control. Eight of those times it's waited a little bit too long or it's waited for inflation until inflation got too high and it was a little bit too sticky and they had to overcorrect. And that ultimately steered us into a recession. There were three times once in the 60s, once in the 80s and once in the 90s where the Fed acted proactively to try and get inflation under control. And in those three cases, they were able to steer us into a soft landing and avoid a recession. In this case, they've already admitted they waited too long. They admitted that inflation got much higher than they expected.

 

Keith Weinhold (00:28:48) - It certainly wasn't as transitory as they'd hoped. So the likelihood is that they've already overcorrected and we will see something of a recession. They may get lucky this time. They may have actually walked the tightrope correctly. And assuming they don't continue with this aggressive course of action, they may have actually managed to work us into a soft landing this time. Yeah, and that is a terrific history lesson that you gave us, Rick. I often like to tell my audience about when you want to predict the future direction of something. I'd like to take history over hunches. It's easy to have a hunch that something's going to go a certain direction. But you look at history. You talked about basically how the Fed was late to identify inflation because they had called it transitory for a while, so they started hiking too late. Now, maybe they've overhyped or maybe they haven't. But if they have, maybe they will need to lower them too quickly. If they don't have that desired soft landing. The economists that follow right now are split about 5050 on whether we'll actually see a recession coming out of this cycle.

 

Keith Weinhold (00:29:51) - It was more like 8020, looking for a recession just a few months ago. Right. The economy is slowing a little bit. The last jobs report had about 187,000 jobs created, which was a good number, but it was lower than what we've seen in recent reports. So the economy slowing down, but not going to full stop or going into negative terms is an indication that maybe we do escape a recession. Good news, by the way, is even if we do have a recession, the rest of the economic measures that you look at are also strong, that it's very likely it would be a very short and very mild recession, and unemployment probably wouldn't get over about four and a half or 5%. So that's something to keep in mind as you go forward. You talked about history, Keith. I big on that too, history as a predictor of what might happen. Yeah. The other thing that points to a recession is something called a yield curve inversion. And without getting too inside baseball on people, people track the yield on a ten year US Treasury and they track the yield on a two year US Treasury and typically your yield on a short investment like a two year Treasury is lower than your yield on a ten year or longer investment because there's more risk involved in the longer time period and so forth and so on.

 

Keith Weinhold (00:31:07) - Every now and then, the bond market senses a disruption in the force. Darth Vader is looming over the market and you see these things switch places and suddenly the yield on a ten year US Treasury is lower than the yield on a two year US Treasury, and that's called a yield curve inversion. Now yield curve inversion doesn't cause a recession, but the last seven times we've had one, it's correctly predicted that a recession was coming and this current period we're in is one of the longer and deeper inversions that we've ever seen. So again, if you look at history as a predictor of the future, this yield curve inversion points toward us having a recession at some point before we get through the cycle. And I know yield curves can confuse a lot of people. If you're the listener or the viewer here, make a very long term loan to a friend, well, you'd want to get compensated with a higher interest rate for that higher risk amount than if you made a short term loan to a friend and he was paying you back.

 

Keith Weinhold (00:32:04) - Tomorrow, you might not charge him much of any interest at all because there's more certainty that you're going to get paid back. But that condition has been inverted, where when you make the long loan to the buddy, you're compensated with a lower interest rate yield. That is what is known as a yield curve inversion. Yeah. And I think yield curve throws people off. If you just think of it in terms of the yields, that probably makes it simpler. But again, if you're looking at recession predictors, these are the two. That I typically look at. And that's kind of important to know if you're going to be investing in the housing market because recessions can have an impact on the housing market. Rick thinks there's a likelihood that the Fed has already overcorrected with too many interest rate increases. If we do have a recession, Rick believes that it's most likely to be mild without many layoffs. Rick and I, we actually seem to agree on a lot of things. We see a lot of things the same way.

 

Keith Weinhold (00:33:03) - Maybe it would be more interesting for you if we disagreed a bit more to stay up on the latest moves in the real estate market. You can follow Rick Saga on X, formerly known as Twitter. His handle there is simply Rick Saga. Well, Rick made a Darth Vader reference there. And, you know, much like the original Star Wars movie had the sequel, which was called The Empire Strikes Back. You know, that was one sequel that some people liked more than the original. And that is atypical because usually people like the original more. But The Empire Strikes Back was a fantastic sequel, and I think that could happen here next week. Rick and I are back together for part two of two, the sequel. We are probably going to analyze and break down the state of the housing market and the future of investment real estate. And we should go on for twice as long on that as we did for today on the economy. So therefore, next week is kind of like the Empire Strikes Back, although I don't expect that next week Darth Vader is going to cut off Luke Skywalker's hand like what happened in the movie.

 

Keith Weinhold (00:34:10) - That just wouldn't be proper. And we're clearly not into improprieties around here.

 

Darth Vader (00:34:18) - You are unwise to lower your defenses.

 

Keith Weinhold (00:34:23) - Oh, Luke lost his hand this week. Not next week. Well, that's not even the scene where Luke loses his hand, But, hey, that totally worked. So. Getting back to real estate here, you need properties to be an investor. The builders know that higher mortgage rates are a pain point for buyers. Our coaches and I hear a know it too. So we have. Yes. Rubbed salve on the wound 5.75% interest rates, 4.75% or even 2.99%. And at times you're going to have to use the builder's preferred lender in order to get those terms. But really some remarkable Bibles that we've negotiated for you. So take advantage of it since I don't know how long that is going to be around. In fact, I'll even bring up those rate by down terms to Rick Saga next week and get his take to help you out on the cash flow side. We also have access to properties that would make good mid term corporate rentals in the southeastern US midterm rentals.

 

Keith Weinhold (00:35:27) - They often have higher cash flow than a traditional long term unfurnished rental. For any and all of that, contact your investment coach, you're probably working with one by now. They'll help you shop the marketplace properties, tell you where the real deals are and tell you how to get those improbably low mortgage rates for income properties. Your coach guides you and makes it easy for you If you don't have an investment coach yet, just go to Marketplace. Com slash coach and they're there to help you out until next week I'm your host Keith Winfield. Don't quit your Adrian.

 

Speaker 4 (00:36:08) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Keith Weinhold (00:36:36) - The preceding program was brought to you by your home for wealth building. Get rich education.



Direct download: GREepisode466_.mp3
Category:general -- posted at: 4:00am EDT

Why is gold even worth anything in today’s modern world? Isn’t it just a lump of metal? 

In fact, I tell today’s guest that I believe gold is a poor wealth creation vehicle.

Our guest is Dana Samuelson, Founder and Owner of American Gold Exchange. He’s one of the most influential, pedigreed and respected names in the gold industry.

Major central banks have been hoarding gold recently—like Russia and China. Last year, central banks bought the most gold on record. We discuss why.

A recent survey found that only 11% of Americans own gold.

The case for owning gold: no counterparty risk, millennia of value, liquidity, limited supply, it’s like “money insurance”.

The case against gold: storage burden, no yield, few industrial applications, difficult to lever.

Though gold is historically a poor wealth *creation* vehicle, it’s excellent for long-term wealth *storage*. Dana generally agrees with me there.

Most gold that’s been mined in world history still exists today.

Learn how to identify fake gold. 

Dana discusses how you can store your gold.

You effectively pay “closing costs” on bullion. I describe.

We also quickly cover: silver, platinum, and palladium.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/465

American Gold Exchange:

www.AmerGold.com

info@amergold.com

1-800-613-9323

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode465_.mp3
Category:general -- posted at: 4:00am EDT

Today’s guest, Shawn Finnegan, failed in California real estate investing pre-2008. But in 2019 he listened to GRE, came back, and succeeded.

He now benefits from $2,000 in monthly residual cash flow from 11 Memphis income properties. He wants a fourplex next.

Shawn and his family moved from Los Angeles, CA to Costa Rica where he now lives financially-free.

He’s a former abdominal model, appearing on magazine covers. He invented “The Anchor Gym” home gym system.

By listening to GRE, he had the confidence to invest with our “Financially-Free Beats Debt-Free” mantra.

“Don’t Quit Your Daydream” resonates with him most. 

Resources mentioned:

Show Notes:

www.GetRichEducation.com/464

The Anchor Gym:

www.TheAnchorGym.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode464_.mp3
Category:general -- posted at: 4:00am EDT

More homeless people have been created due to the housing supply crisis. Homelessness is up 11% since last year, per the WSJ.

The opioid crisis, consumer inflation, and NIMBYism have contributed too.

California has the most homelessness on both a total and per capita basis.

States with higher housing costs have more homeless people.

I share our poll results: “Should we pay to house the homeless?”

Are you a NIMBY? We find out today.

We can increase housing supply with rezoning, construction training, and lower mortgage rates.

The cycle of investor emotions led to wild investing manias. It was tulip bulbs in the 1600s Netherlands and Beanie Babies in the 1990s United States. 

I discuss exactly why “buy low, sell high” is more difficult than it sounds.

Timestamps:

The correlation between homelessness and the housing market [00:00:00]

Discusses the relationship between the housing market and the increasing problem of homelessness in America.

Investing manias and lessons from history [00:00:00]

Explores the phenomenon of investing manias and the lessons that can be learned from historical examples.

The tight inventory market conditions and potential solutions [00:04:56]

Lawrence Yun, Chief Economist of the National Association of Realtors, discusses the tight housing market conditions and suggests tax incentives to increase housing supply.

Timestamp 1 [00:10:32]

Affordability of moving to different cities and the proposal of a tax incentive for real estate investors.

Timestamp 2 [00:11:49]

Discussion on the housing supply crisis, mortgage rates, and the homeless population in the US.

Timestamp 3 [00:14:14]

Increase in homelessness in America, reasons behind it, and the correlation between housing prices and homelessness rates.

The impact of high density housing on quality of life and home value [00:21:12]

Discussion on the potential negative effects of building high density housing near single family homes, including reduced home value, increased traffic and noise, and loss of nearby open space.

Alternative solutions to increase housing supply and reduce homelessness [00:23:30]

Exploration of alternative measures to address homelessness, such as trade training for the homeless and relaxing excessive safety requirements in home building.

Giving real change to the homeless [00:25:50]

Encouragement to give directly to homeless shelters or soup kitchens instead of giving small change to individuals on the street, with the concept of "give real change not small change" explained.

Note: The timestamps provided are approximate and may vary slightly depending on the podcast episode.

The Origins of Tulip Mania [00:31:37]

Tulips were introduced to Europe in the 1500s and became a luxury item for the affluent. The cultivation of tulips locally in the Netherlands led to a flourishing business sector.

The Tulip Bubble [00:32:55]

By 1634, tulip mania had swept through the Netherlands, with the demand for tulip bulbs exceeding supply. Prices reached exorbitant levels, and futures contracts were being bought and sold.

Lessons from Tulip Mania [00:37:53]

Tulip mania serves as a model for financial bubbles, with similar cycles observed in other speculative assets like beanie babies, baseball cards, NFTs, and stocks. It highlights the dangers of excess, greed, and speculation without tangible value.

The cycle of investor emotions [00:44:32]

Explanation of the different stages of investor emotions, from optimism to panic, in relation to stock market investing.

The peak of the stock market [00:46:43]

Discussion on the peak of the stock market being the point of maximum financial risk and the difficulty of selling at the right time.

Real estate as a stable investment [00:51:56]

Comparison of real estate investment to speculative bubbles, highlighting the stability and income stream provided by real estate.

Explains how the integration of HOA (Homeowners Association) helps maintain uniformity and cleanliness in the rental property investing world.

Details about the upcoming real estate event [00:38:31]

Promotion of a live event where listeners can learn about new construction fourplexes and have their questions answered in real time.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/463

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Welcome to Get Rich Education. I’m your host, Keith Weinhold. America’s homeless problem has become FRIGHTENING. I describe how that correlates… with the housing market. 



Then, investing MANIAS. What drives people to spend more for one tulip flower bulb than they would for an entire luxury home? 

 

And lessons you can learn that’ll benefit you the rest of your life from other manias throughout history. All today, on Get Rich Education.  

___________

 

Welcome to GRE! From Seaford, DE to Carmel-by-the-Sea, CA and across 188 nations worldwide, you’re listening to one of America’s longest-running and most listened to shows on real estate investing. Along with plenty of ongoing hot takes on wealth mindset and the real estate economy. 

 

I’m your host, Keith Weinhold. 

 

See, the crash in the SUPPLY of available American homes is bad and it isn’t just creating more upward prices, it’s a contributor to homelessness. 

 

Let’s talk about some of the drivers of homelessness, understand the problem a little more, how many homeless people ARE there in America, and then… what can we do about it?

 

As you’ll soon see, one prominent real estate industry influencer actually suggests that you actually SELL your rental single family homes in order to help serve the homeless. More on that shortly. 

 

Also, I have the results from a GRE Instagram Poll. The poll question is: “Should we pay to HOUSE the homeless?” 

 

And the answers that you - the GRE listeners gave… actually surprised me. I’ll give you those super-interesting poll results later, because I have more to explain there.

 

But first, what IS a homeless person? Let’s define it. I think most anyone knows that since it’s a person without a home, it’s thought of as living on the street.

 

Really, then, that person might not be homeless but “houseless” in a literal sense. Even if they live in a tent under a bridge, that is then, their home. Though it might be INADEQUATE housing.

 

More accurately, the unsheltered or undersheltered population could be more apropos.  

 

Then there’s vagrancy. A vagrant is defined as a person without a settled home OR regular work… who wanders from place to place and lives by begging.

 

So vagrants are PART of the homeless population then. This all helps DEFINE what we’re discussing.

 

Now, the lack of available American housing supply - especially the affordable segment - is OBVIOUSLY a big contributor to homelessness.

 

For example, anymore, how many builders even construct a new-build entry-level home for $200 or 250K? Practically nobody… anywhere.

 

And just how bad is the supply problem now? Well, the NAR has been tracking housing supply since 1982 and it just hit its lowest level ever this summer - EVER - and that’s in 40+ years of tracking. 

 

That’s one reason why just last week, it was announced that Warren Buffett is making a big bet on housing by investing in homebuilders.

 

Now to keep consistent with the same stats I’ve been reporting to you for you, to update that, again 1-and-a-half million available homes is the baseline supply. That’s the long-term “normal” per the FRED Active listing count.

 

And through last month, it’s still under 650,000. That is STILL a housing SUPPLY crash of 57% from its peak of 1 ½ million.

 

I want you & I to listen to this upcoming piece together. This recent interview with NAR Chief Economist Lawrence Yun is from the 8th of this month.

 

Yes, HE is the one that basically wants you to sell your SF rental properties. And he makes his case for an inducement to get you to do this. (Ha!)

 

He’s not proposing anything COMPLETELY ludicrous. It’s REALLY interesting. Listen closely for that.

 

This about 5 minutes in length and there’s a lot of material here within this clip - a nutrient dense piece, so I’ve got SO much to say about this when I come back to comment. 

 

[Yun clip] 

 

Yeah, the NAR Chief Economist there talking about how, much like I have for years, great opportunity is in the Midwest and Southeastern parts of the US. 

 

With this greater ability for people to work from anywhere, when people move in from the pricy coasts, it’s sooo affordable to them.

 

Moving from Manhattan to Cincinnati feels incredibly affordable. 

Moving from San Francisco to St. Louis feels like you’ve upgraded from serfdom to a kingdom.

Moving from Boston to Jacksonville feels like a total life makeover.

 

That’s why, here at GRE, we’re focused on properties in those INbound destinations. 

 

Before I continue, especially for those outside the US, I know that it seems a little odd that Ohio and Indiana are in what we call the Midwest when they’re actually in the northeastern quadrant of the nation.

 

But the fact that they ARE midwestern states is rooted in history and in cultural tradition.

 

So, getting back some new angles on the housing supply crisis.

 

Lawrence Yun proposed that a tax incentive be introduced to unleash the inventory of SF rentals from individual REIs. 

 

And says that there are over 20 million single-family housing units that are rented out. 

 

If we reduced or canceled the capital gains tax & just got 1% of that inventory on the market, he states that that would help.

 

Well, yeah, but even that then would only put about 200,000 units of the market - and they’d get snatched up so fast.

 

Now, if mortgage rates come down to say, 5%, it would unleash both housing demand AND supply. 

 

Both - like Lawrence Yun says. So it’s not apparent that that would help this shortage, if both demand and supply go up.

 

In a nation of about one-third of a BILLION people now - that’s how I like to express it this year - America now has one-third of a billion people… also known as 333 million - how many do you think are classified as homeless?

 

As you think about that - as you think about how many of America’s 333 million Americans are homeless, this homeless population figure that I’m about to share with you is from HUD and it’s through last year, so it’s their latest year-end figure. 

 

And I’ll tell ya, it’s hard to believe this number. The Department of Housing and Urban Development states that about 582,000 Americans are experiencing homelessness.

 

Now, how HUD does this is that their number is a snapshot of the homeless population as of a single night at the end of January each year. 

 

The total number of people who experience homelessness for SOME PERIOD each year will be higher than that.

 

I just did the math and then that means that just 1 in every 572 Americans are homeless. C’mon. Do you believe that? Only one in every 572 Americans are homeless?

 

I might believe that it’s something like more than 1 in 200. What are your thoughts?

 

Even HUD would probably concede that there are shortcomings in that stat and that it’s only a starting point.

 

And over the last decade, according to HUD, the homeless population is little changed… apparently until just this past year.

 

Homelessness is surging in America. The number of people experiencing homelessness in the US has increased 11% so far this year over 2022. That would be the biggest jump by far in equivalent government records beginning in 2007.

 

Now this 11% homeless jump is according to a WSJ analysis of hundreds of smaller & local agencies. 

 

Most  agencies say the alarming rise is because of the lack of affordable housing and rental units, and the ongoing opioid crisis.

 

Inflation is part of that affordable housing problem. Inflation widens the disparity between the haves and have-nots.

 

To cut some slack to census-type of surveying, homelessness can be hard to measure. Some live on skid row, some live in the woods, some homeless people live in their cars. 

 

Some aren’t interested in being counted. Others are essentially invisible.

I mean, if someone’s between jobs and needs to couch surf at their aunt and uncle's place for three months, are they homeless or not? So, to be sure, there’s a lot of leeway in those numbers.

 

One in 572 as homeless - that should just be a minimum - a starting point in my opinion.

 

Now, homelessness broken down by STATE is really interesting.

 

California at 171,000, has the most of any state, more than double of next-most New York, and then Florida is third.

 

But let’s break that down by rate - on a per capita basis. So… think of this as the highest CONCENTRATION of homeless:

 

Washington DC has 65 homeless per 10,000 people. That’s not really a state though, so…

 

#1 on a per capita basis is STILL California, with 44 per 10,000. So California leads in the nation in homeless on both bases then - both absolute and relative.

 

The second highest rate is Vermont. 

Third Oregon

Fourth Hawaii

Fifth is New York

And then numbers 6 through 10 on the most homeless per capita are Washington, Maine, Alaska, Nevada, and Delaware.

 

Now, strictly anecdotally. You’ve probably seen just what I’ve seen in the last year-plus - more visible homeless people in your city and other cities.

 

The state with the FEWEST homeless of all 50 states is Mississippi - and see, housing is quite affordable there. MS is one of the most affordable states for housing. 

 

There is at least SOME correlation between your cost of housing and homelessness.

 

Recently on our Instagram page, and the handle there is easy to remember - it’s @getricheducation - if you want to participate in future polls, we ran a poll on homelessness.

 

Here is the poll question that we ran - and I’d like you to think about your answer to this too.

 

“Should we pay to house the homeless?” 

 

That’s the question. 

 

And in polling, the way that the question is phrased, of course, can skew your answer. 

 

See, if instead, we phrased it as, “Should the government house the homeless?” you might have more ‘yes’ answers - even though it’s the same question - because you FUND the government. 

 

But the question as we phrased it: “Should we pay to house the homeless?” - it also showed a photo of vagrants on a street curb under the question.

 

Here we the results, which surprised me, to: 

Should we pay to house the homeless?

 

Those answering “Yes” were just 6%

The no’s were 45%

But we also had a third option: “It’s complicated”. 48% answered with that option.

 

So again, just 6% of you said we should pay to house the homeless and 45% said “no”. “48% said it’s complicated”.

 

In a way, that makes sense to me since we have a largely entrepreneurial, self-made type of audience. I thought that might have happened.

 

But what surprised me is in how emphatic it was. It was a landslide. 7 to 8 TIMES as many of you said we should not pay for the homeless as those that said we should.

 

Well, the reason that I added - and I’m the one that ran the poll myself - they’re quick to do. I added the paying to house the homeless “It’s complicated” option because it IS complicated… that WAS the most popular answer.

 

I mean, why should you go to work and pay to house a stranger that has no income because he or she doesn’t want to work?

 

But what if they’re disabled and they can kinda work but not really work… or a zillion other complications. 

 

Substance abuse is obviously a big problem that keeps homeless people homeless… and there’s a substantial thought paradigm that says, if they’re an abuser, then why would I pay for THEIR housing?

 

Substance abuse is just one reason that there is a population that’s VOLUNTARILY homeless. They don’t want to have to comply with a group home’s ban on substances. 

 

I wanted to address the homeless problem somewhat today, because here we are on Episode 463 of a real estate show and this is the most that we’ve even discussed it.

 

I think the perspective it gives you is that it helps you be grateful for what you’ve got. 

 

But it’s abundance mentality here. You can be grateful for what you have and at the same time, grow your means.

 

What else would help with more housing supply which would also move us toward mitigating the homeless problem?

 

Well, we’ve already discussed a number of them so I’ll only go in depth with some fresh angles here.

 

Obviously, more homebuilding. We’ve done episodes on how 3D printed homes and shipping container homes are not quick, easy answers. Tiny homes might be but then you could get into a zoning density problem again.

 

Just last week, my assistant brought me this Marketwatch article that reported that the average American home size is shrinking just a little & that often times, new-build houses tend to be a little closer together.

 

That’s what gets us into relaxing zoning requirements. But you know something, OK, this is going to be interesting. 

 

This plays into NIMBYism. Not In My Backyard: communities saying that they don’t want high-density housing built next to them. 

 

Now, I think that there are a lot of critics of NIMBYism. But the criticism comes from people that live far out of that area and aren’t affected.

 

Let me just play a fun little experiment with you here. Let me paint a picture of a fictitious life for you and just… place yourself there.

 

Say that you live in a nice single-family home, with a quarter acre lot. It’s not a sprawling estate but you’ve got a good measure of privacy that way.

 

You’re in a SFH, quarter-acre lot and two car garage. That is classic suburbia.

 

And… just a hundred yards away from your home there’s a big, wide-open field where you walk your dog and use as a little makeshift golf driving range or whatever. Nice open space nearby.

 

Say you’ve got a fairly idyllic life here. It’s always been this way since you bought the home years ago.

 

Suddenly, in your neighborhood of all SFHs, you learn that they want to build a bunch of fourplexes in the nearby lot where you used to throw tennis balls to your dog.

 

What can that do to your quality of life & your home’s value, now that a bunch of new fourplexes and eightplexes were built nearby?

 

It reduces your home’s value because there are less valuable, high density properties nearby.

 

It also increases the amount of traffic & even noise in your neighborhood. Now you can’t use that nearby park anymore - it’s been all-built up with these higher-density apartments.

 

So, let me go back and ask - point blank - did you really want all those new high-density developments near your home?

 

If that made you uncomfortable, that’s NIMBYism. So it’s quite natural to evoke that feeling type. You’re just a human being.

 

How else can we increase housing supply to help reduce homelessness?

 

NOT with rent control. Over time, capping the amount of rent that a LL can charge gives property owners no incentive to improve their property and neighborhoods end up dilapidated.

 

We need more training for tradesman and laborers. How about training the homeless for that? But then someone’s got to pay for that training.

 

Another measure that’s become ridiculous is that we’ve gotta relax these excessive safety requirements in homebuilding. Now, some safety is good.

 

But when every single home - entry-level and all needs to have fire-rated shingles and fired-rated doors and GFCI outlets and smoke detectors in every room and carbon monoxide detectors all over the place, sheesh! Well, that raises the cost of housing for everyone.

 

In some earthquake-prone areas, you’ve got to have seismic restraining straps on your water heater or you can’t even sell your home. Do you know how big of an earthquake it would take to damage your water heater like that?

 

And an excessive safety PROPONENT might say, yeah, but did you hear about that one family that died ten years ago that would have lived if they had carbon monoxide detectors?

 

Well, the counterargument to that is, yeah, but what about all the homeless people that were exposed to the elements and died in the cold because they couldn’t AFFORD the more basic housing, the prices of which have escalated for all this excessive safety stuff.

 

Are you saying a middle class person’s life is worth more than a poor, homeless person’s life? That’s the counterargument. 

 

Again, some safety is good. But we’ve gone overboard in too many places - in housing & beyond.

 

Rising housing costs keep people homeless. A few weeks ago, I did that episode about escalating insurance costs.

 

I now own some properties that have extremely low mortgage rates and the insurance has gone up to the point where I pay more in monthly escrow expenses than I do principal & interest. 

 

But, hey. I’m not homeless, and if you’re listening to this, neither are you.

 

So when it comes to helping the homeless in the short-term, that campaign called, “Give real change, not small change.” - that really resonates with me.

 

Don’t give 5 bucks to a vagrant on the corner. That just keeps them showing up at that corner, plus they’re going to spend your 5 bucks on a cheap bottle of Monarch vodka.

 

Instead, if you’re going to give, give to a homeless shelter or soup kitchen. 

 

That’s what’s meant by “Give real change, not small change.” And that’s something actionable.

 

Coming up next, investing MANIAS. How wild it gets - paying more for a tulip flower than a SFH, shooting and killing someone over a Beanie Baby toy… and then I’m going to wrap it all up with what all this has to do with the cycle of your investor emotions.

 

Around here, we don’t run ads for the Swiffer. This week’s sponsors that support the show are people that I’ve personally done real estate business with myself and have benefited from. 

 

Ridge Lending Group specializes in INVESTMENT property loans in nearly all 50 states. Start your prequalification at: RidgeLendingGroup.com 

 

Then, for super-passive real estate returns, check out Freedom Family Investments. Right now, what you can do, is just text “FAMILY” to 66866.

 

I’m Keith Weinhold. You’re listening to Get Rich Education.

___________

Welcome back to the GRE Podcast. I’m your host and my name is Keith Weinhold. 

 

If you’ve got a friend or family member that you think would benefit from the knowledge drops here on the show, you can simply tell them to grab the free Get Rich Education mobile app.

 

That’s a convenient option for listening every week for both iOS and Android.

 

Today’s topics of homelessness and investing manias could very well bring a new audience here, so… 

 

A little more about my backstory. I’m from PA but got my real estate comeuppance in Anchorage, Alaska of all places & grew out nationally & internationally from there. I had humble beginnings and wasn’t born anywhere near wealthy. I had to figure out how to build it myself.

 

But see, if I were born wealthy, I wouldn’t have learned how to build it, and then I wouldn’t be of much help to you. Likewise, if you’re building it yourself, you’ll be able to help others too.

 

BTW, I was born in the same PA town as Taylor Swift. 

 

Though she & I don’t have much ELSE in common, I guess that she & I are both best-known for using a microphone.

 

Though I think that I’m about as likely to start using this microphone to sing into your ears like Taylor Swift does… as Taylor is to launch a real estate investing show.

 

For hundreds of years, the tulip has been one of the most-loved flowers in the Netherlands. It’s an enduring icon - as synonymous with the country as clogs, windmills, bicycles, and cheese. The tulip has a long and storied history - including the infamous shortage in the 1600s known as “tulip mania”. If you’re someone that has even a fleeting interest in investing, you should at least know what this is.

 

Tulips first appeared in Europe in the 1500s, arriving from the spice trading routes… and that lent this sense of exoticism to these imported flowers that looked like no other flower native to the continent.

It’s no surprise, then, that tulips became a luxury item destined for the gardens of the affluent. 

According to The Library of Economics and Liberty, “it was deemed a proof of bad taste in any man of fortune to be without a collection of [tulips].” Hmmm.

Well, following the affluent, the merchant MIDDLE classes of Dutch society sought to emulate their wealthier neighbors and also demanded tulips.

So to start out with, it was purchased as a status symbol for the sole reason that it was expensive.

But at the same time, tulips were known to be notoriously fragile, and would die without careful cultivation. In the early 1600s, professional cultivators of tulips began to refine techniques to grow and produce the flowers locally in the Netherlands. They established a flourishing business sector that persists to this day.

By 1634, tulipmania swept through the Netherlands. The Library of Economics and Liberty writes, “The rage among the Dutch to possess tulip bulbs was so great that the ORDINARY INDUSTRY of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade. Now, everyone’s in - rich to poor.

It’s a little hard to say for sure how much people paid for tulips. 

But Scottish journalist Charles Mackay, wrote an extremely popular 1841 book - you’ve probably heard of this book - it’s called the Memoirs of Extraordinary Popular Delusions and the Madness of Crowds…

It does give us some points of reference such that the best of tulips cost upwards of $1 million in today’s money (but a lot of bulbs traded in the $50,000–$150,000 range). 

By 1636, the demand for the tulip trade was so large that regular markets for their sale - like a little Dow Jones Industrial Average - got established on the Stock Exchange of Amsterdam, in Rotterdam, Haarlem, and other towns.

It was at that time that PROFESSIONAL TRADERS got in on the action - that’s all that some people do now - is trade tulips… and everybody appeared to be making money simply by possessing some of these rare bulbs. 

Dutch speculators at the time spent incredible amounts of money on bulbs that only produced flowers for a Week—many companies were formed with the SOLE PURPOSE of trading tulips. 

To everyone, at the time, it seemed that the price could only go up forever.

Pretty soon, demand for tulips EXCEEDED THE AVAILABLE SUPPLY of tulips by so much that people were into buying futures contracts, basically saying, I’ll pay you this much money TODAY for a tulip that you provide to me in 3 years.

By the last 1630s, these futures contracts were like a crack that appeared in the price runup. Demand began to wane when people were just buying a token for a future tulip that hadn’t even started growing yet. 

People felt like they weren’t buying anything tangible anymore. That’s one factor that helped create an oversupply of tulips in the market and started depressing the prices. Supply caught up with - and exceeded - demand.

A large part of this rapid decline was driven by the fact that people had purchased bulbs on credit, hoping to repay their loans when they sold their bulbs for a profit. But once prices started to drop, holders were forced to sell their bulbs at any price and to declare bankruptcy in the process.

So people had begun buying tulips with leverage, using margined derivatives contracts to buy more than they could afford. But as quickly as the run-up began, confidence was dashed. By the end of 1637 is when prices began to fall and never recovered.

 

And the bubble burst.

Buyers announced that they could not pay the high price previously agreed upon for bulbs, and that made the market fall apart. 

While it wasn’t actually a devastating occurrence for the entire nation’s economy, it did undermine social expectations. The event destroyed relationships built on trust and people’s willingness and ability to pay.

It’s been said that “the wealthiest merchants to the poorest chimney sweeps jumped into the tulip fray, buying bulbs at high prices and selling them for even more.”

Well, this is what can happen - today it happens with financialization and nothing real backing up purchases.

Tulipmania is a model for the general cycle of a financial bubble. That’s what happened with Dutch tulips.

Now, here in more recent times, similar cycles have been observed in the price of Beanie Babies, baseball cards - I got caught up in the baseball cards as a kid, owning more than 100,000 baseball cards at one time, also non-fungible tokens (NFTs), and shipping stocks.

 

 

 

The example of tulipmania is now used as a parable for other speculative assets, such as cryptocurrencies today or dotcom stocks from around the year 2000.

So, when you hear someone likening an investment to a Dutch tulip bulb, now you’ll know what they’re talking about. It’s a symbol of excess, greed, and FOMO.

But there has been a good bit of more modern scholarship that tells you that tulip mania did indeed occur in the 1600s Netherlands. But that the tale has been exaggerated and it’s something that the upper classes of society were mostly involved in.

Now, that’s the Dutch tulip bubble. But for a more modern-day parable about an investing mania, there’s a new movie about the rise & fall of BEANIE BABIES that’s on Apple TV+.

These were little stuffed, plush toy animals that became more popular among adults than children.

The rise and fall of Beanie Babies—toys that people mistakenly thought would make them rich. The movie is called “The Beanie Bubble”. 

It’s a MOSTLY TRUE account of the lovable toys’ boom and bust in the ’90s -  comparable to the meme stock frenzies that took place during the Covid-19 pandemic.

These $5 pellet-stuffed plush toys had astronomical appreciation estimates: Stripes the Tiger, released in 1996, was predicted by collectors to surge from $5 to $1,000 by 2008. 

Forecasts like these were so enticing that one dad invested his kids’ college funds in Beanie Babies, thinking he’d resell them later for a hefty profit.

At the height of the frenzy, people were ruining relationships and committing felonies to get their hands on some of these sacks of fuzz.

  • Border officials confiscated more than 8,000 smuggled Beanie Babies at a US–Canada border crossing in 1998.

  • A West Virginia man shot and killed a former coworker in 1999 after an argument partly about $150 worth of Beanie Babies.

  • That same year, a divorcing couple couldn’t agree on how to split up their collection, so the judge made them divvy up the toys in person, right on the courtroom floor.

How did that all happen?

Barely anyone cared about Beanie Babies when a company called Ty Inc. launched them in 1994. Stores only got lines out the door once the toy’s creator, now-billionaire Ty Warner, began pulling strings to juice demand. Here’s what Warner did. OK, so here’s how you induce people into a speculative bubble.

  • He refused to stock Beanie Babies at Toys R Us and Walmart. Instead he created an illusion of rarity by only selling them at small toy stores and independent shops.

  • Even if you did find a retailer, every store’s supply of Beanie Babies was limited to 36 of each animal, so inventory restocks drew a crowd.

This, combined with Warner’s decision to start “retiring” certain animals in 1995, created artificial scarcity and a mass panic to stock up on Beanie Babies. 

Soon, an aggressive resale market was born, replete with magazines and blogs and even trade shows for these Beanie Babies.

One woman’s guide to the secondary Beanie Babies market got so popular that she was selling 650,000 copies per month and, on many days, she did two or three radio interviews before her kids woke up for school. Ty Inc. later gave her an award for boosting sales.

At Peak Beanie mania, Ty Inc. and legions of speculators actually made hordes of money:

  • The stuffed animals accounted for 6% of eBay’s sitewide sales in 1997 and 10% in 1998. Beanies averaged a resale value of $30—six times their retail price—but rare ones, like the Princess Diana bear, went for hundreds or thousands of dollars (and now you can find one online for $15 bucks).

  • Ty Inc. hit $1.4 billion in sales in 1998, which is what Mattel grossed in Barbie dolls in 1995. At the end of the year, Ty Warner gave all ~250 employees holiday bonuses equal to their annual salaries.

But most regular people didn’t sell their Beanie Babies at their peak price. And unfortunately for them, the hype subsided. Anticipating a drop in interest as more kids reached for Pokémon and Furbies, Ty Inc. announced it would stop making Beanie Babies at the end of 1999, and that poked a hole in collectors’ this-will-never-not-be-popular mentality and that sent demand plummeting.

There were no underlying fundamentals to Beanie Babies’ value. That’s all that I’ve got on that speculative craze.

 

So let’s review how this happened with both speculative crazes - Dutch tulips and Beanie Babies:

  • Investors lose track of rational expectations.

  • Psychological biases lead to a massive upswing in the price of an asset or a sector.

  • A positive-feedback cycle keeps inflating prices.

  • And soon, investors realize that they are holding an irrationally-priced asset.

  • Prices collapse due to a massive sell-off, and an overwhelming majority go bankrupt.

Now, much stock market investing is based off of buy low and sell high mentality. And stock investors can get caught up in similar crazes. 

 

But because many stocks are tied to productive companies, the stock investor deals with smaller bubbles. A lot of times, the stock price can double, triple, or even 10X even though that company is not even profitable.




Buy low & sell high. Well, that sounds easy. But why is this harder to do than it sounds? It's called the cycle of investor emotions.

 

It starts here with… optimism. Because you HEAR about 10% stock returns or people making money with Dutch tulips or Beanie babies. 

 

Let’s say that you aren't fully invested in the stock market. But some friends are, and they're achieving small gains.

 

Then comes excitement. The market is now up some more. Hey, what’s in motion tends to stay in motion.

 

More friends are telling you how much money they're "making". 

 

You're soon experiencing a full-blown case of FOMO—Fear Of Missing Out.

 

The next stage is the Thrill you feel. So you jump into the stock market fully, rationalizing with something like, "Hey, I'm a momentum investor". Sounds pretty good, I guess.

 

Now that you’re in, it actually feels fantastic to you for a short time. You figure that some days, you're making more from stocks than your job. Winning activates dopamine. 

 

Dopamine is a brain chemical that’s known as the “feel-good” hormone. It gives you a sense of pleasure. It also gives you the motivation to DO SOMETHING when you're feeling the pleasure. 

 

So then, you add MORE shares… at an elevated price until you are FULLY invested. Now everyone is "making money", even your Uber driver.

 

The next stage is Euphoria - The peak! As you can see, this is the Point of Maximum Financial Risk. 

 

OK, now, remember the simplicity of “buy low, sell high”?

 

Well then, savvy stock investors should now be SELLING here in my example - at the HEIGHT.

 

Now be “selling”? Leaving the party at its crescendo? Stopping the dopamine flow? Yes, exactly… and THAT’S why it’s so difficult. 

 

What happens after the stock market peak? Overbought, with bloated price-to-earnings ratios, the market soon drops 10% from its recent high. 

 

That’s what’s known as a correction - a drop of 10% or more. Now you feel a little ANXIETY. Your dopamine flow is stifled.

 

Next, you tell yourself, "I shouldn't be worried because I'm a long-term investor." It's down 15%. You're experiencing DENIAL & FEAR.

 

Now you're checking the Robinhood app almost hourly to see if it will recover.

 

Next, comes Desperation & Panic - Stocks are down 20%, that’s the definition of a bear market. You're devoting more mindshare to this each day than what's healthy.

 

Then there’s Capitulation - Down 30%, you finally surrender to a FEAR of FURTHER LOSS. You’re getting so sick of months of losing. You finally do it and cash out your stocks into a safe money market fund. Now you’re out.

 

And you rationalize and justify doing this because you tell yourself, "You know, at least when I wake up tomorrow, I'll know that I haven't lost money AGAIN. And THAT gives me certainty.” 

 

The next stage in the Cycle of Investor Emotions is Despondency - You realize that what you've done is the polar opposite of successful investing. It’s complete. You’ve now bought high… and then sold low. 

 

Next, stocks completely bottom out. But this is actually the Point of Maximum Financial Opportunity. Instead, you should be buying.

 

But you can’t. Because you’re experiencing the next investor stage - Depression. You're so full of contempt for the situation that the idea of actually buying at bargain-basement levels again is simply inconceivable. You've been burnt badly.

 

Then, there’s Hope & Relief - The market has begun ticking up after the crash. It soon should be clear that share prices are FAIRLY VALUED again. 

 

But you don't buy the recovery story. You wait until enough price growth occurs that the confidence and Optimism stage is felt again before you’ll even consider getting back in and buying.

 

And the entire pattern repeats.

 

That's the “cycle of investor emotions”. There's an average of 3-and-a-half years between each stock bear market, BTW.

 

Of course, we've been kind to call this all “investing”. It's more like speculating.

 

But here's the real problem—most investors THINK they're better than average stock pickers, so they keep playing this game. This effect has a name. It’s called illusory superiority.

 

It's like how at least 70% of people think they're better than average drivers, despite the statistical impossibility.

 

Even professional money managers fall prey to this! Fewer than 10% of active U.S. stock funds manage to beat THEIR benchmarks.

 

The renowned British economist and value investor Benjamin Graham once said: "The investor's chief problem—even his worst enemy—is likely to be HIMSELF."



Well, as real estate investors, we largely SIDESTEP the cycle of investor emotions for two main reasons.

 

Returns are more stable.

 

Real estate, we sidestep this emotional roller coaster. Not only do we have stable prices, but appreciation is one of just 5 ways that you’re simultaneously paid.

 

RE also has monthly income. Dutch tulips or Beanie Babies don’t pay you a durable monthly income stream. They don’t provide an income stream at all.

 

And finally, RE is a REAL asset that fulfills a REAL human need.

 

I hope that you enjoyed this journey through speculative bubbles today and how they play into human psychology and investor emotions.

 

Go ahead and tell a friend about Get Rich Education.

 

If you’ve got a friend or family member that you think would benefit from the knowledge drops here on the show, you can simply tell them to grab the free Get Rich Education mobile app.

 

That’s a convenient option for listening every week for both iOS and Android.

 

My name’s Keith Weinhold and I’ll be back with you right here… next week. Don’t Quit Your Daydream!

Direct download: GREepisode463_.mp3
Category:general -- posted at: 4:00am EDT

Get our free "Don't Quit Your Daydream" Letter. Text 'GRE' to 66866.

Home prices fell three times since 1975. We explore the reasons why.

The homeownership rate is 66% today. (The long-term average is 65%.) I expect the homeownership rate to fall due to low affordability, which will increase renter households.

If you have dollars in a savings account that pays 5% interest, I describe why you’re losing prosperit.

Our Investment Coach, Aundrea & I discuss the state of the real estate market.

Then we discuss our upcoming live event for new-build Utah fourplexes. They produce cash flow, have great tenant amenities and come with built-in equity. This area is extremely fast-growing: Register here.

Timestamps:

National Home Prices Fall and Causes [00:00:01]

Discussion on the historical trends of national home prices, the causes of price falls, and the impact of the 2008 global financial crisis.

Housing Affordability Crisis [00:00:50]

Exploration of the current state of housing affordability and the impact of the pandemic on home prices.

Upcoming Real Estate Event [00:01:44]

Announcement of an informative live real estate event that listeners are invited to join.

The current state of housing affordability [00:11:45]

Discussion on the challenges faced by first-time homebuyers due to higher prices, mortgage rates, and lending requirements.

Homeownership rate trends [00:13:11]

Analysis of the historical homeownership rates, including the impact of aging population and low affordability on the rate.

Future outlook for homeownership rate [00:19:40]

Prediction of a decline in the homeownership rate below the current 66% due to poor affordability and increasing number of renters.

Rental Market Overview [00:24:10]

Discussion on the current state of the rental market, including cash flowing properties, stable prices, and limited inventory.

Demand for Investment Opportunities [00:26:14]

Exploration of the demand from investors who are looking to invest their existing equity and the regions they are interested in, such as the Southeast and Midwest.

New Build Income Properties [00:28:14]

Introduction of a provider offering new construction fourplexes in the Intermountain West, discussing the market growth, population demographics, and amenities of the properties.

The opportunity for new build properties in a fast growth area [00:34:59]

Discussion on the benefits of investing in new construction properties in a rapidly growing area with good cash flow.

The role of HOA in maintaining property values [00:36:04]

Explains how the integration of HOA (Homeowners Association) helps maintain uniformity and cleanliness in the rental property investing world.

Details about the upcoming real estate event [00:38:31]

Promotion of a live event where listeners can learn about new construction fourplexes and have their questions answered in real time.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/462

Join our Utah fourplexes live event:

GREwebinars.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

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Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Historically, just how often DO national home prices fall… and what causes it? 

 

Then, learn more about how TODAY’S housing affordability is absolutely awful. Then, our informative live real estate event that you’re invited to join. All today, on Get Rich Education.

__________

 

Welcome to GRE! From Pennsylvania’s MONongahela River to Mono Lake, CA and across 188 nations worldwide. I’m Keith Weinhold and you are listening to our one big weekly show. This is Get Rich Education.

 

"Real estate never goes down." 

 

Yeah, a handful of people actually told me those five exact words in the mid-2000s decade. “Real estate never goes down.”

 

Of course, 2008's Global Financial Crisis (GFC) and Mortgage Meltdown proved them ALL wrong.

 

And ya know what, I've never heard one single person utter those words since!

 

Late last year, national home prices took just a small dip for a few months on a m-o-m basis. That’s not something that often happens though.

 

So as minor as THAT was, that’s the event that actually precipitated the creation of this segment of our episode.

 

There’s a colorful chart that provides a… terrific visual of the month-over-month shifts in US home prices, per Case-Shiller, dating back to 1975. And if you’re one of our “Don’t Quit Your Daydream” letter subscribers, you got to see it last week.

 

Winston Churchill said, "The farther backward you can look, the farther FORward you can see." 

 

I don’t know that I’ve contributed anything quite that proverbial to the world on that exact subject yet. 

 

I just say that when it comes to future expectations, I favor "history over hunches".

 

So, before we look at WHY home prices historically fall, first of all, why go back to 1975 when we’re looking at a history of home prices. Why that slice of time, 1975 to present?

 

Well, that’s almost 50 years. It’s two generations, so it stops just short of your grandfather’s generation which was back when the dollar was still pegged to gold.

 

Here's what we can we learn from almost 50 years of home price history on a relatively untethered dollar:

Nominal home prices usually rise, but not always. This is NOT inflation-adjusted. That’s the first takeaway. Of the 500 to 600 little rectangles, that’s how many months there have been since 1975, they’re nearly all blue, which means prices rose.

Before we center on the red areas, which is when & where prices dipped…

The next thing I can tell you is that it shows that home prices are remarkably stable.

A SEASONAL fluctuation is quite apparent. Year after year, home price growth is weaker in winter and stronger in summer.

But do you know how many times national home prices have dipped since 1975? Any idea?

It is… three. Three periods of falling prices in the last… 48 years. Those periods were the erstwhile Global Financial Crisis period from 2007 to 2011, then that tiny dip that occurred in the last few months of last year. 

That was due to a late pandemic slowdown.

Before I tell you about the other time, that third time, that so few discuss, let me tell ya, the 2008 GFC went deep red. Most markets had losses of 20% or more.

I WAS an active RE investor at that time.

And that downturn was caused by irresponsible lending, rampant speculation, and an OVERsupply of housing. That’s well documented.

Look around today, and we don’t have any of those conditions today. Today it’s tough lending standards, no wild speculation, and oppositely, as you know, it’s that STARK UNDERsupply of housing.

But few people seem to know about an earlier attrition in prices. It was a mild early '90s downturn. It was really small, just a percent or two per year in a lot of places, but it persisted for more than 5 years.

I think a lot of people DON’T KNOW about that small early ‘90s downturn, that’s why before the Global Financial Crisis, they said what we all know to be false, “Real estate never goes down.”

The start of the ‘90s. That’s before my time - I mean, I was alive but not old enough to be investing, so I had to do some research about what caused prices to circle the drain just a little.

And to boil it down, it occurred for two main reasons - it was from defaults created by high household debt and also, adjustable-rate mortgages kicking in, making those homeowners pay higher rates - and some couldn’t pay it.

So as we look back like Winston Churchill to get lessons from history, I like to look at today’s landscape and see if we have any of those two early ‘90s conditions.

High household debt? Well, rather, really this era’s aberration is the opposite condition. Today it’s households sitting on a lot of cash and equity.

And then the second reason for the early ‘90s price dip - adjustable rate mortgages kicking in. 

Well, that is affecting the commercial space, not the residential side, where homeowners have now been long accustomed to FIXED rate debt. 

Now, before we look into the future of home prices - and I’ve got some good stats there…

To summarize, the top takeaways from 48 years of looking at monthly HP growth are that:

  • Prices typically rise, not always

  • Prices are remarkably stable

  • Prices rise more in the summer than the winter

  • And that historically, let’s distill it down to three - three chief culprits for falling prices are an OVERsupply of homes, irresponsible lending, and a distressed borrower

Now, with housing, people tended to use the word “uncertainty” a lot - really, constantly, ever since the pandemic began in 2020. 

Now, I think that we can finally say that the clouds have begun to clear. Though, of course, we never have 100% clairvoyance.

Most everyone is confident that the majority of interest rate hikes are done, inflation has come down, mortgage rates are back at historic NORMS right now actually, and home prices are rising at historic NORMS again too. 

You have all this money sloshing around the economy that is still fueling consumer wealth from the pandemic.

All this money sloshing around AGAINST a low housing supply, and with more economic certainty. 

All this really has a lot of people more bullish than I’ve seen in a couple years.

Homebuilder confidence is really surging right now.

And looking into the next year, more and more analysts are now forecast increasing national home prices.

 

Fannie Mae recently revised their forecast upward to 3.9% appreciation for THIS YEAR.

 

CoreLogic now expects prices 4.3% higher from June of this year to of next year. And Zillow expects 6.3% price appreciation over this same time period.

 

And, our core investor areas have just kept climbing and really didn’t experience last year’s slowdown at all.

 

I guess this isn’t necessarily good news, right? The bad news might be that there’s no price BREAK.

 

Higher RATES still didn’t break the market.

 

Now, I’ve heard some analysts at real estate research firms speculate that if INTEREST RATES fall in the next year with all these other favorable conditions that 10% HPA is possible.

 

I’d say, that’s speculative alright. It’s so hard to predict future interest rates that I’m not willing to do it.

 

And like I’ve shared with you here, which is contrary to what people USED to believe, it’s that:

 

Mortgage rates really don’t have that much to do with home prices!

 

So when it comes to home prices over the next couple years, I think that the most commonsense expectation is slow price growth and stability.

 

Now, just wait until you see what’s happening with the homeownership rate today. I want to share that with you shortly.

 

Before we get back to RE, let’s Zoom out for a moment and look at the broader investing landscape while we’re here at mid-quarter.

 

Bitcoin is getting less volatile than stocks. That’s one trend lately. Another way to say that though, is that bitcoin prices are in a period of historic stagnation.

 

Gold has fallen from the $2,000 an ounce mark that it touched recently.

 

Oil prices have been on a multi-month tear, but you know, when you look at it on an inflation-adjusted basis, which so many people forget to do, oil at under $100 a barrel feels inexpensive.

 

Elsewhere in investing, some online savings accounts have hit the 5% yield mark.

 

That might sound good when you consider that inflation has backed off. 

 

But as most agree that the CPI is understated, if you think that the true diminished purchasing power of the dollar is 5% and your savings account rate is 5%, aren’t you at least treading water?

 

Well, first of all, just treading water means that you aren’t going anywhere or growing. 

 

But you’re not even treading water. Because don’t forget that your interest earnings on savings accounts get taxed. 

 

So it’s good to hold some liquidity - always. But you’re likely underwater with a 5% savings account in this era.

 

Yes, on your interest earnings, you’re taxed at your earned income tax rate, between 10 and 37%. Say that you’re in the 32% tax bracket. 

 

Well then, real inflation is 5% and your 5% savings account only yielded 3.4%. 

 

On an inflation-adjusted basis, even if you happen to have a savings account with a yield that high, your inflation-adjusted return is negative 1.6%.

 

That’s why, here at GRE, we typically invest in vehicles that target returns VASTLY exceeding both inflation and taxes.

 

As much as that might hurt, you know who today’s real estate market is actually really bad for? Even worse for the saver that isn’t even treading water.

 

It is downright AWFUL out there for those wannabe first-time homebuyers.

 

They are looking at this triple-headed monster of higher prices, higher mortgage rates, and stringent lending requirements. And then if they overcome ALL that, they’ve got to compete for that tight supply.

 

It’s made affordability for people in THAT position really awful. 

 

In a lot of markets, a starter home is $400K. With your 20% down payment plus closing costs, that’s $100,000 out of pocket, right upfront, as well as your ongoing monthly payment… all for an asset that doesn’t generate income when it’s your HOME.

 

Well, that’s an insurmountable hurdle for a lot of people.

 

This low affordability moves people out of the homebuyer class and adds them to the ranks of the RENTER class. 

 

Well, there's our opportunity as landlords.

 

You aren’t preying on them. You’re risking your capital to provide good housing for them. 

 

But curiously, the HOMEOWNERSHIP RATE is actually just a touch higher than usual right now, despite souring affordability.

 

So, let’s take a look at this. And then I’ll break down what it means to you as well as where we’re headed.

 

Since 1965, the average homeownership since 65% and currently, it’s 66%, running a little high.

 

BTW, homeownership peaked at 69% in 2004—that's back when you could outright lie about your income, job, and assets, and still get a mortgage. Many people did just that. NINJA loans.

 

When you hear the acronym, NINJA loans, what that stands for is no income, no job, or assets.

 

Well, you either rent your home or you own your home. It’s one or the other. 

 

So then, today's 66% homeownership rate means that everyone else, 34%, are renters. 

 

When the homeownership rate drops, then you’ve got more renters.

 

The low point for homeownership was in 2016 at 63%. 

 

It’s grown since then, and you might wonder… how in the heck is homeownership above average today in the face of this low affordability? How is it 66%.

Well, there’s a few reasons for that and it’s not always intuitive. America’s population keeps AGING. 

And that skews figures… because homeowners tend to BE older.

Secondly, incumbents - those that already GOT their home have really low, affordable payments. They’re not going to lose their home & become renters. 

80% of borrowers have a mortgage rate under 5%. You’re really happy to stay put when your mortgage rate begins with a “4” or less - and you can also keep making the payment. 

It’s a payment amount that does not rise with inflation.

That introduces a lag effect in the stats. It’ll be a little while until this low affordability gets reflected in a lower HO rate.

There’s a low FORECLOSURE rate, under 1%. Americans can afford their payments and they have the motivation to keep making them.

Now, over on YouTube, I shared a great map with you, the Homeownership Rate by state and broke that down. Join us over there. On YouTube, we’re called “Get Rich Education”, of course. I host THAT show and it’s different from THIS show.

What’s the trend here? Well, HO is highest in low cost states like the Midwest and Southeast, and HO is lower in high cost states. 

WV has the highest rate at 78%... because it’s low cost. 

NY has the lowest HO at 54%... because it’s high cost. NYC drags down the number for upstate NY.

 

So where are we headed? In the future, I expect a NATIONAL DROP in the homeownership rate.

 

This is because few expect property prices or mortgage rates to fall significantly. Lending requirements should stay strict. 

 

So it’s the awful FTHB affordability that will continue to take homeownership lower. 

 

See, FTHBers are also exactly the type of people that often have student loan debt repayments to make… if they ever have to begin repaying them. 

 

That’s also going to make it tougher for people to clear that affordability bar. They’re going to keep being your renter.  

 

And that's why I expect the homeownership rate to plummet below 66% where it is now, and then below the long-term average of 65% by 2025 or 2026. That’s where we’re likely headed if market forces prevail.

 

Depending on who our president is in 2025, government relief programs are just about the only thing that I can see getting in the way of a declining HO rate.

 

Household FORMATION is high right now… because you have sooo many Americans between ages 25 and 40.

 

So that question you’ve got to ask is - is that new HH going to be formed as a OO residence or as a rental?

 

Increasingly, it’s gonna be a rental because of that continued poor affordability.

 

See, for a ton of people, if they didn't get their ultra-low rate mortgage the past couple years, then, well, it’s too late. 

 

That era is over and that’s why their affordability ship has sailed. That ship has passed. It’s gone.

 

And that's why more RENTERS are being made every single day.

 

So if you’re a LL, this is expected to both increase your occupancy rate AND the amount of rent that you can charge.

 

Carefully-chosen rental property is really where today’s opportunity is.

 

I’ve got more on that shortly, as I’m about to bring in one of our two Investment Coaches.

 

You know, you’re telling us that you find it so helpful to have free one-on-one coaching with them, either Aundrea or nuh-RAYSH. 

 

Both coaches have their MBAs. When you read their bios on our Coaching Page, they’ve got some impressive international corporate experience.

 

But they both live right here in the USA and they’re active REIs themselves - that’s really how they help get you started and connect you with the right market and property.

 

It’s an in-house conversation with an IC & I straight ahead and we’ll discuss how we can help you.

 

I’m Keith Weinhold. You’re listening to Get Rich Education.

__________________

 

Aundrea talked about cash flow. OK, that exists. Great. Yet, I still think of these as better for appreciation than cash flow over time. She’d probably agree.

 

Maybe you’re thinking a brand new construction duplex in the path of progress IM West could cost $1M or $2M, but no, this builder provides them for less than that. 

 

And then, of course, you’re probably going to finance most of that cost yourself too.

 

And, BTW, Aundrea did smile at my dorky joke about her loving rap music. A big smile that you couldn’t see through the audio-only podcast here. 

 

But, yeah. You didn’t quite hear a laugh. See, one prerequisite to laughing is that a joke actually be funny.

 

In any case, Aundrea and the provider are your two co-hosts on Wednesday.

 

The provider is a powerhouse of knowledge about not just real estate and demographics and fourplexes, but construction and financing too and everything that goes into it in order to optimize the investor experience for you. 

 

HE can answer questions in real-time for you.

 

It is almost time for the Beehive State to shine as Utah is front, center and under the stage lights on GRE’s Live Event in just two days.

 

You are cordially invited to join… as long as you don’t ask Aundrea about rap music. 

 

But, really. When you put this all together - a 4-unit building is the most that you can get with best financing terms, the cash flow, new construction, often this BUILT-IN equity at purchase time too, a fast population growth market, all inside a demographic population in Utah that’s young and has good incomes… it’s really quite remarkable. Quite a confluence.

 

We haven’t had an event for a product type like this before, and I don’t know if we’ll ever have an event quite like this again. 

 

Attend live to get your questions answered and get the first look at the inventory.

 

But if you can’t make it on Wednesday, then sign up anyway and we will effort to get the replay link for you.

 

You can do it all at: GREwebinars.com

 

Until next week, I’m your host, Keith Weinhold. DQYD!

Direct download: GREepisode462_b.mp3
Category:general -- posted at: 7:20am EDT

Sharply higher insurance premiums are affecting property owners nationwide. It’s especially bad in: CA, LA, FL, TX and CO.

This is due to erratic weather (climate) and higher rebuilding costs. 

Phenomena like an increasing intensity and frequency of hurricanes, tornadoes, wildfires, and floods are sending some insurers out of business.

State Farm and AllState completely stopped issuing new homeowner policies in California.

Some areas are on the brink of becoming completely UNinsurable. In that case, the only sales that could occur with all cash buyers.

Learn three techniques to keep your skyrocketing insurance costs lower.

As you’ll learn today, landlords have more options than homeowners for navigating spiking insurance rates.

Then, listen to a CNBC clip along with me about how the end of ZIRP (zero interest rate policy) affects your life and investments.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/461

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. First, I’m going to help you make your real estate more profitable in the near term as I discuss how to deal with skyrocketing property insurance costs. 

 

Later, I’ll inform your strategy about your long-term, overall personal finance as we talk about what the end of free money means in this new era of higher interest rates. Today, on Get Rich Education.

____________

 

Welcome to GRE! From Tirana, Albania to Albany, New York and across 188 nations worldwide, I’m Keith Weinhold and you’re listening to Get Rich Education.

 

This is how real wealth is built in the real world with real estate. We aren’t day traders. We are DECADE traders.

 

And we do that with the right mission. Let’s invest directly in America - own real property in American neighborhoods, and provide housing that’s clean, safe, affordable and functional.

 

And when we all do that, we can abolish the term “slumlord”.

 

Conversely, what do some people think about first? Themselves.

 

[RIC FLAIR CLIP]

 

Ha ha ha! Over the top with some vintage Ric Flair. There’s nothing wrong with living well. But that best comes as a byproduct of serving OTHERS first.

 

Let’s talk about the SKYROCKETING cost of property insurance. Why it’s happening, what MY experience is, and what you can do to manage it.

 

First of all, and I hope that none of my insurance agents are listening, but why would you ever work in the insurance industry? 

 

And I kid. But that’s got to be one of the most boring industries to work in.

 

What 15-year-old ever says that when they grow up, they want to be an insurance broker? Nobody.

 

But, in any case, it is a STABLE industry because there will long be a need for insurance.

 

But, I mean, even your customers - the policyholders like us - we don’t really want insurance.

 

Insurance ads all say the same thing: “Switch and save.” No one has seen an advertisement from this industry that says, “Upgrade for better coverage.” 

 

That’s because so many people just want the minimum coverage and want to get on with their lives… until a calamity occurs.

 

But now, the insurance industry has gotten SOMEWHAT more interesting lately, the effects of which center around erratic weather… maybe you like calling it climate change, maybe you don’t.

 

But suffice to say, if erratic weather persists, then it’s no longer erratic, rather, it is, in fact, a pattern, and then, a change in a region’s climate.

 

The intensity & frequency of storms is increasing. I’m talking about weather phenomena like hurricanes, floods, wildfires, tornadoes, and even high snowfall. 

 

Inflation also means that there are rising COSTS to rebuild. 

 

And RE-insurance costs are higher. Yes, your insurance company gets insurance from insurers themselves, called re-insurance. Re-insurance companies insure insurers.

 

Everyone knows State Farm’s jingle. “Like a good neighbor, State Farm is there.” No, State Farm is gone. 

 

State Farm is the largest home insurer in CA. So they’re the largest home insurer in the most populous state.

 

Well, you might have heard a few months ago that they’re completely stopping issuance of new home insurance policies in all of CA. And AllState followed shortly afterward.

 

Persistent wildfires are a culprit there.

 

Insurance companies can’t make any money so it’s hard to blame them.

 

Well, why don’t they just, say, double their premiums? Some sure have. Others can’t because of competition for lower rates from other companies. 

 

But a lot of SMALLER insurance companies - including many in Florida - have done just that. They’ve gone out of business… and when there are fewer companies in business - less competition - that’s when rates can get jacked up high.

 

Insurance rates are up the most in many of the states that have the greatest incidence of hurricanes, floods, and wildfires.

 

What are the states where rates are rising most? 

 

CA, LA, and FL. And after that, TX and CO too, and some other states. 

 

TX is one state that’s subject to both hurricanes and tornadoes - hurricanes in SE Texas - Galveston, Houston and Corpus Christi.

 

And tornadoes in NE Texas, like Dallas-Fort Worth.

 

So, when hazards happen, losses can occur. That’s why your lienholder - your mortgage holder - forces you to have insurance. They require you to have it because they’re not willing to take that risk.

 

Louisiana’s problems with insurers REALLY compounded a few years ago when Hurricanes Delta, Ida, and Laura hit the state. That created a true crisis in Louisiana’s insurance market. 

 

A lot of insurers just left with $24B in insurance claims during that period. Others in Louisiana stopped issuing new policies and increased the premiums on the existing insured homeowners.

 

Now, I’m going to center on the homeowner’s insurance problem in Florida soon, because Florida is a popular investor state, I own a lot of rental properties in Florida and I’ll tell you about my personal insurance experience there shortly. 

 

When it comes to wildfires - which are often spurred by hot, dry, and windy weather conditions, some areas are on the brink of becoming completely UNinsurable. 

 

California has a bunch of regions like that. And other places like Bend, Oregon and Boulder, CO are in danger of insurance denial because the homes are surrounded by forest. 

 

If that happens there, the only resale market for the properties would be to all-cash buyers, unless the state ever comes in to buy them out since people were ALLOWED to build there in the first place.

 

Now, notice that I haven’t mentioned earthquakes yet. Earthquakes aren’t related to the surface weather like hurricanes and wildfires and these other things are.

 

Earthquake insurance, which many people have in places like CA, WA, OR and AK is often a completely SEPARATE policy from your standard homeowner’s policy and EQ insurance is prohibitively expensive.

 

Besides that, their deductibles can be high, like 10 or 20%. If an earthquake completely destroys your $500K home and you have a 20% deductible…

 

… then to even make a claim, you’d need to come out of pocket $100K first - plus you’d be paying high premiums all that time just to have that condition!

 

Anchorage, AK had a big magnitude 7.1 earthquake back in 2018. 

 

I was in Anchorage when it happened and I told you about that here on the show back then. I was pretty shaken up. 

 

At the time, I owned dozens of apartment units in Anchorage. I don’t anymore. I had, maybe $40,000 of out-of-pocket cosmetic damage that I had to pay from that one earthquake.

 

Lienholders DO not make EQ coverage a necessity, and 25% of Anchorage homeowners had coverage before the quake. It went up to 35% afterward.

 

Fortunately, the top cash flow REI areas don’t tend to be in the west coast of the United States.

 

So, how high have some of these insurance premiums gotten in states known for disasters?

 

Well, the average is about $225 per month in LA. In TX, it’s $250 per month on their average $300K home, and in Florida it’s about $325 monthly on a $300K home. 

 

Of course, that’s going to vary by what region of the state you’re in and distance from the coast and such.

 

One weather phenomena that I haven’t seen any evidence of in contributing to higher insurance costs is heat itself. 

 

This summer, Phoenix hit a new record for consecutive days that exceeded 110 degrees Fahrenheit. That went on for weeks on end.

 

But heat in itself, and its resultant air conditioner use and power load - is not something directly attributable to escalating insurance costs, unless power load problems start a fire.

 

Now, you keep hearing about climate migrants moving to more northerly places with access to a lot of fresh water like Minnesota, Michigan, and Wisconsin.

 

But these stories seem to be largely anecdotal and of little impact.

 

The faster-growing areas continue to be in the Mojave and Sonoran deserts - that’s Las Vegas and Phoenix - places with lots of heat, rising heat, and dry conditions. 

 

And despite what you might think, they’re not going to run out of water anytime soon. 

 

Those deserts actually have a lower incidence of natural disasters too, which is one reason why they’ve built new microchip plants in Phoenix. 

 

Climate migrants moving north might be a thing at some point - but it still is not.

 

Well, speaking of hot in-migration states, Florida has had a LIGHT hurricane season so far. But that’s not the kind of thing that we can count on for long.

 

Rates have gone up more than 50% throughout the state of Florida, with ALL insurance carriers. 

 

Carriers are either pulling out of the state (because its not profitable for them), or they’re increasing rates across the board, or they’re not renewing policyholders.

 

Now, I’ve had my rates hiked up on my Florida properties more than once. 

 

There, it’s often because an insurance company goes out of business due to too many claims, and then I have to switch to another landlord’s policy carrier that always has higher rates.

 

So here’s what happens. I get a notice in the US mail that my current insurer on a Florida rental SFH - call them Insurer A - is going out of business in 5 months and that I have 5 months to find a new insurer - call them Insurer B.

 

So I take a photo of that notice and forward it over to my Florida insurance agent and ask them to give me quotes for my new prospective Insurer B. 

 

Now, say that if you don’t do that. 

 

If you don’t ask your insurance broker or agent to get you a new policy, if you don’t act, here’s what happens.

 

Say that the 5-month deadline approaches and you still don’t have new coverage lined up.

 

Your mortgage holder, call them Wells Fargo or Chase, they’ll send you a notice in the mail and remind you that it’s required that you have insurance in place – because Wells Fargo or Chase doesn’t want to be on the hook for the risk… and if you don’t get a new insurer - Wells Fargo, say, will buy a policy FOR you & make you pay it.

 

And the insurance that they buy for you will have lesser coverage and cost way more.

 

It seems like, whoever the bank is, they always tell me that they’re going to buy me an ultra-pricey policy with Lloyd’s of London.

 

So again, it doesn’t entail too much work on your part. If your insurer is going out of business or just doesn’t want to issue you a new policy, share that notice with your insurance person and ask them for new quotes. That’s a quick, easy thing to do.

 

And then, when you switch insurance companies, your PM must submit photos of your rental home to the new insurer within something like 15 days.

 

Over the past few years, I think I’ve had Florida properties where the premiums have been hiked up steeply twice. I seem to remember a complete doubling a year or two ago.

 

More recently, I had 30% rate increases on some of my Florida rental properties.

 

So how much am I paying now? Well, on one Florida rental SFH that has a market value of about $300K, I’m paying $330 per month. 

 

Of course, for your long-term rental properties, your landlord insurance contract should provide what’s called “loss of rents,” coverage.

 

That’s something that OO homeowner’s policies don’t have. 

 

That means that if your property is damaged and your tenants are displaced, your insurer pays the fair market rent to you since the tenant won’t. That’s typically capped at 12 months.

 

On your STRs - like AirBnBs and VRBOs, the coverage that you want is called “lost business income” with no time limit. And that might take an upgrade to a commercial insurance policy for STRs.

 

Alright, so let’s get to something actionable. We are real estate investors for the production of income.

 

So amidst what are perhaps UNPRECEDENTED increases in insurance premiums these last few years, how do you navigate this, and what do you do to stay profitable?

 

Well, whether you’re an OO or a rental property owner, you can do things like make sure that your coverage is appropriate.

 

You can raise your deductible amount to reduce your annual premium, of course.

 

The more financially strong that you are, the higher you can make your deductible because the less a claim is going to impact you.

 

But as a rental property owner, you have a FEW LEVERS that you can pull that OOs cannot.

 

The big one - is that this is your cue to RAISE THE RENT.

 

Yes, higher insurance premiums point to raising the rent. 

 

Really, this is like a game of hot potato… and it is your job to pass along the potato. That’s all that you’re doing here.

 

See, the reinsurer raised rates on your property insurer.

 

Your property insurer is raising the rate premium on you, the property owner.

 

Now it’s your job to pass along the hot potato to the tenant in the form of a rent increase.

 

Then your tenant has to pass along the hot potato by asking their employer for a raise or finding new employment.

 

And it keeps going, now your tenant’s employer needs to pass along the higher labor cost in the form of raising consumer prices on the goods or services that they produce… and it continues throughout the economy.

 

That’s how inflation works.

 

It’s your job to pass along the hot potato.

 

What if the tenant leaves? Well, there’s always that possibility. 

 

But if they go to rent or buy a “like” property, it’s still going to have the same higher insurance cost that they’d have to pay.

 

For help with that, and this is the second time that I referred back to this recently, in Episode 449, just twelve weeks ago, I provided you with 12 ways to raise the rent. Again, that’s Episode 449.

 

You always want to provide a REASON to the tenant about why their rent is increasing, say 5% in this case for example.

 

Nothing beats the truth. Your insurance costs are higher. That’s the reason.

 

Now, you might be wondering, if, say, insurance costs just rose 30%, like they did on one of my own properties recently, then how is a 5% rent increase going to offset that?

 

That’s because your rent amount is multiples more than your monthly insurance amount.

 

If your rent on a property goes from $2,000 to $2,100, that’s just 5%, but it’s a $100 increase in your income.

 

If your monthly insurance cost goes from $200 up 30% to $260. That’s a $60 decrease in your income.

 

You have a $100 gain from rent and just a $60 deduction from your insurance increase, and you’ve more than offset it. It’s THAT effect.

 

Now, what if your numbers don’t work for raising the rent though? As an income property owner, you have other levers that you can pull that are less palatable as an OO.

 

That is, can you sell the property? If you’re in SFRs, there is a big buyer appetite for them.

 

And in just the past three years, there’s been so much appreciation that you might have a lot of equity such that you can trade it up for 2 SFRs.

 

Now, new-build properties in a place like Florida have substantially lower insurance costs than older properties, because new-build properties are built to more stringent wind resistance requirements.

 

So you might trade up your older, existing Florida property in this case for a new-build property that has lower insurance deductibles.

 

Insurance costs ALONE rarely drive investment decisions. But it’s the fact that you’d get to reposition dollars at a higher leverage ratio at the same time.

 

But now, if you’ve owned the property for, say 2 years or more, you might lose your ultra-low rate mortgage that you got a few years ago.

 

You need to run some numbers and see if it’s worth giving up your low mortgage rate in order to get more leverage and lower insurance premiums. That’s the trade-off.

 

See what works best for you.

 

So, your first lever is clearly to just raise the rent on your existing properties that have higher insurance rates.

 

To summarize what you can do to meet higher insurance premiums is:

 

#1 - Raise the rent. #2 - Tilt your portfolio into more NEW-BUILD properties in some markets, and #3 - Increase your deductibles.

 

They are the actionable takeaways that I really wanted to share with you today. 

 

Keep investing. Tweak your strategy where you need to. Be sure that your tenants are taken care of.

 

And after that, remember, that it’s common that when you have an insurance CLAIM, that you often profit from the event when your claim pays more than your actual losses were.

 

Coming up shortly, the 15-year Era of Money for Nothing is Over. How does this new era look and how do you adjust to it?

 

There is more real estate news and more that impacts your personal finances every week that we can cover in one big, weekly show here.

 

Strip Malls are Hot (yes, really) Strip malls are hot, Old Houses are Now as Valuable as New Houses, and Zillow predicts 6.3% HPA from June of this year to June of next year.

 

More details on stories like that, as well as my breakdowns of developments like that are in our Don’t Quit Your Daydream Letter. You can get it free. Just text “GRE” to “66866”. 

 

Actionable real estate guidance, breaking news, and a dose of my dorky, cornball humor are all in the letter.

 

Get it free by texting “GRE” to 66866. More next. I’m Keith Weinhold. You’re listening to Get Rich Education.

_____________

 

Welcome back to Get Rich Education. This is Episode 461. I’m your host, Keith Weinhold.

 

The United States is entering a new economic era. 15 years of access to nearly FREE MONEY has come to an end.

 

Let’s listen in to this terrific CNBC compilation where you’ll hear the voices of a number of economists, reporters, and directly from people that used to work at the Fed… on what this all means with the end of Fed Funds Rates at zero - the good and the bad.

 

Some familiar voices that you’ll hear include CNBC’s Steve Leisman.

 

And, near the end, Former Fed Chair Ben Bernanke.

 

This is about 12 minutes in length and then I will come back to comment.

 

[CNBC Clip]

 

Let’s remember that economies work slowly. There are lag effects. The Fed began hiking rates in March of 2022.

 

And higher rates are only starting their job, not finishing.

 

Today, higher insurance premiums and a higher cost of MONEY (which is what interest rates are) are trends to navigate.

 

With both, if you’re a landlord, you can raise the rent. 

 

Longer-term, have that 30-year FIRD. Just that plain, vanilla loan in most cases. Nothing fancy. 

 

That’s because, living in the US has many benefits, like stunning national parks, seedless watermelon, and pizza with cheese baked into the crust.

 

But it’s got something even better, even better than fixing your rate for 30 years. It’s that ability for you to refinance as soon as rates drop.

 

You get to alter the deal whenever it’s best for you whenever you’re in residential real estate.

 

Well, at the end of the show, I’ve learned that you’re often thinking “I want more. How can I get more content like this without having to wait until next week?”

 

I often like to leave you with something actionable at the end. Get our Don’t Quit Your Daydream Letter. I write every word myself. You can get it free right now. Just text “GRE” to “66866”. 

 

Until next week, I’m your host, Keith Weinhold. DQYD!

Direct download: GREepisode461_.mp3
Category:general -- posted at: 4:00am EDT

In this podcast episode, Keith Weinhold and Kirk Chisholm discuss the differences between real estate and stock investing.

Kirk Chisholm is the Principal of Innovative Advisory Group. He provides his perspective as a wealth manager, emphasizing the control and lower risk offered by alternative assets like real estate. 

Learn the difference between risk and volatility.

We discuss risk-adjusted returns, liquidity, and the importance of understanding and managing risk. The conversation also covers cash flow, dividends, big tech stocks, and private mortgages.

Interest rates and inflation—we discuss their future. Kirk believes rates will stay at this higher rate for a long time.

Timestamps:

The Paradigm Shift in Interest Rates and Inflation [00:00:01]

Discussion on the new paradigm of interest rates and inflation and how it affects real estate and stock investors.

The Impact of Front Porches on Society [00:01:35]

Exploration of the impact of the disappearance of front porches on neighborhoods and communities.

The Definition and Management of Risk in Investments [00:05:50]

Explanation of how risk is defined and managed in different types of investments, including stocks, real estate, and alternative assets.

The difference between volatility and risk [00:10:21]

Explanation of the temporary price movements (volatility) and permanent impairment of capital (risk) in different investment assets.

The illiquidity of real estate and non-traded REITs [00:13:11]

Discussion on the illiquidity of real estate compared to publicly traded markets and the example of non-traded REITs during the 2008 financial crisis.

Importance of cash flow and dividends in stock investments [00:15:26]

Exploration of the two camps in stock investing: cash flow-driven investors and appreciation-driven investors, and the significance of dividends and cash flow in stock investments.

Dividend Stocks and Value Stocks [00:20:17]

Explanation of the difference between growth stocks and value stocks, with a focus on dividend-paying stocks.

Private Mortgages and Cash Flow [00:21:12]

Discussion on the benefits of investing in private mortgages and how it provides a passive income stream.

Default Rates on Hard Money Loans [00:25:48]

Exploration of the default rates on hard money loans and the industry's approach to mitigating risks for both borrowers and lenders.

The new paradigm of interest rates and inflation [00:31:32]

Kirk Chisholm discusses the shift in the economic paradigm from low interest rates and inflation to higher rates and a shrinking economy.

The impact of higher rates on mortgages and real estate [00:35:39]

Kirk explains how higher interest rates affect mortgage payments and housing affordability, leading to a decline in house prices.

The consequences of higher rates on corporate America [00:37:48]

Kirk discusses how higher rates can impact corporations, particularly those with short-term debt, potentially leading to bankruptcies and market clean-up.

Higher rates and recession correlation [00:39:55]

Discussion on the correlation between recessions and lowering of interest rates, and why it may not happen in the future due to high inflation.

Fed's focus on stable prices [00:42:48]

The Federal Reserve's prioritization of stable prices over high employment, within their dual mandate.

Interest rates and the economy [00:44:10]

The potential impact of higher interest rates on the economy, with a discussion on when the next recession may occur.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/460

Innovative Advisory Group:

www.InnovativeWealth.com

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

GRE Free Investment Coaching:

GREmarketplace.com/Coach

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:01) - Welcome to. I'm your host, Keith White. As a real estate investor, you are highly cognizant of your cash flows to stock investors. Even think about that and how we've now entered a completely new paradigm of interest rates and inflation and how to respond today on Get Rich Education with real estate capital Jacksonville. Real estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. GPB is ready to help your money make money and to make it easy for everyday investors. Get started at GWB Real estate. Agree that's GWB Real estate. Agree.

 

Speaker 2 (00:00:59) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Keith Weinhold (00:01:22) - What category? From Bogota, Colombia, to Wichita, Kansas, and across 188 nations worldwide. You are back in that abundantly minded place where financially free beats debt free.

 

Keith Weinhold (00:01:35) - And by now you might have already won the inflation Triple Crown. I'm your host, Keith Wild. Hey, Noah, is this a real estate problem? Philip Gulley, the author of Porch Talk. He said, I believe all that is wrong with the world can be attributed to the shortage of front porches and the talks we had on them. Somewhere around 1950, builders left off the front porch to save money, and we've had nothing but problems ever since. That's just the sort of thing that I think about now as you and I are enjoying the dog days of summer, as I trust that you are, you know, neighborhoods, property, it all used to be more wide open. The Pennsylvania house that I grew up in and that my parents still live in, it has a real front porch. And no one I mean, nobody has fences around their yard either. It is a real lemonade sipping chat with the neighbors vibe there that, well, seems to be more and more of a remnant of yesteryear.

 

Keith Weinhold (00:02:44) - I mean, gosh, from what I can see, there are more and more gated communities. Uh, people tend to get more concerned about security and that often means that they trade away freedom. Hey, well, our guest on the show today, he hits differently. And you're going to feel that because he's the principal of a firm that helps investors with stocks, bonds and mutual funds, as well as real estate investing. And it's not just REITs, real estate investment trusts, but more than that. And, you know, whenever he and I talk, we tend to get each other thinking in different ways, in shape, each other's opinions somewhat, as you'll probably see again today. He and I disagree on some things and we agree on others. I'm going to ask him about whether or not stock investors even care about cash flow. We'll be sure to get his insights on the direction of interest rates and inflation and more. Well, I'd like to welcome in our guest today he runs innovative wealth.com he's the principle and a wealth manager there at innovative advisory group.

 

Keith Weinhold (00:03:54) - They're based in Massachusetts but they advise well beyond any state borders. Hey it's been a few years. It's great to have you back. Kirk Chisholm Thanks for inviting me back. Keith. I was a little worried there didn't appear well in your show, but thanks for having me back. Yeah, well, it's been absolutely too long, and I really appreciate your perspective because they're with what you do. You're principal of a company that helps people invest in a big, wide palette of things, from stocks to private mortgages and some things with real estate and elsewhere. So you have this really broad view. So tell us what percentage of your business is is stocks, bonds and their derivative products like ETFs and mutual funds versus everything else? It's interesting because my industry is primarily focused on stocks, bonds and mutual funds. It always has been, probably always will be, in large part because they're easy to sell, They're publicly available information and everyone is can simply just click a button and get it done. So my industry tends to work towards lazy solutions or simple solutions.

 

Keith Weinhold (00:05:00) - Nothing wrong with that. You just have to know with what you're getting. It's funny, when we started our firm in 2008, we were doing a lot of private mortgages and we talked to the regulators at the time and they said, Oh, well, what percentage of your accounts in alternatives? Because we told them we did alternatives like what percentage of your accounts? And we said, Yeah, somewhere like 40 to 50%. You know, it probably ranges between 40 and 60. You could hear a pin drop in that room. I did pick the lady's mouth off the floor like she couldn't believe that. How quote unquote, risky that is. And she said the first question, she's like, are you serious? Isn't that really risky? And I started laughing and I said, risky? You mean like Worldcom, Enron, AIG, Tyco, You know, like Lehman Brothers, Bear Stearns? They just kept going on and on. She's like, all right, I get the point. And we had to define the concept of risk.

 

Keith Weinhold (00:05:50) - This is the part that your audience will appreciate, right? If you're investing in a company, it's been screened by the SEC. It's passed certain muster. It's SEC doesn't endorse it, but it's passed certain muster. You say, all right, I feel comfortable that this company's met the minimum criteria. That's not always the case. Right. Companies go bankrupt all the time. And we actually have a spike in bankruptcies most recently because of the economy. But if you look at piece of real estate, I can go walk up and touch it. I can go to the Registry of Deeds and see that I own it. I can talk to the maintenance guy or the property manager and see what's going on and have influence on it. I would say if you know what you're doing, there's a lot less risk. And I would say if you own a piece of gold, what's your risk? I could lose it. Somebody could steal it. The government confiscates it. That's pretty much it, right? It's not going to zero.

 

Keith Weinhold (00:06:37) - It's not going to the moon. It's just a rock. The way you define risk is really something that a lot of people don't spend time with is managing that risk. So a lot of what we've done is we've looked at it from a different perspective. What is the best investment given the criteria that we have, the markets we're in and the risk available? You know, what is going to do the best considering the risk as an example, Bitcoin or Ethereum or any sort of cryptocurrency, the risk is it could go to zero, right? It's not going to go below zero risk as you lose all your money or you might make 10 or 20 times your money, right? That is also possible. Both scenarios are probably on the extreme ends of probable, but either way, like you have to account for both scenarios and say is it worth it going to zero for me to make X amount of return? If the answer is yes, then it makes sense. If the answer is no, then don't invest in it or invest in a lot less of it.

 

Keith Weinhold (00:07:31) - So that's kind of how we look at risk and that's why we look across the board for alternative assets. We're very agnostic about the assets because it really just comes down to, is it a good investment or not? That's really the criteria we look at. Risk is what goes beyond the edge of your understanding. Think that's what applies to that conversation that you had that you brought up there earlier. Right. It's largely about one's risk adjusted return. You talk about with real estate how you have more control over an investment because you can get in there and understand it and change the operations of it in order to drive a return. And then stocks have this very efficient market where it's quick and easy to get in and out and things are more liquid. This very efficient market with real estate, there really isn't any app you can go on and be like, Oh, okay, well my duplex was up 3/10 of 1% this past week. That doesn't happen. That's part of the inherent inefficiencies with direct ownership of real estate, of course.

 

Keith Weinhold (00:08:32) - I would argue the point of efficient markets, the stock market is is not efficient, despite what the academics will tell you. It is more liquid. I would argue that real estate is illiquid, which is good and bad, right? If you need to sell, it's bad. If you're looking to buy and you don't need to buy, it could be really good. Stock market is very different in that it's claimed to be efficiently priced with all the known information at the given time. And the price is the price. And what I would argue is that's an interesting philosophical standpoint, but it's inaccurate, right? Because if all the information was known, then we wouldn't have volatility. But we do have volatility and the stock market is a forward pricing discount mechanism, right? So you look out six months and say, what's the market going to do? That's where the stock prices are six months from now, not today, six months from now. So whatever the market thinks is happening, they think it's going to happen then.

 

Keith Weinhold (00:09:26) - So if you look at interest rates, which I'm sure we'll get to, they're looking out six months and for the last two years I've noticed on the expectation of the yield curve, it's that, oh, rates are going to drop in the next 3 to 6 months and in 3 to 6 months it's going to drop in 3 to 6 months. Over and over, it keeps pricing out well, another 3 or 6 months. And I think that the market doesn't really look beyond that because it's really hard to predict. First of all, you can't predict the future anyway, but if you're probabilistically, going to try beyond six months is really hard because there's so many things that got to happen that changed the dynamics significantly. Talk about efficiency with stocks. I'm talking about how stocks are efficient and easy to liquidate. It's pretty easy to sell. And then over here in real estate investing, there is no panic selling because it takes quite a while to buy into sell. Therefore, that's some of the inefficiency of real estate compared to stocks.

 

Keith Weinhold (00:10:21) - We look at that through a liquidity perspective, right? So liquidity can be a good thing or a bad thing because when there's panic, selling, liquidity can lead to greater volatility like we see in stock. Yeah. And I want to point out two things here. So first is there's a difference between volatility and risk. And I think it's really important for people to understand the difference. So volatility is temporary price movements. It's how much the price fluctuates in any given day. Real estate investors don't see this right, But stock investors, Microsoft is up 5% yesterday. Nvidia's up like whatever, 70% of the day or whatever it was, 30 some odd percent in a day. That's volatility, right? You look at stock prices drop 30 plus percent in a short period of time. Technically, that should have been risk because the whole global economy shut down. But it turned into volatility because it went down and it came back up, actually exceeded the price of the start of Covid by the end of the year, which is insane to think about.

 

Keith Weinhold (00:11:20) - The whole world shut down. People are locked in their houses and yet the stock market is up. That is what I would consider volatility. Now, risk is what I would call a permanent impairment of capital. Now what that means is you buy a Beanie Baby at $100 because you think it's going to be worth a lot more. And then all of a sudden the Beanie Baby bubble crashes and never recovers and it turns into a $100 Beanie Baby into like a dollar. That's a permanent impairment of capital. That is a risk that you're not going to ever get your money back. You buy a I hate to swear on your show, but a beep coin that make up most of the cryptocurrency coins out there. They could all go to zero. I mean, you look at drawing a blank on the one with that. Elon Musk supports the dog dogecoin. Yeah, they claim this zero. It's a socially supported currency, but it doesn't have any value and they all admit it doesn't have any value. It's virtually worthless except for what people are willing to pay for it.

 

Keith Weinhold (00:12:15) - That has the potential to have risk in it because it could go to zero. But if I'm investing in GE, Microsoft, Apple, Johnson, Johnson, whatever, these companies that produce cash flow, they're solid companies with a long, long track record, they could certainly go to zero, no question. But typically the movements in price are volatility. Risk is when the chairman goes off, steals all the money and moves off to some island and people are left holding the bag saying, what's going on? You know, you look at AIG, Lehman Brothers, Bear Stearns, all those companies that basically made bad decisions, that is risk. That is not volatility. So it's important to understand the differences between the two, because if you don't, most people think of I am managing risk, I'm diversifying. No, you're managing volatility. Managing risk is completely different and you have to use different tools for that. Most people don't manage risk, they manage volatility. The other point I want to make is you mentioned the illiquidity of real estate.

 

Keith Weinhold (00:13:11) - And I want to point out an example which is kind of bordering the owning your own real estate versus, let's say, a REIT. I remember back in 2008, nine and ten when people were jumping out of the windows because they couldn't get rid of their illiquid non traded REITs. And I'm not a supporter of that of non-trade REITs or people jumping out of Windows. But in general, the non traded REITs market was interesting because technically they said you'd have quarterly liquidity, you could get a quarterly and normal times. That was true. They would just cash you out if you need money. However, when everyone's running for the door at the same time, they can't cash everybody out because they can't sell the property. So what do they do? They lock the doors, locked everybody in to burn alive. Well, the price went from, let's say, hypothetically, $100 down to $10 and people wanted out at any price. It didn't matter. They needed out. They need liquidity. Whatever it was, there were actually markets around.

 

Keith Weinhold (00:14:03) - You could buy people's shares of these non traded reach for like $0.10 in the dollar and people were willing to pay to discount 90% of the investment where you could have just walked in and purchased it and waited another five, seven years and you could have made 100 cents in the dollar. It's crazy. But that's one of the nice parts about real estate. And I'm using a security as an example because you can do that in real estate. But when you have the publicly traded markets, that doesn't necessarily happen, but it can happen in certain periods of time when the markets are completely irrational and everybody thinks the world is ending. Sure, that's a be greedy when other people are fearful, sort of seeing their I know their IT innovative advisory group. Since you do have this wide palette of offerings, you kind of have this broader view of things. I'm wondering, Kirk, a lot of people in that stock world, many of them concerned with cash flow or it might be dividend there, or are they even as interested in cash flow there with the kind of stock and mutual fund investments as they are over here in the real estate world where we're quite interested in cash flow? And then do they even take the dividends or do they just reinvest them, which is called a drip program dividend reinvestment program? How important is that to investors on the stock side? It's a good question.

 

Keith Weinhold (00:15:26) - So what tends to happen is people kind of fall into two camps, much like the real estate camp. Some people fall into the. Cash flow camp. Which is your camp? Which is my opinion. I think that's the best way to invest is cash flow appreciation. You're just taking a guess. But there are good amount of people that are appreciation driven. They don't look at cash, so they're happy to make zero cash flow for the expectation They're going to make lots of money and appreciation and look at them like, What are you thinking? Like, what if the cash flow declines? You're going to support the negative cash. Why do you own it? It's silly, but some people think that way. They think, Let's go for the appreciation. Let's roll the dice. Let's go. No whammies, you know? And what ends up happening is these people make mistakes because the real estate market, this usually happens at closer to the tops and people make bad decisions and they realize, oh, crap, I can't make this work.

 

Keith Weinhold (00:16:16) - I was trying to Airbnb this with a two cap, this not working. So now I need to sell this thing or I'm going to lose my shirt. I had these conversations all the time. So using that as an example, because that's where your audience will understand dividend investors the same. So a lot of people, when they're investing in stocks, they're looking at stocks as a way to make money. Most people want total growth, which really means in their mind, appreciation. What are the stock market do this week? What did it do this quarter? That's all people want to know. Well, what about the dividends? Well, actually, there was a time 40, 50 years ago when dividends mattered, you could get six, seven, eight, 9% dividends. Now, that's absurd to think about that. The only stocks that pay dividends of that nature are stocks that are highly speculative or the dividend is highly speculative. Market typically looks at dividends and if they don't trust the dividend will continue to get paid.

 

Keith Weinhold (00:17:08) - They'll actually discount the stock, which will make the dividend look real attractive. It'll suck people in to buy it and then they'll slash the dividend back to a rate that's normal. So people looking at dividend stocks, be careful because we're not in that environment where dividend stocks are all that attractive. If I can get a 5% close to zero risk US Treasury bond and I can compare that to a 2% dividend stock, I'll take the Treasury all day because it's close to guaranteed dividend stock. Maybe it goes up, maybe it goes down, who knows? But, you know, ultimately you're trying to solve a problem. The big challenge we have now, is any of this sustainable? Are the cash flows sustainable? Good value? Investors should be looking at cash flows. They should be looking at metrics and trying to find stocks that are at a good price that will pay them a handsome return over time. And the problem is, is we don't live in that environment much like the real estate market. It gets overheated because too many people are chasing too few properties and virtually everyone was putting all their money into 5 to 7 stocks on the Fantastic Seven or the Faang stocks or whatever you want to call it These days.

 

Keith Weinhold (00:18:18) - That name changes all the time. But the point is, you've got big tech that's driving most of the return this year. Think big tech made up 2,530% of the S&P 500 500 stocks. You have five stocks making up 25 to 30% of the index by size. And by return, it made up think the S&P was up 15%. And these 5 or 7 stocks made up 13% of that 15. Really crazy, crazy to think about. Right. But that's what people look at is the index. And the index is not necessarily accurate, but that's what people look at. So you have to gauge it by that. Most of the marketplace is chasing these appreciation returns. And like you have with real estate, you get the good with the bad, you chase appreciation. You can win or lose. I don't know where the future is going to be, but I know that if I'm chasing cash flow, I'm pretty certain I know where that's going. But if I'm investing in a tech stock that has negative cash flow, I have no idea where that's going.

 

Keith Weinhold (00:19:19) - Right. Could go up, could go down, who knows? But I look for stocks with good cash flow. I think if you're going to invest well, you want to find a legacy stock that you feel comfortable owning forever. Now, when it comes back to the Fang acronym, I tend to think Nvidia should be replacing Netflix in the Fang acronym about this time. But dropping back earlier when we were talking about dividends, I don't track this very closely, but last I checked, probably last year it seemed like the average dividend paying stock in the S&P 500 was something like 2%. Is that still about right? I think it's actually a little bit lower. I haven't looked at it in the last few weeks because it's gotten so low, it's almost not even worth looking at. I think last year was 1.77. As of right now, it's 1.47 on the S&P 500, 1.5%, which is insanely low for real estate investors. I think of the dividend yield in stocks as being synonymous with the cash on cash return in real estate.

 

Keith Weinhold (00:20:17) - But you said something earlier about dividends, Kirk, that I actually thought was the opposite way. I thought that dividend paying stocks tended to be kind of those older, stodgy or staid, like a utility company rather than a younger tech. Company. Yes, that is accurate. Yes, Most of the dividend stocks are what we would consider value stocks. So the terms growth, stock and value stock are actually don't mean anything. They're what everyone wants it to mean. What they tend to mean is growth Stocks tend to be stocks that are focused on appreciation. Value stocks are typically focused on cash flows or their stocks that are discounted, and you can buy them for good cash flow. But if you look at a stock like Microsoft, I mean, you got the dividend yield is about 75 basis points, 76 basis points as of today. So you're getting less than 1%. But Microsoft's one of the the Fang stocks, right, or Fang, whatever they're calling it now, they come up with a new acronym.

 

Keith Weinhold (00:21:12) - But some of these big tech Apple's fang of dividend so some of the big tech actually are paying dividends. Now what we're talking about, the production of cash flow or income from both stocks and real estate here. And one thing that I know you do in there and that you help investors with is private mortgages in producing an income stream that way. Can you tell us more about that? Is that where you have clients where you connect them with ways to make hard money, loans to real estate investors, for example? As we talk about here, I'm a big fan of cash flows and I have a few favorite asset classes and they're not the stock market, right? I love real estate. I love tax liens. Tax lien is by far my favorite. If you can get them the right way and the right price, which you can't, but if you could, that's one of my favorites for many reasons, but one of the ones that we do a lot of are hard money loans or private mortgages.

 

Keith Weinhold (00:22:05) - The reason I love it is because they're simple. If you're investing in real estate, it's not passive income. It's a business. You have to manage the business. You have a property manager, you've got tenants, you've got expenses, you've got taxes. All this stuff you have to deal with, which is fine. There's nothing wrong with that. But when people invest passively, it's not passive, right? It's active. It just happens to be a different business than one that you're selling widgets out of the corner store. If you're investing in private mortgages, you have to do your due diligence up front. But once you invest in it, you're done until you get paid back. It's like any sort of fixed income. It's a bond. It's fixed income is how I look at it now. For the past ten plus years, you couldn't get any rates on bonds, your fixed income, part of your portfolio, your treasuries, your corporate bonds, whatever you're buying, you're getting close to zero.

 

Keith Weinhold (00:22:54) - And there was a lot of risk. So we substituted these for our fixed income and you're getting 10 to 15% over the last ten years where the common rates and I like them because you're getting access to real estate. So real estate is backing the note. So it's a mortgage, right? So you're lending somebody else money at, let's say, 12% and they're going to pay you that 12% and give your money back at the end. And if they don't, you get their property. Now, personally, I don't want their property is too much headache because when I got to do foreclosure and go through all that, that's not the point. Some people do. Some people invest in hard money with the assumption they're going to own that property. And it's a great acquisition strategy. If you're so inclined. It's not you know, I have clients. I can't have that kind of business model. It's just too much of a headache for everybody. So we want people that are going to pay and pay on time and people are going to continually come back and I can work with versus having the lender investor that actually helps the borrower default so that they can get the property correct, which like I said, is a great investment strategy.

 

Keith Weinhold (00:23:55) - It's just not our investment strategy. And I think just like real estate, you can buy foreclosures, you can buy off MLS, you can build. There's so many different things you can do. Same thing with notes with paper. Paper is a great asset class if you know what you're doing. The challenge with private mortgages, hard money now is because everything is so expensive that these investors, these fixed and flippers investors would have. You can't make money. And I know there are people out there that are doing it. So it's not that it's not happening, but anybody I know that's really good at fixing flip or rehabs or things like that in my area, not speaking for every part of the country in Miami, in the Boston area, they're not doing deals because they can't make money. There's no margin of error. If they were to compete and win the deal and they make a mistake, they're going to lose money. They don't want to lose money. So they need to have a big enough margin cushion so that they make a mistake.

 

Keith Weinhold (00:24:49) - They're still making money. So these people we work with, they're not doing deals because there are no deals to find. So that means there are fewer mortgages times like 2008, nine and ten, we didn't have enough client cash to put to work. Like we had so many notes coming at us we didn't have enough cash to find. Now it's the reverse. There's plenty of cash chasing them and there's not enough notes out there. And a lot of the notes are poor quality because the risk is too high. We want easy. We want somebody paying on time, we want our money back and then go on and do it again. So I love them for cash flow. It's simple and easy and it solves a lot of problems. So this is interesting. If you as a real estate investor have ever taken a hard money loan, you might wonder who the lender is on the other side of that. And that might be someone like Kirk's clients in there where he is. Kirk. Can you tell us more about the default rates on the hard money loans lately? How often do they not get paid back and do they go into default? Yeah, that's a good question.

 

Keith Weinhold (00:25:48) - So I don't know the industry rates. So we work with a handful of people and that's all we work with, so we know the rates for them. I'll tell you about ours and I'll tell you about the industry a little bit more. So for us, we've done hundreds and hundreds of these things and I would say less than 1% of them have had issue. So we are truly not looking for rates of default. A tornado tore through the neighborhood and tore off the roof. That's an issue. That's not something I can deal with. Right. Guy you're working with dies. It's an issue you got to deal with, right? Like this isn't somebody making a bad deal or run away with the money. This is stuff that you can't predict and is inevitably going to happen in one way, shape or form. So we mitigate the risk as much as possible, but our rates of default or I would say not even default, but just having issue with the loan because most of the stuff it's, you know, maybe discount if you have a something like that, maybe it's your discounting the interest instead of getting the full interest, maybe get partial interest or even no interest, get your money back.

 

Keith Weinhold (00:26:44) - Like for us, it's like, how do you handle a default is really important because the borrower, there's some risk there, but then there's the lender, there's some risk there. So you have to find a balance that makes everybody happy so that, you know, the borrower is not taking it on the chin because then they're not going to come back. But it's not all in the lender either. So you have to find a balance and work with people. Much like with real estate, you know, you get a bad tenant, so you try to work with them so you still get paid. It's the same kind of thing. But if you look at the industry, the industry is interesting. So I interview a lot of hard money lenders on my show over the years and fascinated to hear what they say and some of the people who do the most or they're in charge of marketplaces of these notes. What they've been telling me for the last few years is think about this way. A lot of these things come from developers or fixing flippers.

 

Keith Weinhold (00:27:31) - They get their properties out of foreclosure, they get it out of sheriff's sale, they get out of fire or estate sales like these things where they're highly discounted. So during Covid, the courts were shut down for a year and a half. You couldn't get these properties if you were foreclosed on, you couldn't get foreclosed on for two years because the courts weren't open. And when they did open, there was such a backlog of other stuff that was more important than that. They were dealing with like murderers and whatever, rapists, people that actually need to go to jail. And they're not dealing with foreclosures to the same extent. So the courts are backed up for a long period of time. And so when they finally opened up, you start to see a trickle through. You're starting to see more now. But that was a big challenge to the market. So what I've been hearing for the people who are really deep in this market and they see everybody across the board, across the country is they've all said that there's a tidal wave coming.

 

Keith Weinhold (00:28:24) - And a lot of the problem is, is there are a lot of bad notes out there. So there are people who basically created these notes, right? So they underwrote the notes. They they lent money to somebody with bad terms or is a bad loan like the person should have borrowed or whatever it is, they're still paying. But you see, the quality of the paper is really bad. And what's going to happen is if you see a hiccup in the real estate market, then you're going to see this paper flush through the system because all of a sudden this deal that was marginal is now a bad deal and it flushes through either people default or they sell or whatever. And that stuff has to flush through the system until it does, the market's not going to be efficient. Everyone is waiting around saying, I know there's bad paper out there. I'm trying to find good stuff and it's harder to find, but it's not from a lack of paper, it's from a lack of quality paper. And this happens every real estate cycle.

 

Keith Weinhold (00:29:19) - Having 2008, nine, ten flushes out the bad people, buy the paper at a discount. You're listening to Get Rejection. We're talking with innovative welcomes Principal Kirk Chisholm when we come back, including his take on where we're going with interest rates and inflation. I'm your host, Keith Lindholm. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited. For some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660.

 

Keith Weinhold (00:30:30) - And this isn't a solicitation If you want to invest where I do, just go ahead and text family to six six, 866. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's So start your prequalification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group.

 

Speaker 3 (00:31:16) - This is author Jim Rickards. Listen to Get Rich Education with Keith Reinhold and Don't Quit Your Day Dream.

 

Keith Weinhold (00:31:32) - Welcome back to Get Rich. We're talking with Kirk Chisholm. He is the principal and a wealth manager at Innovative Advisory Group. And I like to chat with Kirk and some of these people that have this bigger picture view where they offer clients stock options, real estate options and more. In Kirk, I know you like to say that we're sort of living in a new paradigm and that people are only just now starting to realize this new paradigm, which has to do with interest rates and inflation.

 

Keith Weinhold (00:32:01) - So tell us about this new paradigm. Let's take us back a few years. So if you think about what's happened in history, I'm a student of history, much like you are, Keith, You look back in history, it's instructive as to how the future may act, right? It's never going to mirror that because it doesn't happen that way, as I think it was. Mark Twain has said that history never repeats, but it rhymes. I'm not sure if that's actually attributed to him, even though people say it is. But point being is if you look back in history for the pretty much starting in like the 70s, we had a period of time and I'm going to come back to the 70s, but we had a period of time where things were volatile, we had high interest rates and we peaked at 20% rates depending on which rate we're talking about. The 30 year treasuries, I think it hit 15%. Fed funds rate hit 20%. So we had some pretty high numbers. And so the subsequent 40 years, interest rates declined for 40 years.

 

Keith Weinhold (00:32:56) - If you had bought a 15%, 30 year Treasury in 1980, 1981 and held on for the whole 30 years, you would have made 15% for that whole time. And it bottomed out a few years ago. So think about the 70s. Like, here's the economy, right? I got my hands together. Here's the economy. This is what it looks like, right? It's this size Now. If you start injecting leverage, you get a mortgage on your real estate. That's leverage. The company borrows money. That's leverage. Right? So you're borrowing money. So your borrowing future cash flows to use today. So let's say I own a home outright and I decide, hey, I want to borrow money to go buy a motorcycle, whatever. Okay. Well, I just increased the economy size because I borrowed money, right? So I've increased the amount of money in circulation from 1983 81 until pretty much a few years ago, the interest rates went from a high amount of 20% down to close to zero.

 

Keith Weinhold (00:33:51) - Now, the lower the interest rates, the more you can borrow. So if you think about the economy, it kept increasing as rates drop because you can borrow more and more money. Now, how much money can you borrow? A 0%. Keith An infinite amount, in theory, yes. As much as they'll give you. And how much? If it's negative, I don't know. I'm going to borrow a bunch of people and borrow their money like and we get into this crazy period we had a few years ago where there actually negative rates in Japan still does. But the point is, is the lower the rate, the bigger the economy can be because you're allowed to leverage more and it means you can borrow more money and use that money for other things. And now that's a problem because you're borrowing future cash flows to use today. So at some point you got to pay that back one way, shape or form or another. The thing is, is that is increased the size of the economy over this time.

 

Keith Weinhold (00:34:37) - So the paradigm from the early 80s until a few years ago was one of leverage and growth. And there's a lot of things went into that globalization, outsourcing to China and Asia, technology, all these things influence this growth of the economy. But then in 2021, we hit the lowest rates. We hit mortgage rates at 2.5%. Fed funds rates were low, Treasuries were low, and they started raising rates in 2022. So the economy now started to shrink because you can borrow less. Now, it didn't actually shrink, but I'm using this for illustrative purposes. So if I'm looking at this big, huge balloon and think of it as a balloon, right? You start as there's no air in it, you blow it up with air, you get this huge balloon. Well, as rates go up, you start to let air out of the balloon because you can't sustain high interest rates because it comes down to cash flow. So what ends up happening is as rates go up, the economy effectively starts to shrink over time because if low rates help it expand, higher rates will contract it.

 

Keith Weinhold (00:35:39) - But it doesn't happen today or tomorrow. It happens over years, as the economy did in the last 40 years. So the paradigm we had changed two years ago and now we have high interest rates and the economy is shrinking to acclimate to this new higher rate environment. So you could have bought mortgage for 2.5% for 30 years on the house. You bought a $500,000 house, 2.5%. You probably would have paid, I think, $3,700 a month rate. You're paying $3,700 a month. That's where you can afford. And most people were doing that, so they bought as much as they could afford. However, now mortgage rates are seven and a quarter at seven and a half. That $3,700 a month mortgage is now doubled. So now you're looking at about a $7,400 a month mortgage. I can't afford $7,400 a month, so I can't buy that same price house. Now, the house price to accommodate that has to decline. And I'm using real Estate Illustrated because it also I'll tell you in a minute so the house price has declined to accommodate that higher payments because people can only buy what they can afford.

 

Keith Weinhold (00:36:43) - Now take that illustration and overlay that into corporate America, because companies do the same thing. They borrow as much as they can get away with. As you say, with mortgages, it's fixed. It doesn't affect me because it's fixed. And same thing with corporations doesn't affect me. It's fixed. That's correct. Which is why it doesn't impact the economy immediately. But it does impact it over time because with the 30 year mortgage, you never have to move. But if you do have to move, you're in trouble. If you own commercial property, you don't have 30 years, you might have a five or a ten year mortgage, which is going to roll at some point in time and hopefully rates are lower. But if they're not now, you've got some explaining to do, right? In corporate America, there's a lot of companies that get, you know, short term debt that's going to roll over at a higher rate. How are they going to afford it? Johnson, Johnson, Apple, Microsoft, they can afford it, but can borderline junk bonds, companies that are low quality, that are just making it, barely making it buy in cash flow because they can borrow money? What about them? Well, they're going to be forced to make hard decisions or go into bankruptcy.

 

Keith Weinhold (00:37:48) - So what higher rates do? It basically cleans up the economy by taking out the inefficient players and forcing some into bankruptcy, foreclosures, whatever it may be, it effectively will clean up the market, but it also caused the economy to shrink. So it destroys capital. And if we have rates that are higher for longer than, let's say a few more months, if they're higher for 5 or 10 years, it's going to be a problem. And I think we're going to have higher rates a lot longer than most people think. The market is predicting another six months they're going to drop rates. They've been saying that for the last year. So I don't think they're accurate. I think it's going to be at least a year, maybe two, and then we'll see what happens. Hard to see that far out, but people need to be become acclimated to these higher rates for a while because if you look at historically, these aren't that high. Their average rates. Yeah, they're right in the mean like we're not high historically.

 

Keith Weinhold (00:38:43) - If you look at bond yields I mean you look at late 90s, you've got up to 6%. I think you've got to 6 or 7% and depending on what you're investing in. So we are not high and default rates are not high. Default rates for high yield bonds historically are 7%. I think we're like 1% like last 15 years. So the numbers that we saw were extreme examples of the economy. And we're going to find a happy balance somewhere. And I don't know where that is, but this new paradigm is about reassessing the assumptions you're making about your investments, about the economy and any assumption what are interest rates going to be? What's inflation going to be? These are things that people never even thought of. They just assumed, Oh, inflation is going to be 3%, I'll just use that. Or interest rates, they're going to be similar. You can't make those assumptions anymore. You have to have broader. Lateral testing of whether this is going to work or not. You've done a great job of breaking down that new paradigm where basically that 40 year period from 1981 to 2021, we had gradually declining interest rates and something in 2021, that's where things changed and we entered into a new paradigm of increasing interest rates.

 

Keith Weinhold (00:39:55) - So as we're winding down here, you stated you think that we will have persistently higher rates for quite a while. So many people have been saying a recession is just around the corner for so long. It's sort of annoying to really think about it. But as we know, with the recession, that generally correlates with a lowering of interest rates. But you don't see that happening by next year, say, with a lowering of interest rates that corresponds with a recession. What you said is recessions typically correlate with lower rates. You're correct. But what if they don't? I'll give you some examples here of why things are different and why it matters. So if the last 20 plus years, if we had a recession or even a sniff of a recession, the Fed would drop rates, print money, they would boost the markets back up. Everything would be fine. Right. Problems solved. Right? The world's going to end. Don't worry. Here comes the Fed to the rescue. They did that for 20 years.

 

Keith Weinhold (00:40:49) - But now we have high inflation. So with high inflation, they can't do that because if they do that, it causes inflation to spike, much like the 70s. Now they're not oblivious to the 70s. They know full well what happened and they don't want to repeat it. What they're saying has been pretty clear. We're going to make sure we kill inflation. We don't want it coming back. It is very probable that we have inflation dipped down into two even 0% this year. There's the probability is low, but it's probability we could hit 0% inflation by the end of the year. However, I don't think it's going to stay there because we tend to get a bullwhip effect, which we've seen in many commodity prices, lumber in particular, where the prices go up and then too many people, they make too much lumber to sell and then there's a glut and then it goes lower and then it goes higher because, you know, so you get this bullwhip effect, which is a problem which caused and it's the same thing with inflation, right? You get this bullwhip effect because the changes have been too drastic that people can't adjust, so they over adjust, are under adjust, and that causes this big change.

 

Keith Weinhold (00:41:50) - So I think we're going to have a dip back to inflation, probably not 8%. But when that happens, they're going to have to come back and raise rates. So what they're trying to do is they're trying to keep rates higher, longer to make sure inflation doesn't come back. We're really in this back and forth of where are we going to go, where's the Fed going to take us? And if it tends to be five years of high rates, that's going to really impact the economy and eventually we will hit a recession. But I think the probability is showing very low probability of recession anytime soon because it's not playing out in the data. Some data is showing yes, some data is showing no. But when I start to see that, it means it just doesn't matter. It's not going to show up. Well, that's some good perspective, Kirk. CPI inflation peaked at.

 

Speaker 3 (00:42:36) - 9.1%.

 

Keith Weinhold (00:42:37) - A little over a year ago. It's at 3% now. But yeah, one place where I agree with you, Kirk, is, yeah, the Fed sure does not want to see that pop back up again.

 

Keith Weinhold (00:42:48) - And within the Fed's dual mandate of high employment and stable prices, it seems like they're prioritizing stable prices over keeping employment high, that's for sure. Well, yeah, there's been a great wide ranging chat.

 

Speaker 3 (00:43:01) - With interest.

 

Keith Weinhold (00:43:02) - Rates.

 

Speaker 3 (00:43:03) - Inflation stocks, real estate and producing income from both of them. Kirk If our audience wants to reach out to you or learn more about what you do, they're at Innovative Advisory Group. How can they do that?

 

Keith Weinhold (00:43:15) - Thanks, Keith. So yeah, the best way people can find me, I'm really easy to find. They can go to my podcast, Money Tree. Podcast. Com. We have two shows a week. One show we interview really intelligent investors like Keith, for example. We have the second episode is really more of a timely what's going on the markets this week, what's new, what's changed? Just so we can kind of keep people up to date with what's going on and if people are really looking to find out more about me and my services, you can go to Innovative Wealth and I've written all the blog posts there, but our company provides wealth management services for people, whether it's financial planning or portfolio management.

 

Keith Weinhold (00:43:52) - That's a lot of what we do. So like I said, I'm easy to find and I'm pretty easygoing guys. So if you're interested, you can find me there.

 

Speaker 3 (00:43:58) - Kirk Chisholm, Innovative Wealth. It's been great having you here. Thanks so much for coming on to the show.

 

Keith Weinhold (00:44:04) - Thanks for having me, Keith.

 

Speaker 3 (00:44:10) - Yeah. Well, Kirk Chisholm, he thinks that higher interest rates will linger longer. And he told us why. Now, Historically, it takes 3 to 5 quarters for interest rate hikes to hit the economy. Rate increases begin in March of 2022, but Americans are sitting on lots of cash. So many think that this recession that's perpetually just around the corner won't begin until at least next year. One benefit of a recession coming is that people will stop spreading undue concern.

 

Keith Weinhold (00:44:45) - About.

 

Speaker 3 (00:44:45) - A recession Coming Coming up here on the show, lots of great real estate investing strategy sessions forthcoming, not just big picture impacts like the direction of rents, home prices and interest rates, but also how to improve your operational efficiencies, like how to tamp down on higher property insurance premiums and more including what today's market for new build for plex's like investing in America's intermountain West and more.

 

Speaker 3 (00:45:14) - Until next week. I'm your host, Keith White. Don't quit your daydream.

 

Speaker 4 (00:45:21) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 3 (00:45:50) - The preceding program was brought to you by your home for wealth building. Get rich education.

 

 

Direct download: GREepisode460_.mp3
Category:general -- posted at: 4:00am EDT

Watch the video of today's podcast intro here

Are starter homes a thing of the past? Did the Fed just win? I provide commentary and perspective on both.

Hear clips from: Donald Trump, Jamie Dimon, and Jerome Powell.

Then, I answer four listener questions:

Should I make my first real estate investment a new development from raw land?

Does it make sense to sell some rental properties, pay off others, and make my life easier?

My returns are down because my property repair bills are higher than expected. What should I do?

Since the government has high debt, won’t they keep printing dollars?

If you have a listener question, ask it here: GetRichEducation.com/Contact

Timestamps:

The state of the real estate economy [00:00:01]

Home prices and housing supply [00:01:33]

Analysis of home prices reaching new highs, the decrease in new listings, and the impact on housing supply.

Mortgage rates and the future of interest rates [00:03:54]

Insights on the direction of mortgage rates, the unlikelihood of rates returning to the 3% range, and the opinions of Lawrence Yun, the chief economist at the NAR.

The Fed's Soft Landing [00:10:31]

Discussion on the Federal Reserve's efforts to control inflation and maintain economic stability.

Building Development as a First Investment [00:12:49]

Advice on whether it is a good idea for beginners to invest in land development and the challenges involved.

Acquiring More Property or Paying Down Debt [00:19:02]

Advice on whether to continue acquiring properties or pay off existing debt and downsize for a more enjoyable life.

The philosophy of debt [00:21:11]

Debt can be beneficial and indicate wealth, as seen in examples of successful individuals with high levels of debt.

Managing repair costs for rental properties [00:24:18]

Charging tenants for the first portion of repair bills can incentivize them to make minor repairs themselves and reduce long-term repair costs.

Inflation and government debt [00:30:12]

Inflation can debase government debt, reducing its value, similar to how it affects personal debt. The US government's ability to print money allows for easier repayment of debt.

The housing supply and marketplace [00:31:30]

Discussion on the historically low US housing supply and the importance of staying up to date with the inventory and other elements in the real estate market.

Resources mentioned:

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. First, I'll discuss the surprising state of the real estate economy. Then I answer your listener question Should I develop and build property myself? How do I keep my rental properties repair bill down? And two questions about real estate debt all today on Get Rich Education with real estate capital Jacksonville. Real estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. JTB is ready to help your money make money and to make it easy for everyday investors. Get started at JWB Real Estate.

 

Speaker 2 (00:01:01) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

 

Speaker 1 (00:01:24) - Welcome to the area from Warsaw, Poland, to Warsaw, Indiana, and across 188 nations worldwide. And Keith Weinhold in your listening to Get Rich Education.

 

Speaker 1 (00:01:33) - Earlier this month, CNBC reported that home prices have hit new highs again, another up just slightly year over year, though the popular sentiment is that by now people have gotten used to paying 7% or even more than 7% mortgage rates and higher rates. That puts the squeeze on housing supply. I mean, gosh, within this era of already paltry supply, I mean, we're talking about direly few homes in some markets here. Nationally, new listings are down 25% from a year ago. All right. Now, that's all national stuff. But look now, just over half of the nation's 50 largest housing markets and they're mostly in the Midwest and Northeast. They have either returned to their prior price peaks or they have set new all time highs. Annual home prices are still weaker out west, but even some of the Western markets has slumped. They're now seeing month over month gains. Yes, we're talking about gains now even in San Jose, San Diego, Los Angeles, San Francisco and Seattle. Now, look, our starter homes, a thing of the past.

 

Speaker 1 (00:02:47) - Some now think so with these higher prices. Just listen to this from an NAR survey, 40% of millennials who bought homes last year, they plan to stay in them 16 years or more. And for Gen Z, that number jumps up to 48%. Now, who knows if they'll really stay in those homes at that long. But see, what's going on here is just affirmation that so many buyers don't plan to trade in their starter home for a move up home. They got their starter homes when rates were low, though starter homes are not coming onto the market, potential sellers have ghosted the market, making for fewer listings and those fewer listings. That's what's fueling the price growth. So yes, starter homes could largely be a thing of the past, but of course not completely. Now, just two weeks ago here on the show, Jim Rogers told us why long term, he thinks interest rates will go much higher and opinions can be all over the place. So I don't want to get too bogged down in that.

 

Speaker 1 (00:03:54) - But shorter term, one prominent commentator, he is now emphatic that mortgage rates have hit their top, like, for example, hit their top for perhaps this year and next year. Lawrence Yun, chief economist at the NAR on the direction of mortgage rates. He says, quote, This is the top. It will begin to move down. But you can also says if you're a US home buyer waiting for a return to super low mortgage rates, don't hold your breath. The short lived era of 3% interest rates for 30 year fixed mortgages, that is over, and they are unlikely to return anytime soon, perhaps for decades. He goes on to say that one can never truly predict the future but don't see mortgage rates returning back to the 3% range in the remainder of my lifetime. That is all of what Yun said. Okay. The remainder of Lawrence Hoon's lifetime, he looks pretty healthy and that might be 40 years, 40 plus years. Did we see rates that low again, according to him? Now, did you see this? We posted this in our Instagram stories as our curious article of the week last week.

 

Speaker 1 (00:05:07) - The Washington Post get a hold of this title. They published an article and it was titled The Housing Market Recession is Already Ending. My preeminent thought is the housing market recession is already ending. That's a curious headline. What housing market recession? I don't get it. And the subtitle doesn't help. It's subtitled Last year's downturn in the housing market didn't last even with higher interest rates. Now prices are stabilizing. Is supply chains have eased up. All right. Well, even with actually reading the complete article, I don't know what they mean by a housing market recession last year. I guess that national home prices stopped appreciating last year and they just stabilized. But I don't know how the heck you get a recession out of that. Maybe with low housing supply, there were fewer transactions and that was being considered a recession. Now, look, I'm going to posit something really unpopular here in today's climate, but I think that this is a question that you really need to ask yourself today, and that is, did Jerome Powell just win? I told you it was unpopular.

 

Speaker 1 (00:06:20) - He's not a very well liked. Person in a lot of circles. But with CPI inflation at 9% last year and 3% now. Yet throughout this spin, we had a few banks that broke but no recession. Is it possible that Jerome Powell has engineered a soft landing? I've got more on that in a moment. But the actual person of one, Donald, John Trump, made some quick remarks about the economy this month. Let's listen in.

 

Speaker 3 (00:06:52) - We've never had an economy like we had just three years ago. It was unbelievable. And frankly, this economy is not doing well. But the reason it's doing okay is it's running on the fumes of what we built. But those fumes are running out and they're running out fast. And it's not going to be a pretty picture.

 

Speaker 1 (00:07:11) - Yeah, I don't know about that. When we look at the broader US economy, let's get something more substantive. And speaking of people that aren't well liked, Jamie Dimon had some great perspective. I think you know that he's the billionaire business exec and the banker that's led JPMorgan Chase since 2005.

 

Speaker 1 (00:07:30) - To put it another way. This man runs the largest bank in America.

 

Speaker 4 (00:07:36) - It's the other way around. America has the best hand ever dealt of any country on this planet today ever. Okay. And Americans don't fully appreciate what I'm about to say. We have peaceful, wonderful neighbors in Canada and Mexico. We've got the biggest military barriers ever built called the Atlantic and the Pacific. We have all the food, water and energy we will ever need. Okay. We have the best military on the planet, and we will for as long as we have the best economy. And if you're a liberal, listen closely to me in that one, okay? Because the Chinese would love to have our economy. We have the best universities on the planet. There are great ones elsewhere. But these are the best. We still educate most most of the kids who start businesses around the world. We have a rule of law which is exceptional. If you don't believe me and we talk about Britain, Brazil, Russia, India, Venezuela, Argentina, China, India, believe me, it's not quite there.

 

Speaker 4 (00:08:29) - We have a magnificent work ethic. We have innovation from the core of our bones. You can ask anyone in this room what you can do to be more productive. Ask your assistants, factory floors, redo it. It's not just the Steve Jobs. It's this broad death with the wires and deepest financial markets the world's ever seen. Okay. And if you. I just made a list of these things and maybe I miss something. It's extraordinary. It's extraordinary. And we have it today. Yes, we have problems. But, you know, when I hear people down, if you travel around the world, I mean, get an airplane, travel around the world and go to all these other countries and tell me what you think.

 

Speaker 1 (00:09:02) - Yeah, Jamie Dimon really bringing up a lot of those geographic advantages like Peterson and I discuss in depth here Diamond's remarks. They're not new remarks. Those weren't recent ones. And by the way, I don't really care for him calling out liberals, just like labeling people conservatives.

 

Speaker 1 (00:09:20) - That's counterproductive. I like the quality of ideas as soon as we start labeling things left or right, that quickly becomes more divisive than it does unifying. Don't do left right politics. I do. Up, down, up is integrity. The quality of your ideas concepts means for getting things done and track record. That's what matters. But anyway, coming off Jamie Dimon waxing poetic with American optimism and exceptionalism. Yeah, it is time to ask if the Fed is winning. And first, let's understand something fundamental The fact that high inflation occurred for two years that is irreparable. Let's not overlook that. I mean, you're Trader Joe's grocery store prices. They're not coming back down even if the rate of inflation has slowed. I mean, that is a big fat L, That is a loss. It came from printing all those dollars to paper over the pandemic, which created the high inflation with everything from the paycheck protection program to Stemi checks to the Cares Act. And yes, the executive branch created some of that too.

 

Speaker 1 (00:10:31) - But my point is, make the irresponsible people that don't have any savings feel some pain once in a while. If you just make money fall from the sky every time there's a crisis, then people are going to learn to not have any reserves or any cash flowing investments during the next crisis. Yes, supply chain constraints are part of the problem too. But since you tried to paper over the pain, see then creating that inflation that results, that makes everyone feel the pain that's middle class or below. All right. But after that understanding, is Jerome Powell now winning by landing the inflation softly without crashing the economy and keeping GDP rising a little in keeping unemployment low in see even the producers price index that's forward looking that measures this change. In selling prices of goods and services producers. That's falling out, right? That leading indicator for consumer price inflation. And that's why inflation expectations are finally dropping. And that doesn't mean that I like the Fed or the system at all. But by now you've at least got to begin to wonder if the Fed can get their soft landing.

 

Speaker 1 (00:11:47) - They've dropped down from 30,000 foot cruising altitude. There's no turbulence, and they're below, call it, 10,000ft. Now, for the first time in two years, wages are finally rising faster than prices.

 

Speaker 4 (00:12:01) - We at the Fed remain squarely focused on.

 

Speaker 1 (00:12:04) - Our dual mandate.

 

Speaker 4 (00:12:05) - To promote.

 

Speaker 1 (00:12:05) - Maximum employment and stable.

 

Speaker 4 (00:12:06) - Prices for the American people.

 

Speaker 1 (00:12:08) - Yes, sir. That is your job after all. Well, I want to turn to your listener questions here for the remainder of the show. And if you've got a question for me, you can always reach out at Get Rich education, slash contact. The first question comes from Tina in Monroe, Louisiana. She says, Keith, I love your show. Just started listening last month. Tina asks Keith, I have the idea of buying land and I want to know if this is a good idea to build new rentals on. Like for Plex's, I've already formed an LLC and hope to open a business line of credit, but this would be my first ever real estate investment.

 

Speaker 1 (00:12:49) - Okay, Tina, thanks for finding the show here. Welcome in. I expect that you'll have years of profitable listening ahead to start a new development from digging raw dirt all the way through to procuring your certificates of occupancy and have that be your very first investment for almost anyone. I have got to say no because there is just so much to development. Development is going to rely on your experience and your ability to build a team. You're going to need general contractors and subcontractors and vendors, suppliers and experience dealing with regulators and a municipality and bankers and perhaps investors. And legal development is risky for beginners. You're purchasing something that doesn't yet exist. You've got to be sure that you're buying the right land in the right place. And that means studying everything from geotechnical reports and Perc tests to understanding the demographics, whether you plan to buy that land there in Monroe, Louisiana, or wherever else it is, and then your exit strategy. And while it might not actually be to exit, but it's going to be either to sell your completed development or for you to hold it for rental income, you have really got to know what you're doing.

 

Speaker 1 (00:14:13) - I am not a developer, but I talked to a lot of them, especially build to rent developers. Now, the reason that I say that the answer is no for development as your first real estate investment for almost anyone. Well, I say almost because if you have a remarkable mentor, someone that's going to go out in the field with you almost every day, then it's a possibility. And even then that mentor should have a proven track record. You need approvals and subdivision and plans drawn and bringing in drainage and utilities and entitlement mean instead of all that for a beginner and really even for most veteran investors, it is substantially easier to buy something that's already built, that has a history of rental occupancy and income. And then the team that you have to build a so much smaller with that primary long term team member as your property manager. But thank you for the question, Tina, because I think a lot of real estate investors wonder about building themselves from raw land. And it seems that even more investors right in here wondering about, you know, just building one individual single family rental home or duplex or fourplex.

 

Speaker 1 (00:15:25) - And even then, if it's successfully done, it usually takes longer than you think. And then once you're done, the property is vacant and you need to find tenants. So it might be a few more months before it even cash flows. So buy property that's already built, learn investing that way. And what you've done is you've outsourced all of the development unknowns to someone else and they bring you the known and completed development project that is better for more than 99% of people. And then look into being a developer yourself when you've got sufficient experience. If that remains interesting to you, a great mentor with a proven track record or both, if you'd like to ask a question and potentially have me answer it on air here again, go ahead and reach out through get ratification smash contact because that's where you can either leave a voice message or a written one. I am just. Getting started with listener questions. I'm back with more of them. Straight ahead. I'm Keith Reinhold in You're listening to episode 459 of Get Rich Education.

 

Speaker 1 (00:16:30) - If you want some really passive income, listen to this. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with freedom family investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25. K. You don't even need to be accredited. For some of them. It's all backed by real estate and I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660, and this isn't a solicitation If you want to invest where I do, just go ahead and text family to six six, 866. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056.

 

Speaker 1 (00:17:43) - They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's. So start your pre-qualification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group.

 

Speaker 5 (00:18:12) - This is Jerry Operations lead Andrea Newburn. Listen to Get Rich Education with Keith Reinhold and don't put your daydream.

 

Speaker 1 (00:18:29) - You're listening to the show. It's created more financial freedom for busy people just like you than nearly any show in the world. This is guitarist Education. I'm your host, Keith Reinhold. The next question comes from Adam. He is a real estate agent in Seattle. And Adam asks this. Hi, Keith. I've been an avid listener and follower of yours for years now. Like you, the Little Purple Book changed my life early on and I was able to semi retire at age 35. The book that he's talking about, by the way, is that Poor Dad, I am 42 now and back working as a realtor because I love it.

 

Speaker 1 (00:19:02) - And then after he wrote I Love It in parentheses, he put well, sorta. So I don't know that he loves it too much and I am at a crossroad in my life. Do I keep acquiring more property and more debt or do I start paying down the properties I do have? I have seven properties now and with a mindset of less is more as I want to enjoy my life a bit more and I'm honestly getting tired of managing my three in state properties. Therefore I've been thinking about selling one to pay off the loan of two other properties and really start to downsize and truly be debt free. Life is too short and I want to enjoy the rest of my life. Do you have any advice or opinions for me? Thank you in advance. Okay. Adam. Well, since you've listened for years, you probably already understand that I don't pay off any of my properties, though I could. I don't want to. I'd lose leverage in all that. You probably understand that I don't self manage.

 

Speaker 1 (00:20:01) - You said that you self-manage three of your seven properties there in Washington state. So since you probably already understand all that, yes, I would acquire more property, more debt and outsource the property management. That way you can enjoy life if the property is in your home state, don't have high rents in proportion to their values. In a lot of places around Seattle, they don't have a high ratio there. Well then it's probably worth 1030 running into out of state property. Or if you really like those Washington properties, then find a property manager there in state and to find a suitable 1031 exchange facilitator with a proven track record, check the resources tab at GRI marketplace.com. That same website will help you find out-of-state properties if you like. You can also contact our coaches to help walk you through that at marketplace.com/coach. That is a free coaching service by the way. Now as far as keeping the instate Washington properties, if you decide that you do want to do that, the bigger Pockets forums can help you vet a qualified property manager there.

 

Speaker 1 (00:21:11) - Now, Adam, you did say something about the possibility of downsizing and becoming truly debt free, as you put it. But my question is, what's the problem with debt if someone else reliably pays it all for you? Of course your tenant pays a principal and interest and hopefully a little on top of that called cash flow. All right. In that case, all of that debt is outsourced. Now, let me get a little philosophical for a minute. I don't know the name of the person that's the biggest debtor in the entire world. But you know what? He is probably really wealthy or she all circle back to why in a second. Here's a fun way to understand this. The quarterback threw the most interceptions of all time. Oh, you must think that guy is a total loser. Well, you know what? The quarterback that's thrown the most interceptions all time by far is in fact, a Hall of Famer Brett Farve. Oh, well, how can that be? Well, it's because he got so many chances to play.

 

Speaker 1 (00:22:17) - He must have been a pretty good quarterback for the coach to put him on the field. Then often year after year, the baseball pitcher that lost the most ever games for his team all time, he is named Cy Young. Well, Cy Young also won the most games all time in Major League Baseball. He was one of the very first inductees into the Hall of Fame. And there's even an award given each year. Still, the most outstanding Major League Baseball player called the Cy Young Award. Yet he lost the most games and say, did you meet a guy on the street there where you live and you learn that he has $20 million in debt? I don't even need to know anything else right there. That tells me that he's probably a financial winner to have that much debt because, see, he would need to be highly credit worthy to even get all that debt in the first place. See, you're only looking at the $20 million debt side of his balance sheet. His asset side might be $50 million.

 

Speaker 1 (00:23:16) - Hey, that's a $30 million net worth. Even with high inflation, $30 million is fairly wealthy today and mad as Mark Zuckerberg is one of the wealthiest people in the world, he has a net worth. North of $100 billion. And the Zuckerbergs, they took a loan for their home even though they could pay cash for it many times over. And yet when Zuckerberg and his wife bought their home, they took out a loan for the leverage and the arbitrage. The wealthiest people in the world have the most debt AI model that you can model that I personally look to increase my debt as time goes on. And then simultaneously, I expect the asset side to increase faster than the debt side. The asset side increases faster because I've got the debt, hence the leverage. So this is why I have an aversion to being debt free. I hope there's both some helpful resources and a philosophical component for you to chew on there as well. Adam The next listener question comes from Heiko in Utica, New York. Sorry if I mispronounce your name.

 

Speaker 1 (00:24:18) - It's spelled at Jaakko. Maybe it's Jocko, but I'm going to go with Jocko. He asks. I've held my first ever purchase of a rental single family home for a little over a year. It's located in Holladay, Florida, though my property was projected to provide a cash on cash return of 6%, it only produced 3% because repairs cost more than expected On this 1978 built property. I use a local property manager that's been pretty communicative. I always anticipate reading my monthly email statement from him, just wondering how to manage costs over time. Signed Jocko. Okay. Jocko And by the way, I own rental single family homes myself, just about five miles from Holladay, Florida. And these areas are just north of Tampa. Well, Co only getting 3% rather than a projected 6%. It's actually not a terrible miss. Now, it would be if that were your only revenue source or your only return from an investment. But of course, this 3% cash on cash return is one of your five profit sources from income property.

 

Speaker 1 (00:25:28) - But suffice to say, one great long term strategy to keep myriad repair costs down over time. And it's something that Ken McElroy told me about, and that is charge the tenant for the first $50 in repairs or maybe charge the tenant for the first $100 of repairs. That way they're going to think twice before bugging you or bugging your manager. Now, this can have the desired effect of keeping your long term repair bill down in a few different ways, but yet ensure that you're still serving the tenant. All right. First of all, the first 50 or $100 a repair bill, it's really not that burdensome to most tenants, but yet they will think twice before calling you or it's calling your manager, in this case, Jocko, before calling about something ticky tacky and minor like the kitchen cabinet doors got a little loose on their hinges again. Now you want to provide clean, safe, affordable, functional housing. That is a core concept in mission here. At first, this might incentivize the tenant to make a 10 or 15 minute repair themselves so that you never even hear from them.

 

Speaker 1 (00:26:43) - And that also prevents, say, a $75 service call from being made in the first place. Now, if it's a repair that's beyond the tenants expertise or expectations to take care of themselves, say it's something like a kitchen faucet that just leaks a little, well, okay, you want to see that that's taken care of for them. But if they have to pay the first small portion of repairs themselves, then that incentivizes the tenant to report a number of small things in one batch. All right. Well, now, that makes it more efficient for you or for your property managers handyman. That makes for fewer service calls, fewer runs to Home Depot and a real reduction in your repair cost. See? Hello. The work from home movement. That's being good for us as residential real estate investors. But there is one downside to that. A few more tenants spend all day at home and there are more components that can wear out sooner. Or there's this more time that tenants spend at home to notice little things that are amiss.

 

Speaker 1 (00:27:47) - So that's why the time in the real estate market is right to charge the first portion of repair bills to the tenant. That's why this makes sense now. Now, there are a couple caveats around this. Hello. When the tenant first moves in, I'll go ahead and give them a week to bring you any findings and then those things should be taken care of without charging the tenant anything at all. Right? I mean, the tenant shouldn't have to inherit any problems. And the other caveat is that your tenant has to be communicative about items in disrepair that could create long term damage, like a leaky drain, because you don't want that to ruin your subfloor over. Time. So the short answer on how to lower your long term repair bills, especially in a work from home world, is to have it in the lease that the tenant pays for, say, the first $50 to $100 of repairs. Also, you may have heard it just ten episodes ago on episode 449, I discussed 12 ways that you can raise the red in add value to your property.

 

Speaker 1 (00:28:52) - There's a good bit of related content there to help you keep profitable and get your cash on cash return up. Now, plenty of properties. In fact, probably most properties have exceeded their return projections over the last three years, and that is primarily due to rapid appreciation. But see, you don't get the lessons from the winds, you get the lessons from the underperformers. And that's why I wanted to answer your question for everyone's benefit today. Taco Tacos question was microeconomics. Let's flip it to macroeconomics with this. Next question from Dave in Atlanta, Georgia. Davis This one a while ago. First, here's the remarkable part on the listener question form in the how did you hear about a section, Dave? You simply wrote, I've been listening to you from the very beginning. Gosh, Dave, this is so supremely appreciated. I know we've got a lot of great devotees and I'm incredibly grateful for it. Dave asks With the US government, 30 trillion in debt and there's some rounding there and if inflation is say 10% over a few years, doesn't inflation debase the government's debt just like it does ours, taking it from 30 trillion down to $27 trillion in this case? Yeah, that stays.

 

Speaker 1 (00:30:12) - Question That's right, Dave. You've 100% got it. I've talked about this in some prior episodes. Since we get to borrow our mortgage loans in the currency that's denominated in the units of the biggest detonation in the history of the world, the dollar in the USA, then they want to print Dave, just like you. If you had $1 million in debt but you couldn't pay it back right now and you had the ability to print dollars ad infinitum, then sure, the easiest way for you to pay back your debt is to print your own dollars, just like America is doing. And that is just another benefit of you keeping high debt on your properties. In fact, the true definition of inflation is an expansion of the money supply. It's not the result, which is a decline in purchasing power. Technically, if the same Chipotle burrito costs $10 last year at $11 this year, that's not inflation. That's the result of inflation. So the USA wants inflation for this reason and other reasons. I've said it before, the surest been investing is that the dollar is going to continue to decline in purchasing power and that's exactly why we are debtors rather than savers.

 

Speaker 1 (00:31:30) - Take the sure thing. Thanks for the listenership and thanks for the question, Dave. That's all for listener questions. I encourage you to help yourself out. No one's looking out for you more than you amiss. Historically low US housing supply. Gerri Marketplace is where the inventory actually is, and it's the right inventory. The properties that make the best rentals. Real estate pays five ways style. And the selection changes, of course, based on inventory and other elements. So stay up to date. And if you haven't lately, go ahead and log in. There are free coaching service is becoming popular as well in why not it's like your own concierge personal one on one if you want that it is all there for you at gray marketplace.com. I'll be here with you to run it back next week. I'm your host Keith Wayne a little bit. Don't quit your day dream.

 

Speaker 6 (00:32:35) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice.

 

Speaker 6 (00:32:45) - Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:33:03) - The preceding program was brought to you by your home for wealth building. Get rich education.

 

 

Direct download: GREepisode459_.mp3
Category:general -- posted at: 4:00am EDT

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In this podcast episode, host Keith Weinhold introduces Scott Saunders, a successful real estate investor who shares his insights and experiences in building a portfolio of 64 single-family rental properties. 

They discuss the advantages of investing in cash-flowing rental properties, the importance of focusing on cash flow in the early stages, and the benefits of single-family rentals compared to multifamily properties. 

Scott also discusses his analysis of different markets for real estate investment and his approach to financing and leveraging his investments. 

They emphasize the importance of seeking professional advice and using resources like GREmarketplace.com for wealth building.

Timestamps:

The advantages of single family rentals [00:06:22]

Scott discusses the advantages of investing in single family rentals, including better cap rates, long-term fixed-rate financing, and the inherent demand for single family homes.

Greater liquidity with single family rentals [00:08:31]

Scott and Keith talk about the liquidity component of single family rentals, highlighting that even in a recession, people will still need a place to live and therefore be buyers of single family homes.

Longer tenancy duration in single family rentals [00:09:34]

The discussion focuses on how tenants tend to stay longer in single family homes and duplexes compared to larger apartment buildings, often due to factors such as larger square footage and the desire to be in a specific school district.

The importance of cash flow at the beginning [00:11:34]

Starting with cash flow-centric properties and gradually moving towards appreciation as the portfolio grows.

Scaling up the portfolio with short-term targets [00:14:55]

Setting 90-day targets to buy a specific number of properties, leading to significant progress in a year.

Factors in selecting the next market to buy in [00:18:24]

Considerations include having a communicative property manager and existing opportunities in a market rather than solely focusing on a good deal.

The importance of relationships in real estate investing [00:19:18]

Scott discusses the significance of having a good relationship with property managers and asset providers in different markets.

Factors to consider when choosing a real estate market [00:20:18]

Scott talks about the importance of factors such as job growth, a diversified economy, and an influx of people when selecting a market to invest in.

Using inflation as a tailwind in real estate investing [00:23:54]

Scott explains how he leverages inflation to his advantage by locking in assets today and using inflation to propel his investing forward.

The importance of 30-year fixed rate financing [00:28:12]

Scott discusses the benefits of locking in a 30-year fixed rate for financing and shares his experience during the COVID-19 pandemic.

Using paid-off assets as collateral for future financing [00:29:11]

Scott explains his strategy of paying off some properties to use them as collateral for obtaining loans for future investments.

Managing properties and involving family in real estate business [00:31:19]

Scott talks about using Excel to track his rental income and involving his daughter in managing the financials of his real estate business.

The goal of acquiring lifestyle assets [00:36:34]

Scott Saunders discusses his long-term goal of purchasing properties in Tuscany, Italy, Steamboat Springs, Colorado, and other locations for both enjoyment and return on investment.

The importance of return on attention [00:38:01]

Scott explains the concept of return on attention, which focuses on having the freedom to enjoy life without being constantly distracted by financial concerns.

The impact of purchasing single-family rentals [00:40:07]

Scott emphasizes the benefits of purchasing 5 to 10 single-family rental properties, which can provide economic freedom and significantly improve one's financial situation.

The disclaimer [00:46:07]

The speaker provides a disclaimer stating that the show does not provide specific advice and encourages listeners to seek professional advice.

Introduction [00:46:35]

The speaker introduces the show and mentions the website getricheducation.com as the home for wealth building.

Resources mentioned:

Show Notes:

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Complete episode transcript:

 

Speaker 1 (00:00:00) - Welcome to. I'm your host, Keith Weinhold. A follower has built a multi-state portfolio of 64 single family rental properties. He'll tell us how he's doing it, how he finances them all, his management technique and his guiding success principles today on Get Rich education. With real estate capital Jacksonville. Real estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. GWB is ready to help your money make money and to make it easy for everyday investors. Get started at GWB Real estate agree that's GWB real estate.com slash.

 

Speaker 2 (00:01:00) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Speaker 1 (00:01:23) - Hey, welcome to GRE. From the tropical currents in the Gulf of Mexico to the icy waters of Hudson Bay across the Americas in 188 world nations, this is get rich education where we just reach the 5 million listener download.

 

Speaker 1 (00:01:37) - Mark, I am grateful to you for that. I'm your host, Keith Weinhold. Hey, a little context before we chat with our listener guests about the architecture of how he's building this robust 64 single family homes portfolio in growing across nine US states Once in a while. I like to drop things back for just a minute in case perhaps you're new here and you wonder how do people buy so many rental homes like adding ten every year? How am I supposed to do that? Well, of course, your speed of growth is going to be predicated on your income and some other things. But the best long term single-family rental homes, they're not 500 homes. They tend to be more like 200,000 homes in areas that are not upscale but yet safe, where you use a 20 to 25% down payment. And if you're new here and you have an aversion to debt, you know, I think that the simplest, most reassuring thing that I can tell a newcomer about real estate debt in just one sentence is that in a cash flowing rental, the tenant pays all of the debt for you, the principal, the interest, no matter what the interest rate is, all the operating expenses.

 

Speaker 1 (00:02:51) - And then a little on top of that called cash flow. Now, really, when you add the first few income properties to your life and you think about protecting your time, think about how that is a surrogate, a substitute to adding a part time job that can be a rather circuitous way of going about life, because what you really want is the income, not the job or not the lost time. So therefore add properties, not jobs. Most people think of financial improvement is cutting expenses. It is not. It is adding income. Then those the triadic income, many times they look to add a part time job. But I brazenly posit that income producing property is the way. And what do they call Ryan Seacrest the hardest working guy in show business? I guess if you wanted to, you could have as many part time jobs as Ryan Seacrest. Prepare yourself for drama on this stage.

 

Speaker 2 (00:03:54) - This is American Idol.

 

Speaker 1 (00:04:00) - Yeah, Ryan Seacrest. He will also become the Wheel of Fortune host starting next year along with the daytime talk show and being a producer and whatever else he does.

 

Speaker 1 (00:04:10) - I'm not really up on the latest. But yes, you want to have fewer jobs than Ryan Seacrest now speaking to your ROI, your return on time invested. You could get 64 single family rental homes like our guest today, and yet do it the wrong way. The wrong way might be say you live in a certain metro area and you buy all the properties just in your home metro so that the properties are spread, say one hour apart. That way you rationalize that you could self-manage, well, gosh, you'd be running all over the place. You'd have scores of tenants that could tax you. You'd almost be living at Home Depot, and after all that, you would still not be diversified because you'd only be in one metro market. Plus, how would you really ever get away on, say, a vacation? So that's probably not what you'd want either. Let's talk to our listener guest Scott, today and learn about how he does it. Here with me today is a great listener. Don't quit your day dream letter reader to discuss growing his Single-family rental portfolio.

 

Speaker 1 (00:05:22) - He's based in Colorado and he specializes in real estate in tax law. In fact, he often teaches real estate law to attorneys. He's a single family real estate investor that owns 64 single family rentals and four duplexes. So therefore, he owns 72 doors, 64 of which are single family rentals. And he owns those properties across nine different states Tennessee, Florida, Indiana, Missouri, Ohio, New Mexico, Colorado, Kansas and Arkansas. Higher mortgage rates aren't slowing him down as he's added six of those single family rentals this year. He's also a member of a Washington, D.C. based public policy organization that represents real estate interests. So he's really involved. He advocates for investor friendly tax policies with Congress. He's got a lot going on in his life. Hey, it's great to welcome on to Scott Saunders. Hey, Keith, Great to be with you. I'm a longtime follower and you have so many great nuggets of wisdom that you share, and it's just great. To visit with you for a few minutes.

 

Speaker 1 (00:06:22) - So thanks a lot. I appreciate that so much, Scott. Now, in the real estate world, there are pros and cons between single family rentals and larger apartments. Apartments have a certain economies of scale advantage, but single family rentals have advantages that some people overlook. So talk to us about why you like single family rentals so much. Happy to do that. I think single family rentals are, first of all, a great entryway to get into investment real estate. But some people kind of springboard. They get into single family and then they want to go into duplexes, four Plex apartments, Single family is an asset class. You know, if you just look at it, it has so many advantages. The cap rate on a single family is typically better than a lot of commercial buildings right now. You can lock in long term fixed rate financing. So even if the rate's a tad higher, you go into an apartment building or commercial, you've got to refinance. And as we all know right now in the marketplace, there are some commercial properties that are facing some significant distress because they're having to refinance at higher rates.

 

Speaker 1 (00:07:29) - Single family, you lock it in for 30 years and fix that. You've got buyer.

 

Speaker 3 (00:07:34) - Pool. I can sell a single family to an investor or a homeowner. So there just are a lot of advantages and maybe even just at the most basic level, we all need to live somewhere, right? And so a choice of an apartment or a single family. So many people like the freedom, the room, the convenience, the yard, the garage that comes with a single family. So I just think there's a lot of inherent demand where people want to be in that type of property, either as a renter or a homeowner. So I'm a big fan of buying a single family home, buy another one, you know, and just continue scaling in that niche. I call it Get Rich in a niche, right? And that's the single family rental niche.

 

Speaker 1 (00:08:16) - Sure. I had some apartment buildings that I sold recently that had balloon loans that were about to expire. And you mentioned the liquidity component where you have greater liquidity with single family rentals regardless of when it is in the cycle.

 

Speaker 1 (00:08:31) - Even if it were a recession, borderline depression, people will be a buyer because they need a place to live. But a person doesn't always need to invest in an apartment building regardless of where we're at in the economic cycle.

 

Speaker 3 (00:08:45) - Absolutely. Well, smart timing on your part to kind of see where those loans are going. And I think that there's a good time to maybe redeploy that capital somewhere else. So I like single family, and I think you can really grow and scale a portfolio. I mean, think of it this way, Keith. What if I needed to raise some cash? What if I had a medical need? I could unload a single family home or two right away. Now, I know from listening to your teaching, you'd say, don't sell it, refinance it. Right, harvest that equity. And that would be my first bet. But if I needed to generate cash, it's not that hard to unload some smaller single family rentals. And within a matter of a few months I could liquidate that and get the cash.

 

Speaker 3 (00:09:26) - Some apartment buildings, you know, in some markets it could take a long time to find the right buyer in some places.

 

Speaker 1 (00:09:34) - Now, during that whole time on a single family rental, you mentioned the cap rates. Oftentimes single family rentals are more profitable than what an investor projects. And one reason is that greater tenancy duration tenants tend to stay in single family homes and duplexes longer than they do a larger apartment building. Oftentimes it's because it feels like their own single family homes just tend to have more square footage, which lends to having larger families. We have a larger family. It just tends toward people wanting to stay longer and not uproot, and they get invested in things like buying to be in a certain school district, for example, where more single family homes tend to be than apartment buildings.

 

Speaker 3 (00:10:18) - Absolutely. You know, you bring that up. My very first investment years ago was a fourplex, kind of a C class neighborhood. And when I bought it, I naively write. I look back at it now, I thought, well, if this is fully occupied, look at what the money will make.

 

Speaker 3 (00:10:33) - The reality was there was a lot of turnover at that particular area. People came and went. It wasn't the top of the line. It wasn't a top tier neighborhood. And so I found that I was always chasing people and it was never in my case, fully occupied. And that tenant turn, that's expensive, as you well know. When you turn tenants, you have lost rent. You got to fix it up. So a single family home. I've had properties that my longest one I had attended stay in one for 15 years. I don't think you're going to find that in a multifamily property.

 

Speaker 1 (00:11:06) - Yeah, that really is rather unlikely. I know in that first fourplex you bought, you tended to do some things where later you learned that those were mistakes, like doing some excessive landscaping and spending a lot on fencing and. For a nice driveway so that you get a better quality tenant. But sometimes you learn you can only attract a certain quality tenant based on the neighborhood that you're already in. That's why oftentimes it's better to buy a lesser property in a better neighborhood.

 

Speaker 1 (00:11:34) - For example. Looking back and we'll get into your journey in a bit about how you've added all these properties, but one takeaway that you've had is that it's better to focus on cash flow at the beginning, more so that appreciation. So therefore getting a Class B or C property, which you probably don't want to stoop too low, or you also might have a bad experience at the beginning. So talk to us about the importance of for many people think they want to start with cash flow centric properties at the beginning and then maybe new build appreciation ones later.

 

Speaker 3 (00:12:03) - I agree. I think when you go into an asset that produces a cash flow, it kind of gives you the fuel to start growing, right? You get some positive reinforcement, but it also gives you the capital to go out and buy more assets. So I think that. BK and maybe call it B to C plus starting there, you know, getting 250 to 300 an asset in cash flow, you get one of those, you get three, you're talking about $1,000, you've got six.

 

Speaker 3 (00:12:29) - Now you're 2000. And at that point, when you get to maybe 6 to 10 properties, the cash flow is now helping to contribute your down payment to go out and buy another asset. So I personally think you kind of start with that maybe as your gateway for your first 5 or 10, get some momentum and then maybe later. So we all know an A-class property in a great neighborhood with great schools. It might appreciate better long term. And so I lean towards building the cash flow on the front end and then moving over into more appreciation as the portfolio grows. So there are merits on both sides. There's not a right or wrong way to do it, but that I think gets your average investor with some momentum. You know, you want to create momentum, you want to start buying assets. And so the cash flow allows you to buy assets faster than waiting for appreciation to kind of carry you up. That rising tide lifts all boats saying that'll happen over time, but get the momentum with the cash flow to help augment and help you buy more assets quickly.

 

Speaker 3 (00:13:33) - I tend to lean towards that approach. Again, no right or wrong, Keith, I'll tell you, I've done it wrong. I started out buying some A-class, about five new homes, and now those have produced good appreciation, but I didn't have much cash flow off them, so I had a little modest cash flow. I do things differently looking back, but I'm still moving forward. Real estate corrects, right? It's like a bad haircut and not that I would really know, but you can get a bad haircut and give it a 4 or 6 weeks and it'll grow out in a way you go and it covers over any mistakes that Barber made.

 

Speaker 1 (00:14:07) - Yeah, real estate's very forgiving over the long term. I kind of think of real estate as a game of attrition as long as you buy, right? Even if there is a bit of a mistake or a stumble, when you have five simultaneous ways that you're paid, you're going to feel that sooner than later. Scott You've really done a great job of scaling up your portfolio.

 

Speaker 1 (00:14:30) - Last I checked, you were in nine different markets. I mentioned the nine states that you were in earlier and you have 18 different property managers now. Can you talk to us more about how you scaled that? You talk to us about how it might be best to get that snowball rolling sooner with cash flow, but how do you scale up and ramp up to where you're at today with 72 doors, 64 of them single family rentals?

 

Speaker 3 (00:14:55) - Oh, what I'll do, Keith, I'll share what I did to kind of get there. And I want to be candid with you and listeners of that. I probably made a mistake doing that. I don't think everybody has to be in that many markets, that many managers. So what I did, quite frankly, it sounds so simple. I said a 90 day target. So I would say I'm going to buy X number of properties. That was a do or die goal. It wasn't an annual goal. If I wanted to buy three in that 90 day period, I would make sure no matter what, I bought three assets.

 

Speaker 3 (00:15:26) - So what happened was I maybe bought in different states to get the job done. I had to buy quickly, right? I was focused on adding my numbers. So for me, having that short term target that I looked at every day in the morning and the night that gave me the focus. So I wasn't looking over three years. I was like, What do I need to do in the next three months? And I really applied everything to doing that. And so you figure if you do a three month period, you pick up three, but you do that every quarter, that's 12 new assets in a year. That's big progress in just annual time frame. So that's what I did. 90 day targets were the game changer for me. Now, you shared kind of the downside of that and that I'm probably over diversified, I would say probably in my level being in three, four states, half the states and maybe two thirds less property managers would be more. Just from a relationship standpoint. So that was a mistake.

 

Speaker 3 (00:16:25) - And, you know, I can correct for it Over time. I'll probably do 1030 ones out of some of the states and consolidate in areas that I like. But that was how I did it is I just identified a lot of Midwest type markets that are good cash flow markets. And when I saw an opportunity, I grabbed it a few of them. Keith I buy one and then the next door, somebody was doing a renovation next door. And there are a few streets, right? Three houses right next to one another as a result of that. So that's kind of been interesting. And then I also find is word got out that I was buying. I had people approach me and say, Look, I've got a package of properties. Would you like the whole package or part of the package? And so that helped me a little bit. So instead of doing one loan on three different properties three times, I do one larger loan purchase, three properties at once. And so it gave me a little bit of efficiency.

 

Speaker 3 (00:17:19) - Now that didn't happen on all of them, but over time I've been doing more of that. My last one this year I bought four assets in Tennessee from one seller as a package deal, and that makes it a little bit easier.

 

Speaker 1 (00:17:32) - Yeah, I want to get into that financing piece shortly, but I think the important thing is you acted, you jumped in and once you do that, more opportunities begin to present themselves. And not everyone does everything the right way. If you've got 18 property managers you're dealing with, which would be a lot. I mean, if you get one monthly email statement from property manager that's getting one a little bit more than every other day, if one would happen to do it that way. I've often talked about how three, 4 or 5 markets to be in that number probably is a good number where you have adequate diversification, yet it hasn't overcomplicated your life administratively at the same time. But with that in mind, Scott, as you're growing your portfolio, what makes you decide what market to buy in next? Oftentimes it's not the sort of thing that you think it will be, just like you had an opportunity to present itself.

 

Speaker 1 (00:18:24) - For example, if you buy in a market and you find that you have a really communicative property manager that you really like in that market, you might buy in that market where you know you've already got a good manager, for example, rather than just what appears to be a good deal on the surface. So what are some of the factors that go into what make you decide which market to select next?

 

Speaker 3 (00:18:43) - Scott I've done a lot of analysis and there are a lot of good markets. You know, one thing, there's no perfect market. You and I probably know 20, 30, 40 good markets where people can make money that have good growing economies, populations growing. There's pressure on rents and appreciation. So I've identified some that I like. Would you just alluded to is really one of the factors now, which is more of a relationship, right? I've consolidated over, so I have a good property manager in Memphis, Tennessee. I've got a great working relationship with them and then also a provider of assets.

 

Speaker 3 (00:19:18) - And so for me, I'm finding having that relationship makes things a little smoother. There's a trust factor when you manage remotely. I haven't seen most of my assets and I do very little in my own home state. So for me, it's really important that I can trust who I'm working with out of state. And so I find having that relationship makes me more likely to purchase more properties in that particular market because I've got that. So Saint Louis, Missouri is one market. Memphis, Tennessee is another. Those are some markets that I like. Now, some of them have great fundamentals. You know, Memphis, number one airport in the entire country, you've got a waterway, you've got a lot of highways that converge there. You've got a lot of industrial Nike's there, Amazon. So there are, you know, kind of a multitude of factors. You know, right now in Memphis, you've got the blue oval development, which is the Ford. They're going to build battery trucks. And I think it's a $10 billion plant they're putting in.

 

Speaker 3 (00:20:18) - Well, that's going to be a huge draw for jobs. So I tend to look for jobs, a diversified economy. I like to see an influx of people coming into the market. So that's the big macro. When I look at my investment, I try to get fairly close to that 1% rule if I can. You know, I don't have to hit it perfectly, but that's kind of a decent benchmark on an asset. I like to get fairly close.

 

Speaker 1 (00:20:44) - You're listening to Get Rich Education. We're talking with super real estate investor on Single-family turnkey Homes, Scott Saunders. When we come back, including how did he do it with the financing and what does he do to manage all this? You're listening to Get Resuscitation. I'm your host, Keith Weinhold. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom family investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%.

 

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Speaker 1 (00:22:30) - Start at Ridge Lending Group. This is real estate investment coach Naresh Vissa. Don't live below your means.

 

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Speaker 1 (00:22:46) - Listen to Get Rich Education with Keith Weinhold. Welcome back to Get Rich Education we're talking with Scott Saunders get rich education listener owner of 64 single family rental properties. He really loves single family and he's still buying now. But Scott, some people have slowed down their buying with higher mortgage rates. They're not adding properties nearly as quickly. But still, really the question I asked myself is where could I invest better dollar today than in rental property? Of course, inflation debases that debt for us, and then when inflation and interest rates drop, I can refinance. And you've added just about 60 properties in the last four and a half years. So tell us about that.

 

Speaker 3 (00:23:39) - I have added a lot of them recently and it started again with setting those goals and I'm keeping up the momentum now. You know, I realized the rates have changed. This is still a good time to be a buyer If you're in certain markets.

 

Speaker 3 (00:23:54) - There are good purchases out there. So I'm able to negotiate a little better with sellers, maybe get a little concession where they'll give a couple points towards my rate or the closing cost. I couldn't get that and the go go days, people are doing that. And the way I look at it is I'm really making an investment now in an asset, right? What is a single family home? It's just a bunch of commodities glass, bricks, wood. And with inflation, we know commodities are going to go up. So I'm locking in that today and I'm going to really use inflation as a tailwind to propel my investing forward, whether that's with rents and appreciation, whether it's debasing my good business debt, I'm using that as a tailwind. And I'll tell you my personal opinion, Keith, I'll go on record on this. People are going to kick themselves a few years down the road when rates go down, whenever that is for not purchasing now, because when rates go down, it's going to create more demand.

 

Speaker 3 (00:24:54) - And I think you're going to lock in today's pricing now and somewhere rates will change. I don't know when, but nobody has that crystal ball. When they do, prices are going to pop up, I think, at that time. And so people are like, oh, I should have bought back in 2023. I don't want to do the woulda, coulda, shoulda. I'd rather make smart baby steps now. Just keep buying chunking along slow and steady and locking in assets today that I know five, ten years from now, my future self is going to be glad that I took action today.

 

Speaker 1 (00:25:30) - Now, I know that you, the listener, must be thinking, yes, I do want to buy more property here. But how to Scott add so many properties so fast and that really guides us into the financing. What do you do for the financing of these properties? Because of course for single people, those golden ticket Fannie Freddie loans run out at ten.

 

Speaker 3 (00:25:52) - One of the biggest things is getting over that hurdle of those lower rates.

 

Speaker 3 (00:25:57) - So I do what's called non QM or what they're also called DSR financing, where the load is made based upon the asset and the cash flow the asset produces. So these are going to be a little bit higher rate, a touch higher. But once you get into them and you get comfortable, you realize this is what all the big players do. People that buy commercial properties, that's how they buy them. So I'm using a rate that's a touch higher, but now I've got a great working relationship. I have one particular lender. I've done 40 loans with them directly, not with the broker. I go direct to the lender, save some money, and I'll literally email over to that lender at night. I'm buying just one of their contract on two more assets, and it's really easy to do the loan. So I find what's called non QM, which stands for Non-qualifying Mortgage, that type of financing. I actually prefer it. It's easier. I don't have to provide every financial statement, you know, updated within the last 30 days.

 

Speaker 3 (00:26:58) - I actually find it's an easier approach. And as long as you look at the numbers and you still have positive cash flow. So today maybe I'm positive $200 where a year and a half ago I might have been positive 3 or 350. So it takes me five assets to get another thousand in cash flow today where I could have done that and maybe three or so a little while back. Okay, I'm just buying more assets, right? I win with that because I'm still locking in more of those commodities in those assets. And so I just that inflation raised that up over time and I just get the benefit of it. So now instead of fighting against inflation, I'm using inflation to move me forward.

 

Speaker 1 (00:27:41) - About dcr loans, debt service coverage ratio loans which are used more commonly in the five plus apartment space area. That is one option for one after they run out of their ten golden ticket Fannie Freddie loans that are at the best rates in terms. Can you tell us more about those terms of the hours? Are you getting a longer term fixed rate? Do you need to put a greater percent down for those?

 

Speaker 3 (00:28:08) - Most of mine are relatively close to a conventional loan.

 

Speaker 3 (00:28:12) - You can get those with 20% down. I have chosen in some cases to put down maybe 25%, but I'm getting in almost all situations 30 year fixed rate financing. To me, I want to fix that debt service and have it locked in. So that's really important. So I'm a big believer in 30 year fixed rate. I did have during Covid right at the beginning and I had some assets under contract. You couldn't get a loan. It was very difficult. March, April, May and I had deals closing. Then I had lender that I had to get the lender that they required me to put down 40%. So I had to put a bigger down payment to get it done. At the time, Keith, I was like, Oh, I'm not getting as much leverage. My money's not working quite as hard. Now, that was several years ago, and a few of those because they were smaller assets. I've got little small loans on them where and I want to be careful because I know your view on debt.

 

Speaker 3 (00:29:11) - I'm going to be paying some of them off, not to have them free and clear, but to use those as a resource as collateral. So I can go to a bank and say, Look, I'm going to pledge this collateral. Let's say ten homes that are free and clear, you give me a loan and now I'll use that loan to do some other things, probably like hard money, loans, private lending. So I'm going to use those paid off assets as a tool for me to do some financing, some creative financing deals in the future. So it's a means to an end. It's a stepping stone to go a little bit deeper and use the banks money for me to make more money in the future. So that's kind of what I'll be doing there.

 

Speaker 1 (00:29:51) - All right. It sounds like you still want to keep most of them leverage. Are you talking about the advantages of having a few of them paid off and therefore really so that you can borrow against the value of those paid off properties? So really, you're just paying them off to effectively use leverage again in a different way?

 

Speaker 3 (00:30:08) - Precisely.

 

Speaker 3 (00:30:09) - That's exactly what I'm going to do is bundle those together and those become collateral. So exactly. I'm going to relieve them maybe in a different fashion. So I am a huge fan of good business debt. It's one of those things is concepts. So you got to wrap your head around it at the beginning because we're beat into our brains that, you know, debt is bad, but good business debt is not only good, it's great. It allows you to multiply your efforts faster than you could with your own capital. So to take the bank's capital and use that to get ahead, that to me is is a smart move 100%.

 

Speaker 1 (00:30:50) - So you've got this robust portfolio spread across several different states. You've even admitted probably dealing currently with more managers than you even want to. And it makes one wonder, is there any particular type of management software that you use? Now, of course, each one of your individual property managers, 18 of them, they have their own management software. But how does that work? How do you manage all this? Do you really get 18 monthly statement emails from 18 property managers each month?

 

Speaker 3 (00:31:19) - I do actually get 18 different emails and statements a month.

 

Speaker 3 (00:31:23) - I'll tell you what I've done, Keith. I'm very low tech. I'll be honest. I use Excel to track things and what I've done, which is kind of a fun thing for me. My youngest daughter, who, believe it or not, actually owns. She bought her first single family home at age 16. She's been watching me. She actually helps me now track my rental income and work with the financials. So I've hired her in my real estate business. She now gets all the statements she puts in, puts everything into my spreadsheet and then runs the reports for me. So it's been kind of neat in that I get the data I need, but I'm also training my kid about real estate. And not only that, I actually include her on my emails, so she has a real estate specific email. When I reply to my property manager about an issue, I'll copy her so she sees my thinking how I do it. So I'm trying to be strategic, realizing I'm not going to be around forever.

 

Speaker 3 (00:32:21) - Someday my kids are going to get a pile of real estate and I want them to know what to do with it when they get it, that they walk into it and they're like, okay, I kind of know what to do versus selling it all off and then giving the money to Wall Street, which is I would hate to have that happen. So I'm. Try to bring them along.

 

Speaker 1 (00:32:41) - Despite the fact you use Excel. You talk about how you're relatively low tech. I'm, in fact, impressed with that because it demonstrates to me that, you know, the proper formulas to use in Excel and which numbers actually matter to drive your current and future investment decisions. So that actually tells me a lot that you really understand what's going on behind the scenes and you don't have it too automated. Also, when you're involved like this, which is a sense that you just cannot get being a stock investor where your profits are really coming from and where they're really not coming from. Having one of your children involved that is huge at building this legacy wealth piece like we talked about on the show last month and helping ensure that there is generational wealth in your family, like with your daughter.

 

Speaker 1 (00:33:26) - Now, she understands where it comes from and what it takes. So I absolutely love that piece. Scott We talk about what drives investment decisions. We talk about how you've acquired and you've held some properties. What about the time to sell? For example, I like to buy turnkey investments that already have the renovation done, or they're just brand new and oftentimes like to just hold them 7 to 10 years because in 7 to 10 years, in the last three years, it's been as short as three years, those properties have gone up in value enough where the leverage ratio was cut such that I either want to do a cash out refinance or a 1031 exchange, not get too emotional about properties, only hold them seven years, rarely if ever, more than ten years. What are your thoughts with the whole time and the duration?

 

Speaker 3 (00:34:09) - I'm fairly similar to you on that. I do. My preference is turnkey. That's what most of my portfolio is. So I'm buying stuff that's already been renovated after, you know, 10 to 15 years.

 

Speaker 3 (00:34:21) - And that window, that's when you're going to start to see roof issues, the furnace, the AC. So my plan would then be to do a 1031 roll out and get more turnkey. So let's say I take one single family home that might allow me to go out and buy 2 or 3 more single family homes, probably ten years max would be what I would be doing. And I did that. I rolled out A1A couple of years ago. I had one single family in Arizona exchanged out of it, and I bought four in Saint Louis, one in Memphis. I got a much better return on my investment. So to think of if you take my portfolio today, right in the 60s, if I can roll out of that and go up to, let's say 120 or 130, that's going to give me some significant scale and benefits. So that would be my plan. I'll never sell and pay the taxes. I always do it 1031 or I'll refinance to harvest equity.

 

Speaker 1 (00:35:17) - If you're a brand new listener and you don't know what a 1031 tax deferred exchange is, the short story on that is it basically allows you to roll your profits from appreciation into another property, either multiple properties or a larger property is what it usually is with you being able to 100% defer the tax.

 

Speaker 1 (00:35:37) - And there's no limit to the number of times you can do that. Therefore, it should become a tax free event. You can defer that tax your entire life by trading up with that. 1031 also called a 1031 like kind exchange. As you go along, I know that you've got some great philosophy, Scott. I mean, first of all, you're a goal driven guy, so you have these longer term goals. And you mentioned you also have these shorter term milestones, like a 90 day goal on your way to those longer term goals. For one that hasn't heard the acronym before, Goals should be smart, that is specific, measurable, achievable, relevant and time bound. That's what differentiates a goal from a wish. So tell us about your goals and how that drives this. Scott.

 

Speaker 3 (00:36:22) - My duals. I do every three months. I do have a short term goal and I've got some For this year. I'll probably pick up 15 properties. I think I'm halfway through the year. I'm on track, so I'll do that.

 

Speaker 3 (00:36:34) - I've got some long term goals. One of them just before I left on vacation a couple of weeks ago, I'm under contract on a property in Tuscany, Italy, so I can have what I call a lifestyle asset. So one of my goals would be to get a few lifestyle assets. I want to buy a place in Steamboat Springs, Colorado, enjoyed some of the year, rent it out other times. So one goal would be picking up a few of these. That would be something that I can enjoy and my kids can enjoy, but it also produced a return. So it's a twofer. I gave money on it and I get to enjoy it. That's a big long term goal of doing that. So Tuscany, I like to do a place in Sardinia, Italy, which is the most beautiful beaches, gorgeous. The mountains may be a place in Florida, so I like to pick up over the next few years, maybe a property a year in that category. That's just something that's fun.

 

Speaker 3 (00:37:25) - It doesn't make any sense to work really hard and save if you can't enjoy life, right? I mean, that's the whole goal is to get free where you can enjoy your time and enjoy spending time with the ones you care about. So I want to transition that way into Tastic.

 

Speaker 1 (00:37:42) - Yeah, spending time in Tuscany was part of perhaps the best week of my life personally, part of your philosophies. It's not just having tangible goals, it's you call something rather than an ROI in ROA, and it's that the return on a realisation that I talk about.

 

Speaker 3 (00:38:01) - Yeah, what that is, you know, so many people have heard of ROI, which is a return on investment and we kind of get bottlenecked around that, right? Looking at our return, you know, 7%, 8%, 1619 And there's a lot of focus. What I tend to do, and this actually came through a good friend of mine, Rick ROA, is return on attention. Yeah. Looking at our life from a time standpoint.

 

Speaker 3 (00:38:25) - So when we look at ROI, we're looking at money dollars return on attention. We're now measuring things in time, right? What do we have the free time to enjoy without having to be distracted with following the stock market every day? And is it up or down? Or what's the Fed doing? So return on attention to me is actually more important than the ROI. And I know we're on a podcast talking about real estate, so surely making wise investment decisions is important. But if I look at where I am in life, more important to me is my return on attention than my return on my investment. So I want to have my attention free that I can enjoy what's around me while I'm young enough and vibrant enough to enjoy it. So I just got back from travel and Saint Lucia had a wonderful time out there. I love to travel. I typically do an international trip probably every quarter or so. I'm taking my son to Morocco, did an African safari. We did Iceland swam with whale sharks last year.

 

Speaker 3 (00:39:30) - Portugal. I want to spend time with the people I care about and travel is a part of that and having my attention freed up so I can do that. That actually is a big principle. It's a big objective is having my time freed up and my attention freed up.

 

Speaker 1 (00:39:47) - Wealth is measured in time, not dollars. You and I sure do agree there. Scott is we're about to wrap up here. I know you often talk to people about the importance of taking action and just sort of getting those base hits and how do you think that people would have more economic freedom if they just purchased 5 to 10 single family rentals?

 

Speaker 3 (00:40:07) - Absolutely. And it's not that hard, right? You get over the first one's the hardest and then you get a little momentum after that, Right. The first one hard, the second one, you've just doubled the size of your real estate portfolio. You go to four, you quadrupled your first one. And I think the magic number to hit is get to five and add five assets.

 

Speaker 3 (00:40:28) - You typically have enough rental income coming in that it's pretty close to being self-sustaining. So if you have one vacancy, you're going to typically have pretty much enough rental income to do it. So getting to five and then pushing on to 10 or 15, that can change so many people's lives. Just that small thing for the average American. If you had ten single family rental homes, you'd be light years ahead of the people that are doing all the 401. And Wall Street racket stuff.

 

Speaker 1 (00:40:59) - That's so on point. Yeah, you are really doing the things. Scott, before I ask you how our audience can learn more about you, do you have any last thoughts? Anything else you'd like to discuss maybe that did not come up with scaling up this terrific Single-family rental portfolio and how that's enhancing your life.

 

Speaker 3 (00:41:18) - I'll give two quick tidbits to kind of wrap things up here. Keith, it's been great visiting with you. I've been a longtime follower and just love all the information you bring out and the resources, so it's great to visit with you in person.

 

Speaker 3 (00:41:30) - Two things. One, I would say use the tax code, use guys like Tom Lehrer write, read those books, figure out how to master the tax code. A lot of people don't do that. They're intimidated by taxes and the IRS go after that and it'll give you more capital to grow your portfolio. The other one, I would say, and I think you alluded to it, is don't be paralyzed by inaction. Don't do that analysis paralysis thing of is this good or not? My whole philosophy is I never try to hit a home run. I don't need the best performing investment. I just need a good investment. And you know, in a portfolio, I've some that have been stellar and I've had 1 or 2 dogs like anybody would. When you get a bunch of them, my feedback would be, if you're not in the game of real estate, put all your focus on to getting that first one and then jump to your second translated into action rather than overanalyzing. So on your show, you've got a lot of great resources of turnkey providers.

 

Speaker 3 (00:42:29) - In many of the markets that I'm in pick market, take action and jump in. You'll be so much farther ahead by taking action than by studying and running formulas and spreadsheets. Get into the game, buy the first property, buy the second push with some short term goals, and then all of a sudden you're using all of these economic forces to get ahead in life and they're not fighting against you. And I think what that does is now you're swimming downstream, so to speak, rather than fighting upstream. That's what all these inflationary forces that you talk about all the time do. So get in, start swimming downstream, join it. I want to see more people in America that have freedom and have some independence and are benefiting from the economic forces rather than getting crushed by those same economic forces.

 

Speaker 1 (00:43:21) - And it starts with just getting your first base hit. Well, this has been terrific, Scott. How can our audience learn more about you?

 

Speaker 3 (00:43:29) - I've got a website up. It's my name, so it's Scott R Saunders.

 

Speaker 3 (00:43:35) - Sanders And that's got a little more background. And I've got for people that are interested, I put together a course of how to kind of get into single family and scale it and grow it. So for those that is appropriate, I'm happy to be a resource in that department there at that website.

 

Speaker 1 (00:43:54) - Scott has been such a great chat. Our audience is going to benefit from it. Thanks so much for coming on to the show.

 

Speaker 3 (00:44:00) - It's been a blast. Thanks, Keith.

 

Speaker 1 (00:44:07) - Yeah, great stuff from Scott. We do a lot of things the same way as far as having remote managers in multiple markets. I've also never seen most of my properties in person, nor do I need to. We often buy multiple properties at once. I like to buy at least two single family rentals at a time to make things more efficient. But big picture, we are not postponing life and are traveling to great places. As I'm fond of saying, some delayed gratification is good, but the risk of too much delayed gratification is denied gratification, which is the road of the 401 plan, which is also known as a life deferral plan.

 

Speaker 1 (00:44:49) - Scott is currently meeting with our provider of Chattanooga Properties on Marketplace. It is rare to see Crest buying properties in Jerry Marketplace. I guess I'm actually not sure we might have to turn him onto it so that he can quit one of those part time jobs. He's got pretty cool part time jobs, though. He's not breaking his back like a longshoreman. Yeah. Jerry Marketplace. That is where you find the right properties that really are just never going to make it out onto the open market at all. And they're the ones that are conducive to this strategy. Lower cost properties that have a high ratio of rent income to a low purchase price, they're typically fully renovated with a tenant from day one where an experienced manager also manages it for you from day one, if you so choose. And it's free. Just creating one log in one time like thousands of others have, gives you access to nationwide providers. We've even got free coaching for you there if you so choose. Knowledge really isn't power in itself. Knowledge plus action is what's powerful.

 

Speaker 1 (00:45:56) - Get started at GRC marketplace.com until next week I'm your host Keith Winfield. Don't quit your day dream.

 

Speaker 4 (00:46:07) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:46:35) - The preceding program was brought to you by your home for wealth building get rich education. Com.

 

 

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Higher interest rates are cracking the economy—failing banks and failing commercial RE loans. With many expecting rates to go much higher, what else will break?

Keith Weinhold, the host of the Get Rich Education podcast, discusses the current state of interest rates and their potential future trajectory. 

Jim Rogers, legendary investor with an estimated $300M net worth, returns. He shares his insights on interest rates and inflation. 

We discuss the impact of inflation on various asset classes, including real estate, and the potential for higher interest rates in the future. 

The conversation also touches on topics such as agricultural real estate, the oil market, central bank digital currencies, and the role of gold and bitcoin as alternative forms of wealth storage. 

Overall, the episode provides valuable insights into the current economic landscape and its implications for investors.

Title [00:01:56]

Introduction and overview of the current state of interest rates and market distortions.

Title [00:05:03]

Discussion on the unpredictability of interest rate predictions and the acknowledgment of inflation by Jerome Powell.

Title [00:08:28]

Explanation of the historical trend of interest rates, the recent rise in rates, and predictions for future rate movements.

Title [00:12:09]

Jim Rogers on Borrowing Money and Interest Rates

Discussion on the benefits of borrowing money at low interest rates and the prediction of interest rates going higher.

Title [00:14:27]

Jerome Powell and the Possibility of a Soft Landing

Questioning whether Jerome Powell can raise interest rates enough to control inflation without causing an economic crash.

Title [00:18:41]

Inflation, Interest Rates, and Real Estate

Exploring the impact of inflation and interest rates on real estate investments and the potential risks for property owners.

Topic 1: Agricultural Real Estate [00:22:21]

Discussion on the opportunities in agricultural real estate due to erratic weather patterns and reduced yields in various crops.

Topic 2: Oil Market [00:24:16]

Conversation about the current state of the oil market, the decline in known reserves, and the potential for higher energy prices.

Topic 3: Central Bank Digital Currencies (CBDCs) [00:26:04]

Exploration of the proliferation of CBDCs and the implications of a digital currency controlled by central authorities, including potential restrictions on spending and increased government control.

Title [00:32:06]

History of Money and Gold Standard

Discussion on the different forms of money throughout history and the transition from silver to gold as the basis for the US currency.

Title [00:32:47]

The Diminishing Value of the Dollar

The prediction that the value of the dollar will continue to diminish over time and the suggestion to invest in real estate instead of saving in dollars.

Title [00:33:33]

Invest in What You Know

Advice for investors to only invest in what they know about and not rely on advice from others, emphasizing the importance of knowledge and understanding in investment decisions.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/457

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Interest rates rose fast last year, but a lot of experts think that they're going to go substantially higher from today's level, including our guest today, who is a legendary investor. How much higher will rates go and what's driving them higher today on get rich education.

 

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Speaker 1 (00:01:10) - Join the Freedom Family and become a real estate insider. Start on your path to financial freedom through passive income. Text Family to 66866. This is not a solicitation and is for accredited investors only. Please text family to 66866 for complete details.

 

Speaker 2 (00:01:33) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.

 

Speaker 1 (00:01:56) - Welcome to GRE! From Mount Washington, New Hampshire to Mount Whitney, California, and across 188 nations worldwide. I'm Keith Whitefield and you are listening to Get Rich Education. Hey, it's great to have you back. Interest rates are not high today. They're just moderate by historic standards. But of course, the rapid rate of increases last year was faster than it's ever been in our lives. And that's what introduces market distortions. Today's guest is going to talk about that with us later. That's the legendary Jim Rogers. And it's public information that he has an estimated $300 million net worth. When Jim talks, people listen. When he was here with us in 2019, he was emphatic that interest rates were going to go much higher.

 

Speaker 1 (00:02:43) - He was completely correct. And few others were saying that then. In fact, when he's with us here shortly, all recite the interest rate quote that he stated here on this show back then and get his forecast from this point on as well before discussing interest rates a quarter recently ended. So let's whip around the asset classes as we do here at times, because you need to be able to compare real estate with other investments. The first half of this year, the S&P 500 was up a fat 17%. I'm just running to the nearest whole percent here. The tech heavy Nasdaq index had its best first half of the year in four decades. Gold was up 6%. Oil was down 34%. Bitcoin up an astounding 84% the first six months of the year. And that's partly because it really bottomed out near the beginning of this year per Freddie Mac. The 30 year fixed mortgage began the year at 6.5%, and now it's up to 6.7 for real estate. Since it lags, we've got a realtor.com year over year figure.

 

Speaker 1 (00:03:48) - The median listing price was up 1% to 440 K financial institutions aced their Fed stress test that they call it that measures how banks are holding up during a downturn. Q1 GDP was revised way higher than they previously calculated, so the economy is doing even better than many thought. And the number of Americans that are filing for new unemployment claims that fell the most in 20 months. So therefore, the economy is still hot by a lot of measures. Well, that puts more upward pressure on interest rates. Well, an interest rate that can be thought of as your cost of money, and they can even affect factors beyond the economic world. For example, in demographics, I mean, historically high interest rates, they've actually been a mild impediment to people's very migration and mobility. Understand the Fed's interest rate predictions and really all of their predictions have been awful, just awful. A long line of them. Fed Chair Jerome Powell's inflation is transitory. I mean, this is the latest notable one. He said that in 2021.

 

Speaker 1 (00:05:03) - I mean, though, look on your phones weather app, you don't trust the weather forecast ten days into the future. So I don't know why we would listen so intently, even reverentially to what the Fed economists predict for the next month or the next year. I mean, the economy can have as many or more variables than the weather. I'm going to assume. And these people know nothing Volcker, Greenspan, Bernanke, Yellen, Powell. They know nothing but see, they act like they know. So I just sort of wish they'd say we don't know more often. And by the way, this is why I do not predict interest rates like virtually everyone else. I know nothing on that. I joke around and I say I will let someone else be wrong and go ahead and predict interest rates. It's really hard to do now. A little credit to Jerome Powell later on, though, he did acknowledge that they ought to stop calling inflation transitory. So I think the word transitory has different meanings to different people.

 

Speaker 1 (00:06:08) - To many, it carries.

 

Speaker 3 (00:06:09) - A time, a sense of of short lived. We tend to to to use it to mean that that it won't leave a permanent mark in the form of higher inflation. I think it's it's probably a good time to retire that that word and try to explain more clearly what we mean.

 

Speaker 1 (00:06:26) - Another credit to Powell in today's Fed is that they'll tell you what interest rate decisions they plan to make at upcoming meetings, which is certainly a welcome departure from the opaque Alan Greenspan where you needed to try to translate his Fed speak. So if the Fed rate goes higher, then you can generally expect other rates to go higher. The prime rate mortgage rates, credit card interest rates, automobile loans and more. Jim Grant. Who's been running the interest rate observer since 1983. He recently said that we are embarking into a long era of higher interest rates. He says that that's due to inflation and asset price speculation and of course rates wouldn't move up in some sort of straight line from here. During recessions, interest rates fall.

 

Speaker 1 (00:07:14) - Well, in that case, if you had recessions during a longer term up spell, where you'd have is higher interest rate lows in a recession. Now, starting in 1958, something strange happened in America. In a recession, prices did not fall into many. This marked the beginning of the age of inflation. That was 65 years ago. So you're pretty used to that. If there is a recession, prices don't fall. All right. Well, after that period, rates went up, up, up until they peaked in 1981. And then they went down. Rates fell from 1981 until 2021, and now they have begun to rise again. Well, because artificially low rates that were set to deal with Covid, because they're still recent, I mean, many people have this sort of muscle memory of zero zero interest rate policy. Maybe you do, too. And it was an all you can eat buffet table of credit. And that buffet table was open for business for ten years. Well, now that we've hiked up the Fed funds rate from 0 to 5%.

 

Speaker 1 (00:08:28) - All right. Well, back on June 28th, Powell said that more restrictive policy is still the COB because they're continuing to fight inflation. And that includes the likelihood of quarter point interest rate hikes at consecutive meetings and two or more increases by the end of this year. Now, our frequent macro economist contributor here on the show, Richard Duncan. He says there is an unusual divergence between weak credit growth and solid economic growth. And that was probably brought about by the surge in savings from people's government checks during the pandemic. Well, if that divergence persists, then the Fed might have to raise rates even more than the half percent plus that they suggested is necessary by the end of this year. And Duncan says that the stock market is not prepared for the Fed rate to go from 5% today up to 6%. And if it does, the stock market could be in for a painful correction in the months ahead. Now, to my point about interest rates being hard to predict, some economists think that rates will generally fall after this year as well.

 

Speaker 1 (00:09:34) - So some people see it that way, but I think there are more now predicting that they will rise rather than fall. As the legendary investor that predicted that interest rates were going to go way higher when he was back here with us in 2019 is he joins us soon. We could have some challenging audio quality on this remote to Singapore, but people really hang on what Jim has to say. That's next. I'm Keith Wild. You're listening to episode 457 of Get Rich Education. With real estate capital Jacksonville. Real estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. Genevieve is ready to help your money make money and to make it easy for everyday investors. Get started at GWB real Estate. Agree that's GWB Real estate agree Jerry Listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They've provided our tribe with more loans than anyone.

 

Speaker 1 (00:10:49) - They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your pre-qualification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. Hi, this is Russell Gray, co-host of the Real Estate Guys radio show. And you're listening to Get Rich Education with Keith Reinhold. Don't Quit Your Day Dreams. Today's guest is one of the most esteemed celebrated and legendary business moguls, investors and financial commentators of our time. He co-founded the Quantum Fund, one of the world's first truly global funds. He's created his own commodities index, his own ETF, and he is a popular author of a great many books. Welcome back. For your third appearance on Jim Rogers case. There's no reason to go into all that. I'm just a simple Earth. That's why people like listening to you, because you rather plain spoken on what some people deem to be some pretty complex concepts.

 

Speaker 1 (00:12:09) - So it's good to have you here joining remotely from where you live in Singapore. You were here with us in both 2019 and 2021 and in 2019 here on the show you said and I've got the quote right here, if you can borrow a lot of money for a long period of time at low interest rates, rush out and do it right now, That's what you said. That was prescient. And also in 2019 here on the show, you said, and I quote again, interest rates are going to go much, much, much higher over the next few decades and it is going to ruin a lot of people. And here we are today. So what are your thoughts with regard to interest rates and inflation here? Jim.

 

Speaker 4 (00:12:52) - You make many mistake. Please. It's made many, many mistakes and I'm sure hope I live long enough to make many, many more mistakes. Yes, interest rates are up. They're up substantially. It sent them, but it is not over yet. Interest rates will go much, much higher because we have friend, not just we, but central banks everywhere have printed huge amounts of money.

 

Speaker 4 (00:13:17) - And whenever you print lots of money, inflation, college interest rates go higher and the usual amount of money inflation gets very high. And that always leads to central banks having to raise interest rates too high level because they don't know what else to do. In 1980, before you were born, interest rates on central US government Treasury bills, 90 day Treasury bills, interest rates were over 21%. Gosh, that's not a typo. 21% because inflation was out of control and we had to take drastic measures, which meant you have to do something like that again.

 

Speaker 1 (00:13:58) - That would be interesting. So to bring us up to where we are right now, the federal funds rate is basically gone from 0 to 5% since last year. Mortgage rates rose from 3% to 7% just last year alone. And a lot of nations are jacking up interest rates. Turkey just decided that they are going to raise interest rates 6.5% all at once. And some people don't think that is enough. So here we are. I mean, you talked about what happened about 40 years ago.

 

Speaker 1 (00:14:27) - Can Jerome Powell engineer a soft landing? Does he have any chance of doing that where he can raise rates enough to quell inflation but yet not crash the economy?

 

Speaker 4 (00:14:37) - No, of course not. First of all, in 1980, America was still a creditor nation. Now with the largest detonation in the history of the world. Yeah, that's staggering. And they go up every week, and the amount of money that's been printed is beyond comprehension. I don't know how they can solve this problem without really getting drastic and taking interest rates to very high levels back in 1980. The Federal Reserve had the support of the president. The president told him to do whatever you have to do because the head of the central bank was all over. It was a smart man. He knew what he had to do, but he made sure he had political support before he did it. Now, the president did not get reelected because Volcker did what had to be done. We don't have as smart a central bank head now as we did then.

 

Speaker 4 (00:15:31) - And the amount of money that's been printed is overwhelming. And America's debt with the largest detonation in the history of the world and we were a creditor then. So there are things that are different. So he would be worried if I were you. In fact, I am worried, so I'll leave it to you. But I'm more.

 

Speaker 1 (00:15:50) - Well, that's right. Carter was a one term president. We'll see if Jerome Powell ends up breaking too many things. If Biden only ends up being a one term president, then as well, whether it's his fault or not, oftentimes the onus could fall on him. You bring up all this debt, the greatest detonation in the history of the world. And maybe the first time you and I spoke back in 2019, I don't know what our debt was then. Maybe it was 25 trillion. Now it's more than $32 trillion. Maybe just as concerning. More our debt to GDP ratio is about 121%. So I guess really what I'm getting at, Jim, is how will we know that things break and things are already breaking in a world of higher interest rates with failing banks and more stress in the commercial real estate market.

 

Speaker 1 (00:16:37) - So what else is going to break?

 

Speaker 4 (00:16:40) - Jimmy Carter did say to go do whatever you have to do and I will go you. I doubt Biden would say to the central bank, do whatever you have to do without or you. And I doubt if the central bank Powell, the head of the central bank, now really comprehend what he's gotten us into. You know, he kept saying all along, oh, don't worry, everything is under control. The secretary of the Treasury, Janet Yellen, he's got Ivy League degrees, also kept saying, don't worry, everything is under control. We know what we're doing. We do have different people this time, not many Paul Volcker's that comes along in history. To me, the indications are going to get worse. They will not solve the problem until we have a very, very serious problem. I'm not optimistic. Having said that, if I'm not selling short or anything else at the moment, I'm worried about the markets in a year or two. But at the moment, since nobody seems to understand what they're doing at the Reserve or in the presidency, we can have okay times for a while, but the ultimate problem gets worse and worse and worse unless you deal with it.

 

Speaker 1 (00:17:56) - I don't know whether the economy has been slowed down enough yet or not. So in the midst of higher interest rates, we continue to create an awful lot of jobs. But there's a greater body of work that shows a lot of these jobs are just jobs that have recovered, that were lost in the pandemic.

 

Speaker 4 (00:18:13) - The economy is not bad in the US, economy is still strong. You mentioned office. You'll have a lot of jobs. ET cetera. Yes, we have inflation, but inflation is not as bad as it was in the 70s. And you look out the window and everything seems okay. At the moment. I'm just worried about what's coming down the road because I know that some throughout history, if you print a huge amount of money, you create big problems.

 

Speaker 1 (00:18:41) - We are avid real estate investors here directly investing in real estate. And as we have this chat about inflation and interest rates is real estate investors, ideally we would have low interest rates and high inflation. However, those two are positively correlated.

 

Speaker 1 (00:18:57) - You typically have both high interest rates and high inflation or low interest rates in low inflation. That positive correlation.

 

Speaker 4 (00:19:05) - Inflation always in the history has led to higher interest rates for a variety of reasons, which I'm sure you understand. If history is any guide, interest rates are going to go much, much higher eventually. And then you know very well I interest rates are not good for property, not good for real estate investors. They never have that. Even if you don't have any big debt and you don't have that problem or mortgage problems or anything, maybe your neighbors do. And if your neighbors have problems, that means their property prices will go down and that's going to affect you because you're nearby and everybody will say, oh, that property is collapsing. What about teeth? And teeth can say, Oh, no, don't worry about me. I don't have any debt. They'll say, okay, you don't have any debt, but we can buy property in your neighborhood. Very cheap because your neighbors have problems.

 

Speaker 4 (00:20:06) - That gives you a problem.

 

Speaker 1 (00:20:08) - That's right. Fortunately, Americans have plenty of protective equity in their properties despite these higher rates. You know, residential real estate here in the second half of 2023 is still doing just fine, probably because there's still a scarce supply of residential real estate. You've got more people working from home driving demand for residential real estate. But of course, office real estate has probably been hit the worst, crunched by high interest rates and the work from home trend both. So really that's where we've seen so many of the cracks in the real estate world, especially around the office space. Where else might we see cracks as interest rates continue to go higher like you think they will?

 

Speaker 4 (00:20:46) - Well, again, throughout history, when interest rates go higher and it attracts investors and money and people take their money out of property or stocks or whatever with their money and say yielding is you can buy the Treasury bills at 21%. That's attractive to a lot of people. And that's, you know, risk free and it's very high return.

 

Speaker 4 (00:21:12) - So as interest rates go higher in attracts money from other investment classes in other areas, it's very simple. People are not that dumb. We know that if we can get high interest rates safe, they will do it. And we have to take a risk and the stock market or something else for that spike to do.

 

Speaker 1 (00:21:33) - Sure. Higher rates just incentivize a few more people to be savers as they can now safely get above 4% in these online bank accounts today, where they are getting pretty close to 0% just a couple years ago. We talk about real estate investment. Oftentimes here we talk about improved property on a piece of land. But of course, the more traditional use of real estate is growing crops on a piece of land. And I know you've been a long time agricultural investing enthusiast and a thought leader in agricultural real estate investing. What are your thoughts about agricultural real estate, since in these past few years really we've seen more of these erratic weather patterns that have resulted in things like reduced peach yields in Georgia and reduced ores yields in Florida.

 

Speaker 1 (00:22:21) - Something else, Jim, we've seen reduced coffee yield in Panama, that last one, that's sort of a fractional ownership investment that we featured on the show here. Fractional ownership investment in coffee farm parcels in Panama. That's created some problems with their yield. Of course, you can see that reflected in the low levels of the Panama Canal as well that looks to threaten the economy. But what are your thoughts about agricultural real estate in this erratic weather that we've had? Perhaps that's an opportunity if that's reflected in lower agricultural real estate prices?

 

Speaker 4 (00:22:52) - I'm optimistic about agricultural land prices because, you know, for a long time, nobody wants to be a farmer. The average age of farmers in America is 58. The average age in Japan is 66. Mean, I can go on and on. Although the highest rate of bankruptcy in the UK is in agriculture. So agricultural disaster worldwide for a long time and disaster usually leads to great opportunities. If you know how to drive a tractor, if you should go buy yourself some farmland and become a farmer, if you like getting hot and sweaty every day, it can be a very exciting way to live.

 

Speaker 4 (00:23:38) - I just see I know from history when something gets very bad for a long time, it usually leads to a great opportunity.

 

Speaker 1 (00:23:48) - Well, you are so experienced in commodities trading in the number one, the most traded commodity in the world is oil. And it seems that the oil price really isn't very high now, especially when you adjust that for all the inflation that we've had the past few years and of course the oil market and the oil price drives the prices of so many other downstream products. So what are your thoughts with regard to the oil market and where we're headed there? Jim.

 

Speaker 4 (00:24:16) - I know that known reserves of oil have peaked and are in decline just about worldwide. Does it mean it has to continue going up? But unless somebody finds a lot of oil quickly in accessible areas, the price of energy undoubtedly will go higher. The price of energy is going to stay high. Oil and natural gas, whether we like it or not, and I know we don't like it, but unless you wave a magic wand and you know, in Washington, they keep doing things that they don't help the supply of energy, they they damage it because they put restrictions and controls on energy.

 

Speaker 4 (00:24:55) - So unless something happens somewhere in the world pretty quickly, energy is not going to be cheap.

 

Speaker 1 (00:25:01) - Renewables like solar and wind may be the future, but oil has a high degree of energy density that a lot of those renewables still don't. We're talking with legendary investor Jim Rogers. He's joining us from Singapore. You talked about all this dollar printing, which has created inflation. And in order for central governments and central banks to get more control over people, discussion with Cbdcs central bank digital currencies has really percolated quite a bit in the past few years here. And with your international perspective, your world view. I'd like to know what your thoughts are on Cbdcs, whether you see a proliferation of it, where you see it starting for those that aren't aware of it. Central bank, digital currencies. That gives a government central control where all money is digital issued by the central authority, where your money can be stored digitally on your phone so that a central authority like a bank or a government can have control over you.

 

Speaker 1 (00:26:04) - For example, if your local economy is sagging, well, the government could tell you through your cbdc, your central bank, digital currency, for example, that you need to spend 30% of your income within a ten mile radius or else your money expires. Or this would give central authorities power to do something like say, you know, there's a curfew so you can't spend any of your money after 9 p.m. or this is where they could push ESG, environmental, social and governance agendas through targeting your spending or targeting your spending through diversity, equity and inclusion and getting more control that way through Cbdc. So what are your thoughts with the proliferation potentially of Cbdcs, Jim?

 

Speaker 4 (00:26:44) - We're all going to have digital money in the future, whether we like it or not. It already happened and China's way ahead of it. You can't take a tax in China with money. You have to have your digital money. Your own money. Yeah. And the ice cream in China with money. So it is happening. And nearly every country is working on computer money.

 

Speaker 4 (00:27:06) - Let's call it whatever you want to put your money. And governments love computer money is cheaper. It's easier. They don't have to transport it all they love. But mainly they love it because they've complete control over all of us. As you point out, they know everything you do. They'll call you up one day and say, Keith, you've had too much coffee this month. Stop drinking so much. Whatever it is, they love control and they love knowledge. I don't, but they do. So this is the world we're coming to. None of us will have money in our pockets except on our own. And yes, that's the new world. It's not far away in 2023. Okay. Anything that's not good for the citizen, Washington will catch up very fast if it's good for them. So no money is coming.

 

Speaker 1 (00:28:00) - Yeah. Let's hope the cbdcs don't turn up the coffee for anybody. This might make one wonder, you know, what can they do about it is you see more cbdc sentiment building in other nations with them potentially doing something like this.

 

Speaker 1 (00:28:15) - Is it a smart thing then for someone rather than store dollars, to instead borrow dollars by having loans on real estate? Or is it better to just completely be out of the government system of currency issuance or at least park more of your prosperity outside of the government system of dollars and euros and pesos and riyals and yen, and instead into a non governmental alternative like gold or Bitcoin. Would that be a better path? What are your thoughts there?

 

Speaker 4 (00:28:44) - When the government says, okay, now this is money, they're not going to say, okay, but if you want to use that money over there, use their money. We don't care. Governments love control and they love Monopoly, especially when it comes to money. So there may be competing types of money that you dollars now anyway. I guess you and I could swap gold coins or seashells or something if we wanted to. Most of the people in the US use government money and that's the way it's going to be. Whether we like it or not, the government has the monopoly.

 

Speaker 4 (00:29:22) - They have the guns. And if you can say, All right, I'm not going to use government money, I'll say, okay, but you're not going to be able to pay your taxes, then you're money. You're not going to be able to buy a driver's license or pay your other fees with other money. You're going to have to use government approved money.

 

Speaker 1 (00:29:42) - Well, the government tried to shut down ownership of gold like they did previously or Bitcoin, which would be unprecedented. I'm talking about the United States government, especially in this case or other developed economies.

 

Speaker 4 (00:29:54) - But when the US took away the right to go in 30s, that was gold was the basis for. Monetary system. It is much, much, much more important to the world economy. Then gold is not that important in the world's economy now. It's important, but so is right. So a lot of stuff. So I doubt if they will take gold away again. I don't see them outlawing digital money currency unless it becomes very successful and competitive to the government.

 

Speaker 4 (00:30:30) - Then they'll do. They always have.

 

Speaker 1 (00:30:33) - Bitcoin's market cap is still under $1 trillion, but increasingly you do have more and more politicians that own Bitcoin and there are a few advocates for Bitcoin there in Congress. So if that's the change you want to see, maybe you want to vote in people that are promoting the holding of prosperity outside of US dollars really by being Bitcoin advocates in Congress there. That's one thing that you can possibly do. But we talk about gold and silver. You know, I really like the fact that it is scarce. Just like Bitcoin has scarcity. There will never be more than 21 million Bitcoin. And of course gold and silver have a finite supply.

 

Speaker 4 (00:31:14) - Well, but first of all, please remember many digital currencies, not Bitcoin, but many have already disappeared and gone to zero.

 

Speaker 1 (00:31:23) - And there are some Bitcoin critics out there that say something like, well, there have been more than 20,000 cryptocurrencies. So what makes Bitcoin any better? Well, I think the fact that a lot of these cryptocurrencies that have little or no utility or mean coins, so if they come by and then they die, I don't think that should diminish Bitcoin in its utility in any way.

 

Speaker 1 (00:31:42) - Just like there have been over 20,000 stocks in history. And if a new stock comes by that doesn't have any value or any fundamentals and it fails, it doesn't diminish the market cap leader Apple one bit at all. So I don't think it's a valid comparison to say that just because a new cryptocurrency comes and goes that shouldn't diminish or knock Bitcoin at all, just like it shouldn't Apple, if a flashy new stock comes by and dies?

 

Speaker 4 (00:32:06) - Well, throughout history, money has come and gone. People use seashells, people use cows, People use lots of things, glass beads all over the world. You know, the US was founded on a silver standard at 1792. Silver was the basis for the US currency that later changed to gold.

 

Speaker 1 (00:32:27) - What's so interesting, Jim, written in our United States Constitution, it stated that gold and silver shall be money, but of course it's not. In Nixon completely departed the last vestige of that in 1971. Yet there was no amendment written to the Constitution to supersede it.

 

Speaker 1 (00:32:47) - Gold and silver shall be money when it comes to currency and how one measures the prosperity in the United States. It is the dollar. We know it's going to continue to be the dollar for some period of time yet, and you can't get too many certainties in investing. And really the second near certainty we can get is that the dollar is going to continue to diminish in value. So that's why rather than save it, we borrow for real estate. Jim, wrap it up here. In this world of higher inflation, though, it's come down in higher interest rates where you tend to think they will keep going higher. What should one do, maybe especially a younger person today, You know, any direction that you would have for a younger person, a younger investor, or maybe that's even investing in themselves and developing skills themselves. So what are your thoughts?

 

Speaker 4 (00:33:33) - They're all investors. Young, old, whatever should invest only in what they themselves know a lot about. If you want to be successful, don't listen to somebody on the TV or in the magazine or even on the Internet.

 

Speaker 4 (00:33:48) - You know your program. They should invest only in what they know about you. Listen to somebody and she said, Buy X and you buy x and x goes up. You don't know what to do because you don't know why you bought it. Right? X goes down, you don't know what to do because you don't know why you bought it. So if you want to be successful, just stay with what you yourself know a lot about. You might say that's boring. Be boring If you want to be successful, be boring. You know, invest in what you know. And I cannot tell you how important that is for all investors, young or old.

 

Speaker 1 (00:34:31) - Yeah, well, to sum it up on rates, Jim Rogers said that governments have debt, therefore governments will keep printing. So then governments will raise rates to keep inflation in check. Remember, just last year, a lot of people didn't think that Powell would have the guts to raise rates so high. Well, he sure did. Who else did I ask about how high interest rates will go? Will, I asked you on our get Recession Instagram poll, the majority of you think.

 

Speaker 1 (00:35:01) - That the Fed rate will exceed 6%. And again, it's about 5% now. All right. Well, then with mortgage rates around six and three quarters now, perhaps they'd go up to about 8%. But of course, mortgage rates don't track the Fed rate in lockstep. They more closely follow the yield on the ten year note. Now, this is really interesting for real estate investors when inflation is low. So interest rates, well, in those environments, real estate people seem to love that. But you know what? Those two things pretty much cancel out. Well, since we're big borrowers as real estate investors, you get less benefit from low inflation and more benefit from low interest rates, just like high inflation and high interest rates cancel out because now you've got your debt being debase faster and a greater interest expense to pay. So really it's a wash either way. If for some reason real estate investors seem to be more concerned about high interest than they are thinking about the benefits of the high inflation and in fact, real estate investors, hey, we can totally have our cake and eat it too, because when inflation goes high, well, you can stay fixed on your low interest rates.

 

Speaker 1 (00:36:16) - And then when inflation and rates go low, you can refinance. So savvy real estate investors then in fact benefit from the inflation and interest rate dance. This kind of tango that they do where they stay together. If you enjoy the show here each week, do you mind doing something as a give back that takes less than two minutes of your time? Leave a podcast rating and review. The fastest way to do this is just perform a search. Either search how to leave in Apple Podcasts Review, or how to leave a Spotify podcast review. I'd be grateful that helps others find the show. And we've got a bunch of terrific episodes coming up for you here on Gray, providing you with free content and reliably showing up for you every week. I would greatly appreciate your podcast rating in review. Again, it's easiest to simply search how to leave an Apple Podcasts Review or how to leave a Spotify podcast review until next week. I'm your host, Keith Weintraub. Don't quit, dude. Adrian.

 

Speaker 5 (00:37:24) - Nothing on this show should be considered specific, personal or professional advice.

 

Speaker 5 (00:37:28) - Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

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Are you curious about the direction of rents and property prices? 

In this episode of Get Rich Education, host Keith Weinhold dives into the absolute 100% certainty of a housing crash and how mortgage rates affect home prices. 

Keith is interviewed by Ken McElroy.

He also shares the importance of real estate in reducing taxes and increasing income. 

Keith discusses the attractive pricing and inflation in Ohio, and the benefits of investing in new build properties. 

He even touches on the increasing gold purchases by central banks and the potential impact on personal finances. 

Don't miss out on these valuable insights and learn about the prospects for a housing crash. Tune in now!

Title [00:01:37]

Advertisement for Freedom Family Investments

An advertisement for Freedom Family Investments and the benefits of investing in real estate.

Title [00:02:00]

Introduction to Get Rich Education

Keith White introduces the podcast episode and talks about the longevity and popularity of the show.

Title [00:03:54]

Real Estate Price Gains Since the Start of the Pandemic

Keith White discusses the cumulative home price appreciation in different regions since February 2020.

Title [00:12:33]

Discussion on the attractiveness of real estate pricing and the impact on renters.

Title [00:15:08]

Keith's personal experience of starting with a fourplex and the concept of house hacking.

Title [00:19:38]

Exploring the house hack model as a solution to affordability issues and leveraging other people's money for real estate investment.

Title [00:22:12]

Investing Out of State

The speaker discusses the benefits of investing in real estate out of state and the importance of choosing the right market and team.

Title [00:24:58]

Importance of Prioritizing Market and Team

The speaker emphasizes the importance of prioritizing the market and team before considering the property in real estate investing.

Title [00:27:19]

Supply Crash vs Price Crash

The speaker explains the significance of the housing supply crash that occurred in April 2020 and how it affects property prices and homelessness.

Title [00:31:51]

Inflation Measurement Challenges

Discussion on the difficulty of accurately measuring inflation due to various factors such as personal preferences and hedonic adjustments.

Title [00:34:05]

Housing's Impact on Inflation and Interest Rates

Exploration of the significant contribution of housing to the Consumer Price Index (CPI) and its implications for future interest rate changes.

Title [00:35:38]

Paradox of Rising Mortgage Rates and Home Prices

Explanation of the counterintuitive relationship between rising mortgage rates and increasing home prices, with historical data supporting this trend.

Title [00:42:28]

Advantages of Investing in New Build Properties

Discussion on why it makes more sense now to look at new build properties than in the recent past.

Title [00:43:49]

Feasibility of Building vs Buying in Different Markets

Comparison of the cost per unit for acquiring existing properties versus building new ones in different markets.

Title [00:46:28]

Turnkey Rental Properties and Scarcity as an Investment Theme

Exploration of the concept of turnkey rental properties and the importance of investing in scarce assets like real estate, gold, and bitcoin.

Topic 1: Central banks buying gold [00:51:38]

Discussion on how central banks are buying gold as a way to store value and hedge against the inflation and debasement of the US dollar.

Topic 2: Increasing geopolitical uncertainty and gold [00:52:36]

Exploration of how geopolitical events, such as trade agreements and conflicts, have led to increased uncertainty and a rise in the price of gold.

Topic 3: Reasons why home prices won't crash [00:56:46]

Explanation of several reasons why home prices are unlikely to crash, including a shortage of homes, strict lending guidelines, government intervention to prevent foreclosures, and the slowing of new home construction due to higher interest rates.

Resources mentioned:

Show Notes:

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Complete episode transcript:

 

Speaker 1 (00:00:01) - Welcome to Get Rich Education. I'm your host, Keith Weinhold, with a crucial update on the direction of rents and property prices. Then a discussion between Ken McElroy and I where I posit to his audience about why a housing crash is 100% certain and why what mortgage rates do to home prices is exactly the opposite of what everyone thinks. And more today on Get Rich Education. Taxes are your biggest expense. The best way to reduce your burden is real estate. Increase your income with amazing returns and reduce your taxable income with real estate write offs. As an employee with a high salary, you're devastated by taxes. Lighten your tax burden. With real estate incentives, you can offset your income from a W-2 job and from capital gains freedom. Family Investments is the experience partner you've been looking for. The Real Estate Insider Fund is that vehicle. This fund invests in real estate projects that make an impact, and you can join with as little as $50,000. Insiders get preferred returns of 10 to 12%. This means you get paid first.

 

Speaker 1 (00:01:08) - Insiders enjoy cash flow on a quarterly basis, and the tax benefits are life changing. Join the Freedom Family and become a real estate insider. Start on your path to financial freedom through passive income. Text Family to 66866. This is not a solicitation and is for accredited investors only. Please text family to 66866 for complete details.

 

Speaker 2 (00:01:37) - You're listening to the show that has created more financial freedom than nearly any show in the world.

 

Speaker UU (00:01:44) - This is Get rich education.

 

Speaker 1 (00:02:00) - Working from Hot Springs, Arkansas, to Palm Springs, California, and across 188 nations worldwide. You're listening to one of America's longest-running and most listened to shows on real estate. This is Get Rich Education. I'm your host and my name is Keith Weinhold. And with 456 weekly episodes, you probably know that by now. Hey, I'm really grateful that you're here. Carefully chosen buy and hold Real estate is not day trading. Rather it is decade trading. Yeah. I'm a decade trader. Perhaps you're one two. You just haven't thought of it that way before.

 

Speaker 1 (00:02:41) - When I was recently with Ken McElroy in person in his studio in Scottsdale, Arizona, we produced a terrific media interview and conversation together that I'm going to share with you later today. But first, you know, it's not just you're out of control. Trader Joe's grocery bill. The entire world seems to be losing its battle with inflation. U.S inflation is still double where the powers that be want it. The UK recently stunned markets will need jacked up interest rates a half point to the highest level in 15 years. The ECB, Australia, Canada, Switzerland and Norway. They have all announced recent rate hikes. But Turkey Turkey is raising rates and astounding. 6.5%. Yeah, you heard that right. 6.5% all in one fell swoop. That's how much interest rates are going up there. Yet many say that it's not enough for them to get on top of their wildly out of control inflation. Now, let's get into a few real estate numbers here before my fantastic chat with real estate influencer in Great Guy Ken McElroy.

 

Speaker 1 (00:03:54) - Now here's a great set of real estate numbers since inflation has hit real estate too. Okay, we'll talk about rents in a moment, but let's talk price first with credit to John Burns, Real Estate Consulting. Let's look at American real estate price gains since the start of the pandemic. Okay. So this is not annual. This is cumulative starting in February of 2020 up to today. Here we go. There is a national home price appreciation figure and then it's broken into ten regions. And I think this regional breakup is kind of quirky, and I'll tell you why in a moment. But nationally, since the start of the pandemic, national real estate is up 36%. But let's stop and think about what that means for a moment. Well, since that time, February 2020, which is when these figures are all tracked back to, has the real rate of inflation also been 36%? I'll just say that the answer is yes. Well, then real estate has no inflation adjusted gain in all that time.

 

Speaker 1 (00:05:03) - Well, here are the ten regions cumulative gain since that time. Okay. Going from lowest to highest, Northern California is up 27%. The Northeast up 29%. The northwest is up 32%. Southern California up 33% cumulatively since that time, about three and a half years here. The Midwest is also up 33%. The Southwest up 38%. Texas up 40%. The Southeast up 46%. North Florida up 50%. A lot of castle markets there in north Florida, too. And the top appreciating region, according to this stat set since February of 2020 with 56% cumulative home price appreciation is South Florida. Yeah, up 56%. And now some of those regions mentioned like in the West, they were actually up more than this a few months ago and they've given back a little bit of their gain. But that is a great stat set. The only thing that seems quirky about the methodology to me is that you've got Florida and California, each with two stat sets, yet the entire Northeast is lumped in together without, say, breaking out New England.

 

Speaker 1 (00:06:26) - But I don't know, There might be a reason for the odd amalgamations there. I might look into that. Maybe that's just some regional bias or some concern there. Since I am a Northeastern guy, I think that by now, any long time listener knows that I'm from Pennsylvania and have lived most of my life there. I'm in Pennsylvania every year and I like to avoid hot summers, so I spend my summertime and more time in Anchorage. AK So fantastic home price appreciation in the past three and a half years, partially demand driven. Partially inflation driven, you know, three plus years ago, a lot of people, but never me, a lot of people, including real estate influencers, they said that the pandemic would be awful for both real estate and stocks because people would lose their jobs and lose their homes and businesses would shut down. Oh, no. We talked here about agree with it or not, the government's safety net is on its way and it came with the PPE and the Cares Act and everything else.

 

Speaker 1 (00:07:29) - I mean, Biden won't let people lose their homes. That's what was going on back then. And then in late 2021, I stated Jerry's National Home Appreciation forecast that home prices would rise between 9 and 10% in 2022. They ended up rising 10.2%. And then you remember that late last year I forecast that there really wouldn't be much of any national home price movement this year. Okay, 0%. I am on record right here on the show saying that then and here we are near the year's midpoint. And I like how that forecast is looking. And it was interesting. Late last year, Realtor.com, they predicted 5.4% national home price appreciation for this year. Well, just last week they revised it down to a drop of 6/10 of 1%. Okay. So basically they've gone to 0% as well, much like I forecast late last year. But of course in our core investor areas of the inland in the south, home prices, they are rising just a little this year. What about rents? That's something you might care about more.

 

Speaker 1 (00:08:42) - CoreLogic They tell us that rents for both single family homes and apartments are up 4% year over year, and that's really unremarkable. That's just the historic long term norm. And it's really been interesting how the rent growth rate for single family homes and apartments has just been remarkably similar, like shadowing each other. But the real story is that rent growth has really decelerated because national rent growth, it peaked at about 14% a year and a half ago. And now among Single-family rental homes, what you'd expect in inflation is happening. High end property rents are up just 2% because they're the least affordable. And then the more affordable low end rents are up 6%. And like anatomy, there are so many ways to parse real estate. There are so many ways to dissect the frog here. So let's look at rental growth by region. And it's from that chart that I shared with you in last week's Don't Quit Your Daydream Letter. Rents are down 2% in the West. They are up 1%. In the South. They're up 5% in the Midwest and they're up 5% in the Northeast as well.

 

Speaker 1 (00:10:02) - And what's been persistently steadiest is the Midwest price growth in rent growth. I mean, they're in the Midwest. That is like as stable as the clover honey that's in your pantry right now. And also, did you know that honey is the only food that doesn't spoil? Did you know that? Yes. Yeah. It's also stable, so it doesn't need mixing either. Stable like Midwestern real estate. And that's the reason that's had that best ratio of high rents to a low purchase price, which is really that key metric that you care about as a real estate investor. Now, for example, let's take a look at this specific property in Exact Street address from Marketplace. I mean, this is a great example. This is 224 Baltimore Street in Middletown, Ohio. Middletown is between Cincinnati and Dayton. Okay. This duplex here has a monthly rent income of $1,400 total from both sides. The price is $139,900. And this duplex is substantially rehabbed. And the $1,400 rent that's broken down by $800 comes from the two bed one bath side and $600 from the one bed, one bath side.

 

Speaker 1 (00:11:26) - The duplex is 1680 eight square feet. It's in a classy neighborhood and the rental status is that both sides are already leased. Okay, So when you have an existing property like this, sometimes you have that as the advantage. It's leased and on a duplex when you have both sides leased, you know what questions I would want to know before I buy a duplex like this? What is the rent payment history of those tenants on each side of the duplex and where are they employed? I mean, one might have been paying the rent. But if they're employed at the malls, pop up, stand for 4th of July fireworks or something, Well, I would want to know that. Or if their employment is more stable than something like that. So this 140 duplex is something you could buy with a 25% down payment. So even with closing costs, you're in there for under 50 K. So yes, they're in America's seventh most populous state of Ohio and might take on a property like this. Is that this duplex that's for you? If you're more interested in cash flow than you are appreciation.

 

Speaker 1 (00:12:33) - I mean, my gosh does pricing like this almost make you feel like inflation missed Ohio? That's how it feels in hey, that's what attracts renters as well. And you can find their property in more like them, including an increasing proportion of new build property nationwide from Florida to Indiana to Texas to utah@marketplace.com. Coming up in this interview with Ken, where I was a guest on his show, you're going to hear me say some things that you might have heard me say before, but I sort of say them in a different way when someone else sees interviewing me and I talk about including why there is a 100% certainty of a housing crash in a few other surprising things. And then at the end I discuss some new things that I have not discussed previously, including what I personally champion and invest in myself outside of real estate. We don't run with the herd on the mainland, but you know, here in Jerry, we are not an island to ourselves either because the dust from the herd affects us. Our investing philosophy is on a profitable, I suppose, peninsula, if you will.

 

Speaker 1 (00:13:48) - That's why I definitely say things that you don't expect to hear in this interview. And you know what? If someone only says what you expected to hear, that would probably be a disappointment and a waste of your time and you wouldn't learn anything. A critical real estate conversation between Ken McElroy and I, straight ahead. I'm Keith Reinhold. You're listening to Get Rich Education. With real estate capital Jacksonville. Real estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. Genevieve is ready to help your money make money and to make it easy for everyday investors. Get started at GWB Real estate. Agree That's GWB Real estate. Agree. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex.

 

Speaker 1 (00:15:08) - So start your prequalification and you can chat with President Charlie Ridge personally, though even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. This is Richard Duncan, publisher and Macro Watch. Listen to get rich education with cheap wine and don't quit your day drinks. Hey, everybody. I'm here with Keith Reinhold. Welcome back. Hey, it's so good to be here. It's interesting. I was last here in January of 2021. And remember, Ken, that's when we talked about how you can profit from inflation. Inflation was only 1.5% back then. So for all the viewers and listeners, had they watched that, they really were profited from that surge of inflation, we should go back and check that one out again, you know, because I remember that discussion was fabulous. And now now that's kind of the hot topic, the hot topic for sure. So Keith has a great company. It's called Get Rich Education. Before we go down that road, let's talk about how you started, because most people, you know, they struggle with just getting started.

 

Speaker 1 (00:16:22) - And I know you started with a fourplex. Yes. And you know, this is something very actionable for you, the listener, the viewer there. You can start off like I did. I didn't have a lot of money when I started out. I think that's a common investor's story. So how could I do more with less? And, you know, I was in Anchorage, Alaska, at the time when I was about to buy my first fourplex building, and I didn't have the inclination to know how to remodel places or be a landlord or anything like that. And, you know, Ken, it's a quote we've all heard, but it bears repeating the circle of friends I had fallen in with Harkins, the Jim Rohn quote, You are the average of the five people that you spend the most time with. Take your five closest friends income level. Take their educational attainment level, take the way they dress your five closest friends. If you want to change yourself, change your five. In two of my five in Anchorage, what I call pretty aspirational guys and two of my friends, they had made their first ever property a fourplex building with just a 3.5% down payment.

 

Speaker 1 (00:17:25) - So I learned how to do this from them. And you can still do this today. All you have to do is live in one of the units at least 12 months and just have a minimum credit score of 580. You can do that with a single family home, duplex, triplex or fourplex. That's how you can start with a bang and a small down payment. Yeah, we call that house hacking. Yeah, yeah, yeah. We talk a lot about this and I don't think people really realize, you know, and if you move into one side of a duplex and you buy a duplex with with this low money down and the lower credit score, you're basically you might not have a lot of cash flow if you live on the other side. But what you are is you're eliminating that huge expense that might have been for rent or something else, right? That's right, 100%. You know, everybody has their wacky landlord story. So I bought my first property living in one unit of the fourplex, renting out the other three.

 

Speaker 1 (00:18:16) - And like a duplex, like you said, where you might live. Did you tell me you were the owner? I because that's always thing. Yeah. You know, after a while after I got the new tenants in there, actually after I had moved offsite to another place, I didn't really want to admit I'm the owner. They ask all kinds of crazy things, but, you know, everything didn't go perfectly. For example, you know, shortly after I moved in, it was time for a tenant to pay the rent. It was the first that was due. They said they pay it the fifth. I was like, Oh, yeah, sure. Okay, whatever. Well, of course they didn't. I had to replace them. And you know how I qualified my next tenant in that vacant unit? What the qualifications were. Three females applied. They were attractive. So I let him move into the unit next to me based primarily on the fact that they were attractive. Well, that didn't work out very well.

 

Speaker 1 (00:19:00) - They had parties and they did not invite their landlord to the party. So everyone's got their wacky landlord story that's mine, but that's how you can start big. It is a good way to do it. And I think I don't think a lot of people realize that they can do that. So a lot of people I know are struggling with these affordability issues. So, you know, we've seen since our last podcast, you and I did, we've seen massive inflation, massive rent growth, obviously massive interest rate growth, which has driven people's mortgages up and doubling people, the mortgage payments up, plus we have all the inflationary components that I just mentioned. This is the best time to look at that house hack model because, you know, why wouldn't you grow.

 

Speaker 3 (00:19:38) - With inflation if you can do it with a with a two unit or four unit? Right now, there are some restrictions for for units and underwriters there something where if you go over that, it's a different kind of loan.

 

Speaker 1 (00:19:50) - That's right.

 

Speaker 1 (00:19:51) - Four units is the most you can do with that FHA loan in 3.5% down. So it's single family home, duplex, triplex or fourplex. And if you have VA Veterans Administration benefits, you can use that same plan with zero down. Believe it or not. It's a great way to start with the bank. Yeah.

 

Speaker 3 (00:20:07) - So you guys really need to look into this. If you could replace your living expenses large of the largest one, which is obviously typically rent and utilities and all that, then why wouldn't you?

 

Speaker 1 (00:20:20) - Yeah. And you know, here's the thing. Here's the takeaway. And I didn't understand this until I had owned that first fourplex for a couple of years. I think we've all learned we've all been influenced by the mantra that you don't want to invest with your money. You can build wealth profoundly by ethically employing other people's money. We're talking about doing it ethically. Providing people with housing that's clean, safe, affordable and functional. With that fourplex like I just described, I was using other people's money three ways at the same time.

 

Speaker 1 (00:20:50) - And you can do it too, because I use the bank's money for the loan and leverage. I use the tenant's money for the income that you were just talking about to offset all the building expenses and the mortgage payments. And then thirdly, I was using the government's money for very generous tax incentives, use other people's money three ways at the same time with the loan for income property, that's really going to accelerate your wealth building.

 

Speaker 3 (00:21:15) - That's right. That's right. And can you with that also do it with the down payment? That might be a fourth way.

 

Speaker 1 (00:21:21) - There are creative ways. For example, I know with FHA, sometimes you can get a gift. So that's a very astute question.

 

Speaker 3 (00:21:27) - Yeah. So that's another thing that a lot of people don't think about is, you know, I know with the FHA program, they're going to be looking at you. But there are there are ways to get gifts.

 

Speaker 1 (00:21:38) - That's right. And really use other people's money for the entire thing with keep using other people's money all that you can.

 

Speaker 3 (00:21:45) - The point is, guys, all can be OPM or other people's money. And that is the point. And so if you can't look into that, then it's now just an excuse. So let's talk about like you've done a very successful job of going out of state, out of the network and, and buying real estate. How have you done that? Because a lot of people are freaking out around, you know, how do I do I stay local? Do I go out of state? There's a lot of things to consider.

 

Speaker 1 (00:22:12) - I don't invest in my own local market. In fact, can I sell my last local meaning local to Anchorage, Alaska? I sold my last local apartment building last year. It's the first time in 20 years since I bought that first fourplex building. I don't own any local properties. I do all my investing out of state in investor advantage markets in the Midwest and South. And I know to some people it's scary to go out of state for the first time. You know, for some reason with stocks, people feel quite comfortable with, you know, buying stock for a company.

 

Speaker 1 (00:22:41) - They don't even know where that company's headquartered. But with real estate and something called turnkey real estate investing, that's one way to go across state lines. But really, here's my mindset in getting comfortable without estate investing, this is how I think of it. Can The property is only the fourth most important thing in real estate investing, and if you're thinking about investing, you often start by thinking about, okay, what would my next property be? It's important. But there are three things more important. Number one is you. What do you want real estate to do for you? This is what I like to share with people. Can Secondly is what market are you in? Thirdly, what's the team of professionals, especially your property manager, that you choose to surround yourself with? And then fourthly and only fourthly is the property. So let's go through that. It starts with you. What do you want real estate to do for you? Or are you looking for cash flow, which is common, or appreciation or tax advantages or a lifestyle benefit? Like maybe you want to live in it yourself.

 

Speaker 1 (00:23:37) - Once you've got that figured out what you want real estate to do for you, the market is the next most important thing. There is more risk with being in a little ho dunk market of 6000 people where half the employment is tied to the zinc mine than you think. So I like to be in larger metros have a diversification of economic sectors, something that you really excel in. Can So the market's at second thing because you need to have a place that's going to be filled with tenants. And when you buy your property, you need to have a reasonable expectation that 18 months down the road you're going to have another tenant that's going to be able to come in and fill that property. And then the third most important thing is the manager, your team. I mean, a bad property manager would drive a good property into the ground because you want this to be relatively passive. And fourthly and only fourthly is that property. And you know what happens. Can I see this happen? So often people get a 100% backwards.

 

Speaker 1 (00:24:30) - They go for three, two, one. First, they get all excited about a property and buy it because it has pretty blue shutters. Then they try to figure out if there's a good manager in the market because they don't like to get texts from tenants. And then secondly, they try to figure out the market that they bought in and it's too late. And then they go back to number one, which you're just so far out of line. And this is why a lot of people say that real estate doesn't work. So, again, the property is only the fourth most important thing. It starts with you market and team first. Yeah, I.

 

Speaker 3 (00:24:58) - Find that key. They do go for three, two, one all the time. Right? It drives me nuts because, you know, as you know and most professionals go one, two, three, four. And I think what happens is if when they get to one, they're they're figuring it out. You know, they need you to start there because it certainly clears up the vision, right?

 

Speaker 1 (00:25:18) - Yeah, 100%.

 

Speaker 1 (00:25:19) - And, you know, you intrinsically know this, but you just haven't thought it through before. Like, for example, you already know that the market is more important than the property. A giant mansion in a swamp outside Charleston, West Virginia, is not worth much, but yet a tiny 400 square foot efficiency apartment in the Tribeca neighborhood of Manhattan. Can be worth an awful lot. It's just reinforces the fact that the market's more important than the property and a lot of people get it wrong and always.

 

Speaker 3 (00:25:46) - Has been and always will be because you can you can screw up a purchase in a market that's going like this and you'll still look like a star.

 

Speaker 1 (00:25:55) - Yeah. And this will be true a decade and maybe even a century know. Yeah.

 

Speaker 3 (00:25:59) - So that's why the market is so important. So let's talk about the most controversial thing here, which is why there is 100% certainty, 100% of a housing crash. This is a I heard you talk about this and we talked a little bit about it for the podcast.

 

Speaker 3 (00:26:16) - I said, let's just wait, wait, wait, Let's talk about it on the podcast.

 

Speaker 1 (00:26:20) - There is a 100% certainty of a housing crash. And one might be wondering, first of all, how could you say that no one has complete clairvoyance to know the future? And the reason there is a 100% certainty of a housing crash in this era is because it already occurred. It happened in April of 2020, More than three years ago. It was a housing supply crash, not a price crash. In fact, the fact that we have had a supply crash really hedges against any sort of price crash. So using Freddie Mac data and I shared the chart with you before I came over to this video here so that you could see the backup. There are so many ways to go ahead and measure the available supply of homes, but about 1.5 million is what you'll see, Fred. The Federal Reserve economic data, about 1.5 million has historically been the amount of available homes going back to 2016. It began to fall after that with what happened in the health crisis.

 

Speaker 1 (00:27:19) - It plummeted in April of 2020 to 600,000 units and it still hasn't rebounded and it's continued to fall. So it's a 60% supply crash, 1.5 million down to less than 600,000 now. And that's what hedges against a price crash. That's why prices are continuing to stay buoyant at whatever demand level. The supply is really low, and that helps keep a bid on property. And really, I'd like to share with you the profundity of the fact that we've had a supply crash, not a price crash. I mean, think about this. We're the most powerful nation in the world, by so many measures, were the most powerful nation as far as political positioning and our military and our currency and our brand, the most powerful nation in the world. And we have trouble housing our own people. I mean, we're talking about food, shelter, safety, Maslow's hierarchy of needs, base level stuff here. So it's actually a bigger deal then a price crash. If you think about it, you may very well see more more homeless people in your in your hometown, for example.

 

Speaker 1 (00:28:25) - So the crash already occurred. A supply crash, not a price crash. Yeah. Yeah.

 

Speaker 3 (00:28:29) - It's important distinction, I think. I think people really need back up from this a little bit and understand where things are headed. You know, we have affordability problems. We definitely have homelessness issues creeping up. And so what really, really challenged everybody were these federal funds, increases in interest rates that went up. So all of a sudden, you know, we've also had the largest delta between rents and the the average mortgage price. So you got mortgages here. So rents and mortgages were kind of trending along at a pretty, you know, pretty equal amount. But now because of the whole prices that went up and the interest rates went up, there's a big, big gap between rents, even though rents have gone up. So that's also keeping people in their houses because they've got the 6%, let's say five, 6% interest rates, but they bought them at three. So they have this trapped equity, right? So so if you own a home that's 500 grand and you you have 3% on it, you're not going to move.

 

Speaker 1 (00:29:39) - Right? No, it's the mortgage interest rate lock in. Yeah, And that's a really astute point, Ken, because this plays in to the national dearth of supply on Iraq, 1.5 million available units down to 600,000. I talked to just lay people in everyday homeowners that have become landlords because they say, I don't want to sell my home. And it's 3.25% interest rate. So when I move out of it, I just want to hold on to that loan and rent it out. In the United States, you can't move your mortgage along with your property like that. So it's that interest rate lock in effect, that property, rather than coming up for sale, which would increase supply, doesn't it stays put. And almost two thirds of mortgage borrowers in the United States have a mortgage rate of 4% or.

 

Speaker 3 (00:30:24) - Less, a staggering number. It is. So I always tell people, Keith, you know, when I was growing up, cash was an asset, right? That was a liability. But now it's the opposite.

 

Speaker 3 (00:30:35) - Cash is now a liability because inflation. If you're if you have it in the bank is running faster and harder than what you're getting in interest. And now that debt at 3%, let's say, is an asset, you would actually be selling the property and you'll be getting rid of that asset. You can't borrow at 3% today because that is OPM or other people's money like we talked about.

 

Speaker 1 (00:31:00) - Right, Right. And if I borrow from a bank, say I'm a borrower and I want to take a loan from you. Well, of course, if I can do that at an interest rate, that's less than the rate of inflation. I want to do that because it's profitable. And how the mechanics of that work actually is when I repay Ken the bank in this case, every month that dollar debases on him faster than his interest can accrue on me. That's profitable for you if you can find that it's getting a little harder to find. But you can in some situations, still get interest rates lower than inflation.

 

Speaker 1 (00:31:33) - And inflation is such a fluffy number. We know that the CPI is manipulated with substitution and weighting and things, but if you can borrow at less than real inflation, that's exactly the transaction you're profiting from.

 

Speaker 3 (00:31:43) - What do you think real inflation is? Because I, I'm all over the Internet trying to figure this out, you know, and I go to all the shadow stats and all the things.

 

Speaker 1 (00:31:51) - Yeah, that's good that you're in shadow stats. There isn't really a good accurate way to measure inflation. I mean Ken and I a for next door neighbors were going to pay different rates of inflation. Say one of us is a vegetarian and the other eats beat then inflation in the price of steak affects one of us, but not the other. So if he commutes more than I do, gasoline prices affect him more than me. It's very difficult to pin down what the real rate of inflation is. There are hedonic reasons as well. Hedonic means pleasure seeking. So, for example, if home values go up 10% in a year, but now it's more common for homes to have quartz countertops in them a year later and they didn't have that in the homes of yesteryear.

 

Speaker 1 (00:32:33) - How do you adjust inflation for that? Because you're getting a better standard of living with quartz countertops. So this is why can and anyone has such a hard time pinning it down to what's the real inflation number. It's really nebulous.

 

Speaker 3 (00:32:45) - And I do know it's more.

 

Speaker 1 (00:32:48) - We do know it's more than what the CPI is reporting. How much more? No.

 

Speaker 3 (00:32:52) - One. I know it's true. It's all over the map. But I got to tell you, man, things are creeping up. You know, we were you know, my wife and I were you know, we just go to dinner and it's 100 bucks now. I mean, there's all these things that are there a lot more. But one thing is for sure, guys, if you can have an interest rate less than inflation, you're beating the market. That's the important thing to understand. And that's why, you know, go go the way back to Rich dad, poor dad with Kiyosaki. He was way ahead of his time when he said cash is trash.

 

Speaker 3 (00:33:27) - And, you know, savers are losers. And he doesn't mean that you are a loser. What he means is savers are losing money as compared with inflation. Back then, it was 2%. So now it's obviously more. Right?

 

Speaker 1 (00:33:41) - Yeah. And you know, really with inflation, I think the word is noticeable. No one talked about it when it was about 2% these past few years when it was right around the Fed target. It isn't until it became noticeable that it really became a thing. And you know, what do they say? What's Walmart greater say? They no longer say hello at the door. Instead, they just apologized for what's about to happen to you in there. It's noticeable.

 

Speaker 3 (00:34:05) - I noticed I was digging into the CPI or the Consumer Price Index recently for a video I was doing and I saw that housing was 44% of that number.

 

Speaker 1 (00:34:14) - Yeah. Between rent and owners equivalent rent, those two measures contribute to the CPI.

 

Speaker 3 (00:34:19) - So that's a lot. So think about that because I know, you know, what does that mean To me? That means that the Fed is not done increasing rates because, you know, I guess now they're reporting it at five.

 

Speaker 3 (00:34:33) - But if 44% of that 5% is housing in theory, then it looks to me like they're going to they're going to clip away at more of these federal funds rates. Right. What do you think?

 

Speaker 1 (00:34:46) - That's right. A lot of people think the Fed pivot will come later this year. The Fed pivot means when they stop hiking, which is increasing rates and begin to lower rates. I've got something really almost pretty trippy, really on interest rates to share with your audience here, Ken, because I think this is a real paradox that's going to blow some people away. What is it? So we know that mortgage interest rates have been up so much lately. And you know what happens with rising mortgage rates, right? When mortgage rates rise, home prices. You thought I was going to say fall, didn't you know? When mortgage rates rise, expect home prices to rise. And you might say what? That turns my whole world upside down. I mean, wouldn't one know that when mortgage rates rise.

 

Speaker 1 (00:35:38) - Well, that to. Creases affordability so one would afford less in prices would need to come down. And you know, the lens I like to look through a lot of times. Can we talk about applying economics to real estate? It's what I call history over hunches. I think it's really easy to have a hunch that when mortgage rates rise, well, obviously prices would have to come down due to impeded affordability. So maybe you're still wondering, well, what kind of upside down world would that happen? It's the world that you've been living in these past two years. What happened in 2021 and 2022? Home prices rose at a torrid pace, about 20% in 2021 and the following year last year, another 10% way beyond historic norms. And what happened with interest rates during that same time, they got doubled. I mean, they climbed a cliff. So that actually usually happens that when rates rise, prices rise. In fact, in the history over hunches, vane Winston Churchill is the one that said, the further you look into the past, the further you can see into the future.

 

Speaker 1 (00:36:44) - So let's open this up and look at the past, talk about why this happens, and then think about some lessons that you can learn from it. So in about the last 30 years, since 1994, mortgage rates have increased substantially nine times. That's defined as a mortgage rate increase of 1% or more. And during those nine times that mortgage rates rose, home prices rose seven of those nine times. This typically happens. And, you know, when I share this with real estate, people can a lot of them are blown away. They don't understand how they really don't even believe it. And I shared the data with you right before I came down here. You have the studio and maybe you can even put that chart up there to show people that I.

 

Speaker 3 (00:37:25) - Will do that.

 

Speaker 1 (00:37:25) - Jerry Yeah, but you know what? When I talk with doctors of economics, like the ones that I interview on my show, some of them aren't aware of it, but they all say, Oh yeah, I can believe it.

 

Speaker 1 (00:37:33) - I can understand how that would happen. All right. So what's going on here? Why does this happen? Why wouldn't mortgage rates rise? Would home prices rise? And, you know, there are for a couple of reasons. You know, can you and Donnell talk so eloquently about lag effects in the economy? Yeah, So that's one reason. But this can't completely be explained by lag effects because we have to think about what makes a person buy a home. Okay. We'll come back to that in a moment. But let's think about what happens when rates rise. Okay. Generally, the Fed is saying that the economy's hot, people are employed right now. There are some high profile tech layoffs for sure, but there are still more open job positions than there even are people to fill them. And this makes inflationary pressures heat up. So that's why they raise rates. When everyone has a job and you have an option if you get laid off to go to a second job and employers are competing for employees, what happens? You feel pretty secure in your job and what do you do when you feel secure in your job? You're likely to buy a home.

 

Speaker 1 (00:38:37) - So your situation, your income, your job security is an even more important factor than what mortgage rates are. So this is why, completely counter-intuitively and paradoxically, when mortgage rates rise, expect home prices to rise as well. And in fact, can. The only two times in the last nine that rates rose, that prices didn't rise as well. You know, they were they were 2007 and 2008 when there are really wacky aberrations going on in the market leading up to the global financial crisis. So, again, when rates rise, prices typically do two completely opposite of what most think.

 

Speaker 3 (00:39:12) - Yeah. And don't forget that part of the reason rates rise is because of the scarcity. So when you go from 1.4 million to 600,000, yeah, you have less just basic demand and supply. Less supply.

 

Speaker 1 (00:39:27) - That's right. And I think importantly, one needs to remember that there's less supply of both homes to buy and homes to rent. And even when one does want to buy and they continue to get shut out of the market with higher rates and higher prices than that obviously puts more people back in the renter pool, which is pretty good for guys like you.

 

Speaker 1 (00:39:45) - And I can know a lot of income priced right?

 

Speaker 3 (00:39:47) - That's why I did that video Renter Nation because it's not good by the way this you know housing is supposed to be balanced. So as somebody who owns a lot of rentals, we lose people. We lose people to single family home buying. That is the way it's supposed to be. Right? And then there are some people that when they're when they're done with the single family side, they want to come to rentals for convenience, for flexibility, for all kinds of things. So it's a natural stop. And so when one's out of whack or the other is out of whack, it's not necessarily good.

 

Speaker 1 (00:40:21) - No, it's not good. I mean, that impedes the upward mobility in really part of the American dream. Of course, you never want to lose a tenant from one of your apartments, but at least you can say, hey, congratulations, you moved up a rung or whatever. So this is the cost of any entry level. Housing is really high.

 

Speaker 1 (00:40:40) - In fact, when you parse the amount of available homes by the entry level type of, say, single family homes and duplexes, which tend to be the ones that make the best rentals, yeah, they're even more scarce.

 

Speaker 3 (00:40:51) - It's it's gotten worse. You know, I don't know that as a builder as you know, we built we can build entry level you know the.

 

Speaker 1 (00:41:00) - Most can't make it feasible.

 

Speaker 3 (00:41:01) - Cost the cost to build a house today is expensive.

 

Speaker 1 (00:41:05) - Yeah it really is. And you know, if you are looking to be a real estate investor in the 1 to 4 unit space, which is really an area where I specialize, if you can find a builder that builds entry level homes, I do know of a number of them in the Midwest and South, this could be a time for you to get a new build rental property more so than a renovated one. You know, that's really opposite of ten years ago. Ten years ago, we were still coming off the global financial crisis. Crazy.

 

Speaker 1 (00:41:32) - That was when the cost of property was even less than the replacement cost no one was going to build. Now you do have people building and, you know, can I know a number of these builders because mortgage rates are higher, that they're helping the investor, the individual investor down there. People like me, yeah, they're buying down the rates. So it's quite common for, oh, say on a $350,000 property for the builder to give you 2% of that 350 K purchase price. What is that, $7,000 at the closing table for you to buy down your mortgage rate? You also have turnkey newbuild companies that are giving 1 to 2 years of free property management. So new build typically costs more than renovated, which is why in the past a lot of investors like to buy a renovated property. But with the new builds and incentives like that and the fact that you're probably going to have lower insurance rates with new builds versus renovated, I think this really tilts toward you as the investors looking at property to your portfolio.

 

Speaker 1 (00:42:28) - It makes more sense now to look at new build than it has at any time in the recent past.

 

Speaker 3 (00:42:33) - Yeah, I know that like when we look at those big projects for for acquisition, you know, we're looking at what is it, what is the cost per unit for, let's say an acquisition in Phoenix versus building one? And in the last three years it was building all day long because the cost was 100,000 more per unit to buy crazy, crazy how existing product can get pushed up that high. And so all of a sudden that makes the building more affordable. Yeah, actually. And when you when you build the one next to the other, people are going to want the newer product all day long.

 

Speaker 1 (00:43:12) - Ken And maybe I can ask you a little something about being a builder. You know, I have learned from some builders that in a way some things are nice because they're not getting as much competition from resales on the market. We talked about why there aren't resales on the market. People want to hold on to their low mortgage rates so builders don't have the competition that way.

 

Speaker 1 (00:43:31) - But maybe you could let me know. Of course, it's going to vary by region and we've been talking very much nationally so far in the conversation here. But really, what's the lowest price point where it's still feasible as a builder to build where you have enough margin? Like what's the lowest price point on maybe a single family home? And then a larger. Yeah.

 

Speaker 3 (00:43:49) - So for me, it's mostly just apartments. So, you know, we'll go into a market. I'll give you a great example. We can buy in Austin, Texas, mid-nineties product, vaulted ceilings, nine foot ceilings, beautiful garages for $180,000 a door. Really nice. There's no way we can build that there for that price. Not even close. However, you take that exact project and you move it to Phoenix, it's 350 now. The rents are different, the expenses are different, the insurance is different, the property taxes are different. I understand the math. Is that the same? But, but on a per foot basis and a per unit basis, that's how different it is.

 

Speaker 3 (00:44:33) - So because of that, we're building in Arizona and buying in Texas. So now that can change. And also, you know that Austin could get really hot, those prices can go up and then we know that then it would change that dynamic. And so to your point, you always have to take a look at the difference between the deliverable. You know, do you buy The one thing I do like about buying is that it's immediate. You know, you could step into something immediate, make change immediate, whereas there's a bigger lag with the construction. So you do have some interest rate risk because you can't get a fixed rate loan on something that doesn't exist. It's land, it's air, and then it's built until it's in service, they call it. Then you can put fixed debt on it, but that's it. Up to that point, you're subject to a little bit of the whim of the fluctuations of the Fed and all the other things that that determine interest rates. So so you do have those things.

 

Speaker 3 (00:45:36) - We do love the new property. And so do our tenets. So when you build something new, people want to be there and they move out of that ten year or 15 year old product into something new. So there is that, plus you get a little bit more rent and, you know, all of those things. So there's positives and negatives for both.

 

Speaker 1 (00:45:55) - And so it's really, I'd say in the last ten years when you've seen the advent and proliferation of these build to rent companies, they're turnkey companies that build a finished product for you. That's the first thing that they do. And then the second thing they do is they place a tenant in it for you. And then thirdly, they hold it under management for you, the investor, if you so choose. Basically, it's those three things that define what a turnkey rental property is. So it's making more and more sense to do that with new build properties.

 

Speaker 3 (00:46:28) - Yeah, it certainly can and it's market by market. But you're right, you have to look at it each and every time.

 

Speaker 3 (00:46:34) - So before we wrap up, I'd like to talk about, you know, you always say invest in what's scarce, which I completely agree with. You know, And the other thing I like to say is invest the things that you can't print. So, you know, you could print dollars. You know, you can you can create a stock or ETF out of gold and all kinds of things, but you can't print gold, you can't print oil, you can't print trees. You can't print real estate. So let's talk about what's invest in what's scarce. So what do you mean by that?

 

Speaker 1 (00:47:05) - Oh, I love that. And we're so aligned on that. If I have any one investing theme, it comes down to one word scarcity. Yeah, I like to invest in what's scarce, not what's abundant and can be printed. You know, you don't even have to print anymore. It's just a few keystrokes and things like dollars and additional stock shares, abundant things, they can just be conjured into existence.

 

Speaker 1 (00:47:27) - So I avoid what's abundant like dollars in stocks and I focus on investing in what's scarce and is difficult to produce more of and take, yeah, real world resources to produce which is for me, it's real estate, gold and bitcoin that rounds out my scarcity theme. Why Real estate? It's a wealth builder really. Gold and bitcoin are not proven wealth builders. I think gold and bitcoin are maybe good places to move some capital once you've built it. Gold and bitcoin can be good stores of value gold really the classic store of value and bitcoin the real risk. But you know real world resources to produce. They're all scarce. Like we talked about the low supply of real estate. It has utility meaning usefulness. And yeah, when you buy a piece of real estate, a lot of people don't think about it this way, but break down all the commodities that you're buying when you buy a piece of real estate from drywall to gypsum, the copper wire to glass and all those sorts of things, it takes real world resources to produce that real estate.

 

Speaker 1 (00:48:27) - Real estate gives you advantages that gold and bitcoin don't like a reliable income stream and the ability to use leverage and terrific tax advantages. So that's why I'm a real estate guy. That scares gold, has a scarcity. What's really special about gold is it's one of the few things that's had enduring value for millennia, about 5000 years. You can say that about exceedingly few things. I guess you could make jokes about. It's intrinsic value. It's really not used that much industrially, but people have always flocked and gravitated toward that during times of uncertainty. And there's low supply inflation on gold that is very difficult to mine 2% more gold than it was the previous year. There were just challenges from exploration to mining and creating much more of this gold. And then thirdly, Bitcoin. You might not be that familiar with Bitcoin, but it takes real world resources, hardware, software and electricity to bring more Bitcoin into existence. There will never be more than 21 million bitcoins, so it has a fixed supply. You can't quite even say that about real estate and gold.

 

Speaker 1 (00:49:37) - A hard cap of fixed supply. More than 19 million bitcoin have already been mined. It's truly scarce and Bitcoin does have a role. It has some downfalls too, in case the government cracks down on it. I think that's the big risk with Bitcoin. But gold and dollars each have their downfall is difficult to transport gold across space due to its weight in its volume and security problems and then dollars. You can't transmit dollars across time due to inflation. Bitcoin is that one store of value. It's still volatile, it's still got some problems there, but it's the one store of value that you can transport across both space and time. You can't say that about dollars or gold. I'm a real estate guy. Real estate, you know, I think of it Ken is real estate is old and slow and analog and Bitcoin is young and fast and digital, so it is kind of a counterpoint. To the real estate with the Bitcoin. But yeah, if you need to build wealth and you don't have it yet, it's really difficult to invest in an asset class outside of real estate.

 

Speaker 1 (00:50:47) - Wealthy people's money either starts out in real estate or it ends up in real estate.

 

Speaker 3 (00:50:52) - Yeah, that's true. Yeah. I personally, I'm a big gold guy. I, I love being able to just throw a couple coins in my pocket and fly to wherever I want and pull them out and they're like, I got 4 or 5 grand.

 

Speaker 1 (00:51:04) - It's something tangible. You could actually look at it.

 

Speaker 3 (00:51:06) - It's nice. It's kind of nice to have that, you know, I don't particularly look at it as an investment, right? I look at it more as a hedge, an insurance policy, maybe a hedge against the dollar.

 

Speaker 1 (00:51:17) - Yeah, it's sort of like money insurance. I agree. And really a lot like an insurance policy. You hope you never have to use it, just like you hope you would never have to sell your goal. It's good money insurance. It's not a wealth builder. In my experience. It really just generally tracks inflation over time.

 

Speaker 3 (00:51:35) - Which is a good thing, by the way, especially now.

 

Speaker 3 (00:51:38) - I think what's interesting is have you had a chance to look at how much gold the central banks have been buying? I really have. So this is a really interesting point before we wrap up. So as you guys might know, central banks are in charge of printing money, basically. Well, other things, but one of those, that's one of them. So and they're kind of upset at the US dollar right now. Yeah. Because, you know, the world trades in US dollars and they're sitting on US dollars. And as we inflate and print US dollars, it looks like that a lot of them are buying gold, Right. And I would if, if they're they're trying to store their value in something that dollars so something other than dollars. I read an article the other day that said that we've been weaponizing the dollar against the rest of the world. Right.

 

Speaker 1 (00:52:28) - Right. So many foreign central banks, China, Russia and many more, they've really been loading up on gold these past few years.

 

Speaker 1 (00:52:36) - You see more and more international trade agreements, like you alluded to, cutting out the dollar and going through the yuan. You had the war in Ukraine, all these things increased geopolitical uncertainty. And that's why gold was on a tear and went over $2,000 recently.

 

Speaker 3 (00:52:49) - And then BRICs, BRICs is showing up. You know, that's the Brazil, Russia, India, China and South America. Right. And South Africa. Right. And I think there's a 30, 40 countries now. I've joined something like that.

 

Speaker 1 (00:53:04) - Yep. There's more and more. And they're not they're not pals of the United States.

 

Speaker 3 (00:53:07) - No, no. I don't know if you guys are watching this stuff, but it's something you have to watch. I mean, because your hard earned, your hard earned money is yours. And so you have to be a steward of it. You have to look at this stuff. It's not conspiracy theory stuff. You need to go out and Google this stuff and you'll see it's the dollar doomed. I don't know the answer, but I do know that you have to keep your eye on all this stuff.

 

Speaker 3 (00:53:30) - Right.

 

Speaker 1 (00:53:31) - Well, I'm glad you bring this up because one can speculate, one can make projections. But one of the few things that we do know and this is central to every investment that you make is that the dollar is going to continue to be debased. At what rate? We just don't know. But there are a few guarantees in life, but that's one thing that's virtually guaranteed. And really everything that we're talking about here hedges you against that. Again, dollars in stocks can easily be printed. Want to stay out of those sorts of checks?

 

Speaker 3 (00:53:59) - And if you could fix your rate while the government debases your dollar, you're winning.

 

Speaker 1 (00:54:05) - That's a winning formula for every million dollars in debt you have with just 5% inflation, you know the bank back 950 K after one year because wages and prices and everything, salaries are all higher. And with real estate, it's wow, your tenant pays all the interest for you while you're enjoying that debasement benefit. It's definitely counterintuitive. Get more debt. That's one of my favorite four letter words.

 

Speaker 3 (00:54:31) - Ha ha ha. Well, good. Keith, this has been awesome. So what's the best way people can reach you? I know I listen to your stuff, but I'm not sure everyone knows the.

 

Speaker 1 (00:54:40) - Get Rich Education podcast and get rich education YouTube channel. Real estate pays you five ways at the same time. Just regular buy and hold real estate. And it's actually okay that we didn't get into that because I made a free course with five videos, one on each of the five ways, just regular everyday buy and hold real estate pays and we're giving that away free right now at Get Rich education slash course. So it's a gift certificate and podcast and YouTube channel and again that free course real estate pays five ways which really reinforces why real estate is that generational wealth builder is a get rich education slash course. Awesome.

 

Speaker 3 (00:55:21) - All right, buddy, always great to see you.

 

Speaker 1 (00:55:23) - Love catching up, kids. Yeah. I hope that you enjoyed that vibrant conversation and a lot of original thoughts between Ken and I there.

 

Speaker 1 (00:55:36) - Ken is one of the more giving guys in the real estate industry. I like to hang around with the givers and reciprocate myself. One thing that I cannot take credit for as original is my part of the discussion where I was speaking about how the property is only the fourth most important thing in real estate investing. I learned at least some version of that from the real estate guys Robert Helms and Russell Gray. Now, when it comes to the prospect of a housing price crash, I think that a lot of the gloom and doom was that were completely wrong about that. Since 2020, you know, a lot of them have just dissipated or have gone away. Economic uncertainty that could not make home prices fall in any meaningful way like we've experienced the last three plus years and then last year a doubling of interest rates. Well, that couldn't really touch home prices either. Looking into the future, the rest of this year and into next year, I've got a good eight or so reasons here that home prices won't crash, although there could always be a black swan event, I suppose, from a pandemic to a direct hit by a meteor into the center of the United States.

 

Speaker 1 (00:56:46) - You are listening to someone that successfully invested through two recessions here. Home prices won't crash anytime soon because there aren't currently enough homes to house Americans. There are billions of dollars sitting on the sidelines right now just waiting for people to jump into the market. Lending guidelines have been strict for a decade plus, and that means those that own homes now can afford to make the payments. Home equity is also near record levels, so those that do have trouble making their payments, they wouldn't have to make a highly distressed fire sale. The government will do everything that they can to stop foreclosures, and on average, it takes 900 days to complete one. The population keeps increasing, although slowly US housing is still some of the most affordable in the world. And what higher interest rates do is that they also slow homebuilding. They slow that rate of new supply. This is all why housing prices cannot crash any time soon. We've got a fantastic show coming up here next week for you. If you're newer to this show or you just haven't seen my free real estate pays five Ways video course yet.

 

Speaker 1 (00:58:00) - Like I was telling Ken's audience about there, this is fundamental to you building the kind of life that you've always wanted for yourself. The course is truly free. I don't try to upsell you from that to some paid course. Perhaps the best thing that you can do for your financial future is to watch and understand all of the ways that you are paid. You can do that now at Get Rich Education slash course Happy independence Day. I'm Keith Winfield. Don't quit it.

 

Speaker 4 (00:58:35) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:59:03) - The preceding program was brought to you by your home for wealth building get rich education. Com.

 

 

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Get our newsletter free here or text “GRE” to 66866.

Storing your money at a bank entails more risk than you think. Your deposit is a bank’s liability. Banks must take risks with your money because they don’t charge you fees.

Banks used to have a 10:1 reserve ratio. As of March 2020, all reserve requirements are now eliminated.

Rather than storing lots of money at the bank, borrow lots of money from the bank.

US households own $41T of owner-occupied property—$29T in equity, $12T in debt. The national LTV ratio is 30%, historically low. That’s 70% equity.

Of the five ways real estate pays: one profit source is the market, two are from the tenant’s job, and two come from the government.

Many Millennials plan to rent forever. 63% have nothing saved for a down payment.

The interest-rate lock in effect keeps constraining the available supply of homes.

This forces more homebuilders to build.

Last week, NBC Nightly News covered the rise of build-to-rent communities.

Resources mentioned:

Show Notes:

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Complete episode transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Do you have any idea what banks do with your money? How home equity is like a bank, hot Millennial rental trends, and the proliferation of Build To Rent real estate, today on Get Rich Education!

___________

 

Welcome to GRE! From Glens Falls, NY to Klamath Falls, OR and across 188 nations worldwide, the voice of real estate investing since 2014. You’re listening to Get Rich Education. I’m your host, Keith Weinhold.

 

You did not wake up to be mediocre today. So we don’t focus on long-term budgeting here. 

 

Correlating financial betterment chiefly with reducing your expenses is just a race to the bottom. You and your peers would just be racing to the bottom.

 

We know that, instead, yes, arbitrage is created when you  borrow low and invest high. But the ultimate arbitrage - which is the gap or that spread, is when your quality of life vastly exceeds your cost of living. 

 

That’s that gap that you & I pry open ever wider together right here, every week. 

 

Savers lose wealth.

Stock investors maintain wealth.

REIs build wealth.

 

Savers lose wealth because inflation makes holding onto a dollar like a block of ice melting in your hand. 

 

Retail stock investors only MAINTAIN wealth because their 9 to 10% long-term return is worn down to less than nothing with inflation, emotion, taxes, fees, and volatility.

 

And real estate investors BUILD real, durable wealth.  

 

If you have a mentality of trading time for dollars, then you  have a certain way of looking at your life. 

 

If you realize that your investing mission in your life is to build things that pay you to own them, then you have a different way of looking at life. 

 

The resources that you need to build those things are what we cultivate here on this show. 

 

You know something though, by the time that I bought my first rental property, I didn’t have all of that figured out yet. 

 

It really wasn’t until I bought my second property. It was also a fourplex, just like the first one. This second one cost $530,000. And check out how I bought it. 

 

I bought it with a 10% down payment, interest-only loan, and interest rate of 7⅝%. 

 

Yep, I took accumulated equity from my first four-plex and used it as a down payment on the second four plex.

 

Now, that way, I essentially had zero money in the deal - which is an infinite return strategy - and both fourplexes cashflowed.

 

Now, the interest-only loan on my second fourplex there… that gives some people pause.

 

Why would I do that?

 

That kept my monthly payment amount down - since I could pay only interest - and didn’t have to pay principal. That turned a property with a small cash flow into a nice cash flow.

 

Yeah, some people don’t like interest-onlys because then the tenant isn’t paying down your principal for you. 

 

I typically take interest-only loans because for every dollar that doesn’t go into your illiquid principal as equity, instead, it becomes a dollar of liquid cash flow that goes into your pocket.

 

In fact, changes are that the reason that you have fat equity in home right now is from market appreciation, not principal paydown.

 

In fact, why don’t I approach the classic GRE principle of “your return from home equity is always zero” from a new and novel angle here today. 

 

Gosh, this could make you hundreds of thousands or millions over your investor career.

 

Imagine a bank. We’ll call it a red bank. This bank is offering you zero rate of return, it’s difficult for you to withdraw your money from it, and this red bank might not even let you withdraw your own money at all - it is at their discretion. 

 

How motivated are you to hold your money at that bank? Well, you aren’t at all. 

 

Well, I just described equity that’s locked inside properties… and that’s why… your properties make terrible banks.

 

Equity is the opposite of you being liquid.

 

Instead, the GRE Way is leverage and arbitrage, but it needs to be supported by cash flow. 

 

So, we are not quite on an island here with our strategy, because we’re still connected with the mainstream finance world - but we’re, say, a peninsula then. 

 

And, like a peninsula, maybe, real estate keeps you insulated - though not completely disconnected from that more volatile stock and bond shuffle that most people are on - which provides little to zero leverage or cash flow. 

 

Do you know what that stock and bond shuffle is - that seesaw?

 

Let’s remind ourselves… that when money flees the stock market, it usually ends up in bonds. As demand for bonds goes UP, interest rates go DOWN.

Then, as interest rates go down, investors go back to stocks in pursuit of yield, and everything reverses. It’s an ebb and flow of funds which often provides you with zero real return. That’s how that seesaw goes.

So rather than get a part-time job, which is selling your time for dollars, get a few rental properties instead. 

 

Whether you manage them yourself or you manage the manager - like I do, I manage managers… you’ve got the income stream of a part-time job with an asset that appreciates at the same time.

 

As time passes, the reason that you will feel satisfied is because you took strategic risk.

 

Now, to stick to the bank analogy theme here, a lot of people still don’t realize that when you take your money to the bank, you are a creditor of the bank, and the bank is now lending your money out.

 

So, just think about what you’re doing - well, you yourself probably aren’t doing so much of this - you’re probably a better than average investor since you’re listening here.

 

But think about those depositors that keep a lot of money at the bank.

 

Yes, we know you’re losing to inflation, but besides that, just think about what happens to your money this way.

 

What about a parking garage and your car? OK, when you park your car at a valet, the valet is supposed to turn around and park it in a garage.

 

The valet does not have the right to take your car and let an Uber driver go make money with it while you’re off having dinner.

 

And then maybe they’ll give you the same make & model back at the end of the night… and they stick YOU with the risk of having a problem with your car - or your money. 

 

That’s what banks are doing with your money when you park it there. It’s like a valet letting an Uber driver use it and take risks with it without your knowledge.

 

What isn’t FDIC-insured is… at… risk.

 

Well, what’s the alternative to banks lending out the money that you deposited with them? Well, the alternative to the existing system is that banks, instead, could make money off of fees that they charge you.

 

How is it that you avoid paying fees to your bank right now, like you are? I mean, afterall, banks have capital expenses, technology expenses, and employee expenses.

 

If banks charge fees to you rather than profiting from the spread that they get on lending your money out, we could have a safer system.

 

But most people like the allure of fee-free banking, partly because that’s what they’re used to.

 

Banks used to have to hold onto a dollar for every $10 they had in deposits. That’s also known as a 10:1 fractional reserve ratio. 

 

Well, the risks of parking your money at a bank went up in March of 2020. That’s when the Fed just COMPLETELY eliminated reserve ratios for banks. 

 

Now, for every $10 they have in deposits, banks can hold zero dollars in reserve. 

 

Instead of parking your money at a bank, you do the opposite. You borrow from the bank, pay them their 7% interest and invest it in “Real Estate Pays Five Ways” property that beats 7%. Right there’s… your arbitrage.

 

Now you’re using their money instead of them using your money - like the valet that you entrusted your car with that lent out your car to the Uber driver while you were at dinner. 

 

So outside of inflation, why is it risky to keep your money parked AT a bank - rather than borrowing from them. Because, as has often happened this year, banks implode.  

 

Why are they imploding?

 

Well, just a couple years ago, when banks lent on mortgages at 3%, they’re only collecting 3% for 30 years. 

 

What happens to the BANK when interest rates go up? No one wants to buy their 3% debt. The depositor (that’s you, the customer) wants their money back - because they can go invest it for 5% elsewhere. That’s a problem for the bank.

 

And if the government does come in to give a bailout of your bank - we know by now that they’re more likely to do it if it’s a large bank, like Chase, Wells Fargo, or B of A.

 

Well, more gov’t bailouts of banks… means more money printing… which means more inflation, making our eventual problems even worse.

 

So rather than keeping too much money at the bank, BEAT the bank.

 

Now, earlier, I mentioned how having a glut of equity in your properties is like keeping your money in a rather illiquid bank. 

 

That is a germane point - a pertinent discussion to have right now, because take a look at this. This is America’s equity position, right now.

 

This is for the latest quarter ended. The Federal Reserve Flow of Funds report tells us that 

 

U.S. households owned $41 trillion in owner-occupied real estate. Alright, $41T is the value of that US residential property.

 

Of that $41T, how much do you think is in debt, and how much is in equity? I’m just doing some rounding here.

 

$12 trillion in debt and the remaining $29 trillion is in equity.

 

Therefore, the national loan-to-value "LTV" right now is about 30%. That is historically quite low.

 

Another way to say it is that America’s primary residences have a 70% equity position today. 

 

Yes, 70% of the value of American homes is locked into that vehicle that’s famously unsafe, illiquid, and always has an ROI of zero. 

 

Homeowners today have an average of $302,000 of equity in their homes. 

 

Now, as inefficient as that might sound from an opportunity cost perspective from homeowners.

 

There is, at least, a little upside to your neighbors having a glut of equity even if you try to opportunistically hold a low equity position.

 

This equity provides a cushion to withstand potential price declines, but also prevents any future housing distress from turning into a foreclosure situation. 

 

Those equity cushions around American neighborhoods help prevent the down… drain in prices that we saw from 2007 to 2009.

 

I’ve got more for you coming shortly, including, has the Build-To-Rent concept that we’ve discussed on this show for years & years finally gone mainstream now that NBC news is discussing it?

 

You’ll hear that audio clip and get my commentary on it.

 

But first, I want to ask you, is this the "Golden Age" of quality NEWSLETTERS or what? 

 

News WEBSITES are increasingly riddled with: paywalls, logins, banner ads, and pop-ups about cookies, the hassle of 2FA. Instead, a quality newsletter is just automatically “there” in your inbox. 

 

Our valuable Don’t Quit Your Daydream newsletter is full of real estate investing industry trends and forecasts, broader economic forces that are going to affect you in the future & more. 

 

Get top investment property news in under 5 minutes. 

You can sign up and get the letter free now at GetRichEducation.com/Letter.

 

In there, you get updates about what provider has inventory now - even exact physical addresses of properties. 

 

In fact, I’ve featured two of my own rental properties in the newsletter as I broke down their financials. Again, sign up at GetRichEducation.com/Letter

 

I STILL write every single word of that letter myself. I don’t think that a lot of founders do that.

 

Upon signup, you’ll receive some lay of the land e-mails, and thereafter, I only send it about weekly. Not daily.

 

Alternatively, you can easily sign up for the letter by text. If you aren’t yet one of many subscribers expanding your means with my letter, you can simply text “GRE” to 66866 for our DQYD Letter. It is free.

 

Again, you can sign up by simply texting “GRE” to 66866. More next. I’m Keith Weinhold. You’re listening to Get Rich Education.

_____________

 

Welcome back. You’re listening to Episode 455 of Get Rich Education. I’m your host, Keith Weinhold.

 

Five weeks ago on the show, you’ll remember that I reiterated why real estate does not pay 4 ways and does not pay 6 ways - it pays exactly five ways simultaneously.

 

Sometimes, amid uncertainty - and note that there’s ALWAYS - uncertainty.

 

It never abates. People wondered when the Fed would stop hiking rates at a meeting. Now they did. People wondered when inflation would get down to 4 - now it has. 

 

But those that worry excessively will still point to something else that’s uncertain.

 

But in good times, bad times, and uncertain investing times, you might want to get more offensive. Other times, more defensive.

 

Real estate is both. Of the 5 ways you’re paid, appreciation and cash flow serve your offensive side.

 

At the same time, your return on Amortization, Tax Benefits, and Inflation-Profiting all serve your defensive side.

 

Now, let’s go and look at the sources - the headwaters - the genesis. 

 

What are your 5 profit sources - for appreciation - it’s the market. It’s the vibrancy and diversity of the economic market that you bought in. That’s where your appreciation emanates from.

 

For the second way you’re paid, cash flow, it’s your tenant and your tenant’s job.

 

For the third way, your Return on Amortization - that ROA, that also comes from your tenant, since that pays your loan’s Principal & Interest.

 

The fourth way, tax benefits, that’s the gov’t.

 

And the fifth way, your inflation-profiting, that also comes from the gov’t. 

 

Yes, that’s the source, the headwaters for each of the five ways you're paid and knowing that can help you be mindful about what to pay attention to in your investment real estate portfolio long-term.

 

Yes, this is just with carefully-bought buy & hold real estate. Unlike most investments, if the value of your property goes down, you still get paid 4 ways. 

 

So to review the 5 Ways Real Estate Pays SOURCES - where your money actually originates, it’s:

 

Appreciation - from the market

Cash flow - from the tenant

ROA - tenant

Tax Benefits - gov’t

And Inflation-Profiting - also from the gov’t

 

Now, here at GRE, when we focus on your tenant and where your tenant comes from, you know, one word that comes up an awful lot is Millennials.

 

Why do we discuss Millennials so regularly? It’s not because we’re the first generation to embrace avocados or online dating over “in real life” dating or, it’s the first generation to be raised in a world of participation trophies. Ha! 

 

It’s because, not only are Millennials the largest generation in American history, but they are in their prime household formation years.

 

Though there’s a bit of dissension among demographers, many agree that Millennials were born between 1981 and 1996. That makes them Age 27 to 42 - they are prime household formation years. 

 

BTW, you probably know of the generation after that, Gen Z. They were born between 1997 and 2012, making Gen Z age 11 to 26.

 

But do you know about the generation after that? That is Generation Alpha. They were born between 2012 and today, making Generation Alpha age 0 to 11. 

 

Well, the Millennial homeownership rate lags that of previous generations of people that were the same age. So this is why you have such a deep pool of people that’s driving demand for your rentals.

 

Millennials have the misfortune of being stung by back-to-back global crises. 

 

When they were coming of age in 2008, many couldn’t get a job during the Global Financial Crisis. Then the pandemic disruption made getting their independence pretty bumpy.

 

In fact, fully 18% of Millennials say that they plan to rent forever. Forever! That’s up from 11% just five years ago. 

 

Not just a few, but the MAJORITY of Millennial Renters have zero down payment for house savings. 63% of them have absolutely nothing saved for a house. 

 

And in fact, another 14% have less than $5,000 saved - which is close to nothing. That is all according to a survey from Apartment List. 

 

More Millennials plan to rent forever. 

 

Now, I’ve done a fair bit of research on Generation Z  real estate trends - again they’re the age between 11 and 26. And there are a few more Gen Z homeowners than you might think already. 

 

But the short story on Gen Z, just isn’t that compelling. To distill everything I’ve researched, most Gen Zers want to own a home but few can afford it. Well, no kidding. That’s not a very novel takeaway, but that’s the REAL story there.

 

If Millennials are your current renters, then Gen Z are your current and future renters.

 

Now, I’ve talked to you a good bit about the “interest rate lock-in” effect. So many homeowners have ultra-low mortgage rates that they don’t want to sell their home, and when they don’t put it on the market, that further constrains supply.

 

Well, Redfin recently brought some new color to the interest-rate lock-in effect. They’ve shared some really interesting material with us.

 

92% of mortgage borrowers have an interest rate under 6%.

 

80% of them have an interest rate below 5%.

 

62% of these people have an interest rate below 4%.

 

And a quarter have a rate below 3%.

 

New listings of homes for sale and the total number of listings have both dropped to their lowest level on record for this time of year… and that is fueling homebuyer competition in some markets and preventing home prices from falling. 

 

In fact, Redfin tells us that the national ASKING price for homes is the same that it was one year ago.

 

Sale prices increased most in these 5 metro areas.

Cincinnati leading the way at (9.2%). We’ve got cash-flowing Cincinnati property at GRE Marketplace. Miami (8%) not really a cash flow market there. Third-best is Milwaukee (8%), rounded out by Fort Lauderdale, FL (6%) and Virginia Beach, VA (5%). 

They are the 5 metros with the highest appreciation.

Current months of national housing supply is still just 2.6 months - scarce inventory. 6 months is a balance market.

 

Homes that sold were on the market for a median of 28 days. That is the shortest span since September. There’s a bit of a seasonal factor there though.

 

Now, when we talk about the paltry supply of homes since existing homeowners don’t want to lose their low rate, it’s forced more homebuilders to build - in order to make some inventory available.

 

It’s made a good opportunity for you to buy these homes that are built for renters from Day 1, and rent it to a tenant yourself. 

 

Now, I know that your life is more interesting than watching the NBC Nightly News with Lester Holt and then dozing off to sleep at 9:30 PM (ha!), so in case you didn’t catch it, here it is on “Build-To-Rent” last week.

 

It really takes the perspective of the RENTER and why they want to pay your rent to stay in a Build-To-Rent home… longer than they do for an apartment. This is about 2 minutes long & I’ll be back to comment.

 

BTR on NBC News:  https://youtu.be/BXwTerRQWNo?t=954

 

Yes, that’s the popularity of build-to-rent homes. Something that we’ve been discussing here at GRE, for, gosh, maybe 8 years now.

 

Like they said there, rents are on the rise. But they’re not rising nearly as fast as they were 1 and 2 years ago. Rent growth has slowed for both SFHs and apartments.

 

I think that the assurance for prospective income property owners like you is that in your Build-To-Rent properties, you can have a reasonable expectation of high occupancy and low vacancy as long as you buy your SFRs in a decent market.

 

And see, more often than not, a builder is only going to build new, rental single-family homes if there are plentiful jobs nearby to support that.

 

So you can kind of crowdsource the due diligence that the builder did on what’s demographically and economically feasible if you choose to add these property types.

 

Despite the build-to-rent properties added, today, America only has half as many homes available as 2019.

 

Compared to just a year ago, there are 5% fewer available properties today. 

 

But, we’ve got available Build-To-Rent and existing income property here at GRE Marketplace. Yes, just create one login, one time, and get access to all national providers at GRE Marketplace.com.

 

But say you want a little help, a little coaching. Say perhaps you haven’t bought property before, or you haven’t bought one in a while, or you haven’t bought property across state lines yet - since that’s where the best deals usually are - or you just want to lean on a coach to bounce ideas off of as you’re looking for your next investment property.

 

Well, in that case, you can rely on our free coaching service. That’s at GREmarketplace.com/Coach

 

Our coaches don't blow the whistle at you for missing a play. You'll never find them as grumpy as, say, New England Patriots' Coach Bill Belichick. They’re not that kind of coach. It’s not the kind of coach that will ask you to start your morning with an ice bath.

 

And if you're new to real estate, there's no such thing as a stupid question with GRE Investment Coaches. No penalty flags are thrown.

 

To find that property that builds your residual income and pays you five ways, you can choose which coach you want to have help you.  

 

Coaching is a completely free service to you.

 

What they do is...

  • Learn your goals

  • Find you the best off-market deals nationwide

  • Find the property provider with incentives. (One provider recently offered 4.75% interest rates, another free PM for one year.)

  • Help write your offer if you would like that

  • Submit earnest money

  • Navigate the inspection

  • Interpret your appraisal

  • Check your management agreement

  • And just ensure a smooth closing day for you

Your Investment Coach can do more than this. If you prefer, they can do less than this.

 

GRE Marketplace is where the coaches source the properties. It is more like an organic farmers' market than a big box store. Property offerings change frequently.

 

Because there are limited slots available to talk with them through phone or Zoom, it helps if you've got your down payment and are ready to go.

 

Sheesh. If it were any easier, they'd even make your down payment for you.

 

Did I mention that it's completely free? To get started, choose your coach and book a time. Start at GREmarketplace.com/Coach

 

Until next week, I’m your host, Keith Weinhold. DQYD!

Direct download: GREepisode455_.mp3
Category:general -- posted at: 4:00am EDT

The wealth of families often dissipates to zero within a generation or two. 

Learn about the Vanderbilt family’s downfall and how you can avoid these mistakes.

Have an estate plan. I explain the difference between a will and a trust.

I introduce you to my friend Michael Manthei. 

A regular GRE listener, Michael and his wife bought 55 units within 4 years and acquired $85,000 of annual real estate income.

He thinks about generational wealth as: income, taxes and inflation, giving, faith, service, preserving stories, character, physical health, and that your family is a treasure.

Learn the difference between inheritance and generational wealth.

Today, Michael runs the Elevate Investing Group. His upcoming event, Generational Wealth 2023, is August 18th-19th, 2023 in Lancaster, PA. Register here.

I’ve never heard of an event like this. Multiple generations of one family will tell you how they did it.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/454

Michael’s transformational event:

Generational Wealth 2023

Build a trust or will fast:

TrustAndWill.com

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

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Follow us on Instagram:

@getricheducation

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@keithweinhold

 

Complete episode transcript:

 

Keith Weinhold (00:00:00) - Welcome to G R E. I'm your host, Keith Weinhold. How do you build generational wealth? How do you keep it and how do you pass it on so that it stays within your family for generations? Part of this is today's conversation with A G R E listener that's doing something that I've never heard of anyone else doing today on Get Rich Education.

 

Speaker 0 (00:00:22) - Taxes are your biggest expense. The best way to reduce your burden is real estate. Increase your income with amazing returns and reduce your taxable income with real estate write-offs. As an employee with a high salary, you are devastated by taxes. Lighten your tax burden. With real estate incentives. You can offset your income from a W2 job and from capital gains Freedom. Family Investments is the experience partner you've been looking for. The Real Estate Insider Fund is that vehicle, this fund investing real estate projects that make an impact. And you can join with as little as $50,000. Insiders get preferred returns of 10 to 12%. This means you get paid first. Insiders enjoy Castle on a quarterly basis and the tax benefits are life changing. Join the Freedom Family and become a real estate insider. Start on your path to financial freedom through passive income. Text family to 66866. This is not a solicitation and is for accredited investors only. Please text family to 66866 for complete details.

 

Speaker 3 (00:01:31) - You are listening to the show that is created more financial freedom than nearly any show in the world. This is Get Rich Education.

 

Speaker 0 (00:01:54) - Welcome to GRE from Weehawkin, New Jersey to Weed, California and across 188 nations worldwide. I'm Keith Wein Holden. This is Get Rich Education. Shortly we will hear from a GRE listener that's an engaged real estate investor and is having an unusually large impact on other people with generational wealth. Soil has profound effects on the type of agriculture that's possible and therefore soil has had profound effects on the kinds of societies that have been historically possible going back 12,000 years since the advent of agriculture. So productive and irritable soil is what made real estate valuable. A pattern of farms that are passed down through this same family for generations. Well, that's something that's possible in fertile regions, but not in regions where the soil is exhausted in a few years and has to be abandoned. And a new site found while the first site recovers its fertility.

 

Speaker 0 (00:02:55) - Whole societies had to move when the land in any given location cannot permanently sustain them. Therefore, cities couldn't even be built or contemplated. So then when you have bad soil, you can't have anything that lasts. And if you can't plant your family's principles, call them seeds in fertile soil, which is my metaphor for having moral and cultural standards, well then you can't build generational wealth either. You won't have anything that lasts very far beyond your one finite life. And as society advanced, we have more historic examples about families that built and have still capped their fortune today after several generations like the Rockefellers or families that have built and squandered their fortune like the Vanderbilts. And how that started is that really the Vanderbilts have been heralded as American royalty. The icons of the Gilded Age and that rich history all started with Cornelius Vanderbilt, Cornelius.

 

Speaker 0 (00:04:09) - He's the one that started to amass the family fortune from railroads in shipping businesses in the late 18 hundreds. He became the wealthiest person in America in the 1860s and then he went to pass that title down to his son William Henry Vanderbilt. And then he became the wealthiest American during the 1870s and 1880s. But it began to fall apart with William. Yep, just one generation later. The second generation, one generation after the wealth builder Cornelius and then Gloria Vanderbilt was born. Her father had a gambling problem and squandered most of his fortune. There was also overspending on frequent international travel. So Gloria, the granddaughter of the one that started the Fortune Cornelius, she herself would go on to have four sons each from different marriages. One of her four sons is prominent in American society today, and it might surprise you when I reveal his identity shortly by the time of glory, Vanderbilt's passing, okay, her estate had dwindled from $200 million down to just one and a half million dollars.

 

Speaker 0 (00:05:25) - So from wealthy to almost middle class right there, her New York apartment was bestowed to one of her sons. Two of her other sons remained estranged and only one of her four sons inherited the majority of the estate. And that person is none other than the, I guess, somewhat esteemed broadcast journalist and author Anderson Cooper. So you can see in the Vanderbilt family how that fertile soil broke down culturally and became in fertile to build something that lasts. You need that fertile soil. There's more than just a cultural component to creating generational wealth. I mean, first of all, of course you need to build the wealth in the first place by listening to this show. You're either on your way there or you're already there. And that means they focus on things that most people don't do. It's places, frankly, a lot of people just don't even look or consider like getting lots of smart debt for leverage or being inflation aware, being tax savvy and owning assets that pay you while you hold onto them.

 

Speaker 0 (00:06:33) - There's also a legal component here. I am not a tax or legal advisor or professional. So just super briefly in one minute and in plain English you need to have an estate plan. Step one is have a will. That is like a letter that you write before you pass away. Really that's all a will is if you have possessions that you want to go to a certain place, even if you're only 20 years old or if you're 80 years old and you have say a car and a little money or pets, then have a will. You can write a rock solid will really cheaply start at a place like trust and will.com. Then after a will understand a revocable trust, that's a special account where you put your assets like money in real estate while you are still alive. And the key to the word revocable is that you can cancel or change it any time you want to.

 

Speaker 0 (00:07:34) - When you pass away, things go to your beneficiaries, your heirs, without the annoying probate process in court. Okay, that's a revocable trust. And why have a will versus a trust? Well, there are a few reasons, but if you have less than a million dollar net worth though, then that first step, the will, that's probably going to suffice for what you need. But if it's a million plus, then it's more likely the trust. So really there are two main trust types. I touched on the re revocable trust. Now the irrevocable trust, that's something you cannot change once you set it up. It is rigid, not flexible. Well then why would you set up an irrevocable trust if you can't change it? Well, it can protect you from taxes, lawsuits, and creditors in certain situations. So that is the quick one minute on basic estate planning wills and trusts, yes, there is far more to know like beneficiary designations and durable power of attorney.

 

Speaker 0 (00:08:37) - But look, here's the thing and the motivation for you devoting sometime to estate planning like that. If you die, you can be assured that your family won't squabble over dividing up your assets if you get that in place and you sure don't want that because they're already gonna be broken up about you passing away. You'll want your generational wealth to pass on in a planned way and also wills and trusts. That's the way that your family locates your assets in the first place. Today you'll see how our guests and his wife hit financial freedom when they had $85,000 worth of real estate income and note that that was seven years ago. So therefore on an inflation adjusted basis, that might be say 110 K or 120 K in today's dollars depending on what you think the rural rate of inflation is. And then you'll see how that got him thinking about generational wealth and what he's doing to help others with it.

 

Speaker 0 (00:09:40) - Like I said, he's doing something with it I've just never heard of before. But first, I hope that you've been enjoying our valuable, don't quit your Daydream letter where lately I sent you that great map that shows where the top job growth states are. That chart comparing your rent increases to your increase in operating expenses, that story about how Phoenix is going to have construction limits due to their declining water supply. And all those stories about how wacky California real estate has become, including State Farm recently halting new insurance policies in the state of California. If you aren't reading our letter, which has a dash of humor, I send it about weekly, then you are missing out. I'd love to have you read it. It is totally free. It's full of real estate investing industry trends and forecasts and broader economic forces that are gonna affect you in the future and more.

 

Speaker 0 (00:10:38) - And also whenever we have job openings here at G R E as we keep growing, they are announced in the letter as well. And now you can easily sign up for the letter by text. And if you aren't one of the many subscribers growing your means with my letter, you can simply text GRE to 66 8 66 for or don't quit your Daydream letter. Again, it's free and I rate every single word, all the letter myself. I don't think that many founders do that. This letter is written from me to you and you get top investment property news in just a five minute read. You'll get some valuable introductory emails and then after that it's only sent about once a week, not daily. And again, you can sign up by simply texting G r e 2 6 6 8 6 6 for the letter that's GRE 2 6 6 8 66 generational wealth straight ahead. You're listening to Get Rich Education with J W B Real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. JW B is ready to help your money make money, and to make it easy for everyday investors, get started@jwbrealestate.com slash g rre. That's JWB real estate.com/g R E

 

Speaker 0 (00:12:14) - GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 40 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally. They'll even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.

 

Speaker 4 (00:12:49) - This is Hal Elrod, author of the Miracle Morning and listen to Get Rich Education with Keith Weinhold and don't quit your daydream.

 

Speaker 0 (00:13:05) - Hey, I would really like you to meet someone today. He and I met last year through our mutual friend Dave Zook and of all things last year we crawled through a cave in the middle of the woods in Lancaster County, Pennsylvania together and I mean Crawled. He is a real leader, he's a professional investor and founder of the Elevate Investing Group. Welcome to G R e Michael Manthei!

 

Speaker 5 - Michael Manthei (00:13:29) - Keith, thank you for having me been a longtime fan of you and the show and the worldwide impact you've had. So honored to be here

 

Speaker 0 (00:13:36) - In your bio, you haven't yet added that you're an amateur caver or spelunker as it is

 

Speaker 5 (00:13:42) - One attempt at S Splunking. I'm not sure if I can put it in the bio yet, but uh, maybe after a second round .

 

Speaker 0 (00:13:48) - Well Michael, you have done though what most everyone wants, which is actually not spelunking. You have achieved financial freedom in your early thirties and you're much older than that now. You've now got more than a decade of experience in syndications property management and you have over $200 million worth in real estate acquisition. So talk to us about how you obtained financial freedom after less than four years of investing.

 

Speaker 5 (00:14:17) - I feel like it could be, uh, you know, almost an infomercial with how it's gone. You know, I read Rich Dad Poor Dad and that completely changed my world growing up. I wasn't around wealthy people to know how they thought or what they did with their money or how they got there. So to get a glimpse through the book, rich Dad Poor Dadd changed my life and I set a similar goal as Robert had in the book of buying two properties a year. So after 10 years I figured I'd have 20 properties if everything went well, but could never have expected that. Yeah, like you said, within four years we bought 55 units, had enough passive income to retire. It went a lot faster than I thought, but incredibly grateful. We started with a single family house. I was completely broke when I got married.

 

Speaker 5 (00:15:08) - I was actually a missionary for seven years coming off the mission field, not a dollar to my name. Married my wife who had saved a lot of money for me at the time was $25,000 is what she came into our marriage with. And so I was broke. She had 25,000 and that's how we bought our first rental, which was interesting to work through that process with her, you know, using her life savings to buy the first rental when we were still rent a house. You know, she thought she'd save this for her first house and I said, Hey, how about instead of us buying a house for ourselves, let's buy a house for someone else and start this journey to financial freedom. From there we bought another single family house, then we bought a 10 unit property and with that 10 unit property I bought it cash with a hard money loan.

 

Speaker 5 (00:15:56) - When I went to the bank to go to permanent financing, it appraised for 150,000 more than we bought it for. And so we got all the money back plus a line of credit of $75,000 that then opened us to keep buying. But Keith, the real advantage of that deal was it unlocked my mind to say I don't have to be limited by my own capital. I had no money in that deal and I thought we were gonna be limited by our own capital the whole way, you know, save up 20% down payment. This deal happened in such a way that it kind of unlocked this infinite return concept. And so from there it was kind of off to the raises. Once the creativity was set free from that point, including that 10 unit, we bought 50 units in less than two years and achieved our goal of financial freedom.

 

Speaker 0 (00:16:46) - That is really fast. And I note that at that point with the 55 units, you had a million dollar net worth and those assets generated $85,000 in annual cash flow. But dropping back thinking philosophically the book that introduced me to the concept that I didn't wanna believe for a moment or at least it was one of the Robert Kiosaki books and that is being wealthy is a choice. I actually didn't believe that. And you are being very intentional with the out-of-the-box choices that you're making and you and your wife Kristen, much like me, when I started, I didn't have much of my own money either. I started with that three and a half percent down payment on a fourplex. So then really the impetus often for using other people's money is because you have to because you don't have much of your own money.

 

Speaker 5 (00:17:33) - Yeah. And that's part of, you know, creating the grit. It can be a a blessing to those of us that wanna learn and grow to not have a lot handed to us because the confidence that it brings to be able to figure stuff out and get creative. And what I love is, and what I hope my story helps provide to your audience is when you see somebody else that's done it or hear stories of real people that have done it, it just unlocks the capability inside to say, Hey, that guy doesn't look that special. I think I could walk down some of the same road. So totally agree that it's, it's a philosophical shift and for me the big one was buy cash flowing assets. That kind of became my mantra that all my work, all my effort, all my energy went into acquiring cash flow producing assets and that simple concept just opened a whole new world,

 

Speaker 0 (00:18:26) - Real assets produce real income. So you began with, it sounds like a rental single family home and then shortly thereafter this 10 unit apartment building that sounded like that was the real pivot point for you. It allowed you to get creative that just gave you that much more room, that much more leverage. Had that been a duplex and it appraised overvalue or probably wouldn't have appraised 150 K overvalue like a 10 plex did. So tell us more about the options that gave you in growing this fast.

 

Speaker 5 (00:18:55) - The reason I was looking for a larger building is cuz my wife had gotten pregnant. She was working part-time during that portion of her life and I just had it in my heart. You know, she had wanted to stay at home with our kids once we started having kids. So she's pregnant, I'm thinking let's go find an asset that would replace her part-time income. So I was looking for smaller things honestly. I was like, well maybe if I buy a couple duplexes or a couple triplexes and then this 10 unit came on the market, but I'd had some issues with this seller on a previous purchase that we were trying to work towards and they just seemed a little bit squirrely. So I said, you know what, I want to give the most airtight offer that I can. So I talked to a hard money lender, said, Hey, I'm gonna offer all cash, no contingencies.

 

Speaker 5 (00:19:43) - So it was a big risk. I mean we're buying 10 units, we only had two at the time, so it felt like this huge stretch didn't have, you know, the money to do it ourselves. So got the hard money loan. But then when we took it to the bank and they gave us the appraisals, like oh my goodness. So not only did they pay off the hard money loan and give us a $75,000 line of credit, they also gave us like maybe 10, $15,000 that we, you know, put in our bank account. But then we could use that 75,000 to go put down payments on other properties and go buy other properties cash and then refinance out of 'em. So it really just, it changed everything. It unlocked everything for us.

 

Speaker 0 (00:20:19) - If you were going all cash, why did you need the hard money loan?

 

Speaker 5 (00:20:23) - The hard money loan. Once I secured that, I could offer all cash to I see the seller. So I gave 'em a cash contract because I had the cash lined up with the hard money lender.

 

Speaker 0 (00:20:34) - So it was about that deal making using your intuition when one seems squirrely. So that really leveraged things for you there in order to grow that faster as you're going through this process, as you're building this portfolio. Okay, now you've got 55 units, which does give you enough cash flow, $85,000 a year for most people to declare financial freedom. The interesting thing is you had the million dollar net worth at that time. Most people with a million dollar net worth are really only about middle class because they don't have residual cash flow. So net worth matters, but it's not as important as your passive income. You had the 80 5K of residual income accompanying that million dollar net worth and that's what makes the difference.

 

Speaker 5 (00:21:23) - Yeah, it goes back to the cash flow producing assets. All my effort was focused on acquiring those assets that would pay me the rest of my life. Never flipped anything, have a lot of friends that do flipping and I didn't want to get addicted to that big payout. You know, I take one single family house and maybe I make 20, 30, 40, 50,000 on it. I felt like I was gonna get addicted to that. Whereas for us, the first house that we bought, Keith, like $200 a month of cash flow, it's like this feels like it's doing next to nothing. But I said, you know what, I have a long-term goal here. The only way to get there is one property at a time, one step at a time. You eat the elephant one bite at a time. And so I said, let me continue making steps towards my goal and it snowballed faster than I expected. But again, cash flow producing assets,

 

Speaker 0 (00:22:12) - Find that first property with say, $200 in monthly cash flow. That doesn't change really anything in your financial life, but it changes your mindset. It's a pretty incredible moment. Like ta-da when that $200 shows up month in and month out with little or none of your own effort at all. That's really where it starts. You talk about retiring shortly after this time and you had a major philosophical shift then when you retired at just age 33. So tell us about that.

 

Speaker 5 (00:22:42) - I thought retirement was the goal. You know, I read in four hour work week and other, you know, books like that and it's like inactivity is the goal and I'm ashamed to say that I bought into that and you know, I can't wait till I do nothing. So once we got there, literally within a week I was bored. I'd worked like crazy to get to that point. I was working, you know, 50, 60 hours a week at my normal job plus buying and self-managing, you know, up to 50 units on the side. So it was a lot of work and I needed some time to rest. But after a week of rest, all my energy came back and I said, this feels wrong. I just had this sense. I have not been created to go through the rest of my life from 33 on in my easy chair.

 

Speaker 5 (00:23:27) - I wasn't expecting that at all. It, it hit me by surprise. And so I realized that that goal of financial freedom was a great motivator, but very empty once we got there. We recalibrated, my wife and I, you know, a lot of time in prayer talking with each other. It was a new experience to think we can do anything we want now. You know, our decision on what we do next is doesn't need to be dependent on how to pay our bills. Simple lifestyle, 85,000 a year covers us, but as we considered it, realized absolutely love what I'm doing, but this would be so much more fulfilling if we did it in relationship, became a part of other people's story, helped them on their journey, invest together, build a community and get to know people, build long-term relationships. So that was the major shift and uh, it's been seven years since then, so I appreciate that. Uh, you said I'm not much older than 33, uh,  40, which I guess isn't too far out, but we've had a lot more fulfillment in the last seven years as we've been a part of other people's journey.

 

Speaker 0 (00:24:30) - So that was really the turning 0.7 years ago at age 33 where you're like, we did what we have to do now we get to do what we want to do. Yeah, you're a man that serves. So basically to that point you had been serving society with good housing and now you can pivot to serving investors.

 

Speaker 5 (00:24:48) - Yeah, and really to me, service is life. The Bible talks about if you want to receive, give and you'll receive. So I've never focused on how do I receive, how do I get more. For me it's simple. I try to simplify things. What is the one input that I can focus on that then will knock down the rest of the Dominos? So it's give. And so I've looked at how can I serve, how can I give? And that's been my focus and that has opened up tremendous, uh, doors of opportunity. So seven years ago a mutual friend with Dave Zuck and he's doing these syndications and I was like, Dave, I wanna learn this, I wanna do this. So he introduced me to the guys that taught him and we started doing larger deals and, and Keith, I started on the smaller end. The first two deals that I put together as syndications were both 11 unit apartment buildings.

 

Speaker 5 (00:25:41) - And I'd already bought 10 units and 11 units and 12 unit buildings myself at that point. And I didn't need other people's capital to buy those, that point of our journey. But the goal had shifted from before that it was, how can I maximize my profit on these real estate deals, you know, maximize my cash flow, maximize my profit, and it switched to how can I give people a great experience with me? And so to me you can't give without it coming back. So in one sense I gave away more equity than I would've needed to, to have some investors and partners come along the journey with me. But I knew that if I gave them a good experience and learned this business, that that would snowball into a scale that we would never have been able to touch outside of that, which is exactly what's happened.

 

Speaker 0 (00:26:32) - It's interesting that you mentioned 11 unit apartment buildings because I have owned some of those myself. Oftentimes that's a zone I've operated in kind of these mid-sized apartment buildings. Things that are, are a million and a half dollars in value or below because oftentimes the big boys don't play there. But now you learn how to be a go-giver, that's become part of who you are and that's how you could go bigger with larger apartment buildings in making those opportunities available to investors.

 

Speaker 5 (00:27:00) - Yeah, it's really hard to take on investors at a smaller level. So when the, the focus shifted to how can I be a part of people's journeys and make long-term relationships with people, the answer is to scale up. And so, you know, we've scaled from there to now we own over 2000 apartments, uh, with our investor group and me serving them as a general partner.

 

Speaker 0 (00:27:21) - Congratulations. One of the first things that struck me about you when I met you is really your holistic vision of what wealth is. Finances are obviously part of that, but only one piece of the pie and you often champion generational wealth. Tell us about how you think of total wealth and generational wealth.

 

Speaker 5 (00:27:42) - I have three kids now. Uh, they are the greatest gifts in my wife and i's life. And when you have kids and you have people that you pour into, you start thinking about how can you improve their lives and how can you build something that outlives you? So this generational wealth concept has been, I would almost say consuming me. I mean it's just how I filter everything that I do. Where you set your strategy, tells you what your tactics are gonna be. So if you're making short-term decisions, you can do things that work short-term. They don't necessarily need to work long-term. But I said, what's the most successful patterns that I see in the world of wealth, in the world of impact? And it's these family dynasties that grow, preserve and pass on wealth from generation to generation. And so for me, there's a few things that go into that.

 

Speaker 5 (00:28:40) - It's obviously the financial wealth that's a big piece of it. You need, if you're gonna talk about generational wealth, you're talking about a substantial amount of money that gets passed from one generation to the next in in such a way that it can be carried on by that next generation. But we've all seen examples where just giving the money is not a total solution. And so really focusing on the relationships around you and the people and your family. I'm a fan of making your wife the greatest treasure your spouse, you know, for our ladies out there, your significant other, make them the greatest treasure that you have on earth. I look at my wife as my greatest treasure. I look at our kids as our greatest treasure. My kids right now are eight, six, and two and we train them from day one to think of themselves as kings and queens.

 

Speaker 5 (00:29:32) - I started with two daughters and then my third born is, is a little boy. So he's our little king. But there's this princess culture. All the little girls are princesses. Yeah. And when we grow up we sometimes hear what we heard as a kid in first person. Sometimes people still have those tapes that play and what's a princess? I mean entitled. Yeah, you're royalty but you don't have any responsibility ever since day one. I was like, you're not princesses, you are queens, you're powerful, but you have responsibility. You have resources but you have an obligation to use that to serve the people around you. God made you beautiful. So let's be accepting of every single person that we see, whether they are beautiful or not on the outside the resources that we have. I feel like we are to be a steward of it's never given to us, to prop us up and make others serve us.

 

Speaker 5 (00:30:25) - For me, my resources is a responsibility to serve others with what I've been given. So pouring into the kids spiritual wealth, which we talked earlier about the Jewish people and how they're the highest net worth per capita people group. Yeah, you look at the rich spiritual history that they passed down for thousands of years from generation to generation to generation. And so in our family, you know the stories of faith, the stories of courage, the stories of high character, I have those in my family that I'm passing down and we're creating new stories that we're passing down. And then the final one for me here on the generational wealth kind of holistic topic is one that you and I um, have some commonality with. And just physical health. If you're not taking care of your body, that is a major hindrance to long-term wealth. You know, your income generating capacity grows as you get older.

 

Speaker 5 (00:31:21) - We have this retirement mindset in a lot of our country, which I bought into, you know, in my thirties. I don't think it's as helpful as we may think it is if we want to continue to serve others. Our capacity to serve continues to go up throughout our lifetime as long as we're maintain faculty. And so to continue serving, generating wealth throughout our life, lasting as long as we can, putting things in place for the next generation. I wanna be around for a long time. I know you do too. And uh, it starts with taking care of ourselves.

 

Speaker 0 (00:31:54) - If I do invest well I'm sure gonna wanna be healthy enough to enjoy all of that. So it's really a symbiotic relationship. And you host an event. This year's theme is generational wealth. We're gonna learn about that in just a moment. But why don't you tell us just as a teaser, how does one prevent their generational wealth from getting frittered away? We know that often happens and the generational wealth doesn't really become generational wealth cuz often it doesn't last beyond one or two generations. The Rockefellers are a good example of what to do and keep wealth generational for example. But how do we prevent our wealth from being frittered away? Cuz there's a difference obviously between an inheritance and generational wealth

 

Speaker 5 (00:32:37) - Just practically for a moment for people that, um, are listening. Number one, you need to learn how money works and you need to get your wealth into assets and protect it from inflation and taxes. You know, those are the two biggest thiefs. So that's number one is, is you need to safeguard your money. Then once you have the wealth built and protected, it's really about passing on the character. That's really what it all comes down to because if you hand an ill-prepared heir a bunch of money, that is typically the worst thing that you can do for 'em. So it's passing on the character and instilling that and developing that in your heirs. There's different strategies for this, you know, you can recording the stories, some of the origin stories of grit, of resolve, of sticking with something until it is successful. Those stories inspire the next generations.

 

Speaker 5 (00:33:32) - Maybe they don't have the need for the same level of grit, but they can understand the diligence that is required to create and steward the wealth. So recording the stories people do family conferences where you know, if you're a wealth creator for your family, fly everybody in and have some meetings, you know, do it in a fun place, have some fun connected to it. You can have sessions where you're teaching the next generation about how to steward that wealth. You're giving not only the wealth but you're giving the mindsets and the tools of how to create and steward that. So again, goes back to character and the internal wealth that is needed to steward the external wealth, the the physical wealth, the capital and assets and everything.

 

Speaker 0 (00:34:23) - Oh yeah, that's some really helpful actionable stuff there. If you want to have what most people don't have, you need to be willing to do what most people won't do. Like perhaps these extended family get togethers and yes, that is important stewarding generational wealth. You can watch a a 30 minute video and learn something about taxes or inflation, but character can't so easily be taught. And this is part of what you are talking about at your upcoming event, generational Wealth 2023 in Lancaster, Pennsylvania. Tell us about it.

 

Speaker 5 (00:34:56) - This is our third year of doing, uh, this event. It really strikes a chord with our folks because typically the people that come to our events, they've bought the concept that wealth is not merely an external pursuit and if you don't have the internal wealth to go alongside of it, it ends up being pretty empty. So generational wealth, it's getting people together that have created and stewarded that and then sharing some of the real life stories. Dave Zuck is gonna be a speaker. He's uh, second generation in their family business now. Dave has a bunch of other, you know, businesses with their, his syndication and incredible money manager that he is. But this year his father actually has agreed to talk with us about how he started the family company. So I'm gonna interview him then I'm gonna bring up the four boys, Dave and his three brothers and what it's like taking the business from one level to another, successfully managing that in the second generation and growing it and how they're now passing it along to their children and preparing them to step into leadership.

 

Speaker 5 (00:36:00) - So I have a couple large businesses that are multi-generation that are gonna share like this also have Mitzi Perdue, I don't know if you've ever gotten a chance to know her. She was the daughter of the man that started uh, the Sheraton Hotels. So grew up in that family dynasty and then married Frank Perdue who created Purdue Chicken and today has, you know, 20,000 some employees. So she's seen from a couple different angles, family dynamics and family wealth that goes generation to generation and she's just a wonderful lady. Such a heart for other people and so full of life. I think she's in her eighties, she's a teenager, she's just so full of life. So she's coming, have a lot of amazing speakers and attendees that fly in from around the country. Last year we had about 350 people excited to see who shows up this year.

 

Speaker 0 (00:36:49) - See, this is why I wanted to talk about this event because I have attended so many in-person real estate events and masterminds and general investing events. And rarely, if ever do I see multiple generations come up on the stage at the same time to talk about how to do this the right way. Generationally, very few people in events just really think this long term. So I have to congratulate you in advance for putting this together. It's August 18th and 19th and again it is in Lancaster, Pennsylvania. Do you have any last thoughts Michael?

 

Speaker 5 (00:37:22) - So if people want to go to invest elevate.com, that would be a spot to check us out.

 

Speaker 0 (00:37:28) - I'm highly confident the future generations of your family will know you for more than crawling through a rural Lancaster County Pennsylvania cave.

 

Speaker 5 (00:37:36) - Yeah, hopefully my legacy includes more than our cave, uh, adventure, even though that was a blast. Last thoughts Keith. I just wanna encourage people to step out into what they feel in their heart to pursue. You know, it takes faith, it takes risk, but it's absolutely achievable. And so I hope my story has provided some encouragement to folks and if any of your people want to come to our event, we would welcome 'em with open arms. So thank you for today, Keith.

 

Speaker 0 (00:38:02) - It's a unique event in my experience. It's been great having you on the show.

 

Speaker 0 (00:38:12) - Yeah, as I've gotten to know Michael, he is a real go-giver now. He and his wife began with a single family rental home while they were still renters. Yeah, they owned that rental property before they even had a primary residence. I know a lot of successful people that have done just that. And then it sounded like for him, his third property, a 10 plex, that was the real pivot point. Of course, my pivot point was that very first purchase a fourplex. So for each one of us, the pivot point really came when we felt like we had massive access to other people's money. And you might feel like you have massive access to other people's money with just a 75 or 80% loan on a single family rental or duplex. If that's where you're starting, you don't need Rockefeller or Vanderbilt fortunes to get this going there at Invest Elevate.

 

Speaker 0 (00:39:04) - The interesting thing about their generational wealth event two months from now is how, from talking to Michael, he's actually not super motivated to have speakers there that are the most well-known names and Polish speakers, even if he has the chance to get them. Now you are gonna find some of those there, but he's interested in real stories, real people, and making a real impact with speakers that don't have some big marketing or sales agenda. And some conference attendees just want to meet the biggest names and get an Instagram selfie with them. And there's nothing wrong with that. You might even do some of that here, but he values real connection in meaning. And yeah, I've never heard of anyone else getting multiple generations of the same families on stage as he interviews them, including people that aren't used to speaking to an in-person audience of a few hundred people. Besides the generational component, you're also going to learn a lot about investing and meet a bunch of genuine, authentic people. That's the environment that he's creating. Gratitude to. Michael Manti Today it is Generational Wealth 2023 in Lancaster, Pennsylvania, August 18th and 19th. Check out invest elevate.com. Until next week, I'm your host Keith. We hold. Don't quit your day. Adrian

 

Speaker 1 (00:40:26) - Mother

 

Speaker 6 (00:40:27) - On this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L L C exclusively.

 

Speaker 0 (00:40:55) - The preceding program was brought to you by your home for Wealth building. Get rich education.com.



Direct download: GREepisode454_.mp3
Category:general -- posted at: 4:00am EDT

The world’s most powerful nation can’t even house its own people. Keith Weinhold discusses housing shortage problems and solutions.

Meet our new Investment Coach, Aundrea. Coaching is free for you. It helps you purchase investment properties. Connect with both of our coaches now at: GREmarketplace.com/Coach

We discuss: international RE investing, accumulated dead equity, portfolio loans, declining LTVs, rising insurance premiums, and regional markets.

Aundrea can help you with properties nationwide. We discuss Southeast Georgia and the Intermountain West.

Southeast Georgia has strong cash flow. We discuss mid-term rentals (MTRs) in the area. Many are single-families under $200K.

MTRs are furnished and the owner pays the utilities.

In LTRs, a 1% rent-to-price ratio is possible.

The Intermountain West features new-build duplexes to fourplexes in fast-growth Utah. 

These are better for long-term appreciation and inflation-profiting. Often, you get built-in equity. Fourplexes prices are $970K.

Aundrea’s coaching makes it easy for you. She’ll learn your goals. If you prefer, she’ll help you: run the property numbers, write your offer, negotiate inspection and appraisal, manage your property, and help you through closing.   

Get started at: www.GREmarketplace.com/Coach

Resources mentioned:

Show Notes:

www.GetRichEducation.com/453

Free GRE Real Estate Coaching:

www.GREmarketplace.com/Coach

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode453_.mp3
Category:general -- posted at: 4:00am EDT

Keith Weinhold and Ken McElroy discuss the impact of rising mortgage rates on the commercial real estate market. 

They talk about the foreclosure of a Houston real estate investment firm, and the need for syndicators to anticipate changes in interest rates and have capital reserves in place. 

The speakers predict that high-rise commercial office buildings will be the first domino to fall in the commercial real estate market. 

They also discuss the potential fallout from the expiration of commercial debt and the upcoming Limitless Expo event in Scottsdale, Arizona.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/452

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Attend the Limitless event, June 15th-17th:

LimitlessExpo.com

$22M Office Building to Convert to Multifamily:

https://www.loopnet.com/learn/deal-of-the-month-22m-office-teardown-makes-way-for-multifamily/2115617288/

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete transcript:

 

Keith Weinhold (00:00:02) - Welcome to GRE. I'm your host Keith Weinhold last year's spiking of the Fed funds rate caused banks to fail this year and last year's. Doubling of mortgage rates is causing commercial real estate to fail this year. Why is it happening? How bad is it with commercial real estate and how bad will it get? That's the topic of today's conversation with Ken McElroy on Get Rich Education.

 

Speaker 1 (00:00:27) - Taxes are your biggest expense. The best way to reduce your burden is real estate. Increase your income with amazing returns and reduce your taxable income with real estate write-offs. As an employee with a high salary, you are devastated by taxes. Lighten your tax burden. With real estate incentives. You can offset your income from a W2 job and from capital gains Freedom. Family Investments is the experience partner you've been looking for. The Real Estate Insider Fund is that vehicle, this fund investing real estate projects that make an impact. And you can join with as little as $50,000. Insiders get preferred returns of 10 to 12%. This means you get paid first. Insiders enjoy cash on a quarterly basis and the tax benefits are life changing. Join the Freedom Family and become a real estate insider. Start on your path to financial freedom through passive income. Text family to 6 6 8 66. This is not a solicitation and is for accredited investors only. Please text family to 6 6 8 66 for complete details.

 

Speaker 2 (00:01:36) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

 

Keith Weinhold (00:01:59) - Welcome to GRE from Montreal, Quebec to Monterey, California across North America and spanning 188 nations worldwide. I'm Keith Wein. Hold in your listening to Get Rich Education. Real estate investing is our major here. Minors are in both wealth mindset and the economics of real estate. That's what the matriculated graduates with here at G R E. You can think of an interest rate as how much it costs you to use money and to help you understand the preeminence of the cost of money. Let's you and I step back together for a second. If you go buy apples at the supermarket and Apple cost increase affects you. If you go buy a gallon of paint at Home Depot, a paint cost increase affects you. And if you go buy an acre of raw land, a land cost increase affects you. But rising interest rates mean that there was an increase in your money cost and you use money to buy those very apples paint or raw land.

 

Speaker 1 (00:03:04) - And now you begin to realize how interest rates touch and percolate into every single thing that you buy as a consumer or as an investor. And we know that interest rates are not currently high. Historically, yeah, you heard that right now that's not much consolation to those that are in trouble. But the Fed funds rate is about 5% and all year here the mortgage rate on an only occupied home has stayed between a range of six and 7%. Actually, mortgage rates are a little low. Their 50 year average is about seven and a half percent. Well, so then what's the problem? Well, the problem is not what are indeed historically normal rates. It's that rates rose so fast last year. You look at a graph and they climbed a wall. In fact, it's unprecedented, at least in you and i's lifetime to have them rise that fast. Just last year alone, mortgage rates spiked from 3% up to 7%. Economists estimate a 56% chance that they indeed are going to raise the Fed funds rate again. Yep. There is another meeting. Just next week, let's learn about commercial real estate deals blowing up with Ken McElroy.

 

Speaker 1 (00:04:28) - I'd like to welcome back longtime real estate investor influencer and multi-time bestselling real estate author and G R E podcast guest regular. Really? Hey, it's the return of Ken McElroy. How's it going Ken?

 

Speaker 3 (00:04:40) - Great Keith, how are you? It's good chief. Terrific. Great to see you in Arizona too recently.

 

Speaker 1 (00:04:45) - Yeah, that's right. We were just together in Arizona a few weeks ago, both there and everywhere across the United States, we know that residential loans are for the one to four unit space where those properties typically have long-term fixed interest rate debt, 15 to 30 years. The five plus unit department space is tied to commercial lending even though it's residential property and they often have variable rate debt for a shorter term. And commercial loans are where the trouble is in this world of higher mortgage rates. And a few months ago it made a lot of news in our world, Ken, that a Houston real estate investment firm that was at one time one of the city's largest landlords with $500 million worth of multifamily. They got foreclosed on and launched 3,200 apartments at the time. And one major reason were these floating interest rates that rose so much and rents couldn't keep up proportionately and more deals are going belly up like that. So Ken, tell us about what you are seeing out there now in regard to rising mortgage rates affecting the commercial lending market.

 

Speaker 3 (00:05:45) - Well, it's true. Obviously we all know that the Fed raise rates 10 times, so they were obviously fighting inflation. So if you bid around this business enough to know, know, you should have known that the Fed usually increases rates when inflation goes high. And so it is one of the tools that they use to kind of tampering 'em down inflation because that, no, the Fed is more concerned about inflation than interest rates because you obviously inflation affects everyone. So yeah, if you're in the real estate space, you might feel like you're being picked on. But the truth is, it's not surprising to anybody who's been around that they use this interest rate increases as a mechanism to lower inflation or the masses. So some of those mistakes that were made, I think it was Arbor, you have to go back to the experience of the syndicator. They elected not to buy interest rate caps and have other kinds of protections around those assets. And unfortunately, you know, some of those investors that invested in those assets, those were things that maybe weren't very clear to them. Uh, we're not exactly sure of all the details, but what's gonna happen next Keith, is we're going to start to see there's gonna be a big division of the experience versus the inexperience, I would guess

 

Speaker 1 (00:07:08) - A divergency, yes, of course that Fed has that dual mandate of full employment and stable prices since they're still doing pretty well on the employment. They want to get stable prices and the way to get a handle on that is to continue to raise rates. And when the Fed raise rates essentially from zero to five in just about a year, things are going to break. And we're talking about right now what is breaking first in the real estate space. And you mentioned a syndicator, when one buys an apartment building, oftentimes they get what's called a value add project, this renovation stage. And during that time they often have this variable interest rate debt. So often we are talking about apartment syndicators here, sponsors that put the deal together and what the syndicator essentially does is buy the apartment, renovate it, raise the rent, and then they cash it out to investors by either selling it or refinancing it at a higher value. And right here, these are the people that we're talking about that are in trouble due to their rates being jacked up.

 

Speaker 3 (00:08:07) - That's exactly right. I think you always have to anticipate a change in interest rates, whether they're up or they're down. And I think a lot of times people just always believe that they would stay as is. And I think that was obviously a flaw in their thinking and a flaw in their strategy. The other one of course is capital reserves. You know, cash, you have to have all these things in place. It looked to me from the article, the articles and the, and the different pictures and and things I've seen that they may have run into the problems on the management side as well. And you know, so there's a number of issues that I could see potentially that affected them. And I actually am hearing others kind of stories around this Keith as well. The first domino really to fall I think is gonna be some of these highrise commercial office buildings.

 

Speaker 3 (00:09:01) - That would be my guess because in a very different scenario where a lot of the folks that own those and maybe were in those, a lot of those tenants are deciding that they don't want their people to come back. Maybe they're doing a work from home model or the people that work for them decide that they don't wanna be back or whatever scenarios there are. There's definitely a lot of vacancies. I was looking today, you know, we're looking at pretty high uh, vacancies in la we're looking at very high vacancies in San Francisco, Portland, Seattle, New York. When I'm talking about high, I'm talking about unprecedented. We're talking about 30, 40% in many cases and in some cases even more so we know that if you have a vacancy that high, you're definitely not paying the debt. And so there's all kinds of these big landlords that are actually defaulting on their loans of those commercial office buildings.

 

Speaker 1 (00:10:01) - Now we're talking about vacancy in the office space there and we think really in our residential world, of course people think of you as a multi-family guy, but you also are in, you know, self stores in some other spaces. But we just think about the crux of the problem and how that's centered on residential. Maybe you can just talk to us, Ken, about exactly the details of the problem or maybe you have an example from a case study and just what that, that structure looks like for those in trouble.

 

Speaker 3 (00:10:29) - Why would I be concerned about it? Is, is probably a really good question. And the reason is is because don't forget, we all go to banks for stuff. So if it's an auto loan, a residential loan, a commercial loan or a business loan, it's still a financial institution and it's all connected even though we might only be going for one piece of that. And so as the commercial paper starts to default and starts to make its way into these large regional, smaller community banks, then what's going to happen is the underwriting criteria is going, they're gonna pull back because they don't care. They just know that they're taking water in the boat and they're in trouble. So, so that's why I look at it, you know, obviously, but you have to look at the real estate, the landscape completely, and you realize that, you know, while you might be just doing one piece of that, there are lot and these banks are connected out in the community in many, many, many ways, right?

 

Speaker 1 (00:11:30) - Yeah, that's it right there. Maybe people, some don't think about just a complete seizure and a reluctance to want to extend loans at all if they have enough on their books that are in trouble,

 

Speaker 3 (00:11:40) - Right? So that's why I'm looking at it from the multi-family standpoint as well, because we're already seeing underwriting criteria or in other words, banks are saying we're gonna give you less 50% loan to value, 55% loan to value. So why would that be? The reason is is that you know, they're looking at their, just like you would be and and all your personal assets that you have, stocks, bonds, gold real estate, whatever it is, business, each one is performing differently. A bank looks at it exactly the same way. So if something's happening over here that's negative, it's affecting over here and it's shining a light on the whole thing. And so we're already seeing a tougher underwriting. And what that means is that means that you're gonna have to come up with more money for down payments. And of course the banks are gonna be very cautious about any kind of lending if it's on a single family, if it's on a multi-family, if it's on a residential or retail or industrial or office buildings or self storage or whatever it might be. It we're all connected. And so that's what I think is gonna be hitting us is we're gonna be in a debt and a credit crisis here in the next 18 months.

 

Speaker 1 (00:12:54) - So there could be downward pressure on loan to value ratios, your bank wanting you to put more skin in the game so that they are less exposed and you are more exposed there. So we're talking about maybe new purchases oftentimes in that discussion. What about those that have a loan? Maybe the interest rate has gone higher, they want to refinance it. You know, a lot of times we talk about cash out refinances is something that we want to do when equity accumulates, but could this be an environment for cash in refinances with a lot of these commercial loans?

 

Speaker 3 (00:13:29) - Yeah, so we've done a couple cash in personally. Yeah. So what does that mean entirely? So what happens is, well let's say you had a load at three and now of course they're over five. Well our rate caps hit us at five, but we still don't forget, we went from three to five. So that little bit of piece was expensive for us even though we had a cap though, recap is simply just an insurance policy on the original purchase, that's all. So we're like okay, that cost us about 20 grand a month on this one property as an example,

 

Speaker 1 (00:13:59) - The rate cap below

 

Speaker 3 (00:14:00) - The rate cap below the rate cap purchase was less, but the three to 5% that increase in the mortgage payment was about 20,000 a month. Okay, so call it 250,000 for the year for one asset. So you're like, uh oh. I went from having great cash flow to having a lot less cash flow because my rate went out now it hit the cap. Well I was protected but it still went up 2%. So we started to take a look at what would it cost for us to fix this rate and it was uh, about a million bucks for a cash in. So we did it, we said let's do a million dollar cash in, fix the rate because I'm also afraid of future rate increases. So that $1 million that we put in to fix the rate at 5.2%, we know it's a four year payback or 250,000 times four is a four year payback.

 

Speaker 3 (00:14:52) - So it's a four year loan. But really what we're doing is we're hedging the entire time and of course we have that cashflow coming out each and every month. And the beauty of that E as you know, is what you do is you hedge the upside. You can always re refinance on the doubt. And all I was trying to do was protect that thing from when the recap expired, what's usually caps for two or three years, let's say. I didn't wanna be in a position where it was, you know, six or seven or something. So that's why we did it. We were just protecting against the future. And these are the kinds of things that you can do if you've been in the room before, you know what I mean? You, if you have the experience and and you see these kinds of things happening, you could take action to help yourself and help your investors. And that is clear that the arbor had not set up their loans that way. They had not set up their cash that way and they perhaps weren't looking at some of those things critically like that.

 

Speaker 1 (00:15:49) - Anna and I were each active real estate investors through the global financial crisis. So we know a crisis well, we see what each crisis is a little different when we talk about hedging ourselves against the crisis. Can you talk about rate caps, which is basically this insurance that one can buy to put a cap on how high their rates can go. If you go ahead and buy a property to 3% interest rate and you have a 2% rate cap, that means your cap cannot exceed 5%. So therefore if rates go up to 7%, you're kind of in the money.

 

Speaker 3 (00:16:19) - That's exactly right. And so it's clear to me that they didn't buy those cap, by the way, they're not the only one. There are others. And so if you shine the light on the multifamily industry, there's a fair amount of people that didn't do that either, not just them. And also there's other people that don't have the cash perhaps like the million dollars that we used to do a cash in. And so they're going out to their investors to try to preserve the asset. The crazy thing about it, as you know is we're still very under supply and on a housing stamp. Yeah, the fundamentals of the apartments are actually good though we're still seeing a a little bit moderate red growth and we're hitting theis and the occupancies are good. The apartment industry is not in any kind of crisis. The one thing that's changed is the cost of debt has got up a lot.

 

Speaker 1 (00:17:14) - Why don't we talk about that some more and just how bad is it going to get Ken, maybe through the perspective of just how much commercial debt is about to expire.

 

Speaker 3 (00:17:24) - If you google this, you'll see that there's about 1.4 trillion expiring by the end of 2024. So that's a lot . And so what has to happen is, Keith, let's say you all bought something. Well actually there's already examples. If you Google, there's an office tower that was appraised and valued at 250,000,002 years ago and it just traded at 70 as an example. Wow. So there's a big, big haircut there, right? So first of all, all the equity on that original deal gone wipe down and then the that 70, all that does is cover part of probably the debt. So some bank somewhere took it in the shorts, you know, on that deal. And so that is a good segue to say what happens is anything that was purchased, let's say in uh, call it one to three years ago, is subject to massive valuation change.

 

Speaker 3 (00:18:23) - And if they have a situation where they're trying to do a cash out refi and they're not going to be able to, if they have a situation where they're going to sell, they're not going to be able to because the value of that asset is probably 20 to 30% less than it was just two years ago. So what's going to happen is if they can wait, they might be able to wait it out. If rates go down like everybody's hoping it will, or cap rates go back down like everybody's hoping it will, then you're going to be fine. The issue is going to be the maturities and when they hit,

 

Speaker 1 (00:19:01) - There's a 20 to 30% loss in value as we know at a 75% loan to value loan. Yes, that is a complete wipe out of the equity. Ken, when we think this through, of course apartments have debt that someone is holding onto and apartments also have equity that someone else is holding onto and equity could be held by. It's not just investors in a syndication, it's also a pension fund or a family office. And if these go under, we have to think about those ramifications of course, but we think about equity that's held by LPs limited partners, which are those individuals that invest in a syndication. What do you think that LPs should do? What kind of situation are they in? I mean are syndicators communicating with their LPs and letting them know things like, hey, there just isn't gonna be a distribution this quarter and I don't know about next quarter either or, how's that communication been?

 

Speaker 3 (00:19:52) - So it's hard to know. Obviously if you read the article about Arbor, there was not much and a lot of the investors were surprised. It's interesting though, cuz if you really dial into it, there's no way that they were making distributions for a long time as the things were defaulting. So there must have not been distributions on those assets for some time. That would be obviously a red flag. So I think that some syndicators are probably communicating very, very well. But in this particular case, that wasn't happening because of what some of the people were saying in the article that had invested with them.

 

Speaker 1 (00:20:31) - And when you're talking about Arbor, you're talking about that group in Houston that I brought yeah, up earlier. That's really become sort of like the poster child for what's coming can often that might make one think like the LP that invests in someone else's syndication that might make a savvy investor wonder, well gosh, I wonder if there's going to be a contagion effect. Even if a syndicator shows me a deal and that one particular deal looks really good, does that syndicator have other deals behind him that are blowing up and could affect this good deal that looks good in front of me right now. So what are your thoughts about any sort of contagion effect that way? Are you seeing any of that out there?

 

Speaker 3 (00:21:08) - It's certainly possible. I know that a lot of it's gonna be based around the debt itself. So if somebody got a deal like we did like two years ago or one year ago that put fixed rate debt on it, not a problem. So you have to take a look at the maturity of the debt. There's a lot of people that have bought properties that where they assumed alone in the commercial space you can assume something, people are still doing deals, you know, so if you could step into somebody else's loan at three, three and a half percent, let's say you're not gonna have a default issue, you're not gonna have a debt issue where the debt's gonna go up while you bought something, it's fixed. And that was kind of the whole point. As you know, I've been telling people to get in fixed straight debt for two years. If you go back and look at my videos, I probably said it a hundred times, getting fixed straight debt, getting fixed straight debt, getting fixed straight debt because you have to know what your debt payment is month to month to month for a long period of time. You don't want a fluctuating variable number. And so the people who didn't do that, the people that in my opinion were inexperienced and didn't by caps, this is the result of that.

 

Speaker 1 (00:22:23) - We've been talking a lot about problems here. Of course the flip side of any problem is an opportunity. You are an excellent opportunist. You just talked about situations where apartment values could be down 20 or 30%. So are you seeing opportunity, especially with respect to apartment buildings and what's going on coming ahead?

 

Speaker 3 (00:22:43) - We looked at four deals on Tuesday, we've been in opera on one of 'em. So to your point, if somebody's sitting on some assets and they need cash for ones that aren't doing well, for example, they might sell a couple of the good assets. And what's a good asset? A good asset would be something that's highly occupied and is stable and has fixed rate debt and it's something that you can easily underwrite, easily buy, and you know it's gonna be like clipping a coupon moving forward. That would be what I would call a good asset purchase. And those are definitely hitting the market. So I mean, you think about your own portfolio, you know, at any given time you're looking at the winners and you're looking at the losers, sometimes you have to sell a winner to pay for some of the losers. So we're starting to see some good assets hit the market.

 

Speaker 3 (00:23:32) - That might be great. They help somebody that's um, in a situation that might need cash for something else. So that is exactly what does happen. That is what's happening. So we're gonna be all over those issues and try to snap up some of these really, really nice assets. Another really good opportunity is going to be on brand new class A apartments that are just now being completed. So you know, as you know on a new construction deal, you do not get fixed straight debt because there's no asset. It doesn't exist. So you have a land, you have to build it until it's considered in service, which means you have all the occupancy certificates and it's blessed and the city says, okay, it's all ready to move it. That's in service. And until that point you can't put fixed rate debt on anything. So there's going to be this many opportunities on assets that are under construction that are in trouble because of these high interest rates. People that come in with all cash, for example, are going to be able to buy some of those properties. What I would guess at under replacement costs, it's going be a very exciting time moving forward for buying perhaps real trophy assets or assets up that people have already done a lot of work on or under what they're worth.

 

Speaker 1 (00:24:51) - That could be a good niche to exploit. You're listening to get Resu education. We're talking with Ken McElroy about trouble in the commercial lending market and how that affects real estate. Warren, we come back. I'm your host Keith WeHo with J W B Real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor. Since 2013, JWB is ready to help your money, make money, and to make it easy for everyday investors, get started@jwbrealestate.com slash gre. That's jwb real estate.com/gre. GRE listeners can't stop talking about their service from Ridge Lending Group and MLS four 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally. They'll even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com. This is peak prosperity's. Chris Martinson, listen to Get Rich Education with Keith Wein old and don't quit your daydream.

 

Speaker 1 (00:26:33) - Welcome back to Get Education. We're talking with Ken McElroy, longtime influencer and very successful author, A great influencer in the real estate space. And can you hit mentioned some other sectors outside of the residential and the apartment space earlier, and we look at potential problems or opportunities outside of residential and we think about what's happening to office space. You touched on that earlier, that's probably about the worst real estate sector I can imagine in their high vacancy rates, hotels and retail and warehouses, which actually think about one sector as doing pretty good since the pandemic and online shopping really lifted the warehouse sector. But do you really have any other thoughts about those sectors, how commercial loans affect them or any good opportunities in those outside of residential?

 

Speaker 3 (00:27:24) - As everyone knows, you know, when you buy a home, they look at your FCO score, right? They look at your credit and they look at you or me as the person paying that home as they should. When you move to the commercial side, they look to the asset. So they're very, very different. One's an individual. Another one is the actual asset. So as these asset values go down, as interest rates go up, I think that anything that's going to need any kind of a loan and the next year or two is going to have a problem from an asset value standpoint. Because what we were all used to in the last 10 years were these value add. So you'd buy something and then you would improve it and it would be worth more money at the credit and debt markets were stable, you know, so you could go, uh, you had a very calculated model where you can go put new debt on there and scoop that out and do a cash out refi that's gone right now because the values are down and of course the cash out refi option is off the table.

 

Speaker 3 (00:28:30) - So th those are the real problems that people face moving forward. So that could be all kinds of things. It could be retail, it could be industrial, it could be multi-family cuz everything is impacted even though we've had high cracy and red growth in some of those areas. If you're a seller that has a 3% loan and you're trying to sell it to somebody like us who's a buyer, we're probably at six or seven. We're looking at cash flow very differently than they are when our debt costs are almost double. So we're not gonna be able to pay that price. And so that's what the debt, rising debt costs have done. If the income, any expenses are the same, but the debt costs are double, then we as buyers can't afford to pay that. So therefore the prices that we're we can afford to pay are gonna be a lot less. And so that's actually what's happening

 

Speaker 1 (00:29:26) - And what we think of as perhaps ground zero for problems in the real estate market. I think office first comes to mind, you've talked about office vacancy rates in many American cities being really high earlier, it was a particularly noteworthy stat that was released not long ago that in New York City they have 26 Empire State buildings worth of empty office space. So we talk about all this open office space with more of the work from anywhere crowd and this dearth of residential housing. You know, can you experience, do you learn about very many office buildings being viable for tear down and conversion into residential? Or is that not feasible very

 

Speaker 3 (00:30:07) - Often? Yeah, so that's the million dollar question. What are we gonna do with these big, big office buildings? And think about this, Keith, let's say it's a 50 story building, which is a very common building all over the place and it's got 20 or 30% occupancy. My guess is, you know, what do you do? Like you have to wait until it's a hundred percent vacant, obviously before you can even do something. So what's going to happen is the banks are actually gonna be taking these back, the banks are gonna be managing these and they're gonna have to figure that out. And the only way to take down an office building is if it's a hundred percent vacant. And even then it might not be worth it because let's don't forget, you step into the shoes on day one of the property taxes of the utilities of the insurance, regardless if it's full or not in order to maintain it.

 

Speaker 3 (00:30:59) - So there's an operating cost that exists whether there are people in it or not. And so you have to be careful that you're not catching a falling knife. You know, like, I mean if somebody said to me, I'll give you this vacant office building or a dollar, I probably wouldn't take it because unless I had some kind of a solution for the, uh, on the income side. So I'm not saying I wouldn't, but you have to have a solution on the income side to cover your operating expenses. Otherwise you're just gonna be writing checks just like the person before you

 

Speaker 1 (00:31:34) - That is so well explained on the difficulty of making a conversion feasible from office to residential. Well, if you're like me, you read a lot of Ken McElroy's books like the ABCs of Property Management, the ABCs of Real Estate Investing. Can I read the Return to Orchard Canyon on a beach in India a little over three years ago? Actually, I love that more recent book from you and you have a great live in-person event coming up really soon where the audience can come to see you at a bunch of other speakers. It's a fantastic event. It's a second year, you're doing it, it comes up really soon here in Scottsdale. Tell us about it.

 

Speaker 3 (00:32:15) - Thank you. It's, I cannot be more excited, especially what's happening right now. It's called Limitless and uh, it's at limitless expo.com. So it's just limitless expo.com. But kicking off the very first day is Joseph Wang, who wrote a book called Central Banking 1 0 1 and he is good. He used to work in New York for the Fed and is going to talk specifically about what's the Fed going to do in the second half of the year in 2024 based on all the things that he did on the open markets desk for the Fed. So that's gonna be very exciting. We've got Chris Martinson as well talking right after him, got kiosaki. We have a whole bunch of people around entrepreneurship and um, kind of side hustle stuff just to try to figure out what the heck is happening and what could we be doing to protect ourself moving forward.

 

Speaker 3 (00:33:11) - So this is really, this year in particular is a not to miss year because these are things that all of us are trying to figure out. I don't have a crystal ball just like anyone does, and I'm studying like crazy to try to figure out what's happening next. We've got 45 speakers all coming to try to help us understand what we can do next. Chris boss, who's, uh, wrote the book, never Split the Difference. If you guys haven't read that book, you need to read that book. He's the hostage negotiator in the world and he works for the FBI and Harvard. And, and his talk is going to be how to negotiate during troubled times because these are going to be real things, Keith, real things that are happening. You know, when there's a debt maturity or a loan coming up or you have problems with your limited partners or, or whatever it might be, this is the room you wanna be and that's the talk you want to hear. Chris is gonna be there, I'm gonna do a podcast with him. He is gonna do a book signing, so it's really fun. It's gonna be Thursday, uh, the 15th, the 16th or the 17th of June. And uh, it's right in Scottdale, Arizona.

 

Speaker 1 (00:34:21) - Janice Prager will be there as well. And yeah, it seems like you just keep adding speakers. Okay, I wanna talk to you. Last month it was 40 speakers, now it's 45. So you, you have a buffet that you can sample there as an audience?

 

Speaker 3 (00:34:34) - We do. I can't wait to meet Dennis Prager. I, I've been to his compasses in la I, I'm a big fan of, you know, his messaging and, and what he, he has a billion downloads last year, A billion with a B. That's incredible. So he's getting to be there. I just think it's like the who's who, right? It's tweet thought

 

Speaker 1 (00:34:52) - 100%. You can get started@limitlessexpo.com. Can I and our audience have benefited from your knowledge for years? Thanks so much for coming back onto the show.

 

Speaker 3 (00:35:02) - Yeah, my pleasure. Always great to be on

 

Speaker 1 (00:35:10) - Most of those speakers at the Limitless event. Were guests here on G R E, so you'll probably find a lot of residents there, including Chris Voss who was the FBI's lead hostage negotiator. He was on the show with us here twice you'll remember. And yeah, you'll remember that pretty fondly  because it was entertaining the first time Chris was here back in episode 331, how the World's Best negotiator and I, Chris Voss did a mock face off in negotiating the purchase of a fourplex building. But getting back to imploding apartment syndications, they aren't just blowing up deals and blowing up investors, but also blowing up banks when the borrower cannot repay the loan. And banks have to take back apartment buildings and office buildings unlike, which is actually pretty unusual in a way that they need to take back apartment buildings. I mean, everyone understands how the work from anywhere movement created, the office space decline, but there is quite a demand for all residential types, single family homes and condos and trailers and apartments.

 

Speaker 1 (00:36:17) - But it's those resetting rates that blow up apartments despite the demand for people to wanna live there. So what this does, it makes banks more conservative with lower rent values being delivered, lower rent to value ratios also coming on the way. I would expect more of that ratcheting down. And for more people wanting to refi from a variable rate to a fixed rate, you know those syndicators they have got to put cash in in order to meet that lower loan to value ceiling will well capitalize syndicators. They can do that and others can't. Syndicators might very well be asking for capital calls from their investors then for their investors to help fund that cash in refi to keep those deals alive. The timeline for when you should expect a lot of this activity are from the peak 2021 and early 2022 deals that had short-term debt on them.

 

Speaker 1 (00:37:17) - They are going to face resetting rates late this year and into 2024. You probably noticed that just beyond the halfway point in the chat with Ken. I pivoted from talking about problems to discussing opportunity and the opportunity being that others might sell a good apartment deal because they need the cash to get out of that deal so that they can go take those funds and perform a cash in refi and shore up one of their other deals and get that other deal into fixed rate debt. Most modern offices, you know, they simply cannot be adapted over to residential uses due to their wide and deep floor plates that restrict natural lighting to only the perimeters. And because of the overhauls required to run mechanical and electrical and plumbing to individual residential units in the rare office building where conversions are possible, that sort of thing is wildly encouraged by everyone, developers and brokers and all kinds of governmental bodies.

 

Speaker 1 (00:38:19) - In fact, there was recently a sale of a 150,000 square foot office building in Orange, California oranges between Anaheim and Santa Ana. It's sold for 22 and a half million dollars and it's planning to be converted from office to residential. But yeah, multi-family conversions like that, they just aren't common. And the full story about that from LoopNet is in the show notes for you today. We've been discussing the difference between one to four unit properties and five plus unit multi-family apartments today. The difference in lending is really what makes all the difference. So those larger apartments bought with variable rate debt, say one to three years ago, they are problematic where the one to four unit space instead stays shielded with long-term fixed interest rate debt. Next week here on the show, you're gonna meet our new investment coach at GRE Marketplace. You have heard this person on the show before. I'll introduce you next week. Yes, we're adding a second one to keep up with demand for you. Until then, I'm your host Keith Wein. Hold, don't quit, it's your daydream.

 

Speaker 4 (00:39:31) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests on their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.

 

Speaker 1 (00:39:59) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

 

Direct download: GREepisode452_.mp3
Category:general -- posted at: 4:00am EDT

Did you expect to hear this about Black people? We have a discussion about equality in housing.

First, if you close your eyes and wake up in 10 years, where do you want to find yourself? I explore.

For some reason, investors want to time the real estate market, yet they dollar cost average into stocks. 

1% down payment mortgages are here.

Learn about the latest AI development. The maker of ChatGPT is developing “Worldcoin”. It would verify if you’re human by scanning your eyeballs. 

Finally, there’s a long history of racial discrimination in both society and housing.

The Fair Housing Act—part of the Civil Rights Act of 1968—helped break down discrimination.

The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance.

Learn the difference between equality of opportunity and equality of outcome. The latter is difficult to administer.

Providing equal opportunity in housing is not just the law. It’s the right thing to do. I explain why it actually benefits you.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/451

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. 

 

If you close your eyes and wake up in 10 years… where do you REALLY want to be? 1% down payment mortgages are here, profound AI impacts in your life…

 

Then, some contentious and even volatile discussion about racial discrimination and Black people… in housing. You’ll get my opinion on equality of opportunity. Today, on Get Rich Education.

____________

 

Welcome to GRE! From Allentown, PA to Glen Allen, VA and across 188 nations worldwide, I’m Keith Weinhold and this is Episode 451 of Get Rich Education… where we don’t live below our means. We grow our means. 

 

If you’re being told that you’re crazy or that things aren’t going to work out… you know… hearing that right there can actually be a prerequisite to you being successful. 

 

Are people raising their eyebrows at what you’re doing? 

 

Yeah that could actually be some positive feedback on your direction, as long as your head tells you that it’s right and your gut backs it up. 

 

Don’t trade away your authenticity for approval.

 

Look, if you close your eyes and wake up in 10 years, what do you want to see when you open your eyes? Awards for work? 

 

I doubt it. Or is it kids, family and relationship-oriented? 

 

Or is it, invisible footprints that you’ve left behind all over earth because you traveled or explored that much? 

 

You DID raft the Grand Canyon, visit the Taj Mahal, see the Eiffel Tower, or dive the Great Barrier Reef?

 

Yeah, it’s probably those types of things.

 

Well then, why are you putting 90% of your effort into career-oriented stuff… if that doesn’t help you achieve that goal 10 years from now? 

 

That’s a better set of questions for you to ask yourself.

 

That’s why we talk about generating residual income when you’re actually young enough to enjoy it here.

 

Rich people play the money game to win - that’s what we do here. While most people play the money game not to lose.

 

Real estate is not always easy. It’s not OVERNIGHT wealth, you’ll have your problems. But it can be amazing when you have a strategy and stick to it.

 

If you want me to make your financial life better in 30 days, maybe I can in some cases but that’s really not what we’re doing here, probably not even in a few months.

 

But in a few years… yes, definitely.

 

And I think it helps to remember something simple. The only place that you get money is from other people.

 

All your life, the only way that dollars have come into your hands or into your bank account is because it came.. from other people.

 

For many, that’s just one person - one employer that the money comes from.

 

With each rental property that you add, that is one more person that is paying you…

 

… that’s of tangible benefit to you in a world where the only place that you get money is from other people. 

 

Now, as we dip into the mechanics about how to achieve that…

 

What would be different if you HADN’T taken action in RE?

 

Now, I don’t know what it is, but for some reason, people are trained to TIME THE MARKET in RE. 

 

Yet people might put 10% of their salary - up to $22,500 is allowed this year - $30K if you’re over 50. They put that in their 401(k) - dollar-cost averaging - which is NOT timing the market.

 

I don’t know why that is. Why some people are predisposed to time the market in RE but yet they DCA in stocks - which is the opposite of timing the market.

 

Maybe it’s the cost of the property?

 

Treat RE the same way - DCA there too. Keep adding 1 or 2 a year or whatever you can.

 

When you consider 401(k)’s low returns and low liquidity, you might not even be putting money into it anymore.

 

You’ve got the wherewithal to know that very dollar you lock in a 401(k) is a dollar that can’t use OPM.

 

And it gets even worse. 

 

Because with a 401(k), you are HOPING TO DIE before the money runs out. What kind of a retirement plan or life plan is that?

 

Doesn’t sound like diving the Great Barrier Reef to me. Ha!

 

Rocket Mortgage introduced a new 1% down home loan program. This is a new product for them. But some people to think it’s the first. 

 

It’s not the first. It comes on the heels of rival United Wholesale Mortgage rolling out a similar program.

 

But this particular program is expected to reach a lot of people.

 

And here’s the thing. It also eliminates the monthly mortgage insurance fee. It deletes monthly PMI.

 

Now, even if we’re just talking about primary residences here, this affects you in the rental property market. I’ll tell you why in a moment. 

 

But with this 1% down payment program, a buyer using this program who’s purchasing a single-family home, well, their income can be no more than 80% of their area’s median income…

 

… they are only required to make a down payment of 1% of the purchase price. 

 

Then the lender covers the remaining 2% needed to reach the required 3% threshold for conventional loans.

 

So it’s not only going to reduce upfront costs, but that monthly mortgage insurance fee for the borrower is gone, which is typically a few hundred dollars a month…

That what they had to pay traditionally, if the buyer puts less than 20% down on their purchase. That’s going to help affordability.

So with 3% down being reduced to 1% down, then a homebuyer of a $250,000 home would only need a $2,500 down payment instead of $7,500.

Now, strict underwriting guidelines are still in place - you need income and credit and assets.

There aren’t really as many mortgage borrowers that put 20% down on a home as you might think. In fact, the average new purchase down payment amount in America is only between 6 and 7%.

But this 1% option, which it’s estimated that 90 million Americans will qualify for - over the long-term, that is just going to increase the available pool of buyers, of course, because more people that were on the edge of affordability can now qualify.

Now, in a normal market, a few of your tenants that were on the brink of qualification might be able to run off - and buy.

But you’ve still got those erstwhile strict underwriting guidelines and there’s still just such a lack of supply of this entry-level housing - like I updated you on last week.

You can’t move into what doesn’t exist. So this could create some tenant attrition, but it should be pretty limited for those reasons.

 

But, yeah, with this larger pool of buyers that now qualify, that puts more upward pressure on property prices. 

 

When you make any good or any commodity MORE affordable in the short-term like this, with more buyers & more bidders, it makes that much LESS affordable long-term because that competition pushes prices up.

 

It’s just like decades ago, as soon as financial assistance came to the college enrollment world with Stafford loans and Pell grants and all that stuff, what did it do?

 

More people could afford to PAY MORE with more & better loan types and that made college costs skyrocket.

 

The same effect is happening here when you lower down payment requirements to just 1%. 

 

Though, that factor alone shouldn’t make home prices skyrocket. They shouldn’t shoot up. But it’s just another tailwind on upward price momentum.

 

Typically when a tech CEO goes in front of a Senate committee, it gets embarrassing. Like, they end up explaining how to use email. 

OK, Senate committees are not known for being tech savvy. 

Not so a couple weeks ago, when Sam Altman, CEO of ChatGPT-maker OpenAI, testified on Capitol Hill on the future of AI and how the field should be regulated.

Now Sam Altman has a lot more going on than just ChatGPT. It’s possible that he’s the future wealthiest man in the world.

Now, this is where it gets scary.

He’s about to secure a $100 million funding round for an eye scan-accessible global cryptocurrency project, Worldcoin. That’s what the Financial Times told us.

Worldcoin is not totally unrelated to his signature project. The company’s goal is to verify whether users are human by scanning their irises to disburse universal basic income… to workers displaced by AI.

Now, I’ve explained before how technology actually creates jobs, not destroys them. 

But the hearing continued with a discussion of the dangers of an unpredictable, evolving technology that can generate and spread misleading information without us even realizing it’s fake- like those famous fake images of the Pope in a puffer jacket or Trump running from police.

Well, for his cryptocurrency, Worldcoin, Sam Altman has already released a World App crypto wallet that can be downloaded to your mobile phone. And he’s got big plans for Worldcoin as the first-ever cryptocurrency to be held by every person on the planet.

 

It runs on the Ethereum blockchain. You don’t need to know what that means. In practical terms, Worldcoin will look (and trade) a lot like the cryptocurrencies that you’re already familiar with. So in that regard, Worldcoin isn’t breaking any new ground.

 

What makes Worldcoin stand out is the fact that it has aspirations to be both a cryptocurrency and a global identification system. With a tag line of "the global economy belongs to everyone," Sam Altman plans to distribute Worldcoin tokens to every single human on planet Earth.

 

And this is where things get really creepy. To pick up your free Worldcoin crypto token and sign up for a Worldcoin ID, you will need to give Sam Altman a scan of your eyeballs. 

 

Yes, you heard that right -- Worldcoin has created a proprietary iris-scanning tool known as the Orb. Once you've had your eyeballs scanned with the Orb, you're good to go. 

 

Altman says this step is necessary to verify that you are a real human and is not meant to be an invasion of your privacy. He won't even ask you for your name.

 

Yeah… I don’t know if people are going to go for that, especially Americans. Americans are more suspicious and have more resistance to authority than most places. 

 

We’ll see what develops with WorldCoin but expect to hear more about Sam Altman.

 

If you want more real estate education, your source is GetRichEducation.com

 

For actually physical property addresses conducive to financial freedom, create one login one time like thousands of others have. You can get started there at GREmarketplace.com

 

More straight ahead, including a discussion and some contention about racism. I’m Keith Weinhold. You’re listening to Get Rich Education.  

________

 

Welcome back to GRE. I’m your host, Keith Weinhold. As we’re about to get to racism, now, first… 

 

It's no secret that I prefer investing directly in single-family rental homes and apartment buildings.

 

But when I look for real estate investments that are even more passive than turnkey...

 

... I just thought you might like to know that I personally invest my own money through a company called Freedom Family Investments.

 

Right from the beginning, they’ve always provided me with exactly their stated return, paid on time.

 

You might wonder, what makes their funds any better than, say, a Wall Street REIT or a 401(k)? Well, for starters… 

  • It's being paid passive cash flow today, not when I'm age 65+.

  • And Tax benefits that offset W-2 job income and capital gains. This part itself can be life-changing.

It might be hard to rake in as much money as Taylor Swift's Eras Tour when you're young enough to enjoy it. But this can get you closer.

 

The fund invests in real estate projects that make an impact. So consider becoming an insider along with me.

 

We get preferred returns of 10% to 12%. That means we get paid first. Cash flow is paid quarterly.

 

You can join us with as little as $50K. It is for accredited investors only.

 

Freedom Family Investments they ARE THE experienced partner on the most PASSIVE portion of my real estate holdings.

 

If this sounds interesting, text FAMILY to 66866 and ask about the Real Estate Insider Fund.

 

Again, text FAMILY to 66866

 

Let’s discuss racism and discrimination in America.

 

It’s a topic that I think some people don’t want to discuss. But I will today, because, here we are, Episode 451 and it’s the first time.

 

This was recently published on our Get Rich Education YouTube Channel, so expect some sound effects as we’re about to play this for you here.

 

The first voice that you hear is 60 Minutes interviewer Mike Wallace with Morgan Freeman, then Denzel Washington, and finally, Dr. Jordan Peterson. 

 

This is about 10 minutes in length, and then I’ll come back to wrap it up for you.

 

**PLAY VIDEO**

 

We’ll end it there. If you’d like to see more, check that out on our Get Rich Education YouTube Channel.

 

I’ll tell ya. Practicing equanimity, it was kinda difficult for me to discuss a sensitive topic. I’m not sure if you can tell in the video, but my forehead is sweating by the end of it.

 

The least that you need to know is that 1968's Civil Rights Act includes the Fair Housing Act.

 

This is a piece of landmark legislation is something that any citizen should know the basics about, and even moreso for a real estate investor.

 

The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status...

 

...when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance. 

 

So it’s not just when you’re renting to someone, it’s when you’re lending to someone.

 

You shouldn't steer your advertising in an exclusionary way. Even terms like "cozy bachelor pad" or "ideal for young couples" should be avoided.

 

And equal opportunity is simply better for you as a landlord.

 

Say that you excluded a rental applicant group that comprised 30% of the population.

 

Then your available renter pool would shrink by that amount, reducing your income potential, reducing your occupancy rate, and reducing your tenant quality. So keep that in mind.

 

Next week here on the show we are talking about some big problems and really… the toxicity in the apartment market, the commercial real estate market… and how 2022’s sudden spike in interest rates is causing syndications to fail. 

 

Apartment building owners are getting foreclosed on. More of that is coming as their VARIABLE interest rate debt resets to WAY higher levels.

 

How bad is it going to get? What are you supposed to do as an investor if you’re IN a syndication? What’s it look like if you’re a real estate syndicator yourself?

 

Who is safe and who is going to go… under?

 

All that and more will be answered next week when Ken McElroy returns to the show here with us. 

 

I really appreciate you being here this week. 

 

But as always, you weren’t here for me, you were here for you. I’m Keith Weinhold. DQYD!

 

Direct download: GREepisode451b_.mp3
Category:general -- posted at: 4:00am EDT

Get a 4.75% mortgage rate or 100% financing on new-build Florida income property. Start here.

If I gave you $10M, learn why that probably wouldn’t even help you.

We revisit how “Real Estate Pays 5 Ways”, a concept that I coined right here on the show in May 2015.

Some think real estate pays three, four, or six ways. I revisit why there are exactly five.

Real estate has many paradoxical relationships. I explore.

Americans are living in homes longer than ever, now a duration of 10 years, 8 months.

The active supply of available housing dropped again.

Get an update on the gambling industry. A major sports gambling platform has offered to advertise with us.

Take my free real estate video course right here

Zillow expects US home values to rise 4.8% from April 2023 to April 2024. 

Months of available housing supply is currently 2.7 per Redfin.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/450

Active Supply of Available Homes:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Complete transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. If you were gifted $10M right now, why that very well wouldn’t help you at all.

 

Learn a fresh take on how Real Estate Pays 5 Ways at the same time. A housing market update with perennially sagging inventory supply amounts and more outlooks for stronger home price appreciation than many expected. Today, on Get Rich Education.

 

Welcome to GRE! 

 

From Montevideo, Uruguay to Montecito, CA and across 188 nations worldwide, you’re listening to one of the longest-running and most listened-to shows on real estate… the voice of real estate investing since 2014. I’m your host and my name is Keith Weinhold.

 

How would you like it if I gave you $1M?

 

You know what? That’s not enough to make my point. Make it $10M. I adjusted for inflation - ha! How much would you like it if I gave you $10M? How would that feel?

 

But what if it comes with this one condition.

 

What if I told you that I’ll give you the $10M, but you are not waking up tomorrow? 

 

Not waking up tomorrow? No way!

 

Now you know that waking up tomorrow is worth more than $10M.

 

This is how you know that your time and your life are worth infinitely more than any dollar amount.

 

Hmmm… if your time is so valuable. Then why did you check Instagram 15 times yesterday to see who viewed your Stories? Ha!

 

Why are you spending time with your AI girlfriend? Ha!

 

Get Rich Education is ultimately about living a rich LIFE - whatever that means to you.

 

And we do approach that from the financial perspective here. Money does matter… because leverage, cash flow, and inflation-profiting enable you to BUY time.

 

We’re really one of the few investing platforms… this show is one of the few places with the audacity to tell you that - sure, a little delayed gratification is good… but the risk of too much delayed gratification is DENIED gratification.

 

Denied gratification is a terrible investing risk that most people either don’t give enough weight to - or don’t factor in at all.

 

And getting a $10M windfall is not as great as it sounds either. 

 

History shows that the $25M Lottery winner quickly loses their money. Why does that happen? 

Because it seemed like it was effortless to get the windfall, and because they don't know how to handle an amount like that. 

It’s really similar to a capital gains-centric investor that gets a windfall. 

See, cash flow investors like you & I - we can be more measured because your income stream is metered out over time. That’s why you are less likely to be irrational with your gains.

 

 

Now, I touched on some of those ways that you’re paid in real estate investing. 

 

Real Estate Pays you 5 Ways™ simultaneously. That’s a concept that I coined right here on the GRE podcast. We since went on to have it trademarked.

 

Do you know when I first introduced that concept right here on the show - the month & year? 

 

And I’ve since gone on to do a lot with “Real Estate Pays 5 Ways” to help other audiences understand real estate’s five distinct profit sources.

 

Well, I had someone on Team GRE here do some digging into some of our legacy shows - our past episodes… because I wanted to know when I first said it… and it was apparently in May of 2015, so 8 years ago that I introduced it.

 

Since then, many other thought leaders have gone on to cite the phrase. Someone other than me even wrote a book on it. And that doesn’t bother me at all. I’d rather that other people and readers get good ideas. That’s more important than getting the credit.

 

Of course, c’mon, you can recite these 5 now like they’re the Pledge Of Allegiance or something. 

 

This is as automatic as the Lord’s Prayer is for Christians. The five are:

  • Appreciation

  • Cash Flow

  • Your return on Amortization and

  • Tax Benefits and finally

  • Inflation-Profiting

But now, let’s dissect this frog here a little. Why five ways? Why not another number, like real estate pays four ways or six ways?

 

It is five. There are no more or less. Each of the five are a distinct benefit.

 

A common flawed case that Real Estate Pays 4 Ways is that most real estate teachers omit the Inflation-Profiting benefit on the long-term fixed interest rate debt.

 

Any GRE devotee knows that with 5% inflation on $1M in debt, you only owe the bank $950K of inflation-adjusted debt after year one, $900K after year two, etc. (And in the meantime, the tenant pays all of your mortgage interest.)

 

Some that make the 4 Ways case question the Tax Benefit. Could the tax benefit really be considered a profit source, or is it just a deal sweetener?

 

It's a profit source.

 

Outside the real estate world, to obtain a tax write-off, you must have a real expense backed up with receipts, like building a new computer equipment or buying a new farm tractor.

 

Instead, the magic of real estate tax depreciation says that you can just write off 3.6% of the improved property value each year just for doing... nothing all year. No improvements necessary.

 

It's a phantom write-off, yet legitimate to the IRS.

 

Then the 1031 Exchange means you can endlessly defer all of your federal capital gains tax for your... entire life.

 

Yes, it's one of the few places in life where procrastination actually pays.

 

I've even heard some say that they're a fan of GRE's Real Estate Pays 5 Ways™, but they've discovered a sixth.

 

This often involves an event that's either unlikely or falls into one of the existing 5 Ways.

 

For example, "My appraisal value exceeded the contract price. I’m buying it for $320K, but the appraisal is $340K. I got $20K in instant equity. See, I was paid a 6th way."

 

No.

 

I mean, good for you, $20K of instant equity is a nice sweetener - that’s a $20K credit in your net worth column that you received the moment you opened up that appraisal e-mail from your lender and saw it. Nice!

 

But an appraised value that exceeds the purchase price is not COMMON enough to be expected… and the 5 Ways are.

 

Also, you can make the case that "instant equity" is covered in the first way you're paid, Appreciation.

 

The reason that we invest in real estate is because there's virtually no other vehicle in the world where you can expect to be paid five ways at the same time.

 

That’s a foundational principle - it’s a core concept here at GRE. 

 

It’s why we do what we do. It answers the compelling “why” for real estate better than any answer there is…

 

…and that’s why anything less than a 20 to 25% combined return when you add up all five ways is actually disappointing - and that’s done with low risk - which is paradoxical almost anywhere else in the entire investing world. 

 

If you haven’t yet, take my free “Real Estate Pays 5 Ways” course in order to really understand each of your five distinct profit sources, where they come from, and how that all fits together. 

 

It’s at GetRichEducation.com/Course. The free “Real Estate Pays 5 Ways” short course is free at GetRichEducation.com/Course 

 

Let’s talk about real estate trends.

 

You know, real estate investing has a lot of relationships that you just wouldn’t expect. 

 

Part of that is because it intersects with the economy. Economies are complex and you get these relationships that are counterintuitive. 

 

For example, in a recession, mortgage rates and all interest rates tend to fall, not rise. 

 

Another exhibit is how debt BUILDS wealth with prudent leverage.

 

Another one that I’ve explained extensively here and the show and elsewhere is that higher mortgage rates correlate with higher home prices - not lower ones. That throws nearly everyone off.

 

Some physical real estate trends have been counterintuitive.

 

About 30 years ago in America - the 1990s - a new trend was fueled that everyone wanted to have a big kitchen.

 

New homes were often built with a big, fancy kitchen in the center of the home. Open floor concept - no galley kitchens anymore. That began back then.

 

And this was really the advent of - at the time - what we considered luxury amenities like granite and quartz kitchen countertops. 

 

Anymore, that’s become standard. Even our build-to-rent providers at GRE Marketplace often have new granite countertops in rentals. 

 

But the paradox here is the assumption that a big emphasis on kitchens would mean that more people would start cooking at home. 

 

Oh, no. Just the opposite, in the last 30 years, despite the big kitchens, more people eat out at restaurants and fewer people eat at home. Another real estate paradox.

 

Another counterintuition was the pandemic. Society locked down, people lost their jobs and you think that there are going to be mass foreclosures because with no job, no one can afford their mortgage payment.

 

People thought the pandemic will cripple the housing market. Oh, it was just the opposite. That created a housing boom. Everyone wanted their space. Another paradox.

 

Remember here on the show, shortly after Biden was elected, I told you that this administration - for better or for worse - will not let people lose their homes. 

 

Then we had high inflation on the heels of the pandemic. That was bad for consumers and good for real estate.

 

But high inflation is supposed to mean that bitcoin and gold would surge. Well, another paradox, that brought crypto winter, and gold did nothing in high inflation, until more recently here.

 

Rather than high delinquency rates we’ve got low delinquency rates. In fact, the mortgage delinquency rate has been steadily falling for almost 3 years now. That’s because of strong borrowers and tough lending standards.

 

Now, another real estate investing trend, though there’s nothing paradoxical here, is mortgage rate resets. 

 

Here in the US, on 1-4 unit rental properties, you’re in great shape, whether you locked in your interest rate at 3% or 7% - the thing is that you have a steady payment… and on an inflation-adjusted basis, your same monthly payment amount goes DOWN over time - it’s a tailwind to your personal finances.

 

Inflation cannot touch your steady, locked-in P & I payment.

 

But many Canadians are up for renewal with their 5-year fixed rate, 25-year amorts. 

 

Yeah, just across the border in Canada, they don’t have these 30-year fixed rate amortizing loans. 

 

Their rate resets every five years.

 

One Canadian homeowner that I talked to, he doesn’t live in that posh of a home in Ontario, it’s just a little above the median housing price. 

 

His family’s loan terms are about to reset on the primary residence and it’s expected to increase their monthly payment by $1,280 / mo.

 

How would you feel if that happened to you overnight? It’s a nuisance at best. It might even crimp your quality of life - or worse.

 

That can’t really happen to you in the US. 

 

Having a 30-year FRM is like you having rent control as a tenant. 

 

In coastal areas, some tenants that have a rent control deal - New York, California, Oregon - they want to live in their home for decades under rent control because there’s a ceiling on their rent. Move out of their unit - lose the deal and they’d have to reset somewhere else.

 

It’s the same with you as an American homeowner or REI in the 1-to-4 unit space. Your P&I price cannot rise. 

 

And, I’ve talked about the interest rate lock-in effect before, constraining the housing supply. 

 

Get this. Just last week, First American Title Company informed us that the average resident duration in a home hit a record high. 

 

Amongst this lower intrinsic mobility rate, interest rate lock-in effect, and other societal trends, the average resident duration in a primary home in now 10 years, 8 months. 

 

Lower mobility. Studies show that people are holding onto their cars longer than ever, and people aren’t parting with their real estate either.

 

So, then, with fewer properties coming to market, let's update the available supply of homes. 

 

This is pulling from the same set of stats that I’ve been citing for years, in order to be consistent. Check this out. This is the FRED Housing Inventory - the Active Listing Count of Available US homes.

 

Remember, historically, it's 1-and-a-half to 2 million units available. In 2016 it was still 1-and-a-half million.

 

Then in April of 2020 it dipped below 1 million and fell sharply from there - which I’ve famously called this era’s housing crash. 

 

It was a housing SUPPLY crash - which hedges against a price crash.

 

It fell to as low as 435,000 a year later in mid-2021. Gosh, under a half million.

 

It’s rebounded as builders know that they need to build more homes. Six months ago it got up to 750,000 available homes - which is still less than half of what 

America needs.

 

And now, today, did the supply get up toward at least 1 million yet? No. 

 

It has dropped back the other way to just 563,000. This astounding dearth of housing supply - it’s a condition that we could very well be in for over a decade.

 

This scarce supply is a long-term American condition. Yes, it’s good for your real estate values - both present and future. But it is a problem too. It’s a contributor to homelessness!

 

The Covid home improvement boom is officially over. So says Home Depot. They posted a revenue drop in the first quarter and warned that annual sales would decline in 2023 for the first time in 14 years. 

 

Home Depot said that shoppers are now holding off on the big-ticket purchases they made during the pandemic and are choosing to break up larger projects—like remodeling a bathroom—into smaller, bite-sized pieces.

 

There’s a fascinating new study from a bipartisan think tank shows that everyone wants to LIVE ALONE.

 

That’s what Business Insider just reported on. Now, of course, the term “everyone” is an exaggeration.

 

But Statista and Our World In Data tells us that - get this - this is the number of SINGLE-PERSON households in the US - people living alone.

 

Back in 1960, that figure was just a paltry 13%.

 

By 1970, 17% of households were people were living alone.

 

Every ten years, that percent crept up to 23, 25, then 26%. By 2010 it hit 27% and by 2022 it hit 29%.

 

Now, you can’t think that’s good for society - to have all these single-person households. Almost 3 in 10 living alone. C’mon. Find a good spouse.

 

But in any case, that’s good for you as a REI, when, say, 10 people live amongst 5 homes rather than 3 homes - absorbing all that housing supply and keeping it scarce.  

 

Even if the US population stayed the same, there’s more home demand - with that trend.

 

Of course, the US population is growing, though really slowly, probably just a few tenths of 1% this year.

 

But because of all the Millennials and the embedded “Work From Anywhere” trend, housing demand is pretty strong.

 

The recent rental housing demand and rent boom came almost entirely due to a surge in household formation -- young adults leaving the nest and roommates decoupling to get their own space... especially in urban areas.

 

People working from home want more space (without a roommate) AND are willing to pay more for it -- and able -- to pay more for it.

 

So if you're bullish on work-from-home remaining the norm for at least a chunk of the population (and I am), you should be bullish on the rental demand outlook. 

 

And this has really revitalized America’s SUBURBS - that’s the area where you find that space.

 

The WFH-fueled rise of the suburbs is a wake-up call to cities, where, in the case of NYC, 26 Empire State Buildings’ worth of office space now sits empty. 

The typical office worker is spending $2,000–$4,600 less annually in city centers. Because even if they GO to the city to work, they might only do that 2 days a week now - not 5.

I’ve got more for you straight ahead, including a new forecast on how much home prices are expected to rise this year.

 

Again, check out my free video course if you haven’t “Real Estate Pays 5 Ways”. Get it at GetRichEducation.com/Course

 

I’m Keith Weinhold. You’re listening to Get Rich Education.

 

Yeah, big thanks to this week’s show sponsors. I’m only bringing you those places that will bring real value to your life.

 

Now, here at GRE, I recently read an offer that one of these major sports gambling platforms sent us. They want to advertise on the show here. 

 

Do you want to hear sports gambling ads on GRE? I’ve got an opinion about that, that I’ll share with you shortly.

Gambling is not the same as investing. 

 

If you’re wondering why you’re hearing more about gambling, especially sports gambling than you had just a few years ago, well…

 

Now, just last week, it was FIVE years ago that the Supreme Court lifted a federal ban on sports gambling in the US. 

 

That spawned a multibillion-dollar industry that’s transformed how Americans watch, talk about, and experience sports.

 

Americans bet $95B on sports in legal jurisdictions with consumer protections last year. That’s more money than the amount spent on ride sharing, coffee, or streaming… and you can bet that the off-the-books gambling number, if added in, would make that WAY higher.

Two sports betting companies, DraftKings and FanDuel, control 71% of the US market, per gambling analytics firm Eilers & Krejcik. Gosh, that’s almost a duopoly right there.

But despite that, these companies have struggled to turn a profit. FanDuel recorded its first quarterly profit just last year, and DraftKings has YET to report a profitable quarter. Well, I’ll just tell ya, it’s one of those two big companies that inquired about advertising on GRE.

Of the 50 states, the number is 33 that allow it. That’s 2/3rd of the nation that has legal sports betting (Washington, DC, has it too). Another four states have legalized sports wagering, but don’t have any sportsbooks operating yet.

Interestingly, the three most-populous US states—California, Texas, and Florida—have not legalized sports gambling. And they account for 26% of all teams in the major North American pro leagues.

The number of women joining sportsbook apps jumped 45% last year, marking the third straight year that new women users exceeded men. Hmmm. I guess that’s the growth market there.

My inclination to have gambling advertising and associating with these companies is NOT to do it… not to accept that advertising income.

I don’t see how that’s serving you. This feels like a conflict in my gut and in my heart.

Gambling is sort of the opposite of investing for a stable rental income stream. 

I mean, either way, I guess you’re putting your money at stake. But that’s about the closest common ground I can find. 

At least at this time… and probably all-time, it’s a “no” for gambling content here.

That’s not any sort of moral judgment on the activity at all. I mean, gosh, as a teenager, I was really into sports gambling, but it was the informal kind. My friend & I each lay a $10 bill next to the TV - Phillies vs. Mets. Winner gets the $20 bucks.

So, my inclination is a pretty easy “no”.

Hook up with our sponsors - they support GRE. That’s Ridge Lending Group, offering income property loans nationwide.

JWB Real Estate Capital - if you want performing income property, JWB really has Jacksonville, FL sewn up & locked down. They do one thing and do it well.

Then, Freedom Family Investments. Get started with them for real estate funds that are ultra-low hassle. Text “FAMILY” to 66866. 

Where will the next ten years take you & I on the show here? I would love to be along for the ride with you. I hope that you’ll be here with me.

 

Let me just take a moment to remind you that I’m grateful to have such a large, loyal audience to… well, listen to the words that I say every week. Thank you for your support.

 

This show has almost reached the 5 million download mark. I’ve been shown that it’s between 4.8 and 4.9 million downloads now. I’m genuinely honored and a little humbled about that even. 

 

Let’s listen in to this 3+ minute CNBC clip. This is Lawrence Yun, Chief Economist at the NAR - the National Association of Realtors talking about the housing market just last week. 

 

Now, a little context here - historically, the NAR has tended to give these dominantly sunny side-up, glowing, everything is always good & getting better kind of remarks on the housing market.

 

But I’ve been listening to the NAR’s Lawrence Yun for quite a while and think he’s been rather balanced. 

 

Here, he discusses how real estate sales volume is down - which has a lot to do with low supply, that mortgage rates are steady, and that prices are slowly rising in most parts of the nation.

 

[OK, Vedran. Here’s where we play the insert.]

 

0:09-3:42 First words to keep are: “Lawrence Yun…” Last words to keep are: “... half of the country.”

 

https://www.cnbc.com/video/2023/05/17/home-prices-still-rising-despite-sales-dropping-says-national-association-of-realtors-yun.html

 

Now, Lawrence Yun did go on to say that he thinks that the Fed should lower interest rates by a half point, and more. 

 

Let us know if you’d like us to invite Lawrence Yun onto the show. As always, you can leave your suggestions, questions, or any comments about the Get Rich Education podcast or any of our other platforms at our Contact center at: GetRichEducation.com/Contact

 

When it comes to national HPA, just last week, we learned that Zillow revised its home price outlook upward.

 

Between April 2023 and April 2024, Zillow expects home US home values to rise 4.8%.

 

You’ve got more signs that more & more American markets are being considered a seller’s market rather than a buyer’s market, which tilts toward price appreciation, though I still think pretty moderate price appreciation this year. 

 

CNN recently published an article where they even posited the question: “Are Bidding Wars Back?” Yes, they are in a few markets.  

 

Another measure of housing supply is the MONTHS of available supply. I think you know that 6 to 7 months of inventory is considered a balanced supply & demand market.

 

If it gets up to 10 months of supply, you tend to see little or no HPA. 

 

Well, indicative of the low housing supply, we hit a winter high of 4-and-a-half months of supply. 

 

And today, it’s down to just 2.7 months per Redfin. 2.7 months. That’s just another sign that demand is outpacing supply.

 

Then, among those entry-level homes, like the NAR’s Lawrence Yun eluded to, they’re even harder to find… and they’re the ones that make the best rentals. 

 

How hard are these to find? I mean, in some markets this can be even more rare than finding a true friend? Ha!

 

Is it as rare as the Hope Diamond? Or perhaps a Honus Wagner baseball card? Ha!

 

Well, the good news is that we actually have the inventory that you want at GRE Marketplace.

 

Besides that, we actually have something that you really like and that is - mortgage rate relief to help you with your cash flow. 

 

Purchase rates have been hovering around 6 1/2% lately. That’s the OO rate, so for rentals, it could be 7%+.

 

Well, how about rolling back the hands of time? Through our great relationships here and our free investment coaching, you have access to 4.75% interest rates on investment property - and many of these are new-builds in path-of-progress Florida.

 

Yes, our free coaching will get you the 4.75% mortgage interest rate, they’ll even help write the sales contract for you if you’re new to this, walk you through the property inspection, the property condition, the appraisal. 

 

Yes, a 4.75% interest rate… today, from these homebuilder buydowns. I don’t know how much longer that can last. 

 

To be clear, you’re not buying an income property FROM us. You’re buying it with our help and our connections. It is all free to you. This is educational support for you.

 

In fact, our coaching support like this through our sole investment coach, Naresh is becoming so popular, that I can announce that we soon plan to add a second investment coach. Yes! A new one.

 

And interestingly, you have heard of this soon-to-be second investment coach because they’ve been a guest on the show here a number of times. Yeah, we’ll make that introduction on a future show. You’ll find THAT interesting.

 

But, our Investment Coach, Naresh, does have some slots open to talk with you and help you out. A lot of the best deals currently with these 4.75% rates are with new-build Florida duplexes and fourplexes. 

 

You can use them for rental SFHs too. Last I checked, the deals were a little better on the duplexes and fourplexes.

 

You probably thought that Sub-6 and sub-5 mortgage rates are about as unlikely to make a sudden comeback as AOL or Myspace, but we’ve got them here now. 

 

Now, that 4.75% is just one of two options that we have with some Build-To-Rent builders that are fairly motivated. So to review the first one fully… you can get a

 

  • 4.75% interest rate with a 25% down payment

  • 1 year of free property management and

  • $1,000 off closing costs per deal

That’s one. Or, option 2 is:

  • Zero down payment - yes, 100% financing

  • 2 years free property management

  • $1,000 off closing costs per deal

  • Negotiable price, open to offers

They are the two options. 

It’s rarely more attractive than this. If you hear this in a few weeks, or perhaps months, I doubt that these options will be there any longer.

 

So I’ll close with something actionable that can really help you now. 

 

If you want to do it yourself, that’s fine, like thousands of others have, get a selection of income property - despite this national dearth of supply at GREmarketplace.com

 

Or, like I said, right now, it’s really helpful to connect with an experienced GRE Investment Coach - it’s free - our coach’s name is Naresh - for those 4.75% interest rates or zero down program - whatever’s best for you… you can do all that at once at GREmarketplace.com/Coach

 

Until next week, I’m your host, Keith Weinhold. DQYD!

 

Direct download: GREepisode450_.mp3
Category:general -- posted at: 4:00am EDT

Are you living the life that you were created to live? I explore. 

People have harbored unfounded real estate fears for years. Here they were:

2012: Shadow inventory

2013: Boomers downsizing

2014: Rates spike

2015: PMI recession

2016: Vacant units

2017: Home prices above pre-GFC peak

2018: 5% mortgage rates

2019: Recession?

2020: Pandemic

2021: Forbearance crisis

2022: Rising rates

2023: Recession

US houses prices are heading up this spring. The latest FHFA’s Monthly Housing Report shows 4% national home price appreciation.

We explore apartment reputation scores. This is a great proxy for what’s happened in housing the past three years.

As an investor, you have a low “loss to purchase” with your tenants. It’s difficult for them to buy their first home.

I discuss 12 Ways that you can raise the rent and increase the value of your property.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/449

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:

www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Credit to BiggerPockets.com

 

Welcome to GRE! I’m your host, Keith Weinhold. We get clear together - Are you truly living the life that you were created to live?

 

A housing market update with some perspective that can totally shift your real estate thought paradigm. 

 

Then, 12 Actionable Ways that you can raise the rent and add value to your property. Today, on Get Rich Education.

 

Welcome to GRE! From Johannesburg, South Africa to Harrisburg, Pennsylvania and across 188 nations worldwide, I’m Keith Weinhold and this is Get Rich Education.

 

Last night, people were losing sleep over money. At the same time, last night, you made money… as you slept.

 

Are you living the life that you were created to live?

 

Your big ideas, your grandiose hopes and ambitions that you promised yourself that you would follow through on someday… have they turned into fears?

 

Even ones that you had as a child - like to be an astronaut or a firefighter. Today, it might simply be that you would have quit your soul-sucking job by now.

 

Maslow’s Hierarchy of Needs - how many are you fulfilling? All five? There are five levels. The base level are your…

What are you doing to be the most that you can be? 

 

With financial freedom, you can control your time and have a chance at living the life that you were created to live.

 

How do most people think of financial betterment? In a faulty way, like…

 

  • If you get your hair cut at home and brew your own coffee at home, you figure you could save 6 bucks a day.

 

  • Hey, Men’s Fast-Pitch Softball at the Moose Lodge is still free. Oh geez. So that’s why it’s your entertainment?

 

  • You could save a whopping $80 on flight tickets by adding an extra layover on your trip itinerary.

 

  • Or… it’s buy-one-get-one free week on Hillshire Farm brand bacon at the supermarket.

 

Alright, how do you know that all those things right there don’t move the meter in your life? It’s because, ask:

 

How many times would you have to do that activity - like add an unnecessary flight layover - in order to acquire wealth? 

 

None. It doesn’t apply. You could practically do that an INFINITE number of times and you wouldn’t acquire wealth to create the time to live the life you want.

 

But how many times would you need to add a flight layover in order to make you MISERABLE? There IS a number. There is a certain number.

 

Doing those trivial things only helps ensure that you stay at a soul-sucking job.

 

Because rather than taking your time - a zero-sum game - rather than HAVING your time engaged in expansionary activities, you were focused on contracting. 

 

You were focused on where there’s a low upside rather than activities that have an upside with no ceiling.

 

Another way to ask if the activity is expansionary and moving you toward financial freedom is: Did you overcome FEAR in fulfilling that task?

 

Yes, it’s an inconvenient truth that facing & overcoming fear is what makes you grow.

 

Did you overcome fear when you brewed coffee at home or got some stupid discount on grocery store bacon?

 

What are the activities you do that move you toward financial freedom - not debt-freedom - but financial freedom & overcome fear & grow.

 

That’s an activity like:

 

Making your first home a fourplex with an FHA loan… or repositioning your dead equity, like Caeli Ridge & I discussed here two weeks ago… or buying an income property across state lines… or learning how to become a savvy private lender… or finding out how to become an accredited investor.

 

Are you living the life that you were created to live?

 

Now you’ve got some examples, some milestones, and some checkpoints so that you’ll know if you’re either on the right trajectory - or hopefully - if you’ve been listening here long enough… you’re living that life… now.

 

Why would you live one more day of your life “below your means” than what’s absolutely necessary. That should only be a short-term life mode.

 

Don’t live below your means, grow your means.

 

Live the life that you were created to live.

 

But the major media channels stir up so much fear - and even niche ones - that it can often paralyze, even some clear thinkers.

 

Despite the fact that today’s real estate appreciation rates are quite normalized and modestly growing, some people still have unfounded fear over real estate.

 

And non-doers are always trying to time the market… and timing the market doesn’t work. 

 

Here’s what fearful permabears are concerned about. It’s always something in real estate. 

 

In 2012, it was “Shadow inventory”. Remember that? Never came to pass, just like most of this stuff.

 

In 2013, the fear was Boomers are downsizing

 

In 2014: Rates spike

 

In 2015, it was a PMI recession

 

In 2016, it was vacant units. Ha! A terrible miss.

 

In 2017, it was, look, nominal home prices are above the pre-GFC peak. Yeah, so what? They should be.

 

In 2018, it was 5% mortgage rates. That was the fear.

 

In 2019, I actually don’t remember what the fear was that year. That was a fairly uniform year but people stirred up fear about something in order to get clicks. Call it a recession.

 

In 2020, it was the pandemic

 

In 2021, it was fear of a forbearance crisis.

 

In 2022, the fear was rising mortgage rates will cause a housing price crash and there’s a collapse in sales volume.

 

In 2023, what’s the fear? Are we back to recession fears again? 

 

Gosh, people have been steadily forecasting that for 12-18 months now, it still isn’t here, and it still isn’t on the horizon either, as job growth numbers keep beating expectations. 

 

If you’re waiting to invest in the most proven investment of all-time - real estate, or even something else like gold or bitcoin or stocks - if you’re waiting until the uncertainty dissipates, then you’ll never be investing again for the rest of your life.

 

About the only certain thing in the investing world is persistent inflation and the fact that people are going to need a good place to live.

 

I invest in the certainties, not get paralyzed with uncertainty.

 

This way, we don’t get too caught up in the latest investing fad, often like stock investors do. 

 

In 2017, it was anything around “blockchain.”

In 2021, it was the “metaverse.”

In 2023, “AI” is the term that’s instigated a Pavlovian response from investors salivating over the potential hundreds of billions in value that could be unlocked by the new technology… until that gets oversold.

There IS some opportunity in some of those things, but as soon as people lose money in them, they revert back to principles.

In a lot of ways, we stick to principles here, even if some of them are countercultural principles - like FF beats DF.

Keep your debt & get more of it. More debt means you own more RE.

 

US house prices have stabilized and are heading up. They've gone from modest declines or steady prices… to modest growth in most regions.

 

That's the summary from my latest "light reading" duty—FHFA's Monthly Housing Report. It’s released every month.

 

Some highlights from the latest one, all stats through February, and with nominal pricing…

  • Every division east of the Mississippi is up 5% to 8% annually

  • The Pacific division, which was hurt most, saw a 3% decline

  • National home prices are up 4%

  • And this index covers 400+ American cities

Spring numbers will be factored in soon. Since it's property-buying season, appreciation rates will likely rise.

 

Like I've stated before and am becoming really somewhat known for talking about in the industry. In fact, just last week, I was in Arizona and shared this on Ken McElroy’s show - the housing crash is a 100% certainty. That's because it already happened. 

 

It was a housing supply crash three years ago, which prevented a price crash.

 

So then, let’s look at some of the best appreciating markets in the US here, just the quick, Top 10. 

 

And notice how widespread the national HPA is. It really just excludes the western third or western quarter of US states.

 

The market with the 10th most appreciation - and this is all YOY, through Q1 per the NAR:

 

Santa Fe, NM up 12%

9th is Hickory-Morganton, NC up 12%

8th is Appleton, WI up 12-and-a-half per cent

7th? Milwaukee-Waukesha-West Allis, WI. Up 14%.

I’m doing some rounding here.

6th is Oklahoma City, up 15%

Elmira, NY - hey I grew up near there - is up 15%. That’s 5th.

 

4th is Burlington, NC up 15% YOY

3rd is Warner-Robins, GA, up 16% 

2nd is Oshkosh-Neenah, WI at 17%

#1 in the nation is… the Kingsport-Bristol area, which spans Virginia & Tennessee. Up 19%

 

I’m going to discuss apartments in a minute. But they are the 10 US areas with the largest single-family home price increase annually.

 

In the Information Age, a bad reputation will follow you around like your cat, internet tracking cookies, and a song that you can't get out of your head.

 

Apartment reputation scores are a broad measure of renter satisfaction.

 

It's amazing to see how closely they track the macro trends that impact tenants and property managers (PMs).

 

What I’m referencing here is J Turner Research's Online Reputation Assessment scores from today, and going back to March 2020.

 

This is a very telling pattern here.

 

Spring - Summer 2020: COVID descends. Lockdowns are here. Reputation scores plummet. PMs struggle to rapidly adjust to a new era where renters live and work inside their units 24/7. Everyone started using Zoom. Maintenance techs could rarely even go inside units for repairs.

 

Entropy ran rampant. Parents didn't know what to do with their children. Fear reigned. Common spaces closed. Neither tenants nor PMs were happy.

 

Then, in the…

 

Fall 2020 - Summer 2021: This was the boom period for apartments. PMs have solved for the new era, adopting new technologies and new strategies. They also re-open amenity spaces and in-unit maintenance. 

 

Hey, foosball in the clubhouse is back. Apartment demand surges, and reputation scores go back up.

 

Late 2021: Apartment occupancy rates hit record highs. PMs again wrestle with on-site staffing shortages. Could ultra-low vacancy and still-robust leasing traffic put so much strain on property managers that reputation scores start to drop again?

 

Nope! Because in…

 

Early 2022: Reputation scores climb back up to new highs again. PMs once again adjust to the rapidly evolving climate, many leaning on early-to-mid phase adoption of centralization tech and management practices.

 

Mid - Late 2022: Apartment reputation scores inch back again. That’s when consumers saw peak inflation—including renewal rent increases. 

 

At the same time, demand (for all housing types, not just apartments) slowed down and you didn’t see the high rent growth that you had. This puts more strain on PMs.

 

Inflation hit everyone, with big price hikes in property insurance, taxes, maintenance, turnover, labor, and utilities.

 

Early 2023: Apartment reputation scores are on the rise again, hitting new highs. Consumer inflation is cooling, while vacancy rates and leasing traffic return to more normal levels.

 

Some semblance of normalcy has finally returned.

 

At the same time, new tech adopted in the pandemic era proves to have long-term benefits to both tenants and managers.

 

In recent years, PMs have focused on resident satisfaction, so it's no coincidence that reputation scores keep improving.

 

Now today, as an investor, changes are that you have a low LOSS TO PURCHASE.

 

What’s a “loss to purchase”. Your tenants are leaving to go buy something very often. 

 

You, as an investor in either single-family rentals or condos or apartments - you can retain residents right now because it’s so hard for them to go off and buy their own starter home.

 

Why’s that? Well, it’s not just the higher mortgage rates. It’s that fact coupled with the fact that credit availability is still tough. 

 

As you know, you need to have a lot of good documentation & income & assets to get a loan. That keeps your rent-paying tenant in place.

 

In 2005, we were in the opposite condition. Back then, tenants fled my units. I had a hard time retaining tenants in 2005. Why? 

 

Because it was so easy to get a loan, you could just lie about everything on a mortgage application and no one even checked the accuracy. Bloated appraisal values even came flying in.

 

That’s why my rental property tenants kept leaving. It seems like it was always to buy a first-time condo back in 2005.

 

Today, you can retain tenants. That’s your upside of today’s harder housing affordability and stringent lending requirements. 

 

So, in this normalizing housing era where tenants have to live in your rental unit longer - because they have no alternative - you can find the properties most conducive to this strategy where thousands of other have created a quick account - at our marketplace: GREmarketplace.com

 

It’s not like a big box store. It’s more like an organic farmer’s market. That’s where the good stuff is. So, check back often for new inventory at GREmarketplace.com

 

You’re listening to Episode 449 of the GRE Podcast… and of those 449, I think that two of them were quite good!

 

Haha!

 

Coming up shortly, 12 ways for you to raise rent and add value to your property.

 

If you get value from the show, please tell a friend about the show. I’d really appreciate it. Share it on your social media.

 

More straight ahead. I’m Keith Weinhold. You’re listening to Get Rich Education.

 

Direct download: GREepisode449_.mp3
Category:general -- posted at: 4:00am EDT

The average millionaire has 7 income streams. We discuss 2 income streams today—ATMs and Car Washes.

They’re low touch, more passive than turnkey real estate investing.

With ATMs, is cash use on the decline? Not among the demographic they serve. We discuss the future of cash use.

Some ATM users pay a $3 surcharge to access a $20 bill. That’s why it's profitable.

You can buy a unit of five ATMs. They’ve provided a 26.1% cash-on-cash return and high tax advantages. It’s returned $2,262 per month.

Learn more about ATMs at: GREmarketplace.com/ATM

Car wash profits are enhanced with a subscription model. Few on-site employees are needed. 

You can invest alongside a tech-forward car wash franchise, Tommy’s Express Car Wash.

The WSJ stated that no business other than car washes can create this much profit on a one acre lot.

As society changes, EV, gas-powered, and diesel cars must all go through the car wash.

ATMs and car washes demonstrate high operating margins and many tax advantages. You must be an accredited investor.

Learn more about car washes at: GREmarketplace.com/CarWash

Resources mentioned:

Show Notes:

www.GetRichEducation.com/448

Learn more about ATMs:

GREmarketplace.com/ATM

Learn more about Car Wash investing:

GREmarketplace.com/CarWash

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:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Speaker 0 (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold. It's been said that the average millionaire has seven different income streams. We're going to discuss two distinct income streams that you can add to your life today that lie on the periphery of real estate investing. They are low touch for you because they require little or no management. Today on Episode 448 of Get Rich Education.

 

Speaker 2 (00:00:29) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

 

Speaker 0 (00:00:52) - Welcome to G R E from Altoona, PA to Saskatoon, Saskatchewan, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education. Well, you can't have just one income stream because that's entirely too close to zero. We're talking about two distinct income streams today. People really like the operator and his track record. In fact, he's a longtime friend of mine. We'll talk with him shortly next week. Here on the show, I'm gonna talk about the ways that you can raise the rent and add value to your property. But for today, besides the upside that gets many interested in these two income streams, most investments usually have pros and cons. So I'm gonna ask about the downside. In both, we're talking about the ability to add a couple thousand dollars to your residual income each month with the first of two income streams.

 

Speaker 0 (00:01:51) - ATMs, yes, automated teller machines. Remarkably, the operator has never missed the monthly distribution or the pro forma return target. What about the future use patterns of cash? Yes. Green dollar bills. We will discuss that. It seems as though ATMs just don't care when there's disruption and chaos in the marketplace. They just sit there, do their business and provide you with consistent monthly cash flow. We'll discuss exactly how much inflation, not a big deal to ATMs recession, they can deal with that. Pandemic ATMs breezed right through it. Is the use of cash in decline? Well, not with the demographic that ATMs serve. How about the political party in power? That just doesn't matter in fact, and perhaps is a little sad. The demographic that ATMs serve is one of the fastest growing in the United States to this group, cash is still the currency of choice. Some of them are unbanked or underbanked. First, we'll talk about ATMs then after that, another diverse income stream for you.

 

Speaker 0 (00:03:07) - What's it like to invest in ATMs and car washes and what's the direction of their future use patterns, for example, wouldn't cash use with ATMs B declining perhaps? Well, today's guest expert recently spoke about ATM and carwash investing at the Best Ever conference as alternative asset classes that can perform well over the next decade. And when he was finished speaking, there was a line formed at the back door waiting for him so that people could learn more. So settle in. Let's learn about what's happening. I'd like to welcome back onto the show, g r e, regular and super syndicator, Dave Zuck.

 

Speaker 3 (00:03:43) - Keith, thanks for having me back on your show. It's good to be back and I'm looking forward to having this discussion. I love it.

 

Speaker 0 (00:03:50) - Well, Dave, you know you've been here to discuss ATMs and car washes before, so we wanna get updates today, including what investor returns are like starting with ATMs. Really, that is a predominant thought about ATM investing today. It's that the use of this new technology like Apple Pay or coming cbd, CS, or even cryptocurrencies, are gonna cause cash use to decline. And I know that when you were here previously, we talked about year over year cash use and how that looks. So is that a question that you often get about just the use of cash that an at m spits out?

 

Speaker 3 (00:04:24) - Yeah, so one of the challenges to the ATM space in investor's minds in accredited investor's minds is, well, I don't use cash anymore. I'm guessing you don't use much cash anymore. I don't hardly ever use cash, right? And so that must mean that other people aren't using cash. That is the same as an investor thinking, well, I don't live in a C-class apartment building, so I guess nobody invests in C-class apartment buildings, right? So one of the things yes, is cash use in decline. The answer is yes to our peer group. But when you consider the fact that our demographic, who we serve, what I'm saying, saying our peer group, I'm talking about you and I, Keith and probably everybody who's listening to this show, we use last cash and we did three years, five years, 10 years, 20 years ago. Sure. Okay. But that demographic of people that we serve is one of the largest, one of the fastest growing groups in this country.

 

Speaker 3 (00:05:22) - It's when you really look at the facts. Look back in the early nineties, the Wall Street Journal, there's already a Wall Street Journal that talk about the death of cash. By the end of the nineties, cash wasn't gonna be around anymore. When I started, when I got in the ATM space 12 years ago, the kind of the talk on the street was, yeah, but you got Apple Pay and the Google Wallet and you got all these, this stuff coming on, cash is gonna be dead in two to three years from now. And the fact is, there's more than doubled the amount of currency and circulation today than there was 12 years ago. There's more currency in circulation today than any time in human history. And the peer group who we serve, the demographic who we serve, uses cash and almost transacts entirely in cash. And that's not going away. We've seen that increase. We've done a lot of market research, we see what's going on, but then we also see what's going on inside our own funds and how people are behaving. It's still a vibrant market.

 

Speaker 0 (00:06:14) - Yes. And you and I have discussed before how some businesses and jurisdictions have tried to ban cash use, but those bans were repealed and it was brought back that you're able to use cash. And you brought up such a brilliant analogy. You as an investor out there, you might be interested in investing in a C-class apartment building, even though if you would do that, you'd probably be less likely to live in one. So yes, a lot of times you're with your circle of friends, you're in your peer group and you tend to think like they do and everyone lives just like you do. But when we talk about different demographic groups from people that you usually hang out with, one reason I've learned through dealing with you over the years, Dave, is that ATMs are so lucrative for ATM investors because this is going to seem incomprehensible to you, the educated listener, but many ATM users pay two to $3 just to get access to a $20 bill. Imagine paying $3 to get access to a $20 bill. And you're thinking, well, who would do that? No one that I hang out with would do that. That's 15% of 15% surcharge to go ahead and access your own money. But yeah, I mean that's one reason why these people are financially disadvantaged, but that's why it's lucrative.

 

Speaker 3 (00:07:29) - Yeah. And for those people it's a way of life. And when you look at how a person's wage or ACH today, somebody works at a factory, their paycheck gets ACH right into their account. They transact in a lot of cash. You know, it saves them for two or $3. It saves them from getting in a car. Some of 'em don't even have a car or getting in into public transit and going down the road to a, the neighborhood bank where they bank at and then stand in line at a in front of a teller on a Friday night and to try and get, you know, 20, $5,000 in cash. You know that two or $3 to go down to the corner of convenience store. That's pretty inexpensive. But you're right. I mean, there's people who will pay two or $3 to get a $10 bill or $20 bill. It's just crazy.

 

Speaker 0 (00:08:18) - Now Dave just gave an excellent example because some people might think, are you taking advantage of these people? You're actually helping serve these people and give them an option? And one thing that I know that you really prioritize doing, Dave, with these a t m investments you've been helping people with for years where they can come invest alongside of you, is that for your physical at m locations, you choose high foot traffic areas.

 

Speaker 3 (00:08:44) - You've heard the saying, what's the three most important things about real estate and its location, location, location. Even more so in this investment because at its core this is a real estate investment. You're monetizing a two foot by two foot piece of real estate and you may be taken at two foot by two foot piece of real estate to its highest and best use. So you're monetizing that piece of real estate. But no, you're adding real value in a community and and serving a community, but it's a real estate play.

 

Speaker 0 (00:09:15) - Now if you are the listener and the viewer out there, if you think cash is going to disappear completely in say seven years, well then you probably wouldn't be interested in investing in something like this. But the more you read and the more you learn, the more you're gonna be informed on that. So talk to us a little bit more about the future of payments. Dave,

 

Speaker 3 (00:09:35) - You mentioned a seven year contract and that's what this is. It's a seven year deal. But when you consider the tax impact plus the first 12 months of cash flow and that first 12 months, you're getting about 60 to 70% of your principle back in that first 12 months from the time your cash flow starts, you're getting that first year's tax deduction, 80% right on the front end. You're getting about 60 to 70% of your principal back in that first 12 months. And then you've got an extra six years of cash flow behind that. So although it's a seven year deal, it's not like you have your money at risk for seven years. You get your money at risk count, the tax impact, you got your money at address for less than three years. It becomes a, not only is it a a really good cashflow and income stream play and you can start really beefing up your monthly cash flow, but it's also a tax plan. It's one of the ways that I keep myself tax efficient. You know, it's, you use that big chunk of depreciation in year one and you start getting yourself to the point where you're living the tax efficient life you start gaining on your wealth building journey. You can get momentum quick when you start applying some of those principles and using that depreciation offset, the tax liability and some other income.

 

Speaker 0 (00:10:52) - We're talking about how investors get 80% bonus depreciation right there at the beginning of a seven year hold time. And Dave, is there a specific number of ATMs that a specific investor owns?

 

Speaker 3 (00:11:08) - One unit is considered five or six ATMs and it matter, you know, it depends on what kind and sort of location. There's some ATMs that have dual monitors and there's two people using 'em at the same time. So it really depends on, on what ATM that is. But you're talking five or six ATMs for one unit. One unit is $104,000. We do sell half units now. So you can come in as low as $52,000, but that's how it works. You buy a unit of ATMs, you put 'em in our fund, we manage the fund for you, and you get a portion of that surcharge revenue. This is sort of a three-way split. You got the investor getting about a third of the income or 30% of the income. You get the store owner or the the location owner about roughly 30% of the income. And then you got the management company, which is where all the costs flow through. You get the management company getting about 40% of that income. So it's sort of a three-way split, but you're getting as close to the asset as you possibly can get without owning at yourself. And so you're just buying the units, you're paying us to manage them for you and making it totally passive.

 

Speaker 0 (00:12:18) - As Dave and I have talked about on a previous show, people use ATMs for more than just accessing cash. There are more use cases than just accessing cash. But Dave, when we get back to the numbers and we talk about why you have so many repeat investors that have invested in a lot of ATMs with you years ago and wanna come back and do this more. And that is because this is a cash flow centric investment besides being tax advantaged. However, you as an investor, you shouldn't expect much appreciation on your six or so ATMs that you hold for this seven year or so hold period. Those things are almost fully depreciated in value by the end of your hold period. But this is a tax efficient, cash flow centric investment. So Dave, tell us more about how that looks for the investor, because I know this is actually a highly predictable income stream for investors.

 

Speaker 3 (00:13:08) - It is highly predictable. We've never missed our monthly distribution payments. Yeah. And we've never missed our proforma and so highly predictable. And the depreciation, the way the depreciation works is it, it really you invest, you get that depreciation, you can use it to offset some other income and you got two choices. You can keep your income stream coming from your ATMs. You can keep that tax free for the first couple years or you can use that even more aggressively. You can use that depreciation, go off and and use it to offset the tax liability on some other income. At the end of the day, it's about living the tax efficient life down and getting out of those high tax brackets, getting out of that 37% tax bracket, moving yourself down into the twenties and the teen

 

Speaker 0 (00:13:58) - Reducing your marginal income tax bracket with offsets from this investment. People really celebrate your track record. Tell us about those cash on cash returns and just about that income stream that one has historically gotten.

 

Speaker 3 (00:14:14) - The cash on cash return is uh, right around 26. I think it's 26.1% cash on cash return. Yeah, the IRR is a bit lower. It's uh, right around a 20% i r r. And so you mentioned it earlier about how an at t m machine really actually does depreciate, like, and I'll give you sort of the analogy when you do, when you take depreciation against, let's say a multi-family apartment building and let's say 10 years down the road, you sell that multi-family apartment building for a gain, you not only pay tax on the gain, you also recapture all of that depreciation that you've used and, and now you get taxed on that as well. So it's very different in an at t m investment. In an at m investment, you don't recapture the depreciation, you get a tax break and that depreciation, you never recapture that. So you really need to almost count that into your total return because that affects your bottom line, that affects your tax impact and you never recapture it. And so you'll notice unlike brick and mortar where normally your cash and cash return is lower and your IRR is higher because you get that residue from sale here, it's flip flopped just totally different. And then you get a higher cash on cash return, a lower i r, but it's because of the loss of value of your equipment over that seven year period

 

Speaker 0 (00:15:36) - In real estate, when you relinquish a property and sell it, unless you do a 10 31 tax deferred exchange, yes you have to pay back the depreciation that you were writing off all of those years. You don't have that obstacle, you don't have that problem with ATMs. And yes, you typically hear about IRRs, which all call synonymously total rate of returns in your real estate as being higher than what your cash on cash return is. But here, this is inverted. This is a cash flow centric investment. And part of the reason why is because your machines, they do go down in value over time. Why your cash flow stays at a steady high rate, 26.1% in this case,

 

Speaker 3 (00:16:16) - It's been a fun asset class. And it's interesting, you know, you talk about how the depreciation works and you try to introduce somebody who's not real savvy on the tax side. You talk about how it works and how it will affect them, and then they see it on their tax return. It's like, oh my goodness, yeah that works. Like you said, I'm like, oh, well yeah, it becomes part of many of my investors' tax planning on an annual basis. It is part of my annual tax planning. And so it becomes one of those things where it's just easy to start kind of collecting 'em and, and making it sort of an annual thing where you just collect more at t ATM machines, keep yourself tax efficient and and really start building those massive income streams.

 

Speaker 0 (00:16:57) - Well, you can learn more and get ahold of the proforma and learn more about ATM performance and the projected future use patterns and how to get started as investor if this interests you at gre marketplace.com/atm. Dave, thanks for the great update on ATMs.

 

Speaker 3 (00:17:15) - All right, thanks Keith.

 

Speaker 0 (00:17:17) - You listening to get rich education. We've got more with Dave when we come back on car washes. Why they're so lucrative, especially when you add a subscription model. I'm your host Keith Wein. Hold with JWB real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor. Since 2013, JWB is ready to help your money make money, and to make it easy for everyday investors, get started@jwbrealestate.com slash g rre. That's JWB real estate.com/g rre GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 40 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally though even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.

 

Speaker 4 (00:18:44) - This is the Real Wealth Networks Kathy, Becky, and you are listening to the Always Valuable Get Rich Education with Keith Wine Hole.

 

Speaker 1 (00:19:04) - Welcome

 

Speaker 0 (00:19:04) - Back to Get Risk Education. Car washers are a remarkably lucrative real estate business. It's enhanced with a franchise model and selling subscriptions to car wash customers. That's how you get that recurring revenue. So a rainy week doesn't wash out your profits. In fact, in the Wall Street Journal it recently said, and I quote what they wrote here, there is no other operation on a one acre site that can do one to two and a half million dollars in sales and pocket half of that. So our guest expert, Dave, is back because he helps you get investment returns without having to actually operate the car wash yourself. So Dave, tell us more. I know for example, much like other real estate location of a car wash is vital

 

Speaker 3 (00:19:53) - Even more so with this type of car wash because the whole system is set up to get you a quality wash in two to three minutes. It's designed to get you off the road and back on the road in less than three minutes. So if you can put a really good product like this carwash, everybody that I've ever talked to, whether it's a franchisee, an owner, a a subscription customer or a one-time user, everybody gives Tommy's express carwash a giant thumbs up. It's about volume and you put that on a busy street corner or you know, there's all kinds of metrics that we like and you know, it's, you gotta be where people are already going. You're not creating a an environment where you're drawing people to somewhere you want to. It's all about creating habits. On a Monday morning, my wife gets in her car and she, about eight 15 in the morning, she goes down to Wegmans about a 15 minute drive.

 

Speaker 3 (00:20:50) - And I promise you if you would introduce her to Tommy's and she would get a car wash when she goes to Wegmans on that Monday morning, she would do that two or three times. She'd be a customer for life. Like she now created a habit kind of like a Starbucks creating a habit. So what we're doing is we're putting this asset in a really good location. Recreating an environment where you don't have to wait in line for 10, 15 minutes, five minutes, get your car wash. It's not one of those white glove people wiping your, it's automated. You get a really good quality wash in two to three minutes. You can get in and out quick.

 

Speaker 0 (00:21:26) - You help partner investor money with a model that's proving itself with the Tommy's Carwash Express franchise like you just mentioned. So technology really adds the efficiency of getting cars through the carwash quickly in order to make this more lucrative. And Tommy's is very tech forward. For example, I know that customers buy subscriptions and they typically use a phone app

 

Speaker 3 (00:21:52) - To the point of technology and efficiency. You know, you're talking, especially over the last three years now, what was one of the top concerns or one of the top challenges for employers was getting good quality people. I mean look no further when you go to busy restaurant and you know, I mean there there was some real challenges in finding good employees. One of the things, you know, and then this is due to some of the technology that you just mentioned. You know, we got, because of the systems and technology, we can run two to 300 cars per hour through the scar wash to get washed and maybe even better you can do that with two to three people on site. So very limited overhead in terms of wages employees, you can pay those employees much better because you don't have like 30 of 'em, you got three of 'em. And so really the whole business model, and it also comes back to what you shared earlier about the operating margins. You got 45 to 50% operating margins in this business. It's in terms of percentage, it's one of the most lucrative businesses that I know of and it's just fun business to be involved in.

 

Speaker 0 (00:23:00) - Yeah. Now when you talk about moving two to 300 cars per hour through a car wash, are you talking about, you know, physically we think of a car wash Now are we talking about one long tunnel with the rate like that? Or are we talking about multiple bays?

 

Speaker 3 (00:23:16) - Normally it's one long tunnel and the longer the tunnel, the more you can, you know, there's different speeds that you know the track will take you through. And there's different things inside the carwash you can activate depending on how busy, I mean it, it really is. They're real car wash nerves. I mean they're techies and it, they really did perfect this product to the point where let's say you have a 100 car wash hour where you're putting a hundred cars through in an hour and now now you get into the busy time where it's, you know, people are getting off of work where it, now you're ramping up to two to 300 cars per hour. The speed varies on the track and it's, you know, different features of inside the tunnel kind of kick in because of the volume. So there's a lot of automation, a lot of technology going on inside the wash

 

Speaker 0 (00:24:02) - As society changes, you know, whether it's a gasoline powered car or it's an EV or it's diesel, they all need to go through the car wash. We're talking about that rate at which cars get washed, which is actually pretty important because if I'm a car wash customer, you're talking about your wife's habits earlier with washing her car. If I think about getting my car washed, but I see a long line over there, why might not even go in and use that car wash. And then I'll start to think, oh well what good is my subscription? So keeping that wash tunnel moving also keeps the line short besides increasing your rate of income.

 

Speaker 3 (00:24:37) - Yeah, for sure. And there is, you know, talking about subscriptions, we're not all about subscriptions, but there's kind of a sweet spot and we figured out that sweet spot's somewhere into 55, somewhere between 50 and 60%. It's where you really want your subscription numbers to be. You don't want 100% subscription model. If you were at 90%, that means your subscription model, you're not priced right. Almost like charging $500 a month for your apartment building and you're always a hundred percent occupancy. It's not good.

 

Speaker 0 (00:25:09) - It's a problem. Not

 

Speaker 3 (00:25:10) - Joking. Yeah, that is a problem. Yeah. So that's sort of the things we're watching. We do want a nice mix of retail customers. We think kind of that sweet spots in that 50 to 60% subscription model range.

 

Speaker 0 (00:25:22) - Oh that's a great point. And that's really interesting when you think about business models and a lot like apartment buildings, car washes are based on their income stream amount, but you're gonna have a different set of expenses with a car wash than you will. And apartment building of course, like you're going to have expenses for example, for water and detergent. Dave spoke a bit about how they keep the labor costs down by having fewer people on site, largely through the use of technology. So we're talking about an innovative car wash type here that's proven itself. Tommy's expressed car wash, their footprint geographically just keeps expanding and expanding and expanding. And in fact Dave, I know when we talked about this last year at least, that that time only Panera Bread in Chick-fil-A, they were the only two franchises that had higher sales revenue per location. Wow.

 

Speaker 3 (00:26:11) - We're at number three and we're hoping to get to number two here in short order. But, uh, chick-fil-A, that's a hard one to beat , but uh, yeah, no, it's uh, one of the top performing franchises in the anti our country,

 

Speaker 0 (00:26:24) - Chick-fil-A. Those two crucial pickles on that chicken sandwich. You know, it's, it's really hard to, to compete with there. You need a really efficient car wash to outdo that as far as it is on the investment end and how that actually looks like for one that wants to come alongside you and participate. Before we talk about what the returns look like, talk a a bit about how that is looking for current investors that are already in this investment. Since we first discussed this last year,

 

Speaker 3 (00:26:52) - We launched this fund as a debt fund. We got into it fairly slowly. We were building a couple washes and we knew that it was gonna ramp up, but we had a lot of work to do on the front end. We were, we had lots that were under contract that we were working on permitting. So we started as a debt fund. We launched phase two as sort of a semi equity, I mean it was an equity fund but it, it sort of captain investor 1.75. You got all the depreciation. The depreciation was not, you didn't have to recapture the depreciation cuz you're dealing with a lot of equipment. In fact, car washes are very unique in that you can take bonus depreciation on the building as if it were equipment. Like you don't need cost sake studies, you don't need you just bonus depreciation the thing out like, you know, the entire building, like it was a piece of equipment right up front.

 

Speaker 3 (00:27:39) - First year, that's rare. Yeah. And then we sort of ran through that model and we have eight operational sites today. We have seven more coming outta the ground right now. We expect to be somewhere around 20, uh, fully operational by the end of the year. And here's the exciting part, here's the fun part. We're we're looking to build a hundred of these in five years. Wow. And so to really ramp up and take us, get us into phase three and phase two worked great. Investors got all the depreciation, they got all of the cash flow. I'm working free by the way. They got all of the cash flow until they get to their 1.75 and then they exit, then the GP partners start making money. But that model why it worked very good and it's gonna get us to about 30 ish car washes. We're ramping up.

 

Speaker 3 (00:28:33) - We wanna go under and we're retooling our model. Now that we've uh, got a little bit of experience under our belt, we see how our operations team is operating and see how these car washes are really taken off and really how our team has made these things perform. We want to go to a hundred and to get to a hundred, we're retooling the model. Our investors have spoken. They said, man, we really wanna be, you know, a little bit, kind of give some of that backside you talked about the Wall Street Journal article on Wall Street Journal came out and said that there's PE firms paying 18 to 20 x multiples on EBITDAs and it's just super aggressive. So our investors like to hear that, but they wanted a piece of the upsides. We listened to our investors, okay, we're rolling out an equity model.

 

Speaker 0 (00:29:19) - And just to back up to jump in. So Dave had been talking about the debt side about how previously this was a raise on the debt side and now in the future going forward, this is how you can get in on the equity side investment of car washes.

 

Speaker 3 (00:29:32) - It is an equity model and it's gonna allow the investors, it's gonna allow all of our investors to not only be a part of the backend, but there's gonna be a 10% preferred return. There's gonna be aggressive cash flow throughout the hold and the exit. Um, investors gonna be with us all the way through and be a part of that upside, be a part of the exit.

 

Speaker 0 (00:29:54) - Talk to us about any of the threats that might be out there, whether that's threats to just the overall model of car washes five, 10 or 20 years down the road, and then what the competition is like Tommy's expressed car wash versus other car washes. What are some of the threats

 

Speaker 3 (00:30:10) - We've seen, much like our investors have spoken and expressed their desires to be a part of the upside and we're getting ready to rule that out to 'em. The general public has given their opinion, uh, with their wallets. And so when you get to understand this model and, and how it works, and then you start paying attention to a lot of the other car washes out there and the look and appearance and how they work. And it takes longer and there's lines and you know, some of 'em are full service and you know, it's pretty inconsistent, but consumers have spoken and they want this product and Tommy's kind of the innovative leader in the car space. And so they're really all about just listening to the consumer and get them what they want. Consumers want a good quality wash for a fair price and they want to get it quickly and efficiently. And that's what we're delivering. So there's competition in the space. There's only one or two competitors of ours who we would say, okay, they are there so we're not building across the street. There's not really a need for us to be there if there's that competitor is there. But most of our competitors, if we were to put a Tommy's Express in a neighborhood, we would steal the show and we have what consumers want and they'll come to us.

 

Speaker 0 (00:31:30) - When I think about long-term use patterns, Dave, just anecdotally I think of my own lifespan, I only seem to notice more car washes in cities as time goes on per capita. Not fewer. In fact, growing up my dad used to wash his car by hand in or right next to the garage or old Subaru legacy station wagon. Sometimes I would help him out. Well, he doesn't wash it anymore. It's more efficient to go drive through a car wash. That almost seems to be a vestige of yester year where you would regularly wash your own car in your driveway.

 

Speaker 3 (00:32:02) - Well there's two things there. One is there's a lot more people live in an apartment buildings and, and less out in the country in suburbia. So the, even having the ability to wash your car in some places doesn't make sense. But there's another thing too. You know that by the time I started regularly using a car wash where I actually had to pay some organization to wash my car, I could have bought the car wash . Now, I mean you see it all the time. You got teenagers who's got a nice vehicle and they don't even think twice. They're going through and spending eight or 10 or 15 bucks to wash their car. And I was like, oh my goodness. Okay. But times are changing and it's becoming a standard thing to get your car wash, your car wash and forget the garden hose and the bucket and the soap,

 

Speaker 0 (00:32:43) - The carwash I use most regularly, the highest tier one now costs $18. That's where they use, you know, rain X on the windshield and everything else. But as far as when it comes to the investor perspective, this is one of those investments, Dave, where you recently spoke at the conference that people are lining up at the back of the room to want to learn more because they're so interested in this investment. I know oftentimes car washes have high cash flow and high tax efficiency for the investors. So tell us about how that's expected to look here On the equity side,

 

Speaker 3 (00:33:13) - You get a hundred percent bonus appreciation over five years. You get a big chunk of that in the first year because of the amount of development that we have in the fund, you're getting less than half of it the first year, around half of it, maybe just a little bit less than half of it the first year. So you get a big chunk of your depreciation in year one and then you get the rest of the depreciation and it's four years following that. It's a pretty aggressive on the depreciation side. But then on the cash flow side, 10% preferred returns. You've got multiples that are in the two and a half to three x in five to seven years, you're talking aggressive returns and you're talking aggressive, uh, bonus depreciation for tax impact,

 

Speaker 0 (00:33:57) - You need to be an accredited investor. And what's the minimum investment?

 

Speaker 3 (00:34:02) - So minimum investment is a hundred thousand dollars and you do need to be an accredited investor.

 

Speaker 0 (00:34:07) - Tell us about the expected hold time.

 

Speaker 3 (00:34:09) - We're modeling it five to seven years. So while a private equity firm and with Sam some pretty lucrative offers already, but we've seen, let me back up a second. So this industry is so fragmented that the biggest player in the room has accounts for about 5% of the global revenue. Wow. So that's how fragmented this space is. So there's real opportunity and institutions are desperately trying to get their foot in the door because they see that it's a recession resistant business. They see that it's a, it's got strong operating margin. The Wall Street Journal talked about that where, you know, just crazy operating margin. So they're desperately trying to get their foot in the door and get a foothold in the space and get a little traction in the space. They're not hardly any people who they can write a hundred million checks to. We're building a portfolio that somebody would be able to write a billion dollar check for in a couple years. And so when that happens, we feel like the more mature this space, the more mature this portfolio is, the more cream we can squeeze out for our investors. And so that's where we're going with it. We don't believe that we exit in two to three years, but it could happen. But we're modeling out for five to seven years

 

Speaker 0 (00:35:30) - In case it takes that long to Sure. Get returns on the conservative side, five to seven years. And yeah, I, I learned a little something there. Okay. The biggest player in the space only has about a 5% share. Very fractured, much like real estate itself is well day's, one of our G R E marketplace providers, you probably already know that. So if you wanna learn more, I'd encourage it and see what makes this business so lucrative. You could do that at gre marketplace.com/carwash. Dave, it's really been stimulating to think about some of these alternative real estate investments. Thanks so much for coming back onto the show.

 

Speaker 3 (00:36:07) - Thanks Rob me Keith. It was fun

 

Speaker 0 (00:36:15) - On the ATMs with 100 4K invested that has recently generated $2,262 per month, 2262. And they've never missed the monthly distribution or their proforma return target. And if you go invest quite a bit more than that amount, there is something new to announce. And that is the existence of financing with ATM investments that has the potential to amplify your return some more. So with ATMs, it's a strong cash on cash returns and the I R R along with the quick return of capital, that's what's making it so popular. They have been delivering them to this group for more than a decade now. Now the operator, Dave, he's really proud of what they're doing and that's why he wants to give the opportunity for you to get on the ground in person and see just what they're doing. In fact, in only 10 days, there's a car wash and self storage investor tour.

 

Speaker 0 (00:37:19) - Yes, it is a one day investor tour on May 18th in Columbia, South Carolina. And you are invited. You'll see a Tommy's Express carwash and Moore meet the team, ask questions about the business plan. There is no cost to attend. You can meet Dave there as well. You'll learn more about that and with hotel accommodations and everything else after you get the free investor report. At G R E Marketplace, we're talking about world class operators in the car wash space here. When you have multiple diverse income streams in your life, what you've done is you've made your income resilient. So to connect more and learn more and see proformas on adding an income stream to your life in the at m space, if that interests you, start@gremarketplace.com slash atm. For car washes, visit gre marketplace.com/wash. Until next week, I'm your host Keith Wein. Hold. Don't quit your daydream.

 

Speaker 5 (00:38:27) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L L C exclusively.

 

Speaker 6 (00:38:55) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Direct download: GREepisode448_.mp3
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Learn how to harvest equity without giving up your low, fixed-rate mortgage.

Today, I discuss: conventional loans for single-family rentals, DTI, refinancing, accessing equity, student loan debt, and down payment requirements for income properties with Ridge Lending Group President, Caeli Ridge.

Learn what’s better for a second mortgage—the pros and cons of a HELOC vs. Home Equity Loan.

You also get a mortgage market overview.

We discuss changes in cash-out refinance seasoning requirements. 

Caeli also describes where she believes mortgage rates are headed later this year.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/447

Ridge Lending Group:

www.RidgeLendingGroup.com

info@ridgelendinggroup.com

Join us for tomorrow’s free GRE Florida properties webinar:

www.GREwebinars.com

Ridge’s All-In-One Loan Simulator:

https://ridgelendinggroup.com/aio-simulator/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

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Speaker 0 (00:00:00) - Welcome to GRE! I'm your host Keith Weinhold. You can get a conventional loan for a single family rental with less than a 20% down payment. Learn why you might want to refinance today. Even though mortgage rates aren't as low as they were a couple years ago, how do you qualify for loans if you've already got student loan debt? All things mortgages and financing today on Get Rich Education,




Speaker 2 (00:00:29) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

 

Speaker 0 (00:00:52) - Welcome to GRE from K Patis North Carolina to Hattiesburg, Mississippi and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education, the voice of real estate investing since 2014. Before we get into a great education on all things mortgages today, there is still a little bit of time left for you to join us on tomorrow night's G R E Live event. You can join us from the comfort of your own home. This is for new build single family rentals, opt to four plexes in Jacksonville, Ocala, and elsewhere in Florida. Purchase prices are still below 300 K on the single families. Yes, still in the two hundreds in some cases. I don't know how long that can last. Yeah, these are the property types that are quickly vanishing. Our investment coach Naresh Stars in that event tomorrow, he finds you the good deals with the national providers that are actually giving incentives despite the fact that the product that you're buying is in really short supplies.

 

Speaker 0 (00:01:59) - You're gonna get a good, solid, fundamental education on what makes a durable income property market and a arrest in the Florida provider are going to share with us just for webinar attendees. Those even better than two and two incentives. Yes, for you, the incentives on the webinar are even better than that 2% of your purchase price paid do you in closing costs cash and 2% of free property management. It is going to be even better than that. That's gonna be rolled out tomorrow night, May 2nd at 8:30 PM Eastern, 5:30 PM Pacific. It is free to attend. You can ask questions live, get your questions answered and get access to the actual properties should you so choose. That is the final reminder. So if that's of any interest to you, be sure to sign up now@grewebinars.com. I'm coming to you from the Mojave Desert today here in metro Las Vegas.

 

Speaker 0 (00:03:04) - It's Henderson Nevada. To be technical next week I'll bring you the show from Phoenix, Arizona. And you know what? It's kind of funny. Sometimes you hear people refer to this general area of the nation this southwest and they say they are going to the desert if they were doing what I'm doing. Well this unrepentant geography nerd will clarify that it is the deserts plural. Yes, Las Vegas is in the Mojave Desert in Phoenix is in the Sonora Desert. There are differences in vegetation type and others that distinguish the two. And the most obvious difference perhaps is the presence of the big iconic Saguaro cactus down in the Sonora that you don't find up here in the more northerly Mojave and perhaps the Joshua tree is the more distinct plant type here in the Mojave. Yes, we're talking about two gigantic pieces of real estate here. Much of it is baron. Two disparate deserts with their own distinctive flora and fauna. As you're about to learn about financing real estate today, let's remember that there is a cash out refinance and then generally if you're performing a refinance without pulling cash out, that is known as a rate and term refinance. Let's get into it.

 

Speaker 0 (00:04:30) - Well hey, well how do you qualify for more mortgage loans at the lowest interest rate available, Americans have near record equity levels in their homes. What's the best way to access that equity yet keep your low mortgage rate in place? And what about your student loan debt and how that factors into you getting a mortgage or getting a refinance? We're answering all that today with a GRE regular guest and though it's her first appearance back on the show this year, it's the return of the company president that's created more financial freedom through real estate than any other lender in the entire nation, Ridge Lending Group. It's time for a big welcome back to Caeli Ridge.

 

Speaker 3 (00:05:08) - Keith Wein. Hold. Thank you. You flatter me sir. I appreciate it. Love being here with you and for your listeners.

 

Speaker 0 (00:05:14) - Well yes, the president is back and everyone loves this type of president because it's not about being a Democrat or Republican. So hail to the chief, great to have you here. And Jaylee mortgage rates, they have settled down a good bit from their recent highs now they peaked back in the fall of last year. So with that and some of the other things in mind, why don't you talk to us about the big picture first, sort of your mortgage market overview.

 

Speaker 3 (00:05:40) - Interest rates is always top of mind for everybody. I think they're doing pretty well. I do believe I've been sharing with our listeners and and my clients on a day-to-day. I do believe that rates will continue to kind of increase here and there. There's gonna be some ups and downs. Of course the Fed has been very clear with us. Jerome Powell is gonna continue to raise the Fed fund rate just for anybody that doesn't know the two between a mortgage rate and a Fed fund rate while connected, not the same thing. So when they raise that does not automatically mean that we see the increase on the the 30 year mortgage bonds. I think that that's gonna continue to happen, but I think the pace in which it happens or continues to happen is gonna be a lot less aggressive. So I think that's gonna bode well overall.

 

Speaker 3 (00:06:21) - For interest rates. I know everybody is very, very interested in in are they going up, are they going down, when are they going up, when are they going down? I think that we'll continue to see a little bit of upward movement. I think it's gonna be sometime next year that we start to see interest rates come back down in any meaningful way. And remember gang rates go up much, much faster than they come back down unfortunately. So I think we've got a little bit of way to go. But I'm always the one saying, Keith, you and I have talked about this, um, many, many times you must be doing the math and that the rate as a function of the return of the investment isn't the most important thing. So I'll leave it there for rates. Otherwise, I think that the industry is doing really, really well.

 

Speaker 3 (00:06:58) - One big announcement that we had this year was that Fannie and Freddie both have extended the seasoning period of time to where a cash out refinance when leverage was used to acquire is applicable. So now you have to wait 12 months to pull, to pull cash out of a property using the A R V that after repair value if you use leverage to acquire the property. Quick distinction because this has been confused. If you paid cash for the property, your source and season funds, that still falls under what's called the delayed cash out refi and no seasoning is required. It's only when leverage was used to acquire the property and then they're trying to use an after repair value to pull cash out in hand. Is that 12 month seasoning rate and term is different. So that doesn't apply either.

 

Speaker 0 (00:07:45) - Okay. So if you make a purchase and then say it less than 12 months down the road, you want to do a refi but not pull cash out, is that still all right?

 

Speaker 3 (00:07:55) - That's absolutely fine. No seasoning is required and we can use the arv. It's only when you want cash in your hand that that 12 months is is applicable.

 

Speaker 0 (00:08:04) - Got it. Okay. That's really helpful to know. Just big picture before we winnow down, are there any other big substantial mortgage stories out there that some should know about? Um, it was only a couple weeks ago, there was a lot of misinformation going around on TikTok and elsewhere about 40 year loans from F H A without people understanding that's just for loan modifications and really other stories like that. Any other big picture things where you can help us see what's happening?

 

Speaker 3 (00:08:30) - It seems to be par for for the course? I have not. There's nothing that's come across my desk that I would say was newsworthy or noteworthy to share. I think we've got more to unpack here than any of that.

 

Speaker 0 (00:08:40) - Yeah and things sure are picking up here around G R e. People wanna buy more properties this year. It really slowed down toward the end of last year, right about when the mortgage rates were at their peak. So when we talk about getting loans, we think about leverage. Leverage is created with debt. Has anything changed with the down payment requirements for an income property? And we're largely here in today's discussion talking about one to four unit income properties. Properties that you don't live in yourself,

 

Speaker 3 (00:09:08) - Correct down payments have have remained the same. There isn't been anything that has changed there. Just to reiterate, for those that may not be aware on a single family residence, conventionally 85% loan to value is applicable. You can leverage all the way up to 85, you're putting 15% down. Keep in mind everybody that that will have pmi, private mortgage insurance attached to it, I would have you look at them side by side. The PMI factors actually pretty low and depending on the loan size it may only be 20, 30 bucks a month. So if you're able to leverage extra, it may make sense. You're gonna have to look at the numbers so that single family and then two to four unit on a purchase transaction different on a refinance transaction but purchase is 25% down or 75% leverage is required for those duplex, triplex, fourplexes.

 

Speaker 0 (00:09:54) - Okay, so as little as 15% down on a rental single family home. So you're getting up to six to one, seven to one leverage in that case. Sheila, do you find very many people doing that or would they rather pay the 20% down for a rental single family home and not have the pmi?

 

Speaker 3 (00:10:10) - I find that right now I think that it's less common than maybe it was because interest rates are up from where they were, uh, a year, year and a half ago. So more often than not we see the 20% down. But I still think it's worth looking at. I mean you're never gonna know unless you run the numbers right side by side.

 

Speaker 0 (00:10:25) - Okay, so we're thinking about how much cash we have to have put aside for a down payment in closing costs. And one thing that we need to do in order to qualify for that loan in the first place of course is some people get hung up on the dti, their debt to income ratio is too high to qualify for property and chaley. Over the past few months I've had a few listeners write in with questions and I thought, well I'll say that question until we have chale on again. And one of them really has to do with student loan debt. Student loan debt often contributes to one having too high of a debt to income ratio so that they didn't have to repay their loan. I know that Biden said that you wouldn't have to pay back student loan debt for a while, but can you talk to us specifically about student loan debt with D T I?

 

Speaker 3 (00:11:06) - There's gonna be a few pieces to share with everybody depending on whether we're talking about Fannie Mae or Freddie Mac and we won't know who we're gonna end up selling to after the loan funds. And they have slightly different guidelines between the two of them. Similar. But there are some differences as it relates to student loan debt regardless of whether you're in deferment or you've been told that you don't have to repay. If it shows up on an individual's credit report, the calculation will be as follows. They're going to take the outstanding balance times 1%, that's Fannie Mae's rule or the outstanding balance times half a percent. That's Freddie Mac rule and that will be the payment that we include in the debt to income ratio. Uh, I'll mention that the all-in one, which is a very popular loan right now. First Lean HeLOCK, maybe we'll talk about that here today. They will defer to Fannie rules so it'll be 1% of the outstanding debt pulling on the credit report even if it shows a zero payment listed. Now there is one caveat, if the individual has a letter, this happened maybe in the last six months and I'm trying to think about, there was a title, it's pretty rare. But if they're able to gain access to documentation that specifies that they are not going to have to repay that debt and we can take that documentation, then we can zero out that payment in the D T I.

 

Speaker 0 (00:12:22) - Alright, there's some strategies for how you can approach D T I with respect to any student loan debt that you have and what is the maximum D T I that a borrower can have?

 

Speaker 3 (00:12:34) - Conventionally and non qm, you're gonna get to 50% debt to income ratio for the all-in-one since we just touched on it, 43% is the absolute max.

 

Speaker 0 (00:12:43) - Okay. And on prior shows, Chile and I have discussed specifically with examples just how that D T I is calculated. If you're wondering, you can hear that in some past episodes Chile one one goes ahead and they continue to add income properties to their portfolio. Often I recommend that one does that with high leverage but not over leverage. How does one keep their D T I ratio down over time as they continue to add properties so that they can qualify for more properties in the future? Is there a good strategy for that?

 

Speaker 3 (00:13:14) - There is, and it's such a good question because as investors, right, our qualification primers are not static. They're going to change over time as we buy and sell and refinance. So it's very, very important, especially with the debt to income ratio that we're keeping an eye on it. And there's a few ways in which you can kind of strategize or optimize that D T I. The first is going to be the Schedule E, okay? The Schedule E is where all the rental properties are going to live once you've filed the annual tax return. The easiest way for the time that we have here today, Keith, is gonna be to tell the listeners, send us your draft returns. So on an ongoing basis we tell our active clients do not file federal tax returns until you send us the draft. We're going to run that draft through the pre-formulated calculation that comes straight from Fannie, Freddie and then we're gonna provide you with some feedback, one of which may be Mr.

 

Speaker 3 (00:14:03) - Jones, you forgot to include your insurance as a deduction and that's actually an add back that's gonna be to your disadvantage. Make sure that you put that in there. You didn't claim the full number of days of income for the property, you forgot to put depreciation on there. That's also an add back. There's a whole slew of things that we can look at and look for and give the individual that feedback so that they are filing at that optimal way while maintaining what the maximized tax credits are, right? There's a nice balance there. The more aggressive you are with the tax deductions, the more it can impact the D T I. So we wanna have eyes on that and work closely with the client and or their CPA is a very common part of what we do. So schedule E a little more complicated, that would be one of the the ways in which we wanna maximize debt to income ratio.

 

Speaker 3 (00:14:45) - Obviously not obtaining new debt, new consumer debt is is not gonna be to our advantage, right? We don't want more liability than we have income. Another thing is, is that when we talk about credit and a lot of clients that we talk to, they pay their credit cards off monthly, right? Maybe they charge up five grand, eight grand, 10 grand, they get a miles or whatever it is. It's very important to communicate with us to find out when in the month we wanna strategically pull the credit. Because what will happen is is that the day in which we take that snapshot, if there's a minimum payment due, a balance with a minimum payment, that minimum payment will be used in the individual's debt to income ratio regardless of whether they're gonna pay it off at the end of the month. That doesn't matter to us.

 

Speaker 3 (00:15:26) - There's a payment here, we gotta hit you for it. So strategizing on the day in which we wanna run credit might be another helpful way for D T I. And then finally, and there's probably a few other things, but I think high use would be, I don't like the shorter term amortizations. I think this is something else you and I have talked about many times, Keith, where people wanna pay off quicker, which is great if that's really what they wanna do, that's perfectly fine. I'm not sure that that would be my strategy, but whatever. Don't get yourself into a 15 year fixed mortgage because it's only gonna jack that payment. It's gonna really increase that payment. It's ultimately going to, for long-term optimization, hurt your D T I. You can do the same thing with a 30 year mortgage and not pay extra interest by accelerating the debt if that's what you chose. So those would be the the few things I'd comment on

 

Speaker 0 (00:16:10) - 100%. And for you the listener and viewer right now with what you just heard from chaley, you can begin to understand the value of working with a lender that works specific with income property investors rather than those lenders that are more geared toward primary residents, borrowers. Nothing wrong with them but they're in their lane during their thing. And you can understand why Chaley over there at Ridge is really a specialist to help you qualifying for as many income property loans as you possibly can and optimizing those loans as well. Chaley, when we talk about interest rates, oftentimes it's of interest to people to look at what are refinance interest rates like versus new purchase interest rates.

 

Speaker 3 (00:16:54) - I would say on average there's a variety of of variables that dictate what the rate is gonna be. Okay? I talk about this a lot. They're called LPAs loan level price adjustments. And a loan level price adjustment is a positive or negative number that attaches to the characteristic of the loan transaction. So purchase or refi, hash out refi rate and term refi credit score has its own L L P A loan to value, loan size occupancy. All of these come with a positive or negative number attached to them as it relates to purchase versus refinance. Generally speaking, let's take a rate and term refi where you're not getting cash out, you're just maybe taking an arm and making it affix. You're taking a higher rate and making it lower, whatever, maybe about a half a point difference. So if a purchase was at six and a half, the re rate and term refinance might be at 6 75 or 7%, cash out's gonna be a little bit different. I would add a quarter point to that and then if, if it's a two to four unit, add another quarter point on top of that. So those variables do make a difference.

 

Speaker 0 (00:17:53) - And maybe the listener might think, well why are you talking about refinancing at a time like this? If I wanted to refinance, I would've been more likely to do that about two years ago when mortgage rates read historic lows. But today Americans are sitting on near record equity, oftentimes it might be tied up in a low mortgage rate loan with that equity chaley. I talked to some people out there just lay people, people that aren't even investors and they have a big equity position with a really low mortgage interest rate loan and they seem to think that to refinance it, they would need to go ahead and refinance their entire mortgage and lose that maybe three or 4% loan, but they don't necessarily have to if they can do a second mortgage. So I guess really what I'm getting at and the question chaley is what is the best way to do a rate and term refi versus a cash out refi? And I know there are a lot of scenarios there.

 

Speaker 3 (00:18:44) - Yeah, lots of scenarios. So to your point, it is not necessary to give up a very low fixed rate mortgage if you want to harvest some of that equity. The ways in which, and I'm gonna have a plug after this for the all in one, but I'll get to that cuz I'm just such a big fan. But the ways in which you can do that both for your primary residents, a second home and an investment will be through a second lien mortgage, whether it be a heloc, home equity line of credit or a he loan, the HE loan is applicable for the rental properties. I do not believe, I hope somebody can give me alternative information, but I do not believe you're able to find second lean HELOCs for rentals today. I feel like those have really dried up if they're out there, the ones that I know of that used to do them are not doing them anymore.

 

Speaker 3 (00:19:27) - If they're out there and anyone's listening to this, somebody please let me know. Keylock for rental probably not an option. He loan for rental absolutely is an option. And this is guys a fixed rate mortgage in second lean position, just like your 30 year fixed first, this will be a 30 year fixed second interest rates are gonna be higher. And since we were talking about interest rates, I'm gonna say that they're probably anywhere from 10 to 13%, but they're smaller amounts. C L T V combined loan to value for a he loan on a rental would be 85% is what we have access to. So as quick math guys, if you have a value of a home of a hundred thousand and you owe on your first mortgage 50,000, the CLTV would be 85% of a hundred. So 85,000 minus the 50001st, which stays in place, you'd have access to about 35,000 in that example. And that would be access to rental properties that you just do not want to mess with that first lien mortgage different for owner-occupied. And I'll take your queue on when you want me to get into that.

 

Speaker 0 (00:20:26) - Yeah. Okay. So we are just talking about income property second mortgages there. Tell us about primary residences.

 

Speaker 3 (00:20:32) - So primary and secondary should be in the same bucket. You can leverage just 90% C L T B, same math as before but up to 90% And these are gonna be, you have HeLOCK and he loan. I'm gonna assume most people are gonna go for the HeLOCK, right? The open-ended revolving is definitely more attractive than a closed-ended fixed I believe in a second lien. And you know Prime is at eight I believe right now. Gosh, I should have checked before we go on, but I think Prime is sitting, it's an index. An indices like the Fed fund rate, that's an index two prime is at about eight. And then depending on the characteristics, those l LPAs that I mentioned, loan level price adjustments are gonna come up with a margin. Maybe it's 2% over prime or one or whatever it is depending on those things. So I would anticipate a HELOC and second lie position on a primary residence will be anywhere from eight to maybe 10%. More often than not is what you should expect. Interest only open-ended.

 

Speaker 0 (00:21:24) - And on the second mortgages, whether that takes the form of a HELOC or a HE loan, how long is the initial fixed rate period? Typically

 

Speaker 3 (00:21:32) - There are hybrids where you can fix in for a year or three years, et cetera. Those are available. I'm not sure that you wanna do that in a high rate environment. You probably wanna avoid any fixed rate right now if you had the option to get into it a couple of years ago, you're looking really good right now because you fixed in at at some ridiculously low rate for a period of two, three, maybe five years. I would tell people listening, fixing in on a HELOC right now is not gonna be your advantage when we believe that rates are gonna start coming down over the next year, et cetera. But for the HE loan, it's fixed for 30 years. Just like a 30 year fixed first lie mortgage, it's fixed, you have it four 30 years, it's amortized, it's closed ended. You're making your regular payments until you pay it off after the 30 year period of time.

 

Speaker 0 (00:22:13) - We're talking about how you can more efficiently borrow in this environment where people and investors have high equity positions and we have hopefully come off the mortgage rate highs from late last year. You're listening to Get Risk Education. Our guest is Ridge Lending Group President Chaley Ridge Morton, we come back. I'm your host Keith White Hole with JWB Real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor. Since 2013, JWB is ready to help your money make money, and to make it easy for everyday investors, get started at jw b real estate.com/g rre. That's JWB real estate.com/g R E GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 40 2056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally. They'll even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.

 

Speaker 4 (00:23:45) - This is Rich Dad sales advisor, Blair Singer, listen to Get Rich Education with Keith Wine Hold and above all don't quit your daydream.

 

Speaker 1 (00:24:03) - Welcome

 

Speaker 0 (00:24:04) - Back to Get Rich Education. We're learning about how to be a savvy borrower with President of Ridge Lending Group, Chaley Ridge and Chaley. One product you have there that's really flexible and has helped out so many people and helped save borrowers tens of thousands of dollars in interest or more is what's called your all in one loan. Tell us about it.

 

Speaker 3 (00:24:25) - This is a first Lean HeLOCK everyone. I'm such a big fan, it's not for everybody, but for the right individual, I don't know that there is a loan product to rival it. It's got all the flexibility in the world and as Keith said, the mechanics of this and the concept of this arbitrage, it's called Velocity Banking, infinity Banking. If anybody's familiar with those terms, that's what this does. It allows you all the open flexibility to sort of become your own bank where you have this line of credit. It is a first lien line of credit. So let's take a a step back and talk about those low interest rates that everybody has secured over the last couple of years. We were very lucky to have to two and a half, 3% interest rates. And I'm constantly having this conversation and I'm really trying hard to dispel the psychology of you can never do better than that when it's just not the truth.

 

Speaker 3 (00:25:14) - And mathematically you will be able to figure this out. I'm gonna plug our website here. There is an interactive simulator that will take you to the all-in-one simulator where you can compare your existing fixed first lien mortgage to the All in one and and the input data is very, very simple. No vials of blood here guys, but if the input is accurate, the results page will tell you very clearly if the all-in one will save interest and Trump over the 30 year fixed at two and a half or whatever it is, or if you're fixed rate mortgage is more to your advantage, it will be very clear there'll be no mistaking it from that. I think further conversations will be necessary for those that see some real value in the All In One. I won't go too far down that rabbit hole, it's a little bit more complicated than we probably have time for here. But the first Lean All In one is such a fantastic tool. I really encourage your listeners to go ahead and and check out at the very least the simulator and see how it applies to you.

 

Speaker 0 (00:26:08) - The all-in one loan operates much like a first lien heloc. I don't think we have time to describe it all. Like you said, you do have the simulator there on your website@ridgelendinggroup.com where one could see if their existing mortgage it compares favorably or unfavorably to the all-in one loan. But as we know with the first lien heloc, therefore one feature of the All in one loan is the option, not obligation, but option of making interest-only payments to keep your payment down.

 

Speaker 3 (00:26:34) - Yeah, this is where it gets a little bit tricky for some people when we start talking about payments FirstLine Open-ended HeLOCK, where it's called the All In one because you're replacing not only your mortgage with this revolving open-ended heloc, but also a checking and savings account and combining those two elements whereby simple depository income is being used at dollar for dollar driving down principle balance to save in daily interest accrual. I'm gonna give a quick example and then we can move on and, and I encourage everybody to do the simulator email us, let's talk through it. We'll take you by the hand. It's the learning curve's a little intense, it was even for me. But here's an example of velocity of money and kind of how the all-in-one works. So take a 30 year fixed mortgage and a 15 year fixed mortgage. Both of them started at $400,000 each.

 

Speaker 3 (00:27:22) - You lock the 30 year at 4% and the 15 year was locked at 7%. Without exception, everybody runs to the 30 year at 4%. I would've done the same if I didn't know the math when in fact the reality is is that you will pay $40,000 more on that 4% 30 year than you would on the 7% 15 year because the amount of time that you're paying on that mortgage is greatly reduced. And that's, I guess a, an easy concept. It's a, the first step of trying to define this for most people, they can kind of see it in those terms because they understand the amortized mortgage. It's the amount of time that you are paying interest. So if you're utilizing your depository checking savings and your mortgage and all of that money is going in there month after month before it's going back out the door for whatever your living expenses are. And then whatever's left over is, is stays in there. 24 7 access. Nothing changes about your current banking techniques or or strategies. It's all the same. But now you're in control. You've become your own bank. It's amazing. I can't say enough about it

 

Speaker 0 (00:28:24) - Talking about the all in one loan there. You sure can learn more from Ridge on that. Jaylee, is there really like anything else that I guess is noteworthy specifically in helping a borrower qualify for income property loans, maybe a common problem or a borrower hurdle that you see in there at Ridge?

 

Speaker 3 (00:28:43) - I would just boil it down to education. Just lack of information. It's not dear Google stuff. The guidelines and what's available. All of these things are changing on a consistent basis that real-time information's not available to them. So if I had to pick one thing, I would just say education. And I'm very proud to say that we really focus on that. If there's a value add about Ridge, I think there's quite a few. But the one that I think sticks out for most people is the education that we provide to our investors and shining a light and giving them a look under the hood and what they need to know, teaching 'em how to optimize their qualifications and all of the stuff that we've been talking about here today.

 

Speaker 0 (00:29:19) - Well that's a good point because when we talk about real estate investing, you're really, they're in one of the more dynamic and fast-changing parts of the industry as opposed to something like home construction where a lot of the methods haven't changed for 50 or more years, if you will. So yeah, it's really staying up and staying informed on that and engaging with a lot of the educational resources increasingly that Ridge has for you to help you stay on top of that as an income property bar yourself. And Shaley can tell us a bit more about that shortly. But why don't you tell us about all of the loan types, the mortgage products if you will, that you offer in there.

 

Speaker 3 (00:29:52) - That's another great value add about us. We have a very diverse menu, if you will, of loan products that don't just start and stop with the conventional. We're not a one size fits all. So we've got the Fannie Freddy's, we talk about that a lot. Our all in one, my favorite. We have a very diverse non QM product line and for those that aren't familiar with that term, QM stands for Qualified Mortgage. Fannie Mae and Freddie Mac are the, uh, epitome the definition of what a qualified mortgage is. There's a whole definition we don't need to go into today, but, so everything outside of that QM is now non qm. And within non qm, like I said, extremely diverse. There's things called the debt service coverage ratio product where we're not showing borrower income, we're just looking at the properties income offset by the new mortgage payment. There's bank statement products. If you can't show tax returns, we're gonna take deposits and average them asset depletion. If you've got large self-directed ira, we can come up with an income calculation for that. The list goes on. We've got commercial products for commercial properties, but also for residential properties. Cross collateralization. It's pretty diverse. We have a lot for everybody.

 

Speaker 0 (00:30:54) - When you excel in there, you've been such industry leaders at originating income property loans for investors were proportion of your businesses income property loans and what proportion is primary residence loans?

 

Speaker 3 (00:31:06) - A lot of people don't realize we can do both and we do both very well. But I would say that it's probably 70 30 not owner-occupied. To owner-occupied. A large part of what we do is the investor loans. But most of our investor clients come to us for their primary needs too because we already have their life on file and, and can get that done very competitively

 

Speaker 0 (00:31:24) - Too. , right? And you keep growing. You're in almost all 50 states now.

 

Speaker 3 (00:31:27) - I know. Can you believe it? We're in 47 states. We're not in North Dakota, New York, or Vermont, otherwise we're everywhere.

 

Speaker 0 (00:31:34) - Letter audience know how they can learn about your resources.

 

Speaker 3 (00:31:37) - There's a couple ways to find us our website, ridge lending group.com. They can email us, info ridge linen group.com. Our toll free is 8 5 5 74 Ridge 8 5 5 7 4 7 4 3 4 3. And while you're on our website gang, uh, check us out on our community. I have a live event every Tuesday, one 30 Pacific, uh, four 30 Eastern. Uh, lots of good information register and it's free. Lots of good information and, and education like we've been talking about here. Hope to see you.

 

Speaker 0 (00:32:05) - Oh, it's been a terrific and crucial mortgage market update. Chaley Ridge, thanks so much for coming back into the

 

Speaker 3 (00:32:11) - Show. Thank you. Appreciate it.

 

Speaker 0 (00:32:18) - Oh yeah, lots of good concise information there from Chaley. It's a type of content that can have you hitting the rewind button on your pod catcher at times. All right, so we learned that in a lot of scenarios there. Second, mortgages come with rather high interest rates that is prohibitive. But then on the other side, it's encouraging to learn, learn that on primary residences, for example, you can get up to 90% loaned value. That means you only need to keep 10% equity in your home. And as far as that all in one loan simulator, we'll put a link directly to that in the show notes for you. But like Chaley said, you might wanna reach out to them@ridgegroup.com and then they can help walk you through it. Thank you to Caeli for the generous contribution to your learning today. Until next week, I'm your host, Keith Weinhold. Don't quit your daydream.

 

Speaker 5 (00:33:15) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests on their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L l C exclusively.

 

Speaker 6 (00:33:43) - The preceding program was brought to you by your home for Wealth building. Get rich education.com.

Direct download: GREepisode447_.mp3
Category:general -- posted at: 4:00am EDT

Grandpa told me to save money and buy a fixer-upper. What about paying off my mortgage ASAP?

Learn why I rejected it all.

Changing attitudes towards debt and savings began with high inflation in the 1970s. 

I compare global home prices and their changes since 2010. 

Projects for $300K starter homes are going extinct in America.

Keith Weinhold and Naresh Vissa describe the upcoming webinar for new-build properties in Florida—single-family homes up to fourplexes. 

It will offer incentives that are even better than the 2% closing cost cash and two years of free property management.

Join next week’s Florida properties live event at: GREwebinars.com

Resources mentioned:

Show Notes:

www.GetRichEducation.com/446

Sign up for our Florida webinar next week:

www.GREwebinars.com

World Housing Prices Since 2010:

https://www.visualcapitalist.com/cp/mapped-global-housing-prices-since-2010/

$300K Starter Homes Going Extinct:

https://finance-yahoo-com.cdn.ampproject.org/c/s/finance.yahoo.com/amphtml/news/300-000-starter-home-going-151338810.html

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:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

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GREmarketplace.com

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**Speaker 1** (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold, learn why I rejected my grandpa's advice about debt and real estate. Global home prices have surged not just since 2020, but really for the last decade plus. How does America compare to the world there? Then the real estate market heats up in Florida. All today on Get Rich Education,




**Speaker 2** (00:00:28) - You are listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

 

**Speaker 1** (00:00:51) - Hey, welcome to GRE from England's White Cliffs of Dover to Dover, Delaware, and across 188 nations worldwide. I'm Keith Wein. Hold. This is Get Rich Education. The fact that you want to get lots of good real estate debt, even now that real estate interest rates are off their all time lows from a couple years ago and really most all interest rates. You know, I think to the lay person, it is one of those things that is easy to understand and yet hard to accept to get more debt. Since Americans have near record equity levels. Now, not enough people even ask where that equity came from. I mean, look, you probably don't have a big equity chunk in your home because you paid it down. You have fat equity in your home because it increased in value. Yeah, that's leverage, which was brought into existence by debt. Now lay people can understand that, but yet it's hard to accept that truth.

 

**Speaker 3** (00:01:59) - What you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response, were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points. And may God have mercy on your soul.

 

**Speaker 1** (00:02:26) - <laugh>. Yeah, yeah, yeah. That's from an old school movie, Billy Madison from 1995. But did you ever get a reaction or a look like that when you shared abundantly minded G R E principles with them? <laugh>, debt free doesn't make sense. The wealthiest people have the most debt. The wealthiest and most powerful nation in the world has the most debt. But some people will still clinging to old ways of thinking. They'll rationalize that debt is bad now because we'll say interest rates aren't as low as they used to be. All right, true. Well, also on the flip side, debt is better when inflation is high because it debases that debt. Inflation and interest rates tend to move in lockstep. So therefore, weather interest rates are high or low. That line of thinking cancels out. And of course, 10 is keep debasing your debt by paying down your principle for you no matter how inflation and interest rates are moving.

 

**Speaker 1** (00:03:27) - And this all plays into how I was taught to think about money myself growing up, including the influence of my own grandfather. And I would go on to reject my grandpa's advice as a kid. Grandpa told me to save money. You certainly heard that growing up when I was about 20, I was visiting my grandparents on college break. And I still remember when grandpa told me that when it's time for me to buy my first house, I should buy a fixer upper. And though he never told me this next thing, he probably would've encouraged me to pay off your mortgage fast. I bet he would've said that one. Well, he meant well. And though I didn't deliberately spur him, I have gone on to disregard all of my late grandpa's financial guidance. He was a great guy. Grandpa served in a war. He and grandma raised my mom and uncle in a small, simple farmhouse on a 13 acre farm in rural Berks County, Pennsylvania.

 

**Speaker 1** (00:04:31) - And besides raising livestock and growing crops, he was an electrician by trade. He was an even tempered guy with a wiry frame. And grandpa taught me how to fish for bass in their small farm pond, all with his usual thin smile. And he had a wooden trademark kind of toothpick, pursed between his lips a lot of times. But see, grandpa was born and raised in a pre 1971 world. His concept of money was shaped before Nixon deg the dollar from the gold standard. And as we know, inflation ran rampant after Nixon D pegged the dollar from gold. And then in the 1980s, the Bureau of Labor Statistics, they began to sharply manipulate the way that the consumer price index that had line inflation figure is calculated. They used waiting tricks and other tricks to make the soaring inflation figure appear smaller than reality. Well, I was born and raised in a post 1971 world, so rather than focus on saving money, I want to get out of dollars before they're debased by inflation.

 

**Speaker 1** (00:05:42) - I never bought a fixer upper home though I truly admire grandpa for it. I didn't have the D iy, an electrical skillset that he did that just didn't come naturally to me. And now admittedly, and at its worst, maybe you can say that I'm part of the reason that Americans are less resourceful, or rather, perhaps American life is better. Or maybe it's that with progress, we're all specialists. Now I'd rather pay more for a home that's already new or renovated This way I spend my time, that zero sum game resource of time. I can spend that on my best and highest use and not texturing drywall and not hanging cabinets and not laying tile. I borrow dollars, not save them on rentals, both tenants and inflation payback the debt. So inflation flips dollars upside down, and grandpa might not believe how iconoclastic I sound. Now, the heresy today, I borrow invest and own assets that create residual cash flow.

 

**Speaker 1** (00:06:53) - And I would even spend dollars in some cases before they're debased. And along the way, I provide contractors and service providers with work. I employ an ongoing property manager and I provide families with good housing. I doubt the grandpa knew about how debt compounds the power of financial leverage. There's something good to be said for hard work, you know? And my grandfather showed me that on the farm, maintaining the tractor, loading the coal bin, harvesting crops and feeding the chickens. I mean, dude was amazing. He was like the showy otani of skillset diversification. But the world changed over the long term. Today's abundance mindset beats grandpa's grind. I love him for wanting the best for me. Grandpa never wavered on that. Ultimately, really, he equipped me to learn what's best for me and what's best for others. And I know I'm preaching to the choir here because our Instagram stories poll about paid off properties.

 

**Speaker 1** (00:07:58) - It asked you this question, which one do you prefer to pay off your home A S A P, or to leverage up and don't pay it off? Okay? How do you think that result went? Well, the percent that said pay off your home ASAP P was only 16. And those that said leverage up and don't pay it off is 84%. Yeah, you get it. 84% would rather leverage up and keep borrowing against it rather than pay it off your own home is some of the best debt you can get low rates, fixed rates along payback period, and you can legally kind of reneg and go get a lower rate when they fall as well. And mortgage terms are not quite as good on your rental properties, but they are still advantageous when you go compare that. And you know, really another way to think about it is, if you've got a 500 K home, why would you tie up 500 K in your home?

 

**Speaker 1** (00:09:05) - You could perhaps have just 100 K tied up in that home or in that rental property. Now, I've talked to you before about how many advanced world economies, foreign nations, they have house prices that vastly exceed prices in the United States. Canada's home prices are almost fully doubled that of us home prices right now. Well, I've got some great stats here. They are sourced by the bank for international settlements on not the international house prices this time, but how those prices have changed since 2010. Okay? So what we're looking at here is 2010 all the way up through Q2 of last year. So 2010 all the way up to the middle of last year. And these are all inflation adjusted. So we're talking about a change in real prices. US property was up 63% in that time, basically about the last 12 years. But the United States is not one of the top 10 countries for home price growth over that period.

 

**Speaker 1** (00:10:10) - And here those countries are number one for growth is Iceland at 103%. Second is Estonia at 97%. Third for world home price growth is New Zealand at 97% as well. Chill at 95% Turkey, 91% Canada up 90%, the top 10 for home price growth are rounded out by Luxembourg, Hong Kong, Hungary, and Israel. They're all between 80 and 85% inflation adjusted price growth over those about 12 years. So they're all greater than the United States, which again was up just 63% over that long period. That makes American home value seem somewhat cheaper when you think of it through that perspective. America is the envy of the real estate world. It's not just our rule of law and high property ownership rights and strong diverse economy. It's that it's one of the few places in the world where you can lever up this much and still get cash flow and at these terrifically advantaged debt term terms.

 

**Speaker 1** (00:11:19) - And on the flip side, now we look at the worst nations for price appreciation over the last 12 years. It is a story of price contraction. Prices have dropped in these nations. Okay, so these are the worst five. And let's see if you can guess at what all five of these have in common. Those five worst are Spain, Romania, Italy, Greece and Russia. Russia being the worst at minus 33% inflation adjusted house prices. And yeah, do you know what all five of these nations have in common? All five are losing population and losing the real estate prices with them. All right, well what about the United States? How does our population growth look for the future? What we are just about surpassing the one third of a billion people mark. Now we'll have 336 million people by the end of this year. And over the next 30 years, we're expected to have a population increase from 336 million this year up to 373 million Zen 30 years from now.

 

**Speaker 1** (00:12:34) - And the proportion from immigration is expected to increase while the proportion from the birth rate wanes. And of course, this contributes to the growing renter society in America because people have a harder time affording the entry level home. And you know, really the entry level home threshold that is now largely considered to be right about $300,000. Yeah, that's about two thirds of the value of today's median priced home and housing market research firms Zda. They tracked home prices and home projects across the country and they found, as you might expect, that the share of new projects for homes under $3,000 is declining rapidly all across the country. From Texas to California to Colorado to Ohio, they are vanishing everywhere. 300 K homes aren't just being diminished in creation, they're just completely gone from a lot of markets. Now this share of projects under 300 K are just completely non-existent.

 

**Speaker 1** (00:13:46) - Yeah. Now coming in at 0% of the market for Riverside and San Bernardino, California. Now of course coastal California, new 300 K homes, they are long gone. But Riverside and San Bernardino, they're about 50 miles inland. They're less expensive markets. Those properties are gone there in Sacramento, they are gone in Denver, 300 k properties are gone. So the swath of non-existent new build 300 k single family homes is growing and increasingly just nowhere to be found. But we have found a place where these properties do still exist in. It's in an American in migration. Hotbed straight ahead, listen to our in-house chat about this and the overall warming temperature of the real estate market and a cool upcoming Jerry event to tell you about where I'd love to see you there. I'm Keith Reinhold. This is G R e with jwb Real Estate Capital. Jacksonville Real Estate has outperformed the stock market by 44% over the last 20 years. It's proven to be a more stable asset, especially during recessions. Their vertically integrated strategy has led to 79% more home price appreciation compared to the average Jacksonville investor since 2013. J W B is ready to help your money make money, and to make it easy for everyday investors, get started@jwbrealestate.com slash gre. That's jwb real estate.com/gre.

 

**Speaker 1** (00:15:23) - GRE listeners can't stop talking about their service from Ridge Lending Group and MLS 4 2 0 56. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plexes. So start your pre-qualification and you can chat with President Chaley Ridge personally. They'll even deliver your custom plan for growing your real estate portfolio. start@ridgelendinggroup.com.

 

**Speaker 4** (00:15:56) - This is Rich Dad advisor, Ken McElroy. Listen to Get Rich Education with Keith Wine Hold and don't quit your daydream.

 

**Speaker 1** (00:16:14) - Hey, well I'd like to welcome in GRE's in-house investment coach in Naresh. Now maybe you've never bought a property out of state before and for almost a year and a half, he has personally one-on-one been helping you with that and with your overall investment strategy. And then he gets you matched up with the right financing and direction in actual property addresses through G rre marketplace. And he does that for you free. Hey Naresh, welcome back outta the show.

 

**Speaker 6** (00:16:41) - Hey, thanks Keith. It's been a while, but looking forward to talking about this great real estate market.

 

**Speaker 1** (00:16:46) - You are often dealing directly with the providers and you also know what buyers are looking for too, our audience. So just talk to us about the overall state of the income property market today.

 

**Speaker 6** (00:16:56) - Yeah, well I want to go back a few months and talk about how the market was a few months ago and how it is today. Because I think you can really talk about how things are going, but when it's compared to something else. So if we go back a few months to let's say November, 2022, so this was pretty recent, we're talking about five months ago or so. Yes. The activity in the real estate buying process, just real estate in general building the activity was slim. There were very few people contacting me. There were, if you look at the publicly listed data, there was definitely a slowdown. If people were to look at their own properties and look at a chart of their property values, they'll see that there was uh, a plummeting of asset values. And that was November, 2022. And what's happened since then, because the Federal Reserve, as you've talked about, has slowly hiked up interest rates and interest rates have gone up, mortgage rates have gone up.

 

**Speaker 6** (00:17:59) - What happened is sellers, agents, wholesalers, brokers, builders, they didn't wanna see a crash. And what they did was they started honing up some of their own capital to incentivize buyers to make up for that higher interest rate. So now we fast forward from November where there was no activity. I mean literally we had zero activity at G R E, not even a single inquiry on a property. So we've gone from that to providers providing incentives like, Hey, the price is negotiable. This is just sticker price. Let's negotiate like we're at a car dealership to free property management for one year or even two years, or free home insurance for one year or two years or 2% closing cost credits or X amount of X thousand dollars off closing costs. The incentives go on and on and on. These were not available in 2022 because we saw a super hot real estate market with a ton of buyers all of a sudden turn into a dead real estate with no buyers.

 

**Speaker 6** (00:19:11) - So people who are concerned with the state of the real estate market right now, they might say, oh, you know, the interest rates are so high, these incentives cut down on that interest rate. So your lender may quote you for a 25% down payment. And that's the other thing, because of the market we're in, 25% is the best you're gonna get paying no points. If you pay 20% down, now you're gonna have to pay points to buy down that rate and, and those points don't go towards your equity, you're just buying down the rate. So anyway, with that being said, for 25% down with these incentives, we're now looking at the mid to high five. So five and a five to 5.9% interest rate, which is, I mean we're at 20 18, 20 19 levels at that point. So the state of the real estate market is still very strong.

 

**Speaker 6** (00:20:03) - It's healthy. There's a lot of activity now with buyers, with investors, home builders. We work with a ton of builders. They're essentially trying to sell off all the builds that they were permitted for three years ago, two years ago. So builders aren't building as much as they were like after the lockdowns were lifted in 2020 and they started building like crazy. And this has again, increased the demand of housing where they built a lot and now they're not building, they're just looking to sell what they currently have that hasn't been sold yet. So with an influx of people, we're seeing a baby boom. We have politicians talking about a bigger baby boom within the coming years and more immigration that only increases a demand for housing. So yes, right now is still an excellent, excellent time to buy. November of last year, not so much. But right now, yes,

 

**Speaker 1** (00:20:57) - It's a paradox with this nationwide dearth of housing supply and knowing that that problem is even more chronic in the entry level space that make the best rentals. Considering those factors, you would think that builders and providers wouldn't need to offer any incentive at all. But they have been recently. Some of them are continuing because of what's gone on in the mortgage market and with mortgage rates. So really that's nationally. And then talk to us about the geographies that we work in that tend to be in the Southeast and Midwest and in the inland northeast.

 

**Speaker 6** (00:21:35) - Yeah. Well first off, I, I wanna say that we work with a ton. Not all of our partners or providers are offering incentives, but I would say we just happen to work with a majority of them. So if you're listening and you're like, huh, he said a rent guarantee or a two years free property management or free closing costs, if these strike a fancy, then definitely reach out to me because I can share with you the best properties offering such and senates. And these are older properties, these are new construction. There are no more pre-construction that we're dealing with. Cuz like I said, pre-construction is, so two years ago, three years ago, those pre-construction properties are now available for sale and for closing within 30 days. So reach out to me, NAI, and A R E S h I get rich education.com if these interests you.

 

**Speaker 6** (00:22:28) - Now, as far as who we work with, like who's offering such great deals, what markets we, Keith are still seeing, I would identify two particular markets in southeast South, if you wanna say the south eastern part of the United States. So number one, all of Florida, Florida is still the hottest market that we're dealing with. Our providers are all offering big incentives and we're seeing homes rented really quickly because as you've covered, Florida has become a hotspot along with Texas as a destination over the past three years. And that continues to be the trend. In fact, Ocala, Florida, which we have tons of properties available in Ocala, Florida, brand new constructions, even quads, many of our buyers are so hungry for quads because it's the closest thing to multi-family. And we finally have quads available in a market like Jacksonville, Florida, Ocala, Florida, San Antonio, Texas.

 

**Speaker 6** (00:23:29) - We have a quad available there. That's a really hot market as well. But I want to bring up Ocala, Florida because U-Haul, the famous trucking transportation company U-Haul has a very good pulse on where people are moving, where their rentals are being rented, right? And the number one destination they found for the year 2022 was Ocala, Florida. So that's an area, it's the world has equestrian headquarters, the largest retirement community in the world is a half an hour away from there. So you have a ton of people servicing these very wealthy elderly people to 55 and up community. So a lot of healthcare, a lot of service industry. You have a lot of it jobs, engineering jobs, because Gainesville, which is home to the University of Florida is only 40 minutes away. And Ocala is more affordable than living in that retirement community is called the Villages very pricey because it's like its own world over there.

 

**Speaker 6** (00:24:32) - I've been there a couple of times. And then Gainesville also is quite pricey with the university and with the tech community there. So Ocala has become the next biggest city that's not completely rural farmland that has any sense of modernity. And so yes, I'm identifying all of Florida, specifically Ocala, but then also Memphis, Tennessee for older rehabbed properties, both Memphis, Tennessee and Little Rock, Arkansas. We're seeing a lot of activity there because they are lower priced entry level homes. They're rehab properties, fully rehab, turnkey, gutted. So these are properties anywhere from a hundred to $150,000 in Memphis and about 120 to 170,000 in Little Rock. So we work with a provider there who has a lot of inventory and they are also offering some pretty incredible incentives that our other partners in Memphis are not offering. That includes two years closing cost credit. That includes free property management for two years. And it also includes a mortgage guarantee. So if they're not able to rent out your property, they will pay your mortgage for you until they find a tenant who will uh, tenant that property.

 

**Speaker 1** (00:25:51) - Ah, somewhat different than the rent guarantee that sometimes we hear about where they will pay the market rent for you if you don't have a tenant in the property, but it's paying your mortgage for you.

 

**Speaker 6** (00:26:00) - Exactly. So you just send them your mortgage bill and, and they will pay it. But I will say the reason why they offer this is because they're putting their money where their mouth is. They're so confident that they will, that both Little Rock and Memphis, just like Florida, have become very strong places for people to move to because they're affordable. And you want to be buying real estate in affordable places because A, it's affordable for you and B, it's gonna be affordable for your tenants, which means you're gonna have a greater tenant pool to fill that property.

 

**Speaker 1** (00:26:31) - Yeah, so Memphis and Little Rock, some of the most affordably priced cash flowing markets in the nation. And yes, these prices, 100 to 150 K for you Californians and New Jerseyans and New Yorkers. We're not talking about the down payment, we're talking about the total purchase price of a home in a safe neighborhood that can attract a respectable tenant in places like Memphis and Little Rock. And then when it comes to Texas and Florida, you mentioned U-Haul, they put out annual reports where they actually give some really good migration data to the real estate market, but with all the in migration to places like Florida and Texas and the rest, sometimes I wonder how does U-Haul handle, like all their trucks end up in Jacksonville after a few months or all their trucks end up in a place like Ocala or Central Florida where so many people are moving. It's just interesting to think about what they do with that problem. They need to get all their trucks back out of places like that after all of the in migration. And because Florida, it really is so predictable that the in migration will continue. It's been such a long trend it picked up during the health crisis and we have an upcoming webinar in Florida. Tell us about that.

 

**Speaker 6** (00:27:44) - Yeah, well this is with one of our hottest Florida providers. They've been hot because of a special, you've mentioned it on your podcast, you've mentioned it in your newsletter. I've mentioned it in my communications with students and clients. They had a two plus two program of two years free property management plus 2% closing costs. But we're doing a webinar with them next week. It's going to be next Tuesday evening. If you go to g r e webinars.com, g r e webinars.com, you can find out about the webinar and also register for it. They've gotten rid of that two plus two program because they are unveiling a brand new promotion, a brand new program that is even better than the two plus two. So if you missed out on the two plus two, we're right now in this two and a half week period where there's no promotion and you have to pay retail price.

 

**Speaker 6** (00:28:44) - But if you stick through it, join us on the webinar next week. They are, like I said, they'll be announcing a brand new promotion that is the two plus two was an incredible, incredible program. I think this is way better than even the two plus two. So this is certainly exciting. They're gonna be coming on the webinar talking about Ocala like we just talked about. They have built the quads in Ocala that we have available. They've built duplexes, single families, and not just in Ocala but all around Florida. And they are offering incentives and discounts to sell these properties. So highly recommend people. Check out G r e webinars.com to register for that webinar next Tuesday evening.

 

**Speaker 1** (00:29:29) - All right. And for our group attendees on our webinar there, you're gonna have incentives for these new Build Florida properties, oftentimes single family homes up to four plexes and larger that are even better than the 2% closing cost cash at the table for you. And even better than that two years free property management. They are gonna roll that out to you at the webinar next week that you want to be sure to attend. We'd really like to see you there. That is our live event on Tuesday, May 2nd at 8:30 PM Eastern, 5:30 PM Pacific. And the rest is starring in that one. It is completely free for you to attend and the benefit of you attending it in person is it is live. And you'll have a chance to ask questions and maybe we have another attendee that asks a question that you didn't think about asking. That's a really good question. So you can kind of crowdsource all the questions and ask a question yourself there at the live event@grewebinars.com. Do you have any last thoughts, Lorre?

 

**Speaker 6** (00:30:33) - Well, I will say this, one of the best parts about the webinar for serious buyers who are looking for that next deal is our provider will be providing the best deals they have available. So they're coming with two to three of their best deals. So this isn't one of those things where it's like, oh, you know, NAIA is just gonna send me an email after and I'll see everything. Or I'll watch the webinar replay. Yes, there will be a webinar replay, but the chances of those two deals being sold out during the webinar are extremely high because of the incentives and the deals that the provider is providing. So I highly recommend try to make it live. You want to get in on these deals. Uh, if you miss the webinar, hey, not to worry, we're going to have the replay. Maybe, uh, they'll have some other properties that are comparable, available for sale too. But you wanna be there live, get your questions out of the way and move quickly. Because our last webinar that we did, Keith for Baltimore, it was probably our best webinar yet. And we moved properties, we moved properties very quickly live on air. So that's why I just wanna let our listeners know, hey, things are really picking up in the real estate market. Again, things are picking up at G R E, so you don't wanna be left behind.

 

**Speaker 1** (00:31:51) - These are attractive incentives for path of Progress Florida, usually new build properties for you next week. Again, at G R E webinars.com. This is exciting stuff. Thanks for sharing this with us and the rest.

 

**Speaker 6** (00:32:05) - Thank you, Keith. Always a pleasure.

 

**Speaker 1** (00:32:12) - Yeah, well, 25% down in buying your mortgage rate down into the fives creates some cash flow. But as you'll see a next week's live virtual event, it is going to get better than that purchase prices on these brand new single family homes. They're still below 300 k, still in the 200 s in some cases. Yes. These are the property types that are quickly vanishing. Naresh can find both the good deals for you with the national providers that are actually giving incentives like the ones that we talked about. And this is all despite the fact that the product that you're buying is in really short supply sets for income properties, single family rentals, up to four plexes in Jacksonville and Ocala and elsewhere in Florida. And now if you wanna get ahold of Naresh for the latest on GRE Marketplace Nationwide Properties and who has the best incentives, you can go to G rre marketplace.com/coach and you can get free direction and coaching.

 

**Speaker 1** (00:33:17) - He would like to see you for next week's live event, though, besides just getting a solid fundamental education on what makes a durable income property market, Naresh and the Florida provider are gonna share with us just for webinar attendees, those even better than two and two in incentives for you. The incentives on the webinar. Yes sir. Even better than the 2% of your closing costs paid to you in cash and two years of free property management. Again, this is next Tuesday. It's May 2nd at 8:30 PM Eastern, 5:30 PM Pacific Naresh Stars. In this one. It is free to attend, get your questions answered, and get access to properties should you so choose. Be sure to sign up now while it's on your mind@grewebinars.com. I'm your host, Keith Wein. Hold. Don't quit your daydream.

 

**Speaker 0** (00:34:15) - Nothing

 

**Speaker 7** (00:34:16) - On this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests on their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education L L C exclusively.

 

**Speaker 1** (00:34:44) - The preceding program was brought to you by your home for Wealth building. Get rich education.com.

Direct download: GREepisode446_.mp3
Category:general -- posted at: 4:00am EDT

Keith Weinhold answers listener questions about real estate investing. 

He advises listeners on how many properties they need to own to become a millionaire, how to invest $40,000 to reach a $100,000 down payment for a rental property, and how to find the best future real estate markets. 

Keith emphasizes the importance of positive cash flow, avoiding over-leveraging, and owning properties in multiple job growth markets and states. 

He also discusses the potential for hyperinflation and the benefits of owning real assets to combat inflation. 

Keith encourages listeners to leave a rating and review for the podcast and consult with professionals for individualized advice.

**Taylor's question [00:01:07]**

How many properties must I own to become a millionaire? Keith explains that it depends on the profitability of the properties, how much they go up in value, and how much rent is charged.

 **Mitrel's question [00:05:04]**

Should I invest my $40,000 in the stock market to reach my $100,000 down payment goal for a rental property? Keith advises on risk tolerance and suggests alternative options such as I bonds.

**Kevin's question [00:09:08]**

What are the forward-looking indicators to find the best future real estate markets? Keith talks about the prospect of hyperinflation and provides insights on finding the best real estate markets.

**Forward Looking Indicators for Real Estate Markets [00:09:16]**

Keith answers Kevin's question about selecting MSAs with forward-looking indicators, including population growth, employment, and upcoming government infrastructure projects.

**Sponsor Ads [00:15:45]**

Keith thanks Ridge Lending Group, JWB Real Estate Capital, and Mid-South Home Buyers for sponsoring the show.

**House Hacking in Southern California [00:18:03]**

Keith advises Connor on whether to invest in an out-of-state rental or house hack in Southern California, considering high real estate prices, tax rates, and tenant protection laws.

**Real Estate Financing Options [00:19:03]**

Keith discusses financing options for single-family homes and fourplexes, including FHA and VA loans, and the advantages and disadvantages of house hacking in Southern California versus investing out-of-state.

**Hyperinflation and the US Economy [00:21:40]**

Keith addresses a listener's question about the possibility of hyperinflation in the US economy, defining hyperinflation and discussing the factors that contribute to it, including a nation's debt and foreign demand for its currency.

**Leverage in Real Estate Investing [00:25:00]**

Keith answers a listener's question about being over-leveraged in real estate investing, explaining the risks of taking on too much debt and emphasizing the importance of buying properties that are cash flow positive.

**Real Estate Investing Strategies [00:28:00]**

Keith explains how to avoid over-leveraging and how to project positive cash flow from day one.

**Benefits of High Leverage [00:29:09]**

Keith explains how high leverage can help you build wealth faster and why it's best to finance your properties.

**Encouragement to Leave a Podcast Review [00:30:07]**

Keith encourages listeners to leave a podcast review and explains how it helps the show reach more people.

**Disclaimer [00:31:32]**

A disclaimer is given that nothing on the show should be considered specific personal or professional advice.

Resources mentioned:

 Show Notes:

www.GetRichEducation.com/445

I-Bonds:

https://www.treasurydirect.gov/savings-bonds/i-bonds/

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:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Welcome to GRE! I’m your host, Keith Weinhold. I answer your listener questions today. 

 

A 12-year-old listener asks, how many properties must I own to become a millionaire? 

Another asks, “Should my first property be a house hack or an out-of-state rental”? 

 

One question is about the imminent prospect of HYPERinflation.

 

Also, “What are FORWARD-looking indicators to find the best future RE markets?” Those questions and more questions all answered, today, on Get Rich Education!

___________

 

Hey, welcome in to GRE. I’m your host and Founder, in fact, of this very show… and all Get Rich Education platforms, a 20-year REI and Active Member of the Forbes Real Estate Council. My name is Keith Weinhold. Ya probably know that by now.

 

This is Episode 445 of Get Rich Education.

 

When I do these listener question episodes, I generally begin with some of the more basic questions.

 

Today’s first question comes from Taylor in Wooster, Ohio. Taylor is age 12 and he simply asks:

 

How many properties must I own to become a millionaire?

 

Well, thanks for that, Taylor. I don’t often get questions from a 12-year-old. 

 

I love that you’re listening and the fact that you ARE greatly increases the chances of you building wealth when you’re an adult, yet young enough to enjoy it.

 

Like a lot of questions in real estate, the answer to how many properties you must own to become a millionaire “depends”.

 

It depends on how profitable your properties are - how much they go up in value and how much you’re getting from the rents that you charge the tenants, how long you do a good job of keeping them as tenants, as well as how capable you are of controlling your property’s expenses.

 

So, you could own as little as just ONE property and be a millionaire, Taylor.

 

Owning MORE properties is better than owning fewer properties. That way, if you have one that isn’t profitable, you’ll have profits from your others.  

 

And you can own more properties when you can use part of your OWN money & part the bank’s money… in owning the property.

 

Now, Taylor, if you have one million dollars, say, you had a million bucks in stacks stuffed in your closet, you need to understand that that is not enough. 

 

You’re 12 years old now. You might live another 80 years. Then you’d need that million to last you 80 years. 

 

Even a 50-year-old with a million dollar stack of dollars bills in their closet would not have enough money to live on for the rest of their life.

 

You might need closer to 10 million dollars. That’s called a decamillionaire. So think about setting your net worth target higher. Think, “How can I be a decamillionaire?”

 

But actually, you don’t just want to think about the height of your stack of dollar bills reaching any certain number of millions ONLY. It matters. But what matters more is how fast your stacks are GROWING.

 

That’s called cash flow. If your stacks are growing at a rate every year that exceeds all of your expenses, you are financially-free. That’s why it beats being debt-free.

 

Another thing, Taylor, I know that your hometown of Wooster, Ohio is between Columbus and Akron so - though I’m not familiar with Wooster - but I do know its the county seat of Wayne County - 

 

…you do tend to have markets nearby that can create CF really well - that’s that ability to GROW your cash stacks, hopefully to a height of 10 million someday. 

 

Thanks for your question, Taylor.

 

You know, it warms my heart to know that kids listen to the show. I remember shortly after launching the show in 2014 that a Dad & son from New Jersey wrote in and told us that they look forward to listening to the show together every week. 

 

I like to do that family-friendly show, from Day 1. A clean lyrics show since inception.

 

I like to keep it classy. I like to make that show that would make my late Grandma Weinhold proud - though I don’t think she ever knew how to listen to this show.

 

That’s part of my brand… and it warms my heart to see children in the audience. 

______________

 

The next question comes from Mitrel. I don’t know where Mitrel is from, because some questions come in on our YouTube Channel, but he says…

 

I have a good job and $40,000 in savings, expect an upcoming BOOM in real estate and need $100,000 for a down payment. 

 

Does it make sense to gamble my $40K in the high risk stock market to get up to the $100K sooner and capitalize on the RE purchase?

 

If I lose the $40K, I’ll recover it in time with my job anyway over time.

 

If I win & get it to $100K, I’ll have my income property and be off to the races with leverage and Real Estate Pays 5 Ways.

 

If I simply tried to preserve the $40K in a savings account, I’d lose to inflation anyway.

 

That’s his question. Alright, Mitrel. You’ve got $40K, want to get to $100K for your down payment on some rental property. 

 

Now, we have properties at GRE Marketplace where $30 or $35K is enough to get started… but with your $100K down payment goal, I sense that you might have a specific purchase in mind.

 

Of course, it’s about getting a 20-25% down payment + 4% CCs  - as a percent of your purchase price - and you’ll want to hold some reserves.

 

Well, to get your cash stash from $40K up to $100K, it has to do with your risk tolerance.

 

It sounds like you’re open to risk with putting it in the stock market short-term to try to reach your goal faster.

 

So, yeah. You would probably want to do that OUTSIDE of a retirement account since they generally have early withdrawal penalties.

 

In a savings account, yes, you’re aware that with true inflation, that would just debase your savings’ purchasing power.

 

If you’re open to risk, I guess one could get in & out of crypto at just the right time - if you do that, I’d choose bitcoin.

 

But you know, whether you go with risky stocks or risky bitcoin, the problem with that is that you have to get your timing right twice.

 

Ideally, whether it’s a Russell 2000 Index Fund or Apple Stock or Ethereum, you want to buy close to a near-term low and then sell close to a near-term high.

 

That is more difficult to do than it sounds, and it’s just one reason that stock, ETF, and mutual fund investors don’t build wealth. 

 

One other thing I’ll mention as you’re trying to patch together your first RE down payment is I-bonds. They currently pay a guaranteed 7%. 

 

The way they work is that the interest rate they pay you is the CPI Inflation rate plus a fixed rate on top of that.

 

You can get I-bonds at TreasuryDirect.gov

 

But there is a $10,000 annual limit that you can put into I-bonds. 

 

Another disadvantage is that I bonds can't be purchased and held in a traditional or Roth IRA, Mitrel. The I- bonds have to be held in a taxable account. 

 

But that might work for you in this case, Mitrel, since it’s a shorter-term hold, hopefully it’s shorter-term anyway, until you’ve built up your $100K cash to get your RE and get off to the races, hopefully getting paid 5 ways.

 

Another disadvantage of I bonds is there is an interest penalty if they’re redeemed for cash in the first five years. They knock off 3 months of your earned interest.

 

I hope that you found at last one insight on those options that helps you out, Mitrel. 

________________

 

The next question comes from Kevin. He asked this one quite a while ago.

 

[Listener question played]

 

3) What are the forward-looking indicators to select MSAs? He typically looks at population growth and employment. 

 

That is a rather astute question, Kevin. Yes, you’re looking at some of the right measures for the tide that floats a RE market up. 

 

First, we want to think about landlord-friendly states. Yes, the MW & South has a preponderance of them. But there are some outliers. You’ll also find pretty favorable eviction processes for LLs in PA, TX and AZ.

 

When it comes to forward-looking RE indicators and their sources, first, let me give you two resources that most everyone knows about, then we’ll drill deeper. 

The NAR publishes forecasts for home sales, prices, and other market trends. Their reports give you future RE market insight at both the national and local level.

Zillow offers forecasts too on the housing market, including home values, rents, and other market indicators.

Now, one indicator and one place that a lot of people don’t know where to look, Kevin, is your ability to discover upcoming government infrastructure programs.

Think about learning where the next new highway intersection or highway interchange will be built. Or perhaps it’s a new seaport expansion project or a new bridge that is going to be built in 5 years.

There are a lot of places where you can find out that information ahead of time, and unlike stock investing, it’s completely legal - totally alright - to learn about this ahead of time. 

Get a heads up on where the next bridge is going to be built and how that can make nearby property values rise - that’s not considered illegal insider information.

You can check the websites of government agencies responsible for upcoming infrastructure development in your target state or region. 

That area’s, say, Department Of Transportation makes this public so that contractors can engage in the bidding process for major infrastructure projects. These are known as government PROCUREMENT websites.

For example, in Illinois, that’s under an Illinois.gov website.

Those sources can be kinda wonky & dry, but putting in the work over there can help you see the future.

Now, major news outlets, and just regular, old school, legacy media television channels like good ol’ WPHL in Philadelphia or KMSP Minneapolis or anywhere, they often report on upcoming projects and government initiatives, like an airport expansion.

Now, if you happen to LIVE in an investor-advantaged area, Kevin, well and you do, Dayton, Ohio.

Joining an “in real life” industry association that focuses on infrastructure development can really give you direction & foresight and you’ll grow your network too.

That’ll give you access to upcoming projects - as will attending public meetings like town hall meetings.

And then finally, the US Census Bureau and other sources make all kinds of population projections. That helps you see the future. 

 

And hey, you might as well use the Census’ resources since your tax dollars are paying for it.

 

And those industry associations and public meetings often use & apply those population projections to upcoming major projects.

 

So, there’s more, but that’s a good bit there. I hope that helps you, Kevin. 

 

Today, I am bringing you the show from Anchorage, Alaska.

 

Next week, it’ll be from Las Vegas, Nevada.

 

And in two weeks, I’ll be bringing you the show from Phoenix, Arizona.

 

So, Anchorage, Las Vegas, and Phoenix. That is the largest city in the 49th, 36th, and 48th states admitted to the union respectively. 

 

Only a remorseless geography nerd like me would break it down that way, wouldn’t I?

 

Yes, we’ll be constructing makeshift, mobile GRE recording studios coming up.

 

If you’ve got a question that you’d like me to answer, go to GetRichEducation.com/Contact. That’s where you can either write a message, or leave a voice message listener question - like Kevin did.

 

I answer more of your listener questions next. I’m KW. You’re listening to Episode 445 of Get Rich Education.

____________

 

Welcome back to Get Rich Education. I’m your host, Keith Weinhold, grateful to have you here.

 

Before we return to your listener questions… thanks to this week’s sponsors. They support us so, please, consider supporting them.

 

That is Ridge Lending Group. Consider YOUR next mortgage loan for income property there and see the difference that a lender that works specifically with investors like you… can make. 

 

They serve almost all 50 states. That’s President Caeli Ridge & all the good-looking people over there at RidgeLendingGroup.com

 

Then there’s JWB Real Estate Capital. Income property specialists that provide you with the actual investor-advantaged real estate that you can buy in bustling, fast-growing Jacksonville. 

That’s all-around good guy Gregg Cohen & the team at JWB. They always have good hair days over there. 

 

They really make it easy for you. Find your next cash flow property at JWBRealEstate.com/GRE

 

Finally, there’s Mid South Home Buyers, providing you some of the best rent ratios in the entire South in Memphis and Little Rock. 

 

They’ve got the service that you’ve been raving about for years now. 

 

That’s Terry Kerr, Liz Brody and all the fine peeps over there at MidSouth that shake your hand, look you in the eye, have a symmetrical smile, and even regularly recite your first name mid-sentence for ya. (Ha!)

 

Get started at MidSouthHomeBuyers.com

 

I have been inside the physical offices of all 3 of those sponsors that I just mentioned.

 

If your company is interested in advertising on GRE, let us know. We’d like to check you out first. Just like listener questions, you can also indicate that on the same page. Let us know at GetRichEducation.com/Contact You’ll see the “Advertising Inquiry” area there.

 

Conner asked me a question. “Keith, absolutely love your videos. I live in expensive Southern California (Orange County). Would you recommend my first property be a primary that I house hack or invest in an out-of-state rental?” Thanks, Connor.

 

OK, Connor. Well, there’s a lot to consider.

 

Let’s look at the Socal househack.

 

As you’re surely already aware, real estate prices and tax rates are both very high in California. 

 

California also has a Tenant Protection Act enacted in 2019 that puts strict eviction laws into place. You might have rent control there too.

 

Now, as a SoCal househacker, that could, of course, take the form of buying one big SFH where you live in one of the rooms and rent out the other rooms.

 

The younger you are, the more likely it is that you’re tolerant of living with roommates. If you want to stay alone or with your spouse or whatever & want privacy, then you’ll househack a duplex, triplex, or fourplex.

 

Any one of those, SFH up to 4-plex, you can use an FHA loan on and pay just 3.5% down, or VA loan if you have VA benefits and pay 0% down. With either of those low down payment programs, you must live ON-SITE, usually for at least a year.

 

FHA recently approved 40-year mortgage loans and they will roll out next month. Yes!

 

In Orange County, CA, with really high prices, it might take a fixer-upper type home to make it affordable. If you aren’t handy, that’s a disadvantage on the house hack.

 

Socal is simply one of the most DISadvantaged places in the nation for long-term rental property, though there are still ways to make it work.

 

Then, if you go out of state, you can make it really passive. It won’t be a more active business like it would there for ya in Orange County.

 

Now, the downside of buying an out-of-state rental, like through GRE Marketplace, is that it’s going to take a 20 to 25% down payment.

 

But you can still find respectable properties in safe neighborhoods, in say, Memphis for as little as $100K to $120K. That means you might not have to come out of pocket for much more than you would a SoCal rental with it’s lower PERCENT down payment.

 

And, of course, the big advantages of the out-of-state rental are low purchase prices, high rents, advantageous LL-tenant law, your property is already renovated or brand new, and it is turnkey PMed if you so choose.

 

That’s exactly why a lot of people are choosing out-of-state properties at GREMarketplace. 

 

Those are some of the major trade-offs, Connor. Thanks for the question.

 

The next question comes from Jesse in Reno, Nevada.

 

“With high inflation for two years and cyclical trends entrenched, more nations making foreign trade deals outside of the dollar, and the Treasury printing dollars like mad, I cannot believe the price for a shopping cart full of groceries at Safeway any more. Are we headed for a hyperinflationary period within the next decade?”

 

Well, that’s an interesting question, Jesse. Inflation is an awful malady that disproportionately affects the lower classes more than the upper classes.

 

But do I believe that there’s any significant chance of hyperinflation in the next decade, Jesse? Let me answer that.

 

Now, first of all, a lot of people - not necessarily you, Jesse - but a lot of people throw around the term “hyperinflation” without really knowing what it means at all. 

 

A consensus of economists define HYPERinflation as an inflation rate of 50% or more every month. Yes, month. 

 

With compounding, that would be inflation of more than 600% per year, not the… closer to 6% CPI inflation that we’ve had lately.

 

We could very well have longer-term waves of RECURRING inflation.

 

In America, our debt-to-GDP ratio is high. It’s about 120% right now. Back in 1990, it was just 55%.

 

Now our debt-to-GDP ratio also hit 120% back in the 1940s, but that was as a result of us having to pay for WWII. And the productivity of the 1950s quickly brought the ratio down.

 

Here’s the problem. Today’s 120% is not due to war; it’s due to all these politicians’ various accumulated promises over time. 

 

That includes CONTINUOUS military spending.

 

And you know, historically, every fiat currency ends with the END of that currency. Every single one goes to die. The British pound is the world’s OLDEST currency in use today.

 

But to get hyperinflation, it generally takes two key factors:

 

First, a nation needs to have debts denominated in a currency that that nation can’t print. 

 

Now, for emerging markets, its often dollar-based debt that they have and those nations can’t print dollars. 

 

100 years ago, Weimar Germany had gold-based war reparations. That was their problem. 

 

You cannot print gold, so they printed MASSIVE amounts of their currency. In more modern times, Venezuela and Zimbabwe experienced hyperinflation.

 

The second key reason hyperinflation occurs is when there’s no foreign demand for your currency… so you hyperinflate it.

 

So, to create hyperinflation, it takes a tremendous amount of printing… plus no demand for that currency. 

 

The US still has foreign demand for our dollar and there’s a lot of debt denominated in the dollar globally. That represents demand for it.

 

Since the US can print its own currency, we’re not very likely to default on our total of $32T debt at all. 

 

We’re motivated to let inflation keep running, at whatever fluctuating rate, Jesse.

 

So to answer your question, Jesse, no. No hyperinflation in the US in the next decade.

 

And as far as the prolonged elevated inflation that we’re having, as a listener, I think you know how to beat that by now. Own real assets. 

If you own a house, have a 30-year mortgage. Don’t have it “paid off”. You need a mortgage to benefit most. Thanks for the question, Jesse.

 

Our last question comes from Zack in Claremore, Oklahoma. Zack asks:

 

Keith, is there such a thing as being “OVER leveraged?” Would you finance everything you can as long as you can create arbitrage?

 

Great question, Zack. The short answer is, “Yes, I would. I would finance everything up as much as I could without being overleveraged.”

 

Now, what “overleveraged” means IN GENERAL - out in the larger business world is that you’ve borrowed too much money in relation to your ability to pay it back.

 

In real estate, being overleveraged means that you take on so much debt that you can’t make your monthly payments on your principal, interest, and operating expenses.

 

As long as my properties are cash flow positive, even by a little margin, I have found no limit as to how much I would finance, Zack.

 

Let me use an example. Say that you buy a rental duplex with $4,000 of monthly rent income. Your mortgage and all of your long-term operating expenses are $5,000, leaving you with a NEGATIVE cash flow hole of $1,000 every month. 

 

A $1,000 per month hole is a $12,000 each year hole that you’ve dug. 

 

If you’re financially precarious elsewhere, that can be a difficult hole to fill in and you could descend into delinquency when you miss your first payment, then deeper into foreclosure when you’re several months behind, then the bank takes over your property. 

 

You lose your property, lose your credit score, and lose the ability to get new loans for years. You were overleveraged.

 

You’ve borrowed too much money in relation to your ability to pay it back since your rent income was $4,000 and expenses were $5,000.

 

Well, when you buy right, that’s not likely to happen. First of all, your mortgage loan underwriter is going to check that you have enough income and enough reserves to meet their qualification standards before you can get the mortgage in the first place. 

 

That’s a check against becoming overleveraged, yet things could still go wrong.

 

For one thing, with FHA loans, your debt-to-income ratio can be an eye-popping maximum of 57% and you can still qualify for the loan.

 

But you’re usually going to be buying your out-of-state rental property with a CONVENTIONAL loan.

 

Now, INSTEAD of becoming overleveraged, you would buy in the opposite scenario, projecting positive cash flow from day one.

 

On your duplex instead, if you had just $4,200 of rent income and $4,000 of expenses, you’ve got just $200 of cash flow, but that is a cushion.

 

And like I’ve described on previous episodes, historically your rent income rises faster than your expenses since your mortgage P & I payment stays fixed.

 

That’s why, over time, you often widen that delta from +$200 cash flow so that it just keeps widening to a greater & greater cushion.

 

So, to review, you’re unlikely to find yourself overleveraged if your income exceeds your expenses on day 1, when you have predominantly FIXED RATE LOANS…

 

… and then another measure of protection is when you own properties in multiple job growth markets - in multiple STATES even - you’re better protected against any changes in the law or regulations or changes in that region’s economy or even any detrimental disruption to your PM in each of your chosen investment areas.

 

I dislike overleverage. But I do like HIGH leverage. Because leverage makes compound interest feel really slow. 

 

It is best to FINANCE your properties, even though mortgage rates aren’t as low as they were two years ago. 

 

Look at it this way. With 20% down, you could buy five financed properties instead of one all-cash. Over time, five properties appreciating will build you more wealth than one appreciating.

 

If the properties don’t cash flow with 20% down, then get three with 33% down on each. That’ll accelerate your wealth-building & help you control the mortgage.

 

Then… if rates go down, you can still refinance. If rates don’t go down, you’ll be glad that you bought multiple properties instead of one.

 

Thanks for the question, Zack.

 

I hope you enjoyed listener questions today. I hadn’t done them for a while. If you did, please, go ahead and tell a friend about the show.

 

Also, if you’ve ever wanted to tell me what you think about the show… there’s a great way for you to do that & I will see it and read it myself. 

 

You know, I recently learned that in Apple Podcasts Germany, we only have 3 podcast reviews in that entire nation on that platform. 

 

And that prompted me to ask you - whatever nation you're in, to please, you don’t have to, but if you’d be so kind, leave a podcast review. 

 

When you do that, it not only helps our show reach more people, but, I do actually read your review of the show, so I get that feedback.

 

So if you like what I’m doing here, I’d be grateful if you went ahead, and whatever your podcast platform is…

 

…Google “how to leave an Apple podcasts review” or “how to leave a Spotify review” and go ahead an do that - leave a rating & review for the Get Rich Education podcast and I’d be grateful. 

 

I hope you found one or more listener questions today that really relate to you or your interests, or YOUR unlimited wealth-building potential. Thanks in advance for telling a friend about the show, and for your rating & review.

 

Until next week, I’m your host, Keith Weinhold. Don’t Quit Your Daydream.

 

Direct download: GREepisode445_.mp3
Category:general -- posted at: 4:00am EDT

In this podcast episode, Keith Weinhold discusses the benefits of investing in stable property markets, the risks and benefits of taking out a second mortgage on a property, and the potential impact of remote work on the real estate market. 

Weinhold also touches on the performance of stocks and other asset classes in the first quarter of the year, highlighting the drawbacks of savings accounts, CDs, and money market funds, and suggesting that investing in real estate can be a better option. 

Overall, Weinhold emphasizes the importance of investing in stable markets with high rent ratios and strong landlord tenant laws.

**Real Estate Prices [00:03:39]**

Discussion of the current and future direction of real estate prices, with a recap of the benefits of investing in real estate.

**Tapping Equity [00:04:50]**

Explanation of the problem with tapping equity and the risks of taking out a second mortgage on a property.

**Second Mortgage [00:05:43]**

Explanation of how to add a second mortgage onto a property and access cash without refinancing the entire loan, with details on the 80% combined loan value ratio.

**Risks of Second Mortgage [00:07:49]**

Discussion of the risks of taking out a second mortgage, including interest rate fluctuations and the potential pitfall of borrowing short to go long.

**Second Mortgage Benefits and Risks [00:09:51]**

Discussion of the benefits and risks of taking out a second mortgage on a property for investment purposes.

**Current Direction of Home Prices [00:12:09]**

Analysis of the current direction of home prices in the resale market, including a survey of resale agents and national existing home prices.

**Regional Real Estate Market Performance [00:18:00]**

Discussion of the stability of regional real estate markets, with a focus on the southeast and midwest, and the importance of stable prices, high rent ratios, and strong landlord tenant laws.

**WFH Trends and Regional Real Estate Markets [00:20:24]**

Analysis of the potential impact of work from home trends on regional real estate markets, including an increase in flexible job postings in major cities.

**Virtual Real Estate Investing [00:25:02]**

Discussion of the recent failures of metaverse projects and the risks of virtual real estate investing.

**Factors Affecting National Home Prices [00:26:15]**

Explanation of the headwinds and tailwinds affecting national home prices in 2021, including bank failures, job loss recession, labor and supply inflation, spring home buyer demand, and the supply crash.

**Mortgage Rates [00:30:20]**

Explanation of the difficulty in predicting mortgage rates and the lack of forecast for their direction.

**Various Asset Classes Performance [00:32:17]**

Discussion of the performance of different asset classes in Q1 of the year, including precious metals, savings accounts, and real estate.

**Benefits of Investing in Real Estate [00:35:14]**

Real estate investing as a way to beat inflation and transfer prosperity from dollars to property, with the added benefit of control and potential for five ways of profit.

**Reasons to Invest in Residential Real Estate [00:36:27]**

Advantages of investing in new or renovated residential real estate, including low maintenance expenses and potential for no capex expenses during ownership.

**Expectations for Real Estate Market [00:37:33]**

Expectations for the real estate market in the next five years, with a caution that the historically high price run-up may not be repeated.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/444

National existing median home price:

https://fred.stlouisfed.org/series/HOSMEDUSM052N

National median home price (existing & new):

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

Memphis & Little Rock property that 

cash flows from Day One:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

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@keithweinhold

 

Welcome to GRE! I’m your host, Keith Weinhold. 

 

Would you rather be age 18 and poor or 80 and wealthy?

 

Learn about how a second mortgage could benefit you.

 

Historically, what REGIONS of the nation have the most stable and volatile real estate prices? 

 

Then, there are two ominous threats to FUTURE property prices. All that and more, today, on Episode 444 of Get Rich Education.

 

Welcome to GRE! From Orange County, Florida to Orange County, CA and across 188 nations worldwide, I’m Keith Weinhold, this is Get Rich Education.

 

Last week marked 50 years since the first-ever cellphone call was placed. The call from the 2.5-pound brick-sized cellphone was placed in NYC - Manhattan. 

 

That phone could NOT fit inside a standard pocket. 

 

Sheesh! Look, I won’t even use a case on my iPhone today because I’m concerned about the weight and friction and it would add!

 

I want it light and I want to be able to quickly slide it in & out of my pocket. Ha!

 

Well, I’ve got a more significant trade-off for you to consider. 

 

Would you rather be age 18 and poor or age 80 and wealthy? 

 

I think you and most everyone would rather be 18 years old and poor rather than 80 years old and wealthy.

 

I am pretty confident that you & I agree on that.

 

Well, if you’d rather be 18 and poor, then why would you go to a job to trade your time for dollars?

 

Because that’s exactly how you move away from 18 and poor straight toward 80 & wealthier but probably 80 & still less than wealthy.

 

Why would you make that trade?

 

Even if you love your job - if it’s not the activity you’d MOST want to be doing out of anything else in the wide spectrum of life, move away from 18 & poor?

 

Well, time is going to pass one way or the other, but you can win back your time & end up wealthy rather than “somewhat less than wealthy”...

 

…when you provide value for society by giving them housing, getting paid 5 ways at the same time, one of which includes a MOSTLY passive income stream, trading relatively little of your life time all the while. That’s why we do here.

 

That way, you’re not quite going to be 18 & wealthy, but wealthy when you’re young enough to enjoy it.

 

Over the last three years, property prices are up 30 to 40% in a lot of markets.

 

We’re going to look at the current & future direction of real estate prices in a moment. 

 

But let’s talk about what you can do with this… what you can do with that dead equity in your properties.

 

America has near record-high equity levels right now so this is really timely here.

 

But there’s a bit of a problem with tapping your equity today. Before I get into that, just a recap minute here…

 

Of course, as any longtime listener knows, since the rate of return from home equity is always zero, you have a chance to harvest your equity.

 

Having, even an extra $1,000 of equity in any property, including your own home, is like making an extra principal payment of $1,000.

 

Doing that is like you saying, “Hey, Mr. Banker. Here’s an extra $1,000 principal payment. Don’t pay me any interest on it. If I need it back, I’ll pay you fees, and I’ll try to prove to you that I qualify again.”

 

That’s the short story on why home equity is unsafe, Illiquid, and its ROI is Zero.

 

OK, but if you have a mortgage loan that’s set at just 3 or 4% interest, are you really going to refinance that whole loan just to pull some money out - just to convert some equity to cash?

 

Because if you did, your mortgage rate could go up to 6 or 7%. So accessing equity isn’t as great as it used to be.

 

Ah, but there’s a way around this.

 

One your, say, property at, say, Huckleberry Lane, you could keep your existing mortgage in-place at that low 3% or 4% rate, and potentially add a second mortgage onto Huckleberry Lane - and only that second mortgage is at the higher rate.

The first loan stays in place and so does its amortization schedule.

 

Now, if your Huckleberry Lane property is worth $500K, you can often have 80% of that, or $400K borrowed, that’s that 80% combined-loan-to-value ratio.

 

That means that the amount of cash that you can get your hands on is $400K minus your mortgage balance. 

 

That’s why a lot of property owners are able to access, often, $100K or more cash, without touching their low first mortgage at all.

 

Get $100K cash out - or whatever you have access to - it’s not providing you with any rate of return anyway.

 

Though you can often borrow out up to 80% of your primary residence’s property value, the deal isn’t as good as far as getting second mortgages on your rental property.

 

Second mortgages on a rental are, sometimes available, sometimes not. When they are, it’s recently been just up to 70% that you can borrow out.

 

Now, as good as this might sound, it doesn’t mean that you SHOULD do it. What are the risks with taking a second mortgage on your home or rental properties?

 

Well, some second mortgages take the form of a Home Equity Line of Credit - or HELOC. 

 

The interest rate on your HELOC can fluctuate, so there’s interest rate risk. Most HELOCs have a fixed rate period for the first 5 or more years though.

 

Before I talk more about the risk of a second mortgage, it’s just amazing - the number of people that I run into out there - most of them aren’t REIs - but homeowners that are elated that they got a low mortgage rate 2, 3 years ago (and they should be - congratulations)... but they want to tap their bloated home equity and don’t know about adding a second mortgage.

 

Now, a risk with a second mortgage is the potential pitfall of borrowing short to go long, meaning your HELOC rate resets in a little as five years - it could go down when it resets and it goes up, and at that time, you’re not liquid enough to deal with the second mortgages higher payments.



Now, I know, it’s exciting about getting into more income property, using dead equity from your own home or your own rentals - because it’s “Real Estate Pays 5 Ways” stuff.

 

You might tell yourself, that when you add up a 5 rates of return from investment property - appreciation, cash flow, amortization, tax benefits and inflation-profiting, that you can surely see a total rate of return on your new rentals of 20% or 30% or more. 

 

So if your second mortgage has an interest rate of 7 or 8%, you’d do that deal and pocket the spread.

 

Yes, it sure might work out that way, in fact, there’s even a probability that it could work out that way.

 

But the risk is that you’ve got to stay liquid enough to service the debt if your second mortgage rate rises or any other reason.

 

And you might be just fine. You might have enough cash flow or cash stored that you’re padded, you’re fine… and your underwriter might help you look at that during your second mortgage qualification.

 

You might ask Ridge Lending Group or your favorite lender about second mortgage options.

 

So, now you know. A second mortgage can keep up your velocity of money. There are benefits and there are risks.

 

Utilizing it successfully looks something like this.

 

You start off with 50% equity in one property, which is 2:1 leverage, you move some of that into a second property. 

 

Now you’ve got 25% equity in both.

 

You’ve done MORE than double your wealth-amplifying ability here. You’ve virtually 4Xed.

 

Because rather than having 2:1 leverage in one property, you’ve got 4:1 leverage in two properties.

 

That’s how wealth is BUILT.

 

Let’s talk about those ERSTWHILE home prices.

 

There are at least two ominous threats to future home prices. And now that it’s Spring and market activity picks up, what's the CURRENT direction of home prices? 

 

Real estate can move slower than glaciers, so March numbers are still scarce.

 

Home prices in the resale market - alright, that means existing homes, not new-build - those resale prices have stayed remarkably resilient, even when mortgage rates jumped up back in February.

 

John Burns REC compiles a chart for the latest survey of resale agents. The question that was asked is: “What direction have resale home prices moved in the last month?” 

 

The national survey respondents can pick that prices are either MOST INCREASING, MOSTLY DECREASING, or MOSTLY FLAT.

 

This February, for the first time since May of 2022, more said that home prices are "mostly increasing" rather than "mostly decreasing":

 

Note though, that most of the agents in the latest survey show that prices are merely steady at 51%. 26% said “increasing” and 23% decreasing.

 

Credit to JBREC. This is a national survey of ~2,600 resale agents. 

 

Now just from this chart and THESE stats, note something interesting. October 2022—appears to be housing’s low point. That was then, six months ago—marking housing's recent low point.

 

So, that’s a different angle on looking at home prices than usual - asking agents what they’re seeing.

 

National existing home prices, per the FRED stats, month-over-month are up just a little, from about $361K to $363K. Again, that’s through February.

 

Seasonally, that could go up more. That typically happens each year when spring transitions to summer.

 

There’s a good chance that national homes prices will be rising these next few months.

 

If you think that those prices sound a little low, be mindful, this entire discussion, so far, is about EXISTING homes aka resale homes, which tend to be priced lower than new construction homes. 

 

If you combine both existing & new, same source, $468,000 is the national median home price. That was the same quarter-over-quarter. Same source too.

 

It’s always important to cite the source when it comes to statistics.

 

You know, some say the 1990s are when America moved into the Information Age. But, at some point, in the 2010s, did we move into the DisInformation Age?

 

I don’t know. There’s a lot of both out there - a plethora, a profusion of both information and disinformation.

 

Some of these niche finance social media pages don’t cite their sources, and more often than not, I don’t follow them or I unfollow them if I find that they regularly don’t cite source.

 

The other type of story that I unfollow or just stay away from, are article headlines or images with the word “Rumor” in it.

 

I don’t want to follow Rumors. Now, I guess, in the best case, a rumor could turn out to be true and maybe could give you a heads up on something that actually turns out to come true later.

 

But, the world is full of real information. I don’t want to spend this one finite life I have on earth catching up on rumors. It’s more sports sites that use that word rather than finance sites.

 

Rumor is just an annoying word, I guess. It’s a synonym for “gossip”.

 

Hey, the real estate investing and personal finance world has its own quirks and odd spins on words.

 

One thing I haven’t been able to figure out is how a guru is bad and an obsession is good.

 

Some people disparage thought leaders and influencers as gurus.

 

Guru means an influential teacher or an expert. That sounds like someone worth listening to to me.

 

How are obsessions good. Some say, to succeed, you’ve go to be obsessed.

 

No, you don’t. That sounds unhealthy.

 

The definition of obsess is to preoccupy or fill the mind of someone continually, intrusively, and to a troubling extent.

 

Don’t fall into the trap of an obsession.

 

Well, to recap what you’ve learned today on Get Rich Education Episode 444 (ha!) rumors and obsessions are bad, and gurus are good.

 

Enough digression. Getting back to real estate investing.

 

Like I said at the beginning of the year, I don’t expect much national HPA or price declines this year.

 

But regionally, the markets that we focus on here - the ones in the Southeast and Midwest and a little in the Northeast, have all performed well.

 

Many - even most - in our target markets appreciated in 2018 & 2019 & 2020 & 2021 & 2022 & they’re continuing to do so now.

 

Many Florida markets are still seeing 10%+ appreciation. We’re talking about those stable markets, avoiding the volatile, largely coastal markets where prices are sinking, especially on the West Coast.

 

As I've long discussed, one reason that we invest where we do are for their stable prices, even during downturns.

 

Backed by historical data, American housing's long-term regional price volatility is broken down like this:

The most stable markets are in the Midwest and the Inland Northeast.

The medium volatility markets are in South

And the highly volatile markets, which we avoid  are in the West, and the Coastal Northeast - like NYC and Boston.

I’m going to guess that you’ve never heard regional home price VOLATILITY described before. 

Now, you might wonder, if the Inland Northeast tends to have more stable, long-term pricing than the South, why don’t we favor it more than the South.

Well, stable prices are important. But having high rent ratios and having strong LL-tenant laws and high in-migration make the Southeast a strong investment area.

Of course, when I describe regions this broad there tend to be some outliers and exceptions.

Now, it’s going to be interesting to see how America’s regional pricing level AND its level of stability changes over time.

That is set up to change at a faster pace, and you might know why that is - why these geographic regions could see, really more of an amalgamation of characteristics and that is due to… you MIGHT know what I’m going to say. WFH.

That actually is not an initialism or acronym for some kind of thinly veiled profanity. It is work-from-home. 

The rise in Work From Home Trends could really start to blur these lines over time. Now, it would be a trend that moves slowly. 

But consider, that, in January of 2023 six times more work was happening remotely than it was in January of 2019, that’s according to a company called WFH Research.

In fact, in major cities like New York and Chicago there are now more job postings for flexible arrangements than at any point during the last three years, according to the NBER & Bloomberg.

Now, that’s of less concern to you, the residential property investor. It might just be an interesting trend and create more demand for your product - HOMES!

But it could very well put downward pressure price pressure on higher-priced areas like Manhattan, Brooklyn, and San Jose… and more upward price pressure on those lower cost areas where you & I tend to buy property.

But with more Americans working from their homes, it is bad, bad, bad for downtown commercial landlords and some central business district companies who survived the 2020 lockdowns… but STILL haven’t fully bounced back three years later. Gosh!

GetRichEducation.com is where you can learn more about how to invest in real estate the right way, the profitable way - with articles that I write myself, and our videos and more. It is all free.

If you would like to contact us, with a question about the show, you can do so at GetRichEducation.com/Contact

More straight head, including two ominous signs for the future of the housing market. I’m Keith Weinhold. You’re listening to Episode 444 of Get Rich Education.

______________________

Welcome back to Get Rich Education. I’m your host, Keith Weinhold.

 

We are keepin' it real here at GRE. Building real wealth in the real world with real estate.

 

See the, uh, emphasis on the world “real”. Back in December, on Episode 427, you’ll remember that we did a show devoted to Metaverse Real Estate Investing… and the consensus of the guest & I were that it is risky and in most cases, ill-advised to get involved.

 

Well, it was recently announced that both Disney and Microsoft have shuttered their metaverse projects. 

 

Popular virtual worlds have seen steep drops in interest, with the median sale price of real estate in Decentraland plummeting 90% YoY.

You know, with the real thing, even if your real estate lost value, which isn’t common, it can’t go down too far. You’ve still got the value of the land underneath it and the value of all the materials that your property is built with.

What about national home prices for the rest of this year? Of course, it’s always a little odd to discuss national home prices with the tens of thousands of US markets. 

 

It’s kind of like coming up with a national weather average.

 

Here are the MAIN factors governing national home price direction this year.

 

The headwinds to price growth - the threats are #1:

1 - We had banks fail early this spring. More regional bank fallout could contribute to tightening lending standards. Tightening lending standards would mean that fewer borrowers could qualify, and that could reduce demand. Reduced home demand is NOT good for prices. So that’s ominous housing threat number #1.

But even if that happens, regional banks are often making COMMERCIAL real loans.

The government-backed loans you’re getting for residential are more desirable - we’re talking VA, FHA, rural housing mortgage, and conforming loans that are sold to Fannie Mae and Freddie Mac - which are often those types that you’re getting for 1-4 unit income properties at GRE Marketplace.

All government-guaranteed stuff.

The second substantial threat to some good home price appreciation this year is that there is a small chance of a big "job loss" recession.

With it being over a year since the Fed started raising rates, there is a lag effect and we should some at least a few more job losses as we head toward a likely recession.

They are the two ominous threats.

The tailwinds to price growth - these are the strengths for rising home prices, there are 3.

The first one is that labor & supply inflation remains elevated, and well, that obviously keeps upward pressure on home prices.

The second positive, or strength for home prices is - like I touched on earlier - increasing spring homebuyer demand hasn’t been factored into the numbers yet - and that always boosts prices.

And then the third strength and underlying factor to boost home prices this year is really, what I’ve called “the crash” which has caught some people off guard.

Yes, this generation’s housing crash ALREADY happened. It is that SUPPLY CRASH of about 60% in available American homes to buy.

We have such a low housing supply, like we’ve discussed in-depth elsewhere on the show so I won’t elaborate on that, but that changes nearly everything and it is one reason that home prices are still so resilient today. Still more demand than supply.

National home prices have begun heading up a little, and there are a few more opportunities than there are threats that prices should keep rising, but I don’t expect any huge gain, like no 10% gain nationally this year. I don’t see how that can happen at all.

Now, you’ll notice that, mortgage rates, - I didn’t put them into either category - either the upcoming housing threats or strength and that’s simply because we don’t know where mortgage rates are headed.

They’re so hard to predict so that’s why I’m not forecasting where I think that mortgage rates will go.

You know how when you’re under contract to buy a property and you & your mortgage loan officer are having that strategy session on WHEN you want to lock in your rate.

At least one time in your life - and I sure have in mine - you’re tempted to ask your MLO where they think rates are going… well, like I said, they’re just really difficult to forecast. 

Your MLO often doesn’t know where they’re going to go.

Do you remember, last year, or I sure do because I follow this stuff closely, the number of people and professionals that said mortgage rates would be 8 to 10% by Spring of 2023?

Yeah, quite a few people said that emphatically. They’re about 6.3% today.

Before I get back to real estate, the quarter recently ended so let’s whip around the asset classes like we do sometimes at quarter-end.

Tech stocks got a boost in the first quarter, that helped the S&P be up 7%.

 

Stocks of the tech giants that are leading the charge in          AI-powered search, Microsoft and Alphabet, outpaced that.

 

Meanwhile, the second- and third-largest bank collapses in US history happening within 48 hours hurt bank stocks.

 

Bitcoin was up 72% in Q1. Do we say that crypto winter is over when bitcoin hits $30K?

 

Oil prices were flat, beginning & ending the quarter at around $80.

 

Gold was up 7%, partly due to the bank failures.

 

Silver rose 4% for the quarter.

 

You know what’s been a really bad investment for the last decade, despite all the good things that you hear about its promise - investing in physical silver.

You read that there’s now more silver above ground than below ground.

 

10 years ago, silver was worth $25 dollars an ounce and it’s still worth… $25 an ounce.

 

That’s even worse than it sounds to laypeople. If you’ve held any investment for 10 years like that and it’s worth merely the same amount of dollars, inflation just chomped about half of it away.

 

We might have had 40 or 50% or more real inflation in the last decade… and silver bars didn’t pay you an income stream during that time either. What a poor performer!

 

Though I think that SOME precious metals can still be a good STORE of value.

 

That was whipping around the other asset classes in Q1 of this year.

 

One place to park your money that is NOT a good store of value is… savings accounts and CDs and MMFs.

 

Their interest rate, though it might feel good getting paid up to 4% or 5% on those, it ensures that you’re losing prosperity every day… because CPI inflation is higher than that, and then the real rate of inflation is higher than that yet. True inflation might be double your savings account rate.

 

Instead, the smart money BEATS inflation and all the time, a little more of the smart money is GETTING OUT OF DOLLARS too with these rising concerns about foreign nations doing more of their business in yuan or another currency outside of the petro dollar.

 

The dollar is currently under a lot of stress, besides just the inflation. Dollars in savings accounts & the like… don’t just lose to inflation… they’re actually keeping your prosperity denominated in dollars, which a growing chorus feels precarious about right now.

 

Is the dollar about to lose its world reserve currency status? I don’t know. I think people having been calling for that since shortly after Richard Nixon took us off the gold standard in 1971. 

 

Instead, what about a fully renovated or brand new investment property, with a rent-paying tenant placed and its all under professional management for you.

 

That way it’s low hassle for you, yet because you own the asset directly, you have the CONTROL without the hassle, and you’re often paid those five ways.

 

This way, not only are you getting out of dollars with your down payment - another way to say it is that you’re converting your dollars into real estate…

 

Then on top of that, when you borrow the dollars for 75 or 80% of the purchase price… you’re getting out of dollars so much that you’ve essentially fund a way to go negative with your dollar position on that property.

 

When you buy through our network, since the property is new or renovated, you should often expect little or no ongoing repair or maintenance expense in the early years.

 

And here’s the thing that some investors overlook. You may not have an CapEx expense at all. Those big capital expenditures like a new roof or windows or a furnace.

 

That’s because when you buy new or rehabbed and you consider that your hold time often isn’t more than 7-10 years due to equity accumulation and leverage ratios, as you lever up into another property, you can leave the Capital Expenditures to the next buyer when you sell.

 

So, these are some reasons why buying residential real estate makes a ton of sense in this environment. 

 

Will these next five years be as lucrative as the last five years? No, I really wouldn’t expect that - that’s because of the historically high price runup these past few years.

 

But I still cannot think of a better place to be than that strategically-chosen real estate.

 

You can go ahead and get started looking at some properties in markets and connect with our free investment coaching there if you so choose. 

 

That’s all at GREmarketplace.com

 

Hey, I really had a great time chatting real estate and everything else with you today.

 

Until next week, I’m your host, KW. DQYD!

 

Direct download: GREepisoded444_.mp3
Category:general -- posted at: 4:00am EDT

HGTV Star, Tarek El Moussa joins me today. Incredibly, he got into TV with no experience and no contacts. What a story!

Apartment and multifamily construction is staying heightened. Conversely, few new single-family homes are being built.

We’re now hiring at GRE.

Tarek hustles. His life took a turn when he attended a motivational Tom Ferry real estate seminar.

To flip a property, he began to identify distressed properties with expired listings. Today, he tells us why he actually targets pending listings for acquisitions.

When he got a show with HGTV, Tarek was only doing his first-ever flip. He also didn’t have the money to acquire distressed property for flips.

Tarek didn’t even know how to flip! But HGTV immediately wanted him to flip 13 houses in 10 months.

Tarek is best at finding and negotiating deals. He outsources other tasks.

He chose contractors that specialize in fix & flip renovations. 

Tarek discovers them by looking at rehabbed property listings, calling the sales agent, and asking for the contractor’s name.

Long-term, we discuss being an active flipper vs. passive real estate investor.

Today, Tarek and his wife star in HGTV’s “The Flipping El Moussas”. 

He also has a: real estate syndication, solar company, flipping summit, flipping course, and more. 

Resources mentioned:

Show Notes:

www.GetRichEducation.com/443

HGTV’s “The Flipping El Moussas”:

www.hgtv.com/shows/the-flipping-el-moussas

Homeschooled by Tarek: www.HomeSchooledByTarek.com

TEM Capital: https://temcapital.co

The Flipping Summit: www.theflippingsummit.com/home-page-1

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode443_.mp3
Category:general -- posted at: 4:00am EDT

Get started with new-build Florida duplexes, triplexes, and quads right here

Conventional personal finance says that you should be able to put in your time, effort, and energy when you're young.

When you're older, you can live a great life knocking back drinks served in coconuts.

That's being severely threatened.

Throughout history, some humans have perpetrated malicious time theft on other humans. Murder and slavery are extreme versions.

You're likely the victim of more subtle versions.

If you're working at a job, then you're selling your time, effort, and energy into the marketplace.

The proxy (currency) that you're receiving in exchange for the finite resources that you expended tangibly represents what you've sacrificed.

With dollar inflation blatantly debasing your currency from beneath you, your human life capital is being stolen.

Invest in what’s scarce and take real world resources to produce—real estate, gold bitcoin. Avoid what’s abundant and easy to produce—dollars and stocks.

I play an audio clip of Fed Chair Jerome Powell’s attack from Elizabeth Warren on raising interest rates. Last week, the Fed hiked rates for the 9th straight time.

Florida builder of rent-to-own properties joins me - SFRs in the mid-$250Ks up to fourplexes.

Their build times have been reduced. They’re still paying a higher price for concrete.

They’re building smaller, entry-level rental properties that you can buy and have them manage.

The builder currently provides income property in: 7 southwest Florida markets, Jacksonville, Ocala, Palm Coast, Inverness, and Citrus Springs.

Square footages are falling.

Their site selection and stringent building codes are hurricane-resistant.

Until at least April 15th, 2023, they’re offering investor buyers 2% of the purchase price at closing (buy down your rate to ~5.75% today) and two years of free PM. Get started here.

Our in-house Investment Coach, Naresh, can help get you started. At times, he is paid a referral fee. This is in order to keep it free for you.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/442

Get started with new-build Florida duplexes, 

triplexes, and quads right here

Fed Chair Powell vs. Senator Warren video:

https://youtu.be/Y-IK0xdcRW4

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Inflation is not only stealing your prosperity - it’s worse than you think… IT’S even stealing your time. 

 

I’ve got some new perspective on how you can stop that from happening. Then, a fresh opportunity for incentives on path-of-progress income property in a great market. Today, on Get Rich Education. 

 

Welcome to GRE! From State College, PA to College Station, TX and across 188 nations worldwide, the VOICE of real estate investing since 2014. I’m Keith Weinhold and this is Get Rich Education. 

 

Inflation is a TIME thief. It’s stealing your time.

 

You know, here’s the problem. CW says that you should be able to put in your time, effort and energy when you’re young and live a great life when you’re older - maybe even live the life of your dreams someday.

 

But postponing things until a nebulous someday isn’t actually so great - and even THAT is being seriously threatened for you.

 

Look, throughout history, some human beings have perpetrated time theft on other human beings. 

 

Now, extreme versions of time theft are murder and slavery. YEAH, that’s stealing your time.

 

But you’re likely the victim of more SUBTLE versions of time theft. If you’re working at a job and you’re selling your time, energy and effort into the marketplace…

 

Then the proxy - the money - that you’re receiving back for your human life expended - that money tangibly represents the time that you gave up.

 

That irreplaceable, unreplenishable highest order resource of time, that you gave away.

 

Well, with dollar inflation blatantly debasing your money away from beneath you, your human life capital is being stolen. This is evil.

 

Now, look. “Good money” is something that doesn’t degrade over time. Let’s look at this historically together & then I’ll bring it up to the present day for you.

 

Centuries ago, Europeans landed in west Africa. First, it was the Portuguese in the 1400s. The Europeans found that west Africans use beads for money.

 

Well, Europeans soon found that the beads are really cheap to produce in Europe but expensive to produce in Africa.

 

Well soon, they brought enormous quantities of beads into Africa and they purchased EVERYTHING valuable there.

 

There was NO WAY for beads to remain as money in Africa, no matter what the feelings of the bead holders were.

 

Anyone that kept insisting to use the beads as money completely lost their purchasing power. In effect, the beads ceased functioning as money.

 

Does that sound like any currency that you’re familiar with - any dollars or euros that you’ve got in your wallet today? Are you drawing any parallels here?

 

Now, rather than beads, gold became a popular currency for millennia - because gold is beautiful, durable, and it’s expensive to mine & produce across cultures - and it still is. 

 

But as we reached modernity and we’re no longer in a world where everyone lives within 25 miles of where they grew up, gold fell out of favor as a currency - though it’s still a good STORE of value. Now you transact interstate and internationally more often. 

 

Jet travel became common. Paper money allowed you to more easily move your value across space.

 

Today, you can electronically move dollars across space faster. But you can’t move dollars or really any sovereign currency very well across TIME… and that’s because of INFLATION.

 

Compared to 100 years ago, today’s dollar has about 3% of it’s value from a century ago.

 

So if you held dollars under a mattress for 100 years, you’ve lost the vast majority of your wealth.

 

If you held dollars under a mattress for 10 years, you’ve lost substantial wealth.

 

Lately, if you held your dollars under a mattress for 3 years, you’ve lost substantial wealth - or even if you held them in a CD or what they call a high-yield savings account.

 

What makes a good money is a good proxy for human time. You’ve got to be sure that your money doesn’t degrade over time & that you can store it and use it.

 

You need your medium of exchange in order to track your expended time.

 

When we talk about perpetrating time theft, your government - whatever nation you live in - they can push a button, print billions or trillions more in currency to pay for social programs and pay for infrastructure programs or another stimulus package or QE or to send dollars & weapons to Ukraine, and the Fed buys trillions in treasury securities and mortgage-backed securities, the $2.2 trillion CARES Act. 

 

All those processes are inflationary. All this currency creation dilutes the currency that YOU hold.

 

That’s why that $20 bill that’s in your wallet right now was worth a tiny bit more yesterday than it is today.

 

And if your $20 bill stays in your wallet overnight tonight, it’s going to be worth a little bit less tomorrow.

 

What the easiest way to pay for a new $1.2 trillion government program? Just print $1.2 trillion dollars. They keep doing it. It’s why America has $32T in debt today.

 

Well, what often happens when your government pushes buttons to electronically create tons of dollars or pounds or euros or real or yen? More dollars get circulating.

 

You and the money that you have traded your precious life time for - you just got diluted.

 

A dollar is a low fidelity way for you to store your finite time and your finite life effort.

 

You might pledge allegiance by creating value for others in the workplace everyday.

 

But don’t pledge allegiance to the dollar. Your fealty should be toward accepting your INCOME in dollars but then, quickly getting out of them.

 

Are you upset? You should be totally upset. Every single day, pieces of your life, energy, and ambition are being stolen away from you. That’s immoral.

 

Now you’re being forced into investing. That’s what happens to people that are conscious of dollar dilution and how insidious, and persistent and severe and surreptitious it all is. 

 

Now you need to go chase wealth preservation… with a sense of urgency! You’re being pushed out on the risk curve.

 

The S&P 500 is not the answer. With say, a 10% return over time, subtract out 5% inflation, subtract out emotion, volatility, subtract out taxes, subtract out fees, and your real return is less than zero in stocks.

 

See, dollars and stocks can be easily created and diluted. They can just print more - debasing what you’ve already got there.

 

Conversely, real estate, gold, and bitcoin cannot be easily created or diluted. All three take proof of work. All three take real world resources to create - real estate, gold, and bitcoin. 

 

If you’re not familiar with bitcoin, it takes mining hardware, software, and electricity to create it - real world resources, and there will only ever be 21 million bitcoin.

 

Alright, so what can we learn from this? Unlike west African beads in the 1400s and 1500s which could be diluted and unlike dollars and stocks today which can be easily diluted, real estate, gold, and bitcoin cannot.

 

Gold is really just a wealth preservation instrument, only tracking inflation. It’s not proven to be accretive or additive to your wealth.

 

Bitcoin has some promise. But it’s still a nascent technology. It’s only been around 15 years. I like it but there’s still a lot of questions about it.

 

You’ve got to find a way to stop the time theft! What are you gonna do?

 

If you aren’t upset enough about it, think about how the theft of your time through currency inflation took away more life experiences with loved ones that you could have. 

 

You could spend more of your one finite life on this earth with your mother, father, spouse, kids, church, hobbies, on the boat, at the lake, whitewater rafting, playing pickleball anything.

 

Certainly be offended and even a little outraged at the surreptitious time theft through inflation.

 

This is why… we are… real estate investors - and we get loans for property that produces income. 

 

Now, you aren’t just HEDGING inflation. You’re profiting from it. With income property, you’re performing something ADDITIVE TO YOUR life time.

 

That’s the Inflation Triple Crown. The asset holds it’s own with price inflation. Your debt is being debased by inflation & paid back by the tenant… and thirdly, your income - that property cash flow outpaces inflation because the biggest payment - the mortgage principal & interest, stays fixed & inflation makes it easier to pay back as more & more dollars keep coming into circulation as over the years & decades, everything spirals higher - prices of all types, wages, salaries, expenses, taxes, everything.

 

This all penalizes the saver and favors the debtor. Be a strategic debtor with real estate. Win the Inflation Triple Crown. Win your time back - and then profit on top of that.

 

Now you know that inflation is stealing not just your prosperity… but your time… and now you know what you can do about it. 

 

Most people don’t do anything about it. You have got to. It would have sounded like a bit of an exaggeration until you heard my explanation today - but you’re actually saving your own life.

 

Well, inflation, interest rates, and employment have been huge issues in the economy for about two years now.

 

Jerome Powell & the Fed began raising interest rates to control inflation a little over a year ago.

 

Let’s listen in on how heated and contentious this is all getting, compounded by bank failures. 

 

This is about 4 minutes long, and then I’ll be right back. Listen to this confrontation.

 

This really summarizes the crux and intersection of a lot of these issues. It’s Fed Chair Jerome Powell testifying in front of the Senate Banking Committee’s Elizabeth Warren of Massachusetts. It’s a real clash over inflation:

 

[Play Powell-Warren clip]

 

Yeah, there we go. Elizabeth Warren would rather keep more people employed and have inflation spread across everyone rather than the other way around.

 

I think that the important lesson for you is that, inflation is going to keep happening. That’s a really safe bet, whether the level is the 2% Fed target or the 6% CPI that we’ve had lately.

 

Invest in what’s scarce and avoid investing in what’s abundant and multiplying.

 

Invest in what’s scarce and takes real-world resources to produce - that is predominantly real estate, maybe with a touch of gold or bitcoin. 

 

Avoid what can be easily printed and diluted - dollars and stock shares.

 

What are homebuilders seeing today, is builder sentiment up off the bottom, and how is rental demand now that we’re deeper into 2023? 

 

Let’s talk to our builder-provider guests about that. They have a strong incentive to offer you, the GRE listener. They are still building new construction rental homes in the mid-200s price point in Florida.

 

Let’s get caught up on builder sentiment and look for opportunity in in-migration hotbed Florida.

_________________

 

Yeah, can you tell that they know what investors need? If you think that it sounds like the right “Real Estate Pays 5 Ways” opportunity for you amidst high inflation, I’ve got some more good news for you.

 

After our southeastern US provider was on the show here, I spoke with them again, and they’ve extended those generous incentives for your 2% closing cost incentive & 2 years of free PM until April 15th of 2023.

 

So you do have to act soon. Will it be extended beyond April 15th? We’ll see. You could ask, but they’ve been pretty generous already.

 

And also, this is an opportunity to work with our free, in-house Investment Coach, Naresh here at GRE to easily walk you through getting started with finding just which Florida market might be write for you, helping your write up the purchase contract, inspection, appraisal and all of that. 

 

Now, you might have been an income property buyer that’s worked with Naresh already and maybe you feel a little bad that he’s spending his time helping you for free, well, you shouldn’t.

 

I have endeavored to really reduce the friction for you by always finding a way to make things free and helping you add more rental property to your portfolio and in the spirit of creating less friction for you, often, though not always, the property provider helps Naresh with recompense in the form of a referral fee.

 

So, Naresh does volunteer some of his time and resources for you, but he often is made whole that way, keeping it free for you.

 

So, we are really making it easy for you here with low property prices, strong builder incentives and free investment coaching.

 

Your opportunity to get the new-build, durable Florida product with management & incentives & free coaching. If it were any easier, someone would even make your down payment for you.

 

Well, no one’s going quite that far here.

 

If it sounds interesting to you, this is the window of opportunity. You can get started at GREmarketplace.com/Southeast.

 

Until next week, I’m Keith Weinhold. Don’t Quit Your Daydream!

 

Direct download: GREepisode442_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/441

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode441_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/440

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode440_.mp3
Category:general -- posted at: 5:00am EDT

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:

www.GetRichEducation.com/439

Cashflow Ninja

Be your own bank:

YourOwnBankingSystem.com

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Will you leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” 

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode439_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/438

Memphis & Little Rock property that 

cash flows from Day One:

www.MidSouthHomeBuyers.com

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:

www.JWBrealestate.com/GRE

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:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode438_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/437

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

Book recommendation:

Economics in One Lesson

Find NYC apartments:

StreetEasy.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

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


The nation's capitol, Washington DC, has a strong influence beyond the Mid-Atlantic region. The Baltimore metro area is slowly merging with the DC metro.


Droves of Americans work in DC and live in Baltimore. It's a short commute and offers more space and affordability.

 


And then, with Pennsylvania being my home state, Philadelphia and Pittsburgh and have similar advantages. We’re talking about…

  • Diverse economies

  • Advantageous geographies

  • Reasonable cost of living

  • And substantially more landlord-friendly to you than NYC

 


Yes, GRE is hosting a live show on these markets. And typically on these action-oriented live events, we have a few real property addresses of freshly-rehabbed properties with tenants already placed, PM already in-place if you so choose and more.

We’ll make it real with real, actual addresses. You could reserve a few if you so choose.

 


Tune and don't miss:

  • The Professional Turnkey Provider Introduction

  • We’ll have market talk on Philly, Baltimore, and Pittsburgh

  • And look at that active inventory.

Hey, special thanks to the extraordinary knowledgeable Beth Clifford today.

Now, unless you have $250M to sink into skinny Manhattan skyscrapers, then…

I hope & am looking forward to seeing you on Thursday night for some of the best ratios - rental properties with a high rent income in proportion to a low purchase price.

Rather than $250M, it’ll take as little as $30K for a down payment and closing costs on some of these properties at Thursday’s live event.

Amidst this continued scarce supply of inventory in America, we’ve pulled some strings and found a good selection for you in Baltimore, Philly, and Pittsburgh.

This GRE live event takes place Thursday February 23rd at 9:00pm ET.

I’ll see you there. It’s free. It’s interesting and it promises to be lucrative for you.

Sign up now while it’s on your mind at GREwebinars.com

Until then, I’m your host, Keith Weinhold. Don’t Quit Your Daydream.




Direct download: GREepisode437_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/436

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:

www.MidSouthHomeBuyers.com

Find cash-flowing Jacksonville property at:

www.JWBrealestate.com/GRE

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

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.


I wouldn’t totally count it out that we could have a mild recession LATER this year. But not soon.

 

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:

 

  1. Charlotte

  2. Cleveland

  3. Tampa

  4. Dallas

  5. Nashville

  6. Jacksonville

  7. Kansas City

  8. Miami

  9. Atlanta

  10. Philadelphia

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!




Direct download: GREepisode436_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/435

GRE listeners get a 10% discount My Property Stats 

real estate analysis software:

MyPropertyStats.com/GRE

Get started with our free coaching on your next 

GRE Marketplace income property purchase at:

GREmarketplace.com/Coach

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode435_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/434

Explore Detroit income property:

GREmarketplace.com/Detroit

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode434_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/433

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

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:

 

  • Setup of LLCs complicates your life. Maintaining a registered agent, Articles Of Incorporation, having separate accounts, tracking expenses with separate credit cards, paying annual fees for everything - depending on how many LLCs you have and how you structure your life - it can wear you out.

 

  • The second reason you should ask yourself, “Should I even set up an LLC?” is because you might not have many assets for a litigant to go after. Retirement accounts have certain protections already. Equity in a property could be low-hanging fruit for a plaintiff attorney if someone gets a judgment against you. But since the Return From Equity is always zero, what would you have much equity in a property anyway?

 

  • The third reason you should ask yourself, “Why should I even set up an LLC?” is that frivolous or slip-and-fall type of lawsuits are rare. Not only have I never been a party to one, I’ve never even heard of any investor friend or associate having one - and I talk to a lot of people. You probably haven’t heard of one either.

 

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.

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***AD RESOURCES*** 

 

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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! 




Direct download: GREepisode433b_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/432

Join me live on tomorrow’s car wash webinar:

GREwebinars.com

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode432_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/431

Learn more about Panama coffee farm investing:

GREmarketplace.com/Coffee

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode431_.mp3
Category:general -- posted at: 4:00am EDT

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:

www.GetRichEducation.com/430

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):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Top Properties & Providers:

GREmarketplace.com

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

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.

 

You don’t have to. But consider it.

 

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!

Direct download: GREepisode430_.mp3
Category:general -- posted at: 4:00am EDT

Greed is defined as an “intense and selfish desire for something, especially wealth, power, or food”. 

Should wealth be redistributed so that everyone is equal?

“I have never understood why it is “greed” to want to keep the money you have earned but not greed to want to take somebody else’s money.” -Thomas Sowell

When I was a fresh college graduate, I resented the rich. I discuss the catharsis that made me change my mind.

Our guest, Doug Casey, believes that college reinforces the wrong wealth mindsets.

Today, one often hears that one should “pay their fair share” of tax. What does this really mean?

If one obtains wealth with integrity, that wealthy person makes everyone else wealthy. I give the example of Jeff Bezos and Amazon.

Learn why Doug believes that Social Security is a redistribution scam.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/429

Learn more about Doug Casey:

www.InternationalMan.com

His YouTube show is: Doug Casey’s Take

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Should we “eat the rich”? Are wealthy people greedy? And where does that belief come from? Should everyone be financially equal and taxed equally too. I answer, “Are rich people greedy?” Today, on episode 429 of the GRE Podcast.

 

Welcome to GRE! From Hartford, CT to Weatherford, TX and across 188 nations worldwide. You’re back where FF beats DF. I’m Keith Weinhold. This is Get Rich Education. Welcome to the last show of the year.

 

Are rich people greedy?

 

First, what’s the definition of greed? Well, the world’s best known search engine puts the Oxford dictionary definition at the top.

 

Yeah, I think this is a good definition. It says greed is:

 

An intense and selfish desire for something, especially wealth, power, or food. That’s the definition. And then the example of the use of the word in a sentence is “mercenaries who had allowed greed to overtake their principles”.

 

You know, the example really hints that greed is a corruption of sound morals or principles in order to get more for oneself. 

 

Greed is not good. 

 

Now, for some reason, actors and entertainers can make gigantic salaries and high-flying paydays but people don’t seem to resent them as much as entrepreneurs or CEOs that make a lot of money.

 

For some reason, the actors and entertainers as seen as lovable and the entrepreneur or CEO is deemed greedy.

 

Recently, soccer star Cristiano Ronaldo became the highest-paid athlete ever at $200M per year.

 

Yankees slugger Aaron Judge $360M over nine years.

 

Those athletes entertain others. I like watching sports. But I don’t know that they’re advancing society like the innovation that Steve Jobs brought to Apple.

 

Yet it seems like an entrepreneur could get more criticism.  

 

Now, there are bad examples too. I specifically remember when Shark Tank’s Kevin O’Leary criticized crypto. Then he seemed to do a 180. 

 

Later, we learned that Kevin O’ Leary accepted $15M to promote the crypto company, FTX, that had horrible financial records and was committing fraud. 

 

Was O’Leary greedy?

 

Then you & I need to ask ourselves, if YOU were offered $15M to do crypto commercials, then would you be incentivized to put your $15M on-hold while you did due diligence on a company that even had pro sports arenas named for them. 

 

So, when we think about what is & what isn’t greed, you also need to think about what YOU would do in these situations & hope that YOU would do the right thing. I do too.

 

Do the right thing before you do things right.

 

And, as you know from being a listener to the show here, I don’t take money from just ANY sponsor. They must be aligned with GRE’s mission here of financial freedom over debt freedom and prioritizing ideals like cash flow and prudent use of leverage.

 

Most of my income does not come from the sponsorship of this show, not even close, so I can BE selective. 

 

But what if that were one’s primary income source. You can begin to understand how they would be less selective. Could THAT degrade into greed?

 

Now, when it comes to wealth, poverty & greed, think through the prism of “redistributions of wealth”. 

 

And, in just a minute here, this is going to lead us to the greatest quote about greed that you’ve ever heard in your life.

 

How about something like college student loan forgiveness, which, depending on the borrower’s status is up to either $10K or $20K. It looked like that was going through and then it got held up in the courts.

 

Well, what about those that didn’t go to college because they didn’t want debt.

 

But now, if every American effectively gets taxed at a higher rate to pay for student loan forgiveness, then the people that decided not to go to college in order to avoid the debt have to pay for those that did decide to go to college & take on the debt.

 

Now, as you hold that thought, here is what American economist and academic Thomas Sowell said about greed. Sowell said:

 

I have never understood why it is greed to keep the money you have earned but not greed to want to take somebody else’s money.

 

Yeah, gosh that’s good. And the first time I heard that years ago, I found it remarkably thought-provoking.

 

Therefore, you can at least ask the question then, just posit the question, is it greed for someone to EXPECT student loan forgiveness?

 

Well, International Man Doug Casey is waiting in the wings here. Later on the show, he & I are going to volley this “eat the rich” topic back & forth.

 

BTW, have you ever realized that no one wants to be called rich or poor. If you call someone “rich”, they’re uncomfortable and they like to spurn what you just said.

 

If you call someone poor, that’s seen as a pejorative & quite hurtful.

 

Everyone wants to be known as middle class. No one want to be called rich or poor - but almost anyone would rather have more money than less.

 

The song says, “Mo money, mo problems.” But I think most people would accept $10M if you offered it to them right now. Yeah, I’ll try living with that problem.

 

Well, when Doug comes on with my shortly, I’ll tell you about my cathartic experience with “Are wealthy people greedy” - and how my turning point was about that light bulb moment with regard to “opportunity”.

 

Virtually all 8 billion people on this earth have the opportunity to make their life better.

 

But I think it’s important to acknowledge that some people have more opportunities than others.

 

The United States is one world nation with more robust opportunities than average.

 

Look, if you were born in the US, or even if you emigrated to the United States, globally, you won the “opportunity lottery”. 

 

That’s because the US only has 4% of the world’s population.

 

It’s not much different in Canada, which has less than 1% of the world’s population.

 

Then, within the US, I won what I call the “parent lottery”. No, it is not because I was born wealthy. I was not. Not even CLOSE.

 

It’s because I was born to two parents that provided a stable home, were married & committed to each other before they had me, and nurtured the environment where I could thrive & fail & succeed & learn and not have to deal with dysfunction of any kind.

 

I’m really grateful for that.  

 

Now, what about real estate investors today? Do you deserve to prosper?

 

Think about how made time to listen this show because you care about your future.

 

Your future is worth caring about… because you’re going to spend the rest of your life there.

 

Then you established good credit in order to get a mortgage loan.

 

Then you took on the risk of repaying a mortgage loan.

 

Then you took on property owner risk during COVID and inflation and a possible recession… all to do good and provide housing for others.

 

So… do you deserve to prosper and build wealth for doing all of that for others? For strangers even?

 

Hey, if you did, you overcame many people’s almost inherent laziness. Got up early, worked hard at times, took risk, how about confronting your PM? Or confronting your tenant?

 

If you learned how to make the world a better place & helped others, is that greed to prosper? No. Not at all.

 

Our guest, prolific author & thought influencer, International Man Doug Casey, I saw in an article where he quoted his contemporary Rick Rule. Rule said: “Eat the rich. Prepare to starve.”

 

That gives you a clue as to where Doug Casey is coming from. That’s straight ahead.

 

I’m Keith Weinhold. There will only ever be one GRE Episode 429… and you’re listening to it.

 

Direct download: GREepisode429_.mp3
Category:general -- posted at: 4:00am EDT

Higher returns and lower risk are expected with carefully-chosen real estate.

Two hosts put me on the hot seat about rental property. I’m the guest. You get to listen to one of my recent interviews in the media today.

Real estate deals are not as attractive today as they were 5-10 years ago. But it’s still the best place to invest your dollars today.

The property is only the fourth-most important thing in real estate investing. I discuss the three bigger ones.

I detail why real estate returns are multiples higher than those from the S&P 500.

Learn why a total return of anything less than 20% in real estate is actually disappointing. 

Housing inventory is up year-over-year, down over the past five years.

From 1 (worst quality) to 10 (best quality), a 4 yields the best cash flow in long-term rentals. I describe why.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/428

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode428_.mp3
Category:general -- posted at: 4:00am EDT

Metaverse real estate is virtual. Can you make money with it?

First, I discuss updates to 3-D printed homes and Boxabl homes.

Next, our guest, Steve Hoffman, describes that metaverse is a virtual space where you can interact with virtual objects.

There is no single metaverse. There are apps in the metaverse, like Second Life and Decentraland.

Learn what makes a piece of metaverse real estate valuable or worthless.

You often buy NFTs on the blockchain.

With Upland, you can buy NFTs of real properties, like the Statue Of Liberty or Dodger Stadium.

Our guest feels that metaverse real estate investing is highly speculative. It is risky and often akin to gambling.

Metaverse economies are subject to monetary inflation.

Does metaverse RE have any value?

Steve runs the global innovation hub, Founders Space.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/427

Learn more about Steve Hoffman:

FoundersSpace.com

A current popular metaverse app:

https://decentraland.org

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode427_.mp3
Category:general -- posted at: 4:00am EDT

At times, 3-D printed homes, modular, and shipping container homes are not the answer for both single-family home and apartment construction.

The promise of new truss and framing technology can substantially speed up conventional construction.

This can solve many problems at once: housing shortage, labor shortage, and stubbornly persistent materials supply shortages.

FrameTec is a technology that builds the roof truss, floor truss, and walls all in a forthcoming Arizona factory.

Guests Damion Lupo and David Morris tell us about it today.

The FrameTec process uses solar technology and reduces material waste.

Learn more at FrameTec.com. It’s possible that there is still room for accredited investors. This is Made In America technology.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/426

Learn more about FrameTec:

www.FrameTec.com

Join me live on Thursday’s Florida properties webinar:

www.GREwebinars.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode426_.mp3
Category:general -- posted at: 4:00am EDT

Get an update on how the work-from-home trend is good for residential RE and bad for office RE. 

Office space values are down 17.5% from their recent peak.

Americans must now earn at least $107,281 to afford the monthly mortgage payment on a median-priced home.

The NAR expects 10% home price appreciation this year, 1% in 2023, and 5% in 2024.

The tiny home movement is both architectural and structural. It’s defined as a home of 400 sf or less.

Tiny homes are hard to find. In the US today, just 0.3% of listed homes are tiny homes.

You can own a new-build tropical tiny home near the beach in Nicaragua for under $200K.

Our own COO, Aundrea, bought one. She tells us about it.

It’s on Nicaragua’s west coast. It’s not just an isolated tiny home experience. 

There’s a community with a: restaurant, bar, bird watching area, butterfly garden, viewing tower, yoga area, and communal garden. 

Often, loans aren’t available for foreigners. Here, you can get 50% or 80% loans.

You can live in this tropical tiny home year-round, or keep it as a short-term rental. The provider can manage your rental.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/425

Get started with tropical tiny homes at:

GREmarketplace.com/tinyhomes

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode425b_.mp3
Category:general -- posted at: 4:00am EDT

The ideal inflation rate is zero just like the ideal theft rate is zero.

When lower inflation (7.7%) was recently reported, mortgage rates experienced a record daily drop.

I detail the implosion of crypto exchange, FTX. It was a Ponzi scheme. 2022 is the 2008 of crypto.

Garrett Sutton and his son, Ted Sutton, announce the father-son succession plan. They are attorneys that help protect your real estate from lawsuits at Corporate Direct.

Ted’s experience at a Chilean copper mine helped make him pivot from a mining engineering track and into law.

RE investors have three main lines of defense: 1) Ethical operations. 2) Insurance. 3) LLC.

Learn how to properly form and maintain an LLC.

Don’t try to win a lawsuit. Avoid it in the first place.

Learn why landlords get sued today.

Corporate Direct provides free 15-minute consultations.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/424

Corporate Direct protects your biz & real estate from lawsuits:

Corporate Direct 

Garrett Sutton’s newest book:

Veil Not Fail

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do this for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode424_.mp3
Category:general -- posted at: 4:00am EDT

A housing crash is upon us. But it may not be the kind of crash that you think. I explain what this sales crash means to the future of the housing market.

Caeli Ridge, President of Ridge Lending Group joins us. She gives an exact prediction about where and when mortgage interest rates will peak.

37% of homeowners have no mortgage at all. Among those with a mortgage, 85% have an interest rate under 5% per Redfin. They don’t want to sell and give up their rate, constraining supply.

It’s a nationwide lock-in effect. 

A housing PRICE crash is not expected. Existing homeowners can afford their mortgages and have record equity. This is reflected in the low delinquency rate.

The average age of first-time home buyers hit a record 36.

Caeli Ridge tells you how to get a lower mortgage interest rate with different loan types.

Investors keep their loan an average of 5-6 years.

Ridge offers mortgage loans specifically for investors: plain fixed rates, non-recourse, DSCR, asset depletion, bridge loans, commercial loans, cross-collateralization of residential properties, and the All-In-One Loan which operates like a first lien HELOC. 

See how much interest you save with the All-In-One Loan interactive simulator here: https://ridgelendinggroup.com/aio-loans/

Caeli sees lots of appraisals. They’ve all been coming in “on-value”.

When it comes to higher mortgage rates, get used to it. The long-term average is 7.7%. 

Ridge Lending is where I get loans for my own properties. You can use them too. Start at RidgeLendingGroup.com or (855) 747-4343. 

Resources mentioned:

Show Notes:

www.GetRichEducation.com/423

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.com

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for the show.

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode423_.mp3
Category:general -- posted at: 4:00am EDT

Get our wealth-building newsletter free—text ‘GRE’ to 66866.

Money is an abundant resource, not a scarce one.

If you believe that money is so scarce that it’s more valuable than time, I provide the solution to that quandary today.

Today’s guest, Victor Menasce, believes that today’s macroeconomic environment dominates local stories.

We discuss how to navigate today’s higher mortgage interest rate environment.

Banks could be on the brink of a concerning liquidity crisis today.

Should central banks set interest rates or can free markets perform that role better?

Learn what financial actions you can take in this era of global instability.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/422

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for the show.

Listen to Victor’s Real Estate Espresso podcast.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode422_.mp3
Category:general -- posted at: 3:00am EDT

Get our wealth-building newsletter free. Text ‘GRE’ to 66866.

You can help abolish the term “slumlord”. Profit by providing housing that’s clean, safe, affordable, and functional.

Compared to the world, US mortgage terms are so advantageous that they almost feel illegal. 

I compare this with: Canada, UK, Ireland, Spain, Australia, South Korea, Germany, France, Switzerland, and Japan.

Are we in a recession? There continues to be dissonance in the economy.

College enrollment keeps declining. But now, 46% of parents even hope that their child does not pursue a four-year degree after high school.

A woman faced with eviction released a bee swarm on law enforcement.

It costs $1.7M to build a small public lavatory in San Francisco.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/421

$1.7M public toilet in San Francisco:

https://www.theguardian.com/us-news/2022/oct/24/san-francisco-1-million-public-toilet

Woman being evicted releases bee swarm:

https://www.usatoday.com/story/news/nation/2022/10/20/woman-releases-bees-police-massachusetts/10549905002/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for the show.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode421_.mp3
Category:general -- posted at: 4:00am EDT

In times of high inflation, don’t rents have to collapse? Tenants are getting squeezed, paying more for food, gas, medical care, and everything else. Won't rents have to fall?

Will this create a crisis for landlords too? If tenants can’t pay the rent, landlords must still pay property expenses. 

Historically, what happens is opposite of what most think. So I explore what happened in high inflation 40+ years ago to forecast what will likely happen in the future.

There are three reasons why rents soar in high inflation: 1) tenants move down a class, 2) doubling up as roommates, and 3) today’s low housing supply and high demand.

Rents are up 12% year-over-year today for both SFRs and apartments.

Real Estate Pays 5 Ways™, not four or six.

Get started with income property in Baltimore, Philadelphia, and Pittsburgh at: www.GREmarketplace.com/Coach Our in-house coach, Naresh, will help you. His services are free.

Both urban and suburban properties are available.

Urban areas often have a high Walk Score.

The rent-to-price ratios in these three mid-Atlantic markets often exceed 0.9% and even 1%. Before you buy, you already have an inspection report, desktop appraisal, and placed tenant’s payment history in-hand. 

These rowhouses are often priced at a 20% discount. 3 bed / 1 bath is common.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/420

Get started with income property in Baltimore, Philadelphia, and Pittsburgh at: www.GREmarketplace.com/Coach

Rents In High Inflation:

https://www.realpage.com/analytics/rents-move-high-inflation-market-look-1970s/

Current US housing supply:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for the show.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode420_.mp3
Category:general -- posted at: 4:00am EDT

Are you a quitter? Today’s show can make that feel aspirational. Quit a job you hate for the work you love.

Author of “The Quitter’s Manifesto” and GoBundance Founder, Tim Rhode, joins me today.

For context on quitting your job, start with the I/O Quotient.

The Soul Sucking Meter: Are you being paid enough? Are you respected? Are you a good cultural fit at your workplace? How does it feel when you wake up to go to work? Could you do your job for decades? 

I quit my job for two main reasons: 1) Try it. 2) Be irreplaceable.

Tim describes that quitting your job is like catching the next trapeze. 

Want growth? Try something new and scary. You did this as a kid. For example, when you were 11 years old, you swam in water over your head. 

Take out a home equity loan before quitting your job. Put those funds into another bank. This builds your financial cushion during a lifestyle change.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/419

Tim Rhode’s book, The Quitter’s Manifesto:

QuittersManifestoBook.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Memphis property that cash flows from Day 1:

www.MidSouthHomeBuyers.com

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for this show.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode419_.mp3
Category:general -- posted at: 4:00am EDT

Homebuilder confidence is low. I talk to one today. Then, learn how a home is built.

Join our Jacksonville properties webinar Oct. 20th. Sign up free at: GREwebinars.com.

Text “GRE” to 66866 for our free “Don’t Quit Your Daydream” e-mail letter.

After discussing the best place to invest today, learn how a home is actually built.

Learn how a home is built: zoning, land acquisition, permitting, engineering, drainage, clearing & grubbing, adding earth fill, soil compaction, trenching, adding sanitary systems, stormwater system, lift station, conduit, electrical, foundation, slab-on-grade, plumbing, framing, block, roof truss.   

Homebuilder confidence is low among those that sell to owner-occupants. That’s due to higher mortgage interest rates. 

Among homebuilders that sell to investors, it’s better. Why? Higher rates mean higher rents.

Tenant demand for fourplexes is strong. In inflation and a possible recession, more people must live frugally.

Get started with new-build Florida income property (SFR to fourplex) with today’s guest at: GREmarketplace.com/Southeast.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/418

Today’s guest provider offers new-build Florida property at:

www.GREmarketplace.com/Southeast

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for this show.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode418_.mp3
Category:general -- posted at: 4:00am EDT

You want to increase your expenses. I reiterate why.

All five ways that real estate pays are rarely surging at the same time. In the past year, appreciation has slowed, cash flow rose, principal paydown slowed, tax benefits are roughly the same, and inflation-profiting rose.

How do you become a “laptop landlord” and know that you’re buying a good property?

I share my favorite resources for real estate due diligence (laptop landlording). They’re all in the “Resources Mentioned” below.

One mistake people make is that they tend to overgeneralize. They paint an entire city one color, saying something like: “I read that Memphis has high crime.” Well, where within Memphis?

You can contract with an out-of-state stranger to check out a property for you at WeGoLook.com

Aundrea Newbern, COO of GRE, MBA, NAR member (the woman with all the letters behind her name) joins me. She discusses her top real estate successes and failures.

We discuss floods, old cast iron pipes, partnerships, single-family vs. multifamily, LTRs vs. STRs, and the opportunity cost of waiting to buy property. 

At times, if third-party inspectors see an issue, they refer you to specialists like foundation or mechanical inspectors.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/417

Due diligence resources: ATTOM Data Solutions, Redfin, CoreLogic, Zumper, Altos Research, John Burns RE Consulting, Neighborhood Scout, Google Street View, WeGoLook.com, bls.gov, US Census, FRED, GREmarketplace.com 

I’d be grateful if you search “how to leave an Apple Podcasts review” and do that for this show.

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode417_.mp3
Category:general -- posted at: 4:00am EDT

Residential real estate has greater usefulness and is easier to understand than: agricultural, office, retail, industrial, and warehouse real estate sectors.

Tenants are staying in both SFRs and apartments longer than before. I discuss three reasons for today’s longer tenant retention trend.

Higher mortgage rates correlate with higher home prices. In fact, in the nine times mortgage rates increased 1%+ since 1994, home prices rose seven of those nine.

During recessions, mortgage rates typically fall. Both are opposite of what most people think.  

Resort communities are almost declaring war against short-term rentals. I explore the depth of the problem and discuss solutions.

Are the wealthy at fault? 

People that grew up in an area cannot afford housing in these STR hotbeds.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/416

How to Raise The Rent and Keep Tenants Happy (Video):

https://youtu.be/sqFwbn4yFhA

40-Year Mortgages:

https://www.housingwire.com/articles/newrez-

debuts-40-year-non-qm-mortgage-product/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode416_.mp3
Category:general -- posted at: 4:00am EDT

Car washes can be remarkably lucrative. This is enhanced with a franchise model and selling subscriptions to car wash customers.

“There is no other operation on a 1-acre site that can do 1 million to 2.5 million in sales and pocket half of that.” -WSJ story

Like other real estate, a car wash location is vital.

Much like apartment buildings, car washes are valued based on their income stream amount.

You can participate yourself. Start here: https://gremarketplace.com/carwash. Must be accredited, minimum $100K investment.

Tommy’s Car Wash is an innovative franchise. Customers use a mobile app.

Only Panera Bread and Chick-fil-A have higher sales revenue per location. (Wow!)

Car washes have high cash flow and tax efficiency.

Pro forma returns for individual investors like you have a 1.75x return on investment in five years or less. There is 100% bonus depreciation in year one. 

Learn more and get started at: https://gremarketplace.com/carwash

Resources mentioned:

Show Notes:

www.GetRichEducation.com/415

Get started with car washes:

www.GREmarketplace.com/carwash

WSJ on car washes:

https://www.therealassetinvestor.com/wp-content/uploads/2022/08/Private-Equity-Wants-to-Wash-Your-Car-WSJ.pdf

WSJ on laptop landlords:

https://www.wsj.com/articles/everyones-a-landlordsmall-time-investors-snap-up-out-of-state-properties-11661705278

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Direct download: GREepisode415_.mp3
Category:general -- posted at: 4:00am EDT

Join me live on our St. Louis properties webinar this Wednesday at: GREwebinars.com

The Fed is out to crush lingering inflation. Coming rate hikes will likely lead us into a recession, if we’re not there already.

Home price gains have stalled. This is worse for sellers and better for buyers. 

Landlords are winning in today’s market; renters are losing. 

CoreLogic’s Single-Family Rent Index shows a 13.4% YOY national rent gain. Single-family rents are up $500+ over the past six years. 

For a long time, investing in hardwood trees was primarily for big money hedge funds and family offices. 

You can own the title to quarter-acre parcels with teak trees that grow on top of them for just $6,880.

Timber prices are often counter-cyclical to markets. They keep growing through recessions, market collapses, and fluctuating interest rates.

Teak hardwood has natural oils that make it fire and rot resistant. In Panama, they thrive where there is about six months of rain and then six months of dryness.

The operator that I interview today has been involved with teak plantations since 1999. I first met him in-person six years ago.

Learn more. Get the investor report at: www.GREmarketplace.com/Teak

It costs $6,880 to own one new teak parcel. Optionally, you can own 16-year-old teak parcels for ~$20K.

$6,880 is projected to grow into $94,000 over twenty-five years.

Teak appreciates at 5.5% per year, 11% IRR.

This is a remarkable way to own timber real estate and invest in another nation with a low cost of entry.

They offer in-person teak tours in Panama. You can see your own trees.

Resources mentioned:

Get started with teak:

www.GREmarketplace.com/Teak

Show Notes:

www.GetRichEducation.com/414

New—Join GRE Webinars:

www.GREwebinars.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode414_.mp3
Category:general -- posted at: 4:00am EDT

A GRE listener since 2015, Christian Montalvo and her family are growing their real estate portfolio in the Dallas-Fort Worth area.

She has been a food microbiologist. Christian works for a company that cleans food processing plants. Her husband is a W-2 employee too, a financial analyst.

After being a renter for about $1,000 / month in a tiny DFW apartment, they began with buying a $200K owner-occupied duplex with a 3.5% down payment.

Next, they bought a fourplex. At this point, they have five rent incomes. They kept growing.

Today, she and her husband still work their W-2 jobs. But as a young, married couple, they now have the flexibility such that they don’t both have to work.

We discuss if they invest in 401(k)s and conventional retirement plans.

I give many examples of “growing your means” instead of “living below your means”.

Last year, Christian became a real estate agent. She works with investor clients.

 Resources mentioned:

Show Notes:

www.GetRichEducation.com/413

Christian Montalvo’s e-mail address:

christian@fraserrealty.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at (use code “GRE” for 10% off):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode413_.mp3
Category:general -- posted at: 4:00am EDT

“How long are you going to wait until you demand the best from yourself?” -Epictetus

I share 18 lessons with my 18-year-old self. 

#2 is: Don’t fear being different. That’s your advantage.

#4 is: No one cares about your college grades.

#14 is: Finding the truth is more important than being right.

#17 is: What does life want from you?

National median home prices eased from June to July—from $414K to $404K. 

Homebuilders are in a recession.

However, available housing supply is still low and demand is high.

Almost every human is forgotten in four generations.

Is a housing price crash imminent? You get a clear “yes” or “no” answer.

The NAR says that today’s first-time homebuyer is: 33 years old (oldest ever), $86,500 household income, $252K median purchase price, 7% down payment, and 37% carry student debt. Average size is 1,640 sf.

If you’d like to advertise with us, visit: GetRichEducation.com/Contact

 Resources mentioned:

Show Notes:

www.GetRichEducation.com/412

Median sale price eases:

https://www.wsj.com/articles/existing-home-sales-prices-housing-market-july-2022-11660774574

Median US house price historic chart:

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

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at: (use code “GRE”):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Today’s episode transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. Learn 18 profound life lessons I’ve learned that I wish I could share with my 18-year-old self… and… has the time come? 

 

After the looong & sometimes steep housing price runup, is a housing price crash finally imminent? And what’s the future direction of the housing market? Today, on Get Rich Education.

___________________

 

Welcome to GRE! From Red Deer, Alberta to Red Rock State Park, AZ and across 188 nations worldwide… I’m Keith Weinhold. THIS is Get Rich Education.

 

The voice of real estate investing… 412 weeks in a row… since 2014.

 

I hope that you’re having a great week!

 

You know, I have seemingly been a late bloomer in almost every way in life that you can conceive.

 

But as some say, “many people never bloom at all”. Alright, well enough. But look…

 

I was almost 18 years old when I graduated high school, just like - perhaps you - and many people are. But I looked like I was 13 then. 

 

I was among the very last in my class to experience puberty there at Coudersport High School, Pennsylvania. 

 

This is one reason that I could not attract a high school girlfriend or get a prom date. Even though… I asked a girl to prom and she said “no”. 

 

As underdeveloped and impressionable as I was then, here are 18 lessons that I want to share with my 18-year-old self.

 

I wish that I could share these lessons that I’ve learned now with my 18-year-old self:

 

  1. You Know Nothing. But You're Not Alone. You have so much to learn, 18-year-old Keith. So don't act like you know it all. Society actually likes when you're genuinely inquisitive and want to learn.

 

What about you? Can’t you sense when someone acts like a know-it-all? It’s not something that you want to be around. Back to advising my 18-year-old self.

 

  1. Don't Fear Being Different. That's Your Advantage. In high school and even college, winners fit in. In the real world, winners stand out. In fact, avoid normalcy. It's a synonym for mediocrity.

 

  1. Work To Learn. After that, work to earn.

 

  1. No One Cares About Your College Grades. For your interests, college is optional, not mandatory—regardless of what your friends are doing. Find an energy for learning. Be autodidactic (an autodidact means a self-taught person). Focus on becoming a person of value.

 

  1. Keep Moving. Health is wealth. Prioritize physical exercise over moneymaking. No matter WHAT you choose to do, you'll be living inside that same body when you're age 100.

 

  1. Failure Can Be Alright, Even Good. In school, you learned that mistakes are bad and should be avoided. A failure that you recuperate from demonstrates that you tried. You learned a lesson. In fact, DECORATE your failures so much that you should go ahead and tell others how bad you failed; they'll either relate to you or they’ll learn from you.

 

  1. Don't Follow Paths Others Have Made. Others guide you. But create your own map. If you're soullessly trading your time for dollars at a job, you need to design yourself an escape route so that you can quit as soon as possible. If you’re selling your time that way - stop it. Your life is made up of chapters of time. This is not a dress rehearsal. This is your life.

 

  1. Research, Commit, Then Be Consistent. Prepare for disappointment. Most people won't be as committed as you. Showing up on time is a commitment, so is marriage.

 

  1. Learn About Investing In Real Estate. Everyone needs it. It's made more ordinary people wealthy than anything else.

 

  1. Keep Real Estate And Emotions Separate. Facts trump feelings. It's 99% about: market, management, and income exceeding expenses.

 

  1. Make Grandma Proud. Pretend that she's watching you. Live a life that's exemplary in what you say and do. You might remember me mentioning my late Grandma Weinhold here on the show.

 

  1. Be Present. Don't over-anticipate future moments and events. They are less important than the present. Otherwise, you'll miss out on your entire life. Your life will never not be now. Appreciate "now".

 

  1. Who Your Friends Are Matters. Jim Rohn said: "You are the average of the five people that you spend the most time with." Take the average of your closest five's: values, their athleticism, their ethics, wealth, fashion sense, travel, neighborhood quality, and family structure—that's nearly who you will BECOME.

 

  1. Finding The Truth Is More Important Than Being Right. People respect you when you say: "I was wrong. Here's why." more than trying to defend some antiquated or faulty belief.

 

  1. Give. Money is an abundant resource. You will have a great ability to give. Generosity is championed in the Bible. It's Aristotle's third virtue. It will make you feel happy, it's good for your health, contagious, and spurs gratitude. This ossifies your net "value add" to the world.

 

  1. Mentors Matter. Others see you in a way that you cannot. You'll simply never be able to see yourself in a way that others can. You’ll meet people smarter than you; ask them for their help.

 

  1. What Does Life Want From You? As I learned from Eckhart Tolle, don't ask: "What do I want from life?" A more powerful question is: "What does life want from me?" (And you’ll remember that I mentioned this one last week on the show here and took a deeper dive on it.)

 

And the 18th and final lesson that I’d like to go back and share with my 18-year-old self is… Build. Anthropologists suggest that almost every person is forgotten after three generations. At your trajectory, what will your legacy be? Why and how will you be remembered?

 

They are the 18 lessons.

 

The stoic Epictetus said one of the most profound motivational things ever… and it’s in the form of a question. Epictetus said: "How long are you going to wait before you demand the best for yourself?" Yeah, that is his question.

 

At least here on this Earth, this is your last life ever. 

 

Now, as much as some of those 18 might resonate with you… and maybe you want to share those with someone in your life… I’ve seriously got to ask…

 

(Laugh) If I had read those as an 18-year-old, knowing that I wrote them a couple decades later, would I have ever listened to those as an 18-year-old? 

 

I don’t know. I probably wouldn’t have changed my behavior on some of them… but a few.

 

I’ve also got to wonder, in another 20 years, will these change? 20 years from now, would I be advising my 18-year-old self any differently?

 

Now, I discussed in there how anthropologists suggest that most every human is forgotten in 3 to 4 generations.

 

Sadly, quite a few people are forgotten 3 to 4 minutes after their death. And many more, within 3 to 4 hours, 3 to 4 days, or 3 to 4 weeks after their death. Of course, your children will remember you longer, and your spouse of, say, 50 years will remember you longer.

Realistically, LOTS of people are soon forgotten because they never did anything worth remembering. 

Good people are forgotten. People that never caused any trouble or uproar. 

They kept their lawns mowed. They kept their cars clean. 

But nothing notable worth remembering, like caring for lost animals or handicapped children or always remembering their friends’ birthdays.

For a thoughtful person, it is wise to consider from time to time “what have I done recently, that people will want to remember?”. Of course, we should all do every day all those things necessary to be a good neighbor, a good landlord, and a good citizen. 

If you don’t do that, you may be remembered because you were such a slob, or took care of your house so badly, or didn’t bother to shave and shower regularly.

But assuming you are doing everything so that absolutely no one will be offended or annoyed, then you have to do something special if you are going to be remembered for longer than a few days or a few weeks.

Let’s recognize something. Abraham Lincoln died six or seven generations ago. He is remembered with respect and honor. 

John Wilkes Booth died just a few days after Lincoln. He is remembered with scorn and despising. So it is a mixed blessing, for you to be remembered. For most people, they would prefer to be forgotten rather than remembered as a deviant or a monster or a social parasite.

My own guess is that VERY FEW people are remembered well, for as long as four generations. 

They may be listed in a family genealogy, but beyond being a statistical item, the individuals and who they are have been long forgotten.

It’s been said that "The greatest waste in the world is the difference between who you are and who you could become."

Now, be real with me. Is what I’m telling you making you pensive and even melancholy about your own mortality?

How do you feel… in your heart… right now? How do you feel… in your stomach… right now? What’s your mind telling you here?

 

Cheer up a little. I want you to take some solace in the fact that…

I believe there are more important things than for you to be REMEMBERED for decades and for generations. 

But doing those more important things — helping other people, making a better world, advancing the store of useful knowledge — will usually lead to YOU being remembered, long after you have passed into your next life.

That is probably the person that you strive to be here on Earth… after all.

If you’re still feeling like you’re not enough… well… I don’t have all of the answers. But you just got 18 lessons so that you can listen to those again and see which ones fit into your life.

I’ll be back with some GRE core content about real estate and a housing price crash.

I’m Keith Weinhold. You are listening to Get… Rich… Education.

_________________

 

You’re listening to one of America’s longest-running and most listened-to real estate shows. Welcome back to GRE. I’m your host and my name is Keith Weinhold. I am genuinely grateful for your listenership. 

 

There will only ever be one Episode 412 of Get Rich Education… and you’re listening to it.

 

If you’d like today’s Show Notes, simply go to GetRichEducation.com/412. It includes not just today’s supplemental resources, but the entire transcript of today’s episode.

 

Some people like to say: "Housing prices. They don't matter to cash flow investors."

 

To that, I say. C'mon now.

 

Price might not be the principal consideration. But price matters. If it didn't, why not just pay triple the asking price on your next property purchase?

 

Why does every classified ad have a price in it? 

 

Of course, real estate price matters-even to cash flow-centric investors- when you’re buying, you’re selling, or for you to have an adequate equity cushion for refinancings.

 

US home sales dropped last month. That's nothing new. That just means sales volume.

 

Housing supply is part of the reason for volume drop. Available supply is still just half - or less - of what's needed and it will be a multi-year problem.

 

I’ve discussed that before. The dearth of supply is an inelastic condition - it’s difficult to change. 

 

What’s the way out of that undersupplied condition? It’s homebuilding.

 

Well, many believe that homebuilders are in a recession. Some are building less while they wait for affordability to improve. 

 

This is only going to prolong America’s housing supply problem.

 

Let’s LOOK at prices.

 

Since July 2019, which was back before you knew the definition of "pandemic" and the only time that you wore masks were for Halloween, home prices have risen 44.5%.

 

Yes, 44-and-a-half percent in just 3 years.

 

Now, if we shorten that up to year-over-year median house price growth in America, it is still 10.8%. 

 

But the median sale price from June to July eased from about $414,000 to $404,000. 414 to 404.

 

Now, some might say this is hardly a change at all.

 

No, I think it’s meaningful… because all we’ve seen are both YOY and MOM housing price increases for years now.

 

Is it an aberration or is it a trend to come? Of course, no one really knows. But I think it's worth paying attention to.

 

Has the time come? Did real estate prices run up too far, too fast, meaning they must come crashing down to earth in a streaking fireball… that’s going to leave an indelible crater? Puhhh.

 

Let’s explore that. Well, first of all…

 

…the definition of the word "crash" is somewhat UH-morphous. But if it's equated to a bear market, it means a 20% price decline.

 

Well, that's highly unlikely that a decline like this is imminent. Housing values are famously stable. Today's homeowners have oodles of protective equity and their loans are well underwritten. And the supply is staying low.

 

You’re a smart listener, you listen here every week, and you’re probably apprised of all that. 

 

But did you know that even during the astoundingly irresponsible and toxic Global Financial Crisis and Mortgage Meltdown of 2007-2010, that back then during that cataclysmic event, house prices fell less than 20% nationally? 

 

Yeah, they didn’t even crash 20% then!

 

Fifteen years ago - those were the days of "liar loans", 105% LTVs, loose appraisals because appraisers were in cahoots with lenders, and we had glut of national housing supply and a foreclosure crisis… and nearly every housing market malady that you can quickly think of.

 

Housing values didn’t fall 20% amidst THAT apocalyptic environment. 

 

I made sure that chart was put in the show notes for you so that you can see that. That’s the median sale price of houses sold in the United States, sourced by the F.R.E.D. through the US Census and HUD.

 

Today, homes are still being snapped up quickly. That’s what a lack of supply makes happen. And we’ll still have a lack of supply in 2023 and 2024.

 

In fact, last month, the NAR tells us that the median home sold in just 14 days in July. It's never been faster than that on record.

 

That is not something that you would expect amidst stalled PRICE growth. Well, higher mortgage rates will do that.

 

The American housing market reached a turning point this summer. Price increases haven't just slowed—they've stalled.

 

Of course, local factors often supersede national ones. So then…

 

Where are home values least resilient? Areas that were trendy and higher-priced homes.

 

Where are home values most resilient? Lower-priced and entry-level properties. They're the ones least affected by further losses in affordability. That’s what we’ve talked about on this show from Day 1 - investing in entry-level homes for cash flow in the Midwest and South.

 

Who do stalled price increases harm:

  • Sellers. Price matters, remember?
  • New owners that hoped to refinance fast.
  • Flippers.

Who do stalled price increases help:

  • Buyers. 
  • Rent-to-price ratios. If you were wondering when rents will get a chance to catch up to prices? The answer is now.

This recent outsized RENT growth has clearly been a boon to us real estate investors - even a windfall if you’re well leveraged.

Now… in the workplace, the pandemic spawned “The Great Resignation”.

 

People either started working from home or quit and stayed at home. They were on their Peleton bike… and on Zoom. 

 

But tons of companies… from Peleton to Zoom - have seen consumers end their pandemic buying patterns. 

 

Now… so has housing.

 

The pandemic-era frenzy where buyers hotly demanded more space and a Zoom room is what I have called "The Great Reshuffling". It has settled down.

 

At the point of being overly obvious, compared to just a few months ago, this housing market has become worse for sellers and better for buyers.

 

Sellers, you might even have to STAGE properties again.

 

Buyers, let's run a vibe check on how well you’re doing for new purchases. Now you can usually:

  • Not have to pay all-cash
  • You’ll often have less buyer competition
  • Expect time for an property inspection
  • Have an appraisal contingency
  • And avoid an escalation clause on build-to-rents like I’ve discussed with guests here in recent weeks past.

You know, a friend just shared something with me. He said: "We are officially back into the 2018 real estate market. I made an offer today on a brand-new flip. I got $10K of seller help and a half page of contingencies." That’s what he said.

 

Yeah, that really sums up a lot.

 

The market has normalized - not become totally normal by any stretch, but negotiations between buyers and sellers are more balanced now.

 

There’s one group that loves higher mortgage rates - and that’s single-family rental owners. 

 

That crimps affordability - pricing out that first-time homebuyer… making them rent from you. That’s continuing to push up rents at faster increases than historic norms.

 

Fannie Mae expects that home sales will decrease in the next year. That’s nothing new. The volume of existing-home sales has been decreasing for months. 

 

So where does that leave today’s first-time homebuyer, the person - that is becoming more of a rare breed - that DIDN’T have to pay rent to you in your property?

 

Well, the NAR revealed a profile of today’s first-time homebuyer… and I think it’s particularly interesting. Today’s FTHB is…

  • 33 yo - that is the oldest ever - ever. It might not surprise you since affordability is down so it takes a new homebuyer longer to save & form the capital necessary for a down payment, closing costs, and loan qualification. The FTHB is now age 33.
  • Household income is $86,500
  • Median purchase price is $252K… so… significantly less than today’s median priced $400K home.
  • A 7% down payment. That, on average is what the FTHB puts down… so often paying PMI then.
  • 37% of them carry student debt. Typical balance $30,000
  • How about avg sq footage. The average square footage of a FTHB’s home is 1,640.

 

Now, I’ve largely been discussing either total housing supply or single-family housing supply thus far.

 

One bright spot is for apartment-dwellers.

 

420,000 new apartments are forecast to be built in the US this year - that’s according to RentCafe. Coming on top of 2021 - when there was historically high apartment construction, it would mark the first time since 1972 that more than 400k new apartments were completed in each of two straight years. The top spot for new apartments in 2022 is the New York metro area.

 

Elsewhere, out there in the world…

 

Netflix is about to launch a “Shark-Tank” like real estate show called “Buy My House”. It’s structured much like Shark Tank… except homeowners pitch their house sale deal to four “sharks”. 

 

That could be interesting to watch. 

 

Here, coming up at GRE, hear from not just me, but, as usual some of the most influential personalities in the real estate and finance space commonly come along for an episode and run alongside me.

 

Ramit Sethi from “I Will Teach You To Be Rich” is one of those notable names that will join you & I here on an upcoming show.

 

If you have any questions, comments or concerns about the show, you can always reach out at GetRichEducation.com/Contact. That’s how to get ahold of our team.

 

One question that we’re really not in need of hearing over there on our Contact Page, is: “How do I become a guest on the show?”

 

You know, a couple years ago, we had about 20x as many requests to be a feature guest here on the show as there are available appearances. 

 

Well, anymore, it’s about 50X as many requests as weekly shows.

 

We’re sorry to have to apologize to so many wonderfully bright and credentialed people. I really appreciate them. But we only have one, big weekly show… and that supply is not increasing.

 

GRE show supply could be even more inelastic than American housing supply then. 

 

I’d like to welcome our newest show sponsor, MyPropertyStats.com. It was developed by Hayden Crabtree. Hayden has been a show guest here before and we expect to have him back here to tell us more about My Property Stats.

 

It’s a deal analysis tool developed by an active investor - Hayden - to cut the time it takes you to analyze ANY deal by over 90%. -Calculate the EXACT price to pay to hit your cash flow and ROI goals

-Build a WORLD CLASS pro forma

 

In fact, you can go to MyPropertyStats.com/GRE right now and use coupon code GRE to get 10% off your first year. It’s remarkably inexpensive. That’s just $90 A YEAR for a tool that can save 10 hours PER DEAL.

No more spreadsheets. No more juggling multiple files. You can use coupon code "GRE" to get 10% off at MyPropertyStats.com/GRE.

 

Much like the gratefulness I feel for all of the bright guests that are here, we’ve seen quite an influx of advertising inquiries.

 

This is despite that, we haven’t really pitched for advertisers here - much like guests, fortunately, there are plenty of wonderful resources out there that want to reach you, the listener here.

 

These are resources that I don’t just endorse, but I often use myself.

 

If you’d like to make an advertising inquiry here at GRE, you can also reach out at the Contact Page at GetRichEducation.com/Contact

 

I’m Keith Weinhold. I’ll catch you next Monday, Labor Day. You’ve been listening to Get Rich Education.

 

Don’t quit your daydream!

Direct download: GREepisode412_.mp3
Category:general -- posted at: 4:00am EDT

You told yourself you’d change the world, then you let the world change you.

Rather than asking yourself, “What do I want out of life?”, a more powerful question is: “What does life want from me?”

Almost everyone wants to be “job optional”. 

People often use their words to denigrate the importance of money, yet their actions validate its importance.

High-flying real estate appreciation rates are mostly over with. The market is normalizing.

Through Q2, national median home price appreciation is 14%. But it's quickly slowing.

American apartment rent-to-income ratio is 23% for tenants.

Zumper tells us there’s about 10.2% national rent appreciation. Highest are TN and NC.

We have available properties in the Midwest and South. Naresh & I spotlight Poinciana, FL; Ocklawaha, FL; and Memphis. 

For available properties and free coaching, contact Naresh at: naresh@getricheducation.com

Resources mentioned:

Show Notes:

www.GetRichEducation.com/411

E-mail Naresh about cash-flowing properties:

naresh@getricheducation.com

Zumper’s Rent Report:

https://www.zumper.com/blog/rental-price-data/

Rent Is The New Gas:

https://www.usatoday.com/story/money/economy/2022/08/09/rents-topping-gas-prices-inflation/10279406002/?gnt-cfr=1

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at: (use code “GRE”):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode411_b.mp3
Category:general -- posted at: 4:00am EDT

Is the economy healthy or unhealthy?

We’ve had two consecutive quarters of GDP contraction. High inflation and supply problems persist. On the other hand, we have a strong jobs market, low unemployment, and high rent increases.

Ultimately, the NBER decides whether or not we’re in a recession.

Today’s guest, Tom Wheelwright of Wealthability, tells us why he thinks we’re in a recession. 

I share with you the exact rent increase numbers I’ve had on my rental single-family homes.

Historically, a recession occurs every five years, on average.

Whether we’re there yet or not, I believe there’s a likelihood of a recession soon.

Tom thinks whether or not a recession is declared is important; it affects consumer sentiment.

He breaks down the new “Inflation Reduction Act”. It does not appear to help reduce inflation. 

Rather, it appears that it will: increase union wages, enact climate change policy, add taxes to pharmaceuticals, hurt small business, and increase IRS enforcement.

“People who have never seen an IRS audit will see IRS audits.” -Tom Wheelwright

Resources mentioned:

Show Notes:

www.GetRichEducation.com/410

Get started on lowering your taxes with Tom Wheelwright:

GetRichEducation.com/Tax

All U.S. Employed Persons: 

https://fred.stlouisfed.org/series/PAYEMS

30-Year Mortgage Rate History (gray bars are recessions):

https://fred.stlouisfed.org/series/MORTGAGE30US

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Analyze your RE portfolio at: (use code “GRE”):

MyPropertyStats.com 

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode410_.mp3
Category:general -- posted at: 4:00am EDT

Is today’s housing market healthy? “Yes” for rental property owners, existing homeowners, and sellers. “No” for renters, wannabe first-time home buyers.

“Unbalanced” is a better word to describe today’s housing market.

I bought my first income property 20 years ago today.

In negotiation, emotions trump facts.

Chris Voss, former FBI hostage negotiator, joins us for real estate negotiation tips. 

If you need a decision from someone, get it in the morning before they have decision fatigue.

In a negotiation, try to get agreement. Don’t try to get the other party to say “yes”.

Chris likes to let the other side talk first.

Let “no” out slowly. A great way to say it is, “How am I supposed to do that?”

Self-deprecating humor can work in negotiation.

Learn how to motivate people to finish projects in a timely fashion for you.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/409

Black Swan Group:

www.blackswanltd.com

Mike Gundy rant “I’m a man. I’m 40.”:

https://youtu.be/zQ3oXkDPKbM

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode409_.mp3
Category:general -- posted at: 4:00am EDT

We compare the safety of all these investments: cash, savings accounts, treasuries, CDs, gold, cryptocurrency, stocks, mutual funds, ETFs, raw land, a primary residence, and income properties.

Listen to a mainstream media video clip about inflation from NBC Nightly News.

We get a Florida market update from GREmarketplace.com/Orlando.

Overall housing supply is low. It’s even lower for entry-level properties.

For renovated properties, Florida insurance premiums have risen dramatically in the past few years. However, for new-builds, premiums are about 70% lower.

These particular available properties in Palm Bay, FL are typically: 4 BR, 2 BA, 2-car garage, concrete block, single-family rentals, new-build, vinyl flooring, granite counters, and infill quarter-acre lots. $319,000 is what buyers pay. 

Today, these properties appear to appraise for $370,000+. You have $51K+ of built-in equity.

For those that select property at GREmarketplace.com/Orlando, your insurance is paid for the first year. 

Resources mentioned:

New-build Florida income property for $319,000:

GREmarketplace.com/Orlando

Show Notes:

www.GetRichEducation.com/408

NBC Nightly News on Inflation:

https://youtu.be/Lco2EjA-6IA

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre or (904) 677-6777

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode408_.mp3
Category:general -- posted at: 4:00am EDT

When mortgage rates rise, home builders slow down on building. This constrains supply and supports housing prices.

A record share of Americans say inflation is their No. 1 concern. The CPI is 9.1%.

Property operating expenses are rising with inflation, like insurance and property tax. What helps you pay for it? Rising rent.

Philosophically, why should you raise the rent on your tenants? 

Besides adjusting it to the market amount, you took time learning, you built your credit, you accumulated a 20% down payment, you originated an 80% loan, your operating expenses are rising, you weathered pandemic uncertainty.

If an auto mechanic makes $60 an hour, in ten years, they might make $90 an hour. Where’s the growth in this?

Kathy Fettke from Real Wealth joins us.  

We disagree on the housing market being “healthy”.

I believe a good description of the housing market is: "unbalanced":

Healthy for: rental property owners, existing homeowners, sellers.

Unhealthy for: renters, homebuyers. 

She believes that the Fed has overstimulated the economy, prices are high, and housing is undersupplied.

We discuss real estate’s demographic advantage.

We agree that it’s a bad market for prospective first-time buyers and renters, and good for those that have rental properties.

A housing price crash anytime soon is highly unlikely.

She & I each believe that today, it makes sense to add carefully-bought rental properties to rent to others.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/407

Real Wealth with Kathy Fettke:

https://realwealth.com/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode407_.mp3
Category:general -- posted at: 4:00am EDT

National home prices are up 275% since 1991. I break it down state-by-state for you. Slowest? Connecticut with 137%. Fastest? Utah with 599%.

Two misleading RE statistics are: real estate sales volume, home price cuts.

I tell you where I’m spending my summer.

Next, Tom Wheelwright joins us. He authored the new book, “The Win-Win Wealth Strategy”.

He tells us about the 7 investments that the government will pay you to make.

You don’t pay up to 12.3% Social Security Tax on rental income like you do with your day job.

Tax depreciation is explained.

Bonus depreciation is being gradually phased out after this year. 

Resources mentioned:

Show Notes:

www.GetRichEducation.com/406

Tom’s New Book:

“The Win-Win Wealth Strategy”

State-By-State Home Appreciation Since 1991:

https://advisor.visualcapitalist.com/growth-in-u-s-house-prices-by-state/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

Available Central Florida new-build income properties:

www.b2rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode406_.mp3
Category:general -- posted at: 4:00am EDT

Real estate funds invest in multiple properties. 

Real estate syndications often invest in just one property.

“What is the worst deal that you’ve ever done?” Ask your fund provider that question.

I’m willing to share that I invest my personal real estate fund dollars with Flip & Dani Lynn Robison of Freedom Capital Investments.

Fund pros: More passive than turnkey, stable returns. 

Fund cons: Vet your operator.

Learn more or get started at: GREmarketplace.com/funds

There are short-term funds for liquidity, and longer-term funds for higher returns.

The difference between simple and compound interest weighs in here. 

Learn what a “preferred return” is.

Fund returns of up to 10-12% are offered. Learn where your return comes from.

Fund objectives: safety, certainty, reliability, and growth. 

We’re talking about high-yield, fixed income fund.

Dani Lynn has been a part of more than 600 multifamily deals.

Learn how funds have two audit layers.

There are funds for both accredited and non-accredited investors.

Learn more or get started at: GREmarketplace.com/funds

Resources mentioned:

Show Notes:

www.GetRichEducation.com/405

Get started with real estate funds. It’s the same place I invest:

www.GREmarketplace.com/funds

Dani Lynn Robison’s team contact:

Phone | (937) 551-2282

Email | invest@freedomcapitalinvestments.com

Flip & Dani Lynn Robison’s daily podcast:

Freedom Through Passive Income

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

JWB’s available Florida income property:

www.jwbrealestate.com/gre

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Available Central Florida new-build income properties:

www.b2rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode405_.mp3
Category:general -- posted at: 4:00am EDT

Your Financial Independence Day happens when your residual income stream amount exceeds your basic monthly expenses.

Rental demand is high for three big reasons: rates are rising, stringent mortgage qualification standards, housing undersupply.  

I answer three listener questions: Should I make a big down payment? Is borrowing at lower than inflation profitable? What about prepayment penalties?

Ridge Lending Group President Caeli Ridge joins us to discuss today’s mortgage lending landscape.

Today, are ARMs beginning to make more sense than fixed-rate mortgages? We explore.

Learn about the cash-out refinance climate. Second mortgages on income properties are still limited.

Does it ever make sense to refinance to a higher mortgage interest rate? We discuss.

Caeli Ridge thinks mortgage rates will keep rising.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/404

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE 

or e-mail: info@RidgeLendingGroup.com

Freddie Mac Includes On-Time Rent Payments Into Underwriting:

https://www.housingwire.com/articles/freddie-mac-to-include-on-time-rent-payments-into-underwriting/

Airbnb Enacts Permanent Party Bans:

https://www.cnbc.com/2022/06/28/airbnb-makes-its-party-ban-permanent.html

JWB’s available Florida income property:

www.jwbrealestate.com/gre

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Partial transcript:

Welcome to GRE! I’m your host, Keith Weinhold. Happy Financial Independence Day on American Independence Day.

 

I answer some of your most burning listener questions today. 

 

Shifts in the mortgage market could now change your strategy. 

 

Does a cashout refinance to a higher mortgage rate make sense or not? 

 

Is an adjustable rate mortgage actually feasible for you now and lots more… on Get Rich Education.

_____________________

 

Hey, welcome in to GRE. From San Luis Obispo, CA to Saint Louis, Missouri and across 188 nations worldwide, you’re back in that abundant place.

 

And you’ve got to lead with an abundance mentality around here. How many places can you do that when the scarcity mentality is abundant and the abundance mentality is scarce. 

 

I’m Keith Weinhold. This is Get Rich Education. Though it’s American Independence Day… is it your financial independence day. 

 

Are you drawing closer to that day… as you add income streams in your life.

 

With 8.6% government-admitted inflation and stagnant wages and a higher cost of living… has there EVER been a more important time in your entire life to add an income stream through real estate?

 

You can make the case that this is the most important time for you to do that.

 

I am about to answer your listener questions here on July 4th. It’s also Episode 404. There’s no chance that this becomes an error 404. Some dorky humor there.

 

First…

 

Freddie Mac is going to include on-time rent payments into underwriting. Yes! This starts next week. 

 

This is a good thing for you. This incentivizes renters to make on-time payments to you if they ever want to become homeowners.

 

…and…

 

Airbnb enacts a permanent ban on parties. They & VRBO have long struggled with what to do about parties.

 

I just shared those stories with you in Friday’s newsletter. If you didn’t see them, they’re in the Show Notes of today’s episode.

 

Be sure to get our free “Don’t Quit Your Daydream” newsletter.

 

We’ve been really informing you about so much in the real estate world there. We’ve also been telling you about our webinars. I know that some of you enjoyed last week’s Texas properties webinar.

 

Stay up-to-date with our newsletter at: GetRichEducation.com/Letter

 

Now, let me tell you. Back in the year 2004, eighteen years ago. Yes, I was an active REI then. My tenants were increasingly leaving. They were vacating my property and I had to find a new renter.

 

This was increasingly happening for a few reasons:

 

#1 is that mortgage rates were falling then.

 

But secondly, and really the big reason is that anyone could qualify for a loan. Mortgage underwriting standards were so lax that nearly any human could get a loan, even if they had zero income. So… loans were too easy to get.

 

Then the third reason that my tenants seemed to be vacating is that there was ample supply - and an oversupply of properties - first-time homes - for them to move into.

 

Well, today, all THREE of those criteria are flip-flopped.

 

First, mortgage rates are rising.

 

Second, mortgage qualification standards are tough. Tougher than Kevlar.

 

And thirdly, there’s an undersupply of homes, especially these entry-level homes that make the best FTHB places.

 

That’s precisely why rental demand is sky high today, tenants are not fleeing to become homeowners, rental occupancy is close to 100% in many markets, and rents are rising multiples faster than historic norms.

 

These phenomena can move you closer to you financial independence day. 

 

I had a group of financing-themed listener questions come in recently, so I want to get to three of those before we talk more about today’s lending landscape later.

________________

 

The first question comes from Dave in Bellingham, Washington. 

 

“Keith, I thought it was good to make a big down payment on a property. That way, I’d have not only less debt, but I’d have the benefit of having a smaller mortgage payment over time.

 

This means I’d pay less interest over the life of the loan too. Can you tell me more about how FF beats DF?” 

 

That’s from Dave. 

 

Good question, Dave. Common question. In fact, there was a time in my life, before I ever owned any real estate where that same line of thinking made complete sense to me. 

 

I even thought, “If I could be mortgage-free and own a property, I’d have it made.”

 

Dave, let me answer this in a somewhat different way than I’ve answered it before for other listeners’ benefit. 


If you can borrow at a 6 or 7% mortgage interest rate, which, after tax deductions might be an effective 5% interest rate, many think that they can beat that in the market over time.

 

One probably can.

 

The riskiest thing that a lot of people do by making a big down payment is now they don’t have much liquidity. If the cash is already in the home, then that borrower might worry about not having much cash for other disruptions or expenses that come up in life.

 

The worst one could be, “What if you lose your job and your job was, say, 70 to 100% of your income?”

 

Now that cash is trapped in the home as equity… and you can better believe that today, banks aren’t going to let you access your equity if you don’t have a job.

 

The best way to keep equity separated from your home is to make sure it never goes in there.

 

The other reality too, is that the more than you borrow, the more you make use of OPM. 

 

So the great question to ask yourself, Dave, is “How big of a real estate portfolio could I ever build if I limit myself to only using my own money… and NOT other people’s money?”

 

We’re going to discuss this more later in the show today… but that should provide some sufficient context and food for thought to your question, Dave. Thanks for writing in.

 

You, the listener, can always contact us with any questions at GetRichEducation.com/Contact

________________

 

Andrew from New York state had a question through our Contact Page. 

 

Andrew’s been an avid listener for quite a while. I remember your name, Andrew. You’re a veterinarian from New York state. I hope that we can meet sometime in the future. Andrew asks:

 

“Is it a true statement to think that even in today's High "er" interest rate environment   any mortgage rate under the rate of inflation roughly 8% is a bargain??

 

Today ..I am not getting great cash flow...$100/month or break even..on new builds...but still see the upside in RE investing due to its inflationary hedge.” Alright, thanks for that Andrew.

 

With the first question, is any mortgage rate under the 8% inflation rate a bargain. Well, it could be. Many think that the real rate of inflation - the true diminished PP of the dollar is 15%. 

 

But let’s just stick with 8%. Yes, if you get a mortgage at 6 or 7% today, you are effectively being paid to borrow.

 

That is because with the money that you’ve borrowed from the bank, over time, you get to repay the bank with dollars that debase on the bank faster than THEIR interest can accrue on you. 

 

That’s how it can stealthily build wealth.

 

The risk associated with that is - besides being most attentive to your personal cash flows, Andrew - is that at some point over your loan term, there’s a good chance that inflation will duck back below mortgage interest rates.

 

We’re in this inversion now where the opposite is true. So, enjoy it while it lasts. I’d think of your interest rate being lower than inflation as a short-to-medium term tailwind.

 

Your second question was about how today, you’re not getting great cash flow when you buy a new-build rental property. It might be positive $100 or just a break even. But you still like investing in RE for the inflation hedge.

 

First, I think of RE as more of an inflation-profiting center than a mere inflation-hedging vehicle. I take you point though… and then…

 

Yeah, a lower $100 positive cash flow or less on new-builds is lower than what we’ve all been used to in recent years.

 

There’s a chance that this will widen - certainly no guarantee.

 

It like how I described a couple weeks ago that we think of the housing market in two waves. First the housing price increase wave hit hard, then there’s a trough, then later the rent increase wave hits. The trough between waves is when cash flow is lowest.

 

Though you can’t absolutely count on it, rents are increasing torridly. Andrew, I can tell that you’re a close listener just by the words and concepts that you’re thinking over in your questions. I love that. Thanks for you longtime following.

________________

 

The third question comes from JW. This question came from our YouTube Channel so I don’t know where you’re from JW. But you ask:

 

Keith, what are your views on PPPs on commercial loans? 

 

On my current 8-unit property I am pursuing, I am getting financing offers that all have PPPs.

 

OK, thanks for the question JW. I think one reason that I chose your question is because I, myself, have owned an 8-unit apartment building that had a 5-year PPP attached to it.

 

First of all, let me tell you what a PPP is. And it’s funny. I have been at RE meeting in the past and some people that have never heard of them seem incredulous that a PPP even exists.

 

A prepayment penalty is a fee that some lenders charge if you pay off all or part of your mortgage early. If you have a prepayment penalty, you would have agreed to this when you closed on your home.

 

Now, in my experience, you don’t often see these on loans for 1-4 unit properties.

 

I commonly see PPPs on 5+ unit apartment buildings and other commercial loan types.

 

The way that it often works is that your penalty is less severe as each of the five years transpires. It fades.

 

For example, you’d have a higher penalty if you pay it off in 2 years than the lower penalty would be if you pay it off in 4 years.

 

Then with a 5-year PPP, that means that your penalty disappears completely if you pay it off AFTER five years.

 

PPP loans can obviously be a poor choice if you, say, want to add value to a distressed apartment building and do a cash-out refinance in, say two years.

 

So, therefore, for long-term buy-and-hold strategies, 5-year PPPs often fit.

 

I’ve had 5-year PPPs on numerous occasions on my own apartment buildings, and I have never paid any penalty because I have only accepted those penalty conditions when I plan to hold for more than 5 years.

 

Now that you know about cases when you do and don’t want these as part of your loan, maybe you’re wondering why banks have PPPs at all.

 

Lenders charge prepayment penalties to provide a borrower with a disincentive for paying off a loan ahead of time… because that causes lenders to lose out on interest income. Lenders have to commit considerable time to evaluate a borrower and underwrite the loan in the first place.

 

That’s how PPPs work. Thanks for the question, JW.

 

Stay up-to-date with our newsletter. You can sign up free at: GetRichEducation.com/Letter

 

We also make sure that you get the 5-part video course where I’m your instructor. It’s one video on each of the 5 Ways Real Estate Pays.

 

What would it look like if I wrote a short letter about weekly… written by me… sent directly to you… that supplemented this show about real estate and personal finance trends and opportunities.

 

It can help bring you closer to your financial independence day.

 

Get it & my free video course all in one place at GetRichEducation.com/Letter

_________________

 

Yeah, concise, updated intell from Caeli, as always.

 

All these markets are constantly changing:

  • The market for housing prices
  • The market for rents
  • The market for mortgages

 

Working within them can help get you closer to your Financial Independence Day - that day that your real estate income meets or exceeds all of your basic living expenses.

 

Underwriting guidelines are staying tight, just like they have for more than 10 years now. Dodd-Frank and consumers proving that they have the ability to repay a loan has really helped with that. That’s a big reason that the mortgage delinquency rate has fallen to ALL-TIME lows.

 

In fact, that update on second mortgages on rental properties demonstrates that the market still has a pretty limited appetite for that product.

 

You might want it but it still comes with low LTVs if you can get them at all.

 

Some brighter new is that ARMs - Adjustable Rate Mortgages - are making more sense than they used to - when compared to your more typical long-term FRM.

 

There are both risks and rewards to compare there. I like that the good people over there at Ridge help you with decisions like those.

 

So many great & important shows coming up here on GRE - the return of Tax Advisor Tom Wheelwright, a 2-person housing market panel comprised of Kathy Fettke and I… and… oh geez, the return of Chris Voss - the hostage negotiator from Masterclass. 

 

Remember when I mock negotiated him for a fourplex building last year right here on the show & I lost… to perhaps the world’s top negotiator?

 

Well, here we go, Chris Voss is returning here to discuss how to negotiate in a housing market when the odds are against you. 

 

What do you think? Should I mock negotiate him again… I don’t know. That’s awfully entertaining for you but I don’t know how many losses I can take publicly like that. 

 

Big thanks to Caeli Ridge today. It’s where I go for my own income property loans. You can too, I’m happy to share that with you at RidgeLendingGroup.com

 

Until next week, I’m your host, Keith Weinhold. Happy Financial Independence Day! Though you might quit your day job, don’t quit your day dream!

Direct download: GREepisode404_.mp3
Category:general -- posted at: 4:00am EDT

“You DO care about what others think of you. That’s your reputation.” -Keith Weinhold

People care about your brand when you create value for them. Next, you must reach people.

A construction worker in London decided that he wasn’t where he was meant to be in life. He’s our guest, Steve D. Sims.

He started asking others why they were wealthy but he wasn’t.

A personal branding expert, Steve tells us why the right brand for you is the “authentic you”.

When you meet someone, ask them about themselves. They are their own favorite subject.

“A brand is what people say about you when you’ve left the room.” -Steve Sims

Brands are either solution-based or aspirational.

Every person has a brand.

Donald Trump was well-branded because he had clear slogans like “Make America Great Again” and “Build A Wall”.

The lesson? Be clear about who you are or what you stand for.

It’s OK to know what you’re “not”. For example, I didn’t know how to hire a COO for GRE and still don’t have experience managing people.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/403

Steve Sims’ website:

https://www.stevedsims.com/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript:Welcome to GRE! I’m your host, Keith Weinhold. There’s so much to pack into one show today - inflation at its highest rate in over 40 years, the Fed raising interest rates the most in 28 years, rents are going up fast, then GRE’s COO Aundrea Newbern & I on our favorite REI resources. Today, on Get Rich Education.

 

_______________________

 

Welcome to GRE! I’m your host, Keith Weinhold.

 

When it comes to developing your personal brand to it’s highest potential, what are those traps you might be falling into that have prevented you from doing so. And…

 

There was once a construction worker in London and one day he realized that this just wasn’t where he was meant to be in life. 

 

He contributes to the personal brand discussion today too… on this week’s episode of Get Rich Education.

______________

 

Welcome to GRE! From Franklin, MA to Franklin, TN and across 188 nations worldwide… I’m Keith Weinhold. 

 

With more than 4 million listens, though you’re tuned into one of America’s longest-running and most listened-to real estate shows, today, it’s about how to develop your personal brand which applies most anywhere.

 

There are a few definitions of a brand. A more strict one is that a brand is an intangible marketing or business concept that helps people identify a company, product, or individual.

 

OK, I guess that’s pretty good. Another definition of a brand I’ve heard that I like is: “Your unique promise kept over time.” That’s what a brand is.

 

A big part of keeping promises is doing what you say you’re going to do. Therefore, it’s a commitment.

 

In my mind, a big part of that is keeping your appointments. 

 

If I’m going to collaborate with someone and we have a pre-determined date & time, I put that on my calendar and I would not change that commitment unless some inordinate or unusual circumstance came up.

 

That person trusted me with their time and I trusted them with my time. If someone tells me later that they’d like to re-schedule with me, well, often I don’t do it. 

 

With all the choices I have for spending my time, their wavering commitment doesn’t really reflect so well on their personal brand.

 

Also, other people would have liked to have that time with me & they couldn’t get it because I already committed it to that person that wanted to cancel or postpone.

 

People that have their act together, well-branded people, commit and show up on time.

 

I’ll give you an example of a well-branded person that keeps commitments - whether you like him or not, in my experience, that is, yep, Rich Dad, Poor Dad author Robert Kiyosaki.

 

Robert & I have done a bunch of collaborations in the past, I used to be a writer for the Rich Dad Advisors, he’s been a guest right here with us on the GRE Podcast four times.

 

Not once have we tried to re-schedule or cancel an appointment on each other. 

 

Even if we plan something a month in advance, we keep it. We don’t have to send each other reminders. It was put on our calendar at the time we made the appointment, so what more do you need?

 

And you wonder why that guy is so successful. Well, one reason could be that he keeps commitments. 

 

Now, when it comes to your personal brand - which includes your belief systems, your values, commitment levels, there’s one thing that some people need to “get over” - and I think that Hal Elrod & I touched on this here on the show 3 weeks ago.

 

It’s this myth. There are people that brashly say, “Hey, I don’t care about what other people think of me.” 

 

Oh, that’s wrong. You do too care about what other people think. Because that’s your reputation. 

 

It can be interesting to see the person that says they didn’t care about what other people think, say, have a fake social media account made up impersonating their likeness and embarrassing them.

 

You had better believe that person that said they don’t care about what other people think… frantically tries to point out that, “Hey, I don’t want you thinking that was me over there spamming you.” Someone is impersonating my account. 

 

“Oh, well didn’t you just say that you don’t care about what other people think?” See you did care… and you should. That’s your reputation.

 

What if you own a restaurant & people leave negative reviews about your business & you as a businessperson, you care.

 

DO CARE… about what others think. That’s honesty. But yeah, don’t care too much. 

 

People will care about your brand when they know that you can bring them value. When you start with creating value first, second is how are you going to reach people, and then thirdly, it’s how are you going to create income.

 

It’s value, reach, then income. 1-2-3

 

I’m reaching you right now with this show. In fact, there was a time, between 5 & 10 years ago, that even by having a show like this, one could create value, reach, and income.

 

For new entrants, those days are gone. The podcast landscape became saturated a few years ago and it’s almost impossible to get substantial reach today. 

 

For startups today, a podcast is a lot like a website was 20 years ago.

 

Neither one stands out just by virtue of having one. 

 

You can have a website just like you can have a podcast, but anymore, how would you ever get enough website visitors to make a difference or how would you attract enough podcast listeners to make a difference.

 

Even celebrities that have name brand recognition that have crossed over and started podcasts usually don’t get much traction anymore. They are drowned out in a saturated field.

 

So if you want your brand to reach people today, well, that’s a really long discussion and this isn’t a marketing show. So I’d start with just two pieces of guidance:

 

#1 - Look for that new media source that isn’t crowded today. It might be that “next” media type. For a while, people thought that it might be voice-activated media like Alexa or Siri. I don’t really know that that’s getting traction like some thought. But that’s the way to be thinking. “What’s next?”

 

Secondly, if you know of a thought leader that wants to get their message out with a podcast today, rather than starting their own show and entering a crowded field… gosh, starting your own show, you could spin your wheels with many episodes and unlike a website that doesn’t need to be constantly updated…

 

… a podcast takes regular releases, and production, advertising, sound engineering and marketing, transcription, and a support network of complimentary resources from video to social media and more.

 

Well, I’ve got a great shortcut to that… in the podcasting world that will save you a lot of time, money, and frustration.

 

If you know someone that wants to get their message out through a podcast today, the big shortcut is to be a guest on another show that already has a big following.

 

That way, you’ve outsourced all of the production and marketing and everything else to a proven channel. That can save you hundreds or thousands of hours in your life.

 

Rather than starting a podcast, be a guest on a few big name shows.

 

Now that you know how you’re going to provide value to the world, you’ve got your reach too.

 

Hey, I’ve got more thoughts like this for you on building your personal brand. Before I share those, let’s talk to today’s remarkable guest on how to build your personal brand.

___________

 

Oh, yeah, a really interesting interview with Steve Sims today.

 

One thing we discussed is that you can’t snap your fingers and instantly make yourself someone that you’re not. It’s about gradually being who you are becoming.

 

Now, here at GRE, our show keeps growing and about two years ago, I needed to make a new key hire to run the internal operations here so that I could have enough time clear to make the best content for you every week.

 

But, gosh, I really didn’t know how to make a quality hire here - like, to bring in an experienced pro.

 

Realizing I didn’t even know how to hire someone, I looked around my network of people… and I knew that Ken McElroy had employed a Hiring Manager, Jennifer, to help him and I tapped her so that Jennifer could find a COO for GRE. 

 

Jennifer & I worked on the position advertisement, she interviewed the top candidates, narrowed it down to three, and Aundrea was selected.

 

Then I got Garrett Sutton to help me write the work contract.

 

So, I had acknowledged that hiring a top pro was beyond my skillset.

 

And Aundrea is such a professional here - she has her MBA too - that when GRE added more staff later, she’s the one that does the interviewing - not me.

 

And then… continuing in this vein of, “Don’t pretend to be someone you’re not.”

 

When we make a new hire here at GRE, I don’t pretend like I have some lofty corporate experience at knowing how to run things around here.

 

When I first talk to that new hire here, I simply tell them the truth. I say something like:

 

“I found myself with a show here that a lot of people seem to like to listen to… but don’t have any experience managing people. So I really want you to feel comfortable in speaking up when you think I could be doing something better.” Yeah, I tell everyone something like that.

 

Alright, well, what did that just do when I told them this? 

 

  • First, it’s honesty.
  • It makes me more comfortable
  • It made the new hire more comfortable
  • And finally, I’m not pretending to be someone that I’m not. When I was in the working world, I didn’t climb up the corporate ladder. I didn’t get that corporate experience. Instead, I decided to leave that world behind.

 

Steve made a terrific point at the end about brand clarity - being clear on what your brand stands for - whether that’s your personal brand or your company’s brand.

 

I told you near the start of the show that commitment & respecting other people’s time is a big part of my personal brand. Certainly, attention to detail too.

 

GRE’s brand clarity is in four words: Real Estate Financial Freedom. Those four words tell you where you & I are going together & how you’re getting there too.

 

Once you’re in the GRE world and tribe, then we can get more nuanced, for example, with our strategy and brand of “FF beats DF”. And with that, you see how “RE FF” is achieved faster.

 

I sign off each show with “Don’t Quit Your Daydream” and it’s a trademark that we own here at GRE.

 

So the point is, be clear and memorable in order to have a successful brand for yourself.

 

This doesn’t have to be that well-developed and you don’t have to have terms trademarked to have a strong brand.

 

Juan, my landscaper wacks all the weeds along my fence and doesn’t leave any clippings behind. I can see that his brand was there - imprinted in my backyard.

 

Speaking of some other well-branded real estate figures, if you want to listen to Grant Cardone & I together here on the show, where we 10X your wealth together, he was with us on Episode 264.

 

Robert Kiyosaki’s latest appearance here on GRE was last year. You will find he & I together most recently on Episode 358. 

 

As far as today’s chat, you might be interested in SEEING Steve Sims & I’s chat from today other than just listening to the audio here. It might help reinforce some of these branding concept for you.

 

He’s also just a really interesting figure to see and listen to. You can do that on your YouTube Channel… which is really easy to find and remember… because we’re - I suppose - consistently-branded - ha!

 

That’s because our YouTube Channel is called “Get Rich Education”. I’d expect that video to be published there by about now.

 

Personal branding means that there is… perhaps… a better investment than leveraged income property.

 

That investment… is YOU.

 

Until next week, I’m your host, Keith Weinhold. Don’t Quit Your Daydream!

 

Direct download: GREepisode403_.mp3
Category:general -- posted at: 4:00am EDT

For many, it’s become a scary world with $5-$6 gas, soaring food prices, spiking rents, the medical system is still a mess, and wages aren’t keeping up with inflation.

Inflation is at a 40-year high of 8.6%. The Fed raised rates ¾%, the biggest jump in 28 years.

For every $1M in real estate debt that you have, you’re benefiting $86,000 each year due to your debt debasement.

Affordability has become so bad for wannabe first-time home buyers that increasingly, they’re becoming your renter.

Many project rent growth to exceed home price growth this year. Rent.com’s Rent Report shows a 26% annual rent increase nationally.

Every 1% in a mortgage rate increase decreases a buyer’s purchasing power by 12%.

GRE’s COO Aundrea Newbern, MBA joins me. We discuss our favorite RE information sources.

Aundrea expects to diversify her RE portfolio into more markets. She’s been focused on southeast Georgia.

Some RE resources we use: www.city-data.com, US Census Bureau data, CNBC.com, HousingWire.com, FRED data, the MLS, AirDNA.co, GREmarketplace.com.

When considering adding to your RE portfolio, simply talking to a Property Manager can be more valuable than the best website.

Aundrea sees a balanced market at prices $250K+, and a sellers’ market at prices below $250K in southeast Georgia.

Days On Market (DOM), Sale-To-List Price Ratio discussed.

LTRs are in high demand and low supply. STRs are saturated in many markets.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/402

Rent.com’s Rent Report:

https://www.rent.com/research/average-rent-price-report/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript: Welcome to GRE! I’m your host, Keith Weinhold. There’s so much to pack into one show today - inflation at its highest rate in over 40 years, the Fed raising interest rates the most in 28 years, rents are going up fast, then GRE’s COO Aundrea Newbern & I on our favorite REI resources. Today, on Get Rich Education.

 

_______________________

 

Welcome to GRE! From Auckland, NZ to Oakland, CA and across 188 nations worldwide. This is Get Rich Education. I’m your host, Keith Weinhold.

 

Before I discuss real estate, what’s happening with inflation & interest rates is so exceptional that I want to cover this first.

 

When the latest inflation reading came in at 8.6%, it dashed hopes that it's peaked. We have no evidence that it’s peaked.

 

And as I like to say, that 8.6% is just the level that the government is willing to admit to. It's really higher.

 

It's the third month in a row that it has exceeded 8%.

 

Treasury Secretary Janet "Grandma" Yellen has already warned of what she calls "unacceptable levels of inflation".

 

And Yellen looks like my late Grandma Weinhold. Yeah, they look a lot alike. One difference though, is that Grandma was not wrong about inflation. 

 

Another difference between my grandmother and Yellen is that… Janet Yellen never gave me Star Wars action figures on Christmas like my Grandma did.

 

Well, for many people, especially in the lower middle class, it's become a scary world with devastating $5-6 gas, soaring food prices and spiking rents. (I’ll get to that shortly). The medical system is still a mess. Wages are up perhaps only 5%.

 

Their quality of life is really suffering now.

 

Libertarians point out that fiat inflation is theft of one's private property. You earned a dollar. Now your prosperity has been stolen.

 

Sneaky shrinkflation is stealing from you too. Yeah, you're not imagining it, 

 

Gatorade has trimmed its 32 ounce bottles down to 28 ounces. A small box of Kleenex has shrunk from 65 tissues down to 60. 

 

Package sizes are shrinking faster than Lake Mead, all while producers charge the same price or more. That’s what shrinkflation means.

 

It's become an awful economic malady for consumers.

 

So, let’s talk about higher interest rates since that’s what can keep inflation from soaring.

 

Many interest rate types are based off of the Federal Funds Rate.

 

Now, I like to look at history to see what typically happens in like scenarios. History doesn’t tell you everything, but many people don’t look at it.

 

Rewinding three years, this rate was hiked up to 2.5% by early 2019… and the stock market was freaking out by then. Trump even demanded a rate cut. He got it and that, turned stocks around.

 

Yes, Presidents are supposed to stay independent of the Fed, but, in any case…

 

Just last week, the Fed Funds Rate was raised up to 1.75%... and the stock and crypto markets have already taken a swan dive off the high board.

 

Everyone thinks that rates are going to be raised again at the next Fed meeting next month.

 

So how do you think that equity markets are going to like that? History shows us that they don’t.

 

But see, history shows us that even when the Fed Funds Rate is raised to 10%, it can take years to quell inflation.

 

Commodities like housing, food, and energy, often excel in either inflationary times or recessionary times.

 

That’s where you want to be. Buy & own what people need, not what they want.

 

These things have a finite supply. Bringing them into existence takes "proof of work". 

 

Proof of work means that it takes real world resources to extract or produce something—like framing roof trusses, growing timber for lumber, mining gold, extracting oil, or growing wheat. 

 

If you held any of these commodities individually, you might merely hedge inflation.

 

But if you can control an entire commodity by only putting one-quarter or one-fifth of your "skin in the same", then you get to short the dollar too.

 

"Shorting" means that you're betting that something is going to fall in value—the dollar in this case.

 

Now you're creating leverage and arbitrage. You're really profiteering from inflation ehre.

 

Real estate is like a basket of commodities. It is made of: lumber and copper and glass and all kinds of commodities.

 

So, if you have $1M in real estate debt, it's now being debased at a rate of 8.6%. Great.

 

This effect alone has increased your prosperity by $86,000 this year—$86,000 this year alone, and that’s besides appreciation, income, tax benefits, and amortization.

 

Yeah, you’ve got an $86K tailwind.

 

Do you remember back in 2019 when I did the podcast episode called The Debt Decamillionaire? It was Episode 260. You might remember that episode.

 

That's when I touted the counterintuitive merits of taking out $10M in real estate debt... with the payments outsourced to tenants.

 

Now, I know that not everyone has the wherewithal to do that. But if you were able to implement that plan, it has now created an extra $860,000 of annual wealth for you.

 

Yes, as one of just five ways you’re paid.

 

If you think that sounds scary - or unconventional - it’s definitely unconventional. Because being conventional gets one nowhere.

 

So, though you might have not been able to amass that much good debt, I was ahead of the inflation, helping you get out in front of it to take advantage of it. Of course, I talked about it well before 2019 too.

 

And, no, I sure didn’t know that a pandemic was coming in 2020 and it was going to bring all this inflation this quickly… but that is how things worked out.

 

Now, if you’re uninitiated on this, if you originate $10M in loans, understand something. Your net worth didn’t just decrease by $10M on the day that you got the loan. 

 

The day that you originate the loan, what happens is that you’ve now got $10M in your asset column and $10M in your debt column.

 

Leverage amplifies the $10M in your asset column… and then your debt column erodes through both tenant-made principal paydown - and this higher inflation.

 

Maybe I’m stretching your thinking just merely by discussing 8-figure debt like that.

 

So why is someone really compelled to be a real estate investor today?

 

One big reason is that soaring inflation is going to be around for a while.

 

So last Wednesday, when the Fed raised interest rates three-quarters of 1% - their highest daily increase since 1994.

 

Understand that higher interest rates decrease demand. There's another name for substantially decreased demand. That is called a recession. I don’t know if we’ll get that far.

 

Now, capitalism is not inherently inflationary.

 

Sure, as employers' demand for labor rises, that's inflationary.

 

But as businesses compete to offer goods and services at the lowest price - which is capitalism - that's deflationary.

 

Libertarians are quick to point out that America has too much government intervention to be considered a truly capitalist economy anymore. That’s a different conversation.

 

But some have speculated that politicians are plotting another stimulus check drop on American citizens so that they can deal with inflation.

 

I really hope that they do not do that. Sheesh, this would be a policy blunder. This would be like shooting a man that's already dead.

 

This absurd approach of "printing up currency" would be to help people deal with the consequences of... "printing up currency".

 

If you think that’s preposterous, well…

 

Quebec is actually doing this. They're issuing $500 stimulus checks to help the Canadian province's residents deal with inflation.

 

Yeah, that’s really happening. 

 

Soaring gas prices aren’t just painful for summer road-trippers. Because fuel is a critical input for so many goods and services, higher costs are causing havoc across the economy in a lot of places that you wouldn’t expect it…

Aviation: Airfares in the US skyrocketed 19% in April from a month earlier, an increase that is almost exclusively driven by a jump in jet fuel prices, United CEO Scott Kirby said. Now, you might have expected that one. But get this…

Law enforcement: A sheriff’s department in Michigan instructed its deputies to cut back on visits for non-urgent calls because it had blasted through its fuel budget with months remaining until a new one kicks in. (Yeah, inflation affecting law enforcement!)

Emergency services: An ambulance crew in Pittsburgh said it was limiting its service outside of 911 calls after facing a similar budget crunch. Its fuel expense for the full year is typically $50,000, and it’s already got close to that entering June.

Landscaping: Lawnmowers and trimmers use gas to make your front yard the envy of the neighborhood. But after absorbing all of the cost increases they can, some landscapers have slapped a surcharge on customers, and others are even looking into electric mowers and propane as an alternative fuel.

In any case, a look at history tells us that we could be in for high inflation for a full decade.

 

So make financial decisions accordingly.

 

Risk assets are typically really sensitive to big moves in inflation and interest rates.

 

Major stock indices are down, down, down.

 

And cryptocurrencies are in an all-out historic meltdown. They’re more volatile than stocks, and many have lost 50%-60%+ of their value just this year. 

Crypto trading platforms have halted withdrawals

Companies cut jobs

Panicked investors dumped their holdings

The public is finally dismissing promoters' claims of "Hey, I made $50k on doodoo coin. So you can you!". You don’t really hear that lately.

 

Let's Go Brandon Coin, now worth $0.00. And “Let’s Go Brandon” coin makes Dogecoin look like some sort of respectable family heirloom.

 

I actually still think bitcoin could have some potential, but…

 

So then where to look? Where do you go for yield today?

 

Some feel that the "true rate of inflation" is 15% today. Then that's how much prosperity you lose by storing cash.

 

(I believe it's wise to hold at least 3-5% of your real estate portfolio's value in cash.)

 

One place could be oil if you think there’s still a runup to be had there. But oil has performed well so far this year. Gold still hasn’t really awakened despite inflation.

 

What you can do… is…

 

Follow the money. Big institutional buyers like American Homes 4 Rent keep plowing money into real estate, especially single-family rental homes.

 

That’s historically the place to be in times of either high inflation or a recession.

 

Though the institutional share is increasing, the overwhelming majority of homes are still bought by individuals just like you.

 

In the fourth quarter of 2021, institutional buyers only comprised 18% of home purchases. 

 

As affordability clamps down on wannabe first-time homebuyers, unfortunately, many of these fine people never make it to the closing table.

 

Every 1% in a mortgage rate increase decreases a buyer’s PP by 12%.

 

Mortgage interest rates are now 6%+ on OOs, about 7% on rentals. I believe that the only way houses are going to get more affordable anytime soon is if mortgage rates come down. That’s because home prices aren’t coming down anytime soon.

 

So what do these priced-out people do? Increasingly, they become your renter. 

 

Rent price growth is predicted to outpace home price growth this year.

 

Though some measures are lower, Rent.com's Rent Report shows an astounding 26% annual national rent increase.

 

While a lot of major markets are struggling with a streak of Fed rate hikes that could drag on longer than the final two minutes of an NBA game...

 

...for real estate investors, the rent just keeps flowing in. 

 

And here’s what it comes down to. Picture this. Like I’ve discussed before, first home prices rise, and then rents follow later.

 

Picture two waves. Say that these two waves are 18 months apart. The first wave is home prices. Today, prices are still climbing but the wave has likely crested.

 

That second wave that’s coming in now are the torrid rent price increases.

 

The trough between the two waves is where the cash flow is worst on new purchases.

 

And now the second wave - that rent increase wave - is building. 

 

That’s the ah… seafaring here in the rental housing market ocean if you will. 

 

Hey, In the past, I’ve discussed where I’ve invested and what RE types I like to own. Why don’t we hear from GRE’s own COO Aundrea Newbern, MBA about how she’s positioning her portfolio in this environment of normalizing prices & spiking rents. 

Also, she & I will discuss some of our favorite resources & websites for real estate info. That’s straight ahead. I’m Keith Weinhold. You’re listening to Episode 402 of Get Rich Education!

__________________

Yeah, great stuff from Aundrea, as always. 

We discussed markets. Of course, it’s about the submarket too. As an example, maybe you don’t feel like Erie, PA or Toledo, OH or Grand Rapids, MI are fast-growing markets. 

Actually, I think Grand Rapids, for one, is growing, but the point is, that even if a metro has a stable population but it’s, say, medical district is booming - like a lot of cities’ medical districts are… you may very well be better off in an OK metro with a booming medical SUBmarket than you are elsewhere.

It’s often about that SUBmarket within a metro that really matters to you.

There aren’t too many places that you can invest & get yield today. But high inflation is the motivator to do so. 

Create one login, one time, it’s free & get access to all of our provider at GREmarketplace.com

For everyone here… COO Aundrea Newbern, MBA, Content Manager Matthew Blunt, Producer - me &, Sound Engineer, Investment Coach Naresh Vissa, Website Marvin Diaz Jr, Advertising Jake Madoff, I’m your host Keith Weinhold. 

Don’t Quit Your Daydream!

 

 

Direct download: GREepisode402_.mp3
Category:general -- posted at: 4:00am EDT

The housing market has calmed, but it’s still strong.

The homeownership rate of 65% is poised to fall these next few years. People must live somewhere. This should make for more renters.

Mortgage delinquencies have fallen for seven straight quarters. The forbearance program kept people in their homes.

“The Great Reshuffling” describes the US housing market since 2020.

Inflation flips money upside-down. Focus on prudent borrowing, not saving.

International Man Doug Casey joins us. He calls for a “Greater Depression” ahead.

For consumers, the costs of energy, food, and housing have become crippling. 

Doug thinks that the decline of world economies will continue. World cities have more people living on the streets. 

He thinks that the Fed can’t hike rates very high. It will result in too many debt defaults. Then how will inflation be curbed?

Doug thinks you should save, but don’t save in dollars.

Are price controls coming? That’s when the government tells companies that there’s a ceiling on the price they can charge for their goods and services.

We discuss what you can do to prevent being wiped out in a crisis.

I discuss living well vs. austerity.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/401

More on Doug Casey:

https://internationalman.com/

Current US debt level is over $30T:

www.usdebtclock.org

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. While much of America & the world keeps getting crushed by inflation, you’re profiting from it.

 

I provide you with a housing market update… then, as higher inflation reduces the quality of life for so many WORLD residents, today’s guest gives both us a global and national perspective on the prospects for a DEpression, today on Get Rich Education.  

__________________

 

Welcome to GRE! From NYC’s Brooklyn Bridge to Bainbridge Island, WA and across 188 nations worldwide, I’m Keith Weinhold. This is GRE!

 

And it’s Episode 401. Now, no, it’s definitely not episode 401(k). No life deferral plans here! Uh, oh excuse me… they’e called… uh, tax deferral plans. Though life-deferral plans would be a more apropos moniker.

 

I’m grateful that you’re here for another wealth-building week.

 

Now… asking an angry spouse to calm down is not exactly a tactic that's... effective.

 

By now, Jerome Powell has been effective at raising interest rates to help America's housing market calm down.

 

Though mortgage rates have inched lower in recent weeks, they're still 2% higher now than they were a year ago today.

 

In fact, the rate rise from early March to early May was the swiftest that I've seen in my entire life.

 

Rates scaled a wall. Clearly, this impacts affordability

 

The rate of property sales is a little lower now… off its peak.

 

It's getting more Darwinian out there. The NAR estimates that 15% of wannabe first-time homebuyers will be priced out of the market this year. 

 

People have to live somewhere. If they can't own, they'll have to rent... or keep living in their parents' basement… that’s an option for some people too.

 

Right now, the homeownership rate is 65%... and that is pretty close to the average of the past few American generations.

 

I’ll tell you… that 65% homeownership rate is poised to fall faster than dogecoin. 

 

Well, what this likely falling home ownership rate means is that the renter pool should swell, putting more upward pressure on rents.

 

That’s what happens. If home ownership goes from 65% to 60%, then America’s renter proportion basically goes from 35% up to 40%.

 

You know how I've talked about how home prices rise first, then rent increases lag behind? Well, this is it. This is the place and time where rents catch up.

 

With housing prices, are we set up for a recipe of "housing crash" or is it more like "housing calm"?

 

Looking at purchase applications, demand is probably past its peak. But housing demand still drastically exceeds supply

 

Normal housing supply is about 1.5 million units. We've come up from a jaw-dropping paucity of 376,000 homes back in February. And it's still just 516,000 now (chart).

 

We're only up a tad from famine-like levels.

 

America still needs about 300% more inventory just to bring the market back into supply-demand balance.

 

Housing supply is inelastic; it cannot be increased quickly. It'll take several years to reach balance.

 

How else can we measure this balance? One way is with days on market (DOM).

 

Pre-pandemic it was 45 days. Now, despite higher interest rates, it's under 30 days & under 20 days in a lot of markets.

 

Mortgage delinquencies have fallen for seven straight quarters. The forbearance program worked. One can critique its morality. But it kept people from losing their homes.

 

As the market entropy - with wild bidding wars & a “free for all”, couldn't last forever - nor was it good that that condition persist - it's still a strong housing market. 

 

Expect a gradual return to a calmer, more normalized condition. Yes, “calmer” market conditions are poised to emerge here.

 

Hey, pretty soon, you might not have to offer more than the list price for a property.

 

Expect less competition from all-cash buyers. Sheesh, “all-cash buyers”. What are those zero-leverage psychos doing anyway?

 

Hey, property inspections are coming back. Imagine that you can ask a seller to fix some things for you and not fear that they'll reject your offer.

 

So what is the bottom line with today’s housing market?

 

Rents should keep rising faster than historic norms.

 

Supply is so low that housing price crash prospects are near zero, probably even through 2023.

 

20%+ annual price increases still exist in many markets. Nationally, this is calming now.

 

By the end of the year, home price appreciation should still be higher than the historic norm of 5%.

 

And you know…

 

Back on December 1st of last year, I published GRE's 2022 National Median Housing Price Forecast and I also announced it on this show at that time that I expected a 9% to 10% rate of home price appreciation this year.

 

We’re nearly at mid-year here, and I still like how that forecast looks.

 

In America, you’ve heard of the Great Resignation or the Great Migration but I think that the term that best encapsulates what’s gone on in American housing since the start of this decade is “The Great Reshuffling”.

 

Working from home was a significant driver of this "Great Reshuffling" and accounted for more than half of the steep increases in home prices seen during the pandemic. That’s what new research has found by the Nat’l Bureau Of Economic Research.

 

By now, you’ve got more Americans that are shuffled into place. That found that long-term home with the realities of their new life.

 

That’s the bottom line. There is a Great Reshuffling, and now people are settling into place so we’re kind of seeing this welcome “calming” of the housing market as we move toward eventually settling into more normal conditions.

 

Well, hey. Thank you for the “Instant Reaction” from so many of you after last week’s milestone Episode 400 where Hal Elrod & I discuss how to improve relationships and be a person of value.

 

Greg from the United States remarked: “Two of my favorite people were together in one episode. I’ve been following Keith since the beginning of his podcast and journey… and I love “The Miracle Morning” and practice it habitually.

 

Roxana from Romania said, This was just phenomenal! A terrific talk that I listened to three times already. Thank you for all the good that you do through GRE! Congratulations for 400 episodes.”

 

I appreciate the remarks there, thanks.

 

You know, I want to hear from you, the listener. 

 

If you’ve been following along here and you’ve acted by putting income property into your portfolio and you’re now the beneficiary of inflation & you’re profiting from this inflation… with the Inflation Triple Crown… from time-to-time, we like to have a listener on the show.

 

If that interests you, reach out to us through: GetRichEducation.com/Contact

 

There’s no guarantee that we can get you on the show here. We have 50x as many requests to appear on the show as available slots.

 

But if you’ve had your life impacted, we want to hear from you. You don’t need to be a big name. 

 

In fact, if you’re just sort of salary or wage-earning person that’s had their life impacted by taking GRE principles and putting them into action, I want to hear from you.

 

Again, get started there at: GetRichEducation.com/Contact

 

Inflation flips money upside-down.

 

Though inflation isn’t a new story, most experts believe that inflation is going to stay elevated for a longer period of time here.

 

I think that some people - everyday people - let themselves be coerced by inflation. So they cut back on grocery spending & complain about car gasoline prices & lament that their 401(k) is plummeting & live small and maybe even live miserable.

 

Then there’s this increasingly popular narrative that seems to enforce that - you’ll do with less & you’ll be happy about it. 

 

And you hear more about buzzy terms, like, well “Reducing your standard of living is what “sustainable” looks like. Don’t you want to live sustainably?”

 

And people will try to conserve gasoline consumption by biking in the rain and having a muddy streak up their back.

 

Now, all things equal. I think that doing this for the environment can be good. That’s fine.

 

Rather than sustainability, some try to mask the quality of life degradation (from inflation)... justifying it with… well, I’m practicing “minimalism”. 

 

Minimalism. Yeah, I don’t need to go on vacations. Translation = I’m too fearful of my financial security to even get out and see the very world that I live in.

 

Whoever said that less is more never had more… and why have more when you can “have it all”? I kid a little bit here…

 

But… if you keep your quality of life because you invested in real assets with good debt… then go ahead and recycle some more consumable items in your household if you want to help the environment.

 

You don’t get to recycle your life. You’ve only got one of those… at least here on this earth.

 

Today’s guest believes that the prospect of a Greater Depression lies ahead. Let’s explore this together, today.

_________________

 

Yeah, it’s good to get the bigger-picture perspective sometimes.

 

Doug feels that future RE price increases could be in question. Well, even if appreciation completely stopped in the future, today you can still lock in low mortgage interest rates & rent that property to others… with persistently high inflation debasing your debt all along.

 

I brought up price controls in our chat today, which is when the government steps in & says something like, no, gas station, you absolutely cannot charge more than $6 per gallon for gasoline, or no, leaf lettuce grower, you cannot charge more than $4 for a one pound bunch of leaf lettuce. 

 

That ceiling - that price control - has often led to disastrous consequences for economies.

 

Prices often got high in the first place because there’s a relative scarcity of those goods.

 

Then if you put a price control on, say, leaf lettuce, then producers are less incentivized to produce. They won’t produce at a loss. 

 

When producers stop producing, then there’s even less reason for anyone to produce the item, making it more scarce, making your consumer choices more narrow & making your life worse.

 

Price controls can turn out to be a form of austerity. 

 

Then there’s more direct austerity - which is analogous to saying that you cannot run your air conditioner below 80 degrees in order to conserve electricity. 

 

Well, that DIRECT austerity measure also reduces your quality of life… and it’s politically unpopular. A President doesn’t want to institute a direct austerity measure like electricity conservation.

 

So a price control has more political expediency than austerity but it can have the same drastic result - reducing your consumer choice and quality of life.

 

If you picked up on what Doug was saying, he said that you can save. But don’t save in dollars. Saving in dollars guarantees a diminishment of your purchasing power.

 

My take is that saving in dollars guarantees a loss in you & your family’s standard of living. So the best way to avoid a “Greater Depression” at home, is to be vigilant that…

 

Inflation flips money upside-down. Get out of dollars. Get into real assets & debt. 

 

We’ve built a resource here to help you do exactly that. Get out of dollars, get into real assets & good debt at GREmarketplace.com

 

You’ve got the best markets & proven providers of income property. Create one login one time and connect with providers right there at GREmarketplace.com

 

Until next week, I’m your host, Keith Weinhold. DQYD!



Direct download: GREepisode401_.mp3
Category:general -- posted at: 4:00am EDT

You often relate to other people when you show yourself as vulnerable and fallible. In many contexts, this is even better than acting professionally.

Today’s guest, “Miracle Morning” author Hal Elrod, tells us that people spend too much effort trying to impress others.

When you give the most, it’s liberating.

“You SHOULD care about what others think of you. That’s your reputation.” -Keith Weinhold

Once, Hal e-mailed friends, ex-girlfriends and colleagues to seek criticism about himself. That feedback hurt.

Everyone wants change, but no one wants to change.

Generosity, selflessness, and contribution foster meaningful relationships.

I share that viewers were recently critical of my YouTube video. Hal admits that he believes that he’s not a great listener.

Hal strives to add value to every single person that he meets.

Aundrea Newbern, GRE Operations Lead, joins us for milestone Episode 400. 

Resources mentioned:

Show Notes:

www.GetRichEducation.com/400

Hal Elrod’s books and movie:

www.MiracleMorning.com

Hal’s friend John Ruhlin’s book “Giftology”:

https://www.amazon.com/Giftology-Increase-Referrals-Strengthen-Retention/dp/1732095604

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

 

Partial transcript:

Welcome to GRE! I’m your host, Keith Weinhold. Being a person of value and building lasting relationships often comes down to self disinterest, empathy, and connection. You’re going to build not just your wealth mindset, but your skillset.

 

It’s milestone Episode 400, today, on Get Rich Education!

 

Welcome to GRE! From Cherry Hill, NJ to Cherry Springs Dark Skies Park, PA and across 188 nations worldwide, you’re listening to one of America’s longest-running and most-listened to shows on real estate investing. 

 

That’s our major so to speak… with minors in economics and wealth mindset. I’m your host, Keith Weinhold. You probably know that after 400 episodes. 

 

Today’s guest doesn’t often do podcast conversations like this. But GRE’s Operations Lead, Aundrea introduced me to “Miracle Morning” author Hal Elrod last year. 

 

So Hal is standing by, and then, a bonus, as Aundrea joins me near the end of the show today as well.

 

Yeah, so here on milestone Episode 400, there aren’t any balloons falling out of the sky or anything. It’s an opportunity to expand your thoughts & mindset & skillset in a different direction that should benefit you both within real estate investing & your broader life outside of it - from relationships with your real estate agent to your spouse.

 

In human relations, more than ever, people relate more to you as a vulnerable and even fallible person than they do as one that acts strictly like a professional in a lot of circumstances.

 

The best way to show others in a business relationship (that you don’t know very well) that you’re a real human being & that loosens up both of you & make you laugh is when you go out of your way to point out that when you left home this morning… you’ve got mismatched socks on… and you make some joke about it… something innocuous yet relatable like that.

 

Then there’s handling ego and criticism in a way that makes you endearing and empathetic. 

 

And by the way, the definition of empathy is “the ability to understand and share the feelings of another person.”

 

Now, we get overwhelmingly positive feedback and comments about the show here… and I am grateful to you for that, whether it’s through Apple Podcasts reviews, or where you can always reach out if you’ve got a question or concern or suggestion at GetRichEducation.com/Contact… or increasingly, we get more & more comments from you on our Get Rich Education YouTube Channel.

 

There is a rather robust comments section there…

 

… and there’s one popular video that we have over there. It has more than 100,000 views and a lot of “Likes” and “Comments”. And I was rather criticized for how I handled this video - it was an interview. 

 

Now, it was the type of video that crossed over, it didn’t bring in our usual real estate investor crowd. It was kind of a hybrid crowd of geography & real estate.

 

And, again, we get overwhelmingly positive feedback here. But the nice remarks aren’t where you get the lessons, so… I got dozens of critical comments on this video… and these commenters were clearly critical of the way that I handled the interview. It wasn’t the guest.

 

Comments were rather disparate. Some said that I brought no value to that interview - I was the host with a fairly prominent guest. Others said that I talked too much, some said I talked too little, it just seemed like I couldn’t do anything right with that crowd.

 

Now, one way that I could have handled it is set a policy here that any negative comments have to be deleted. We could have just deleted them all.

 

Well, I don’t want to do that. You can disagree. In fact, some say that a disagreement is actually the start of a great conversation.

 

We could go in there & reply and tell the commenter that they’re being dumb or say something else disparaging.

 

Here’s how I handled it once I learned about this. I went into the YouTube comments myself, read a bunch of the criticism, and made individual responses to a bunch of them. My response was something like:

 

Hey, thanks for the feedback. Others seem to take exception to this material too. It is probably in my best interest to read all of these comments, see what I can learn from this, and I’ve got to do better next time. I have clearly disappointed a lot of people.

 

That was my response. Something like that.

 

Well, what did that do… it appeared to engender… empathy, really. Some of the detracting commenters then came back to me & said, “Aw, you know, that wasn’t so bad. I don’t think there’s much that you need to change. I still learned a lot from your video.”

 

See, when I showed the world that I’m listening and that I’m a fallible human being, just like we all are, sometimes it makes the critic come back and sort of repent or even reconsider.  

 

Next week, here on the show, “International Man” Doug Casey & I are going to discuss economics and what he thinks the prospects of entering what he calls “The Greater Depression” are.

 

Today, Hal Elrod & I on how you can be a person of value and build meaningful relationships…

Direct download: GREepisode400_.mp3
Category:general -- posted at: 4:00am EDT

Have you ever met anyone that created wealth with stocks? I haven’t. Why not? 

Inflation, emotion, taxes, fees and volatility are the reasons. I break this down.

The Rule of 72 is what traditional advisers cite as a wealth-builder. I describe why this does not work.

Learn why returns from stock and mutual funds are often less than zero.

What really creates wealth? Leverage.

Learn trade-offs between long-term rentals and short-term rentals.

Zach Lemaster joins us. A licensed optometrist and captain for the US Air Force, he’s become financially-free through real estate. 

We discuss the pros and cons of owning “Build-To-Rent” new construction income properties. It takes patience during the build process.

Find Build-To-Rent income properties by e-mailing GRE’s Investment Coach:

naresh@getricheducation.com

Resources mentioned:

Show Notes:

www.GetRichEducation.com/399

Get income properties by e-mailing GRE’s Investment Coach:

naresh@getricheducation.com

When I interviewed the 401(k) inventor:

https://www.getricheducation.com/episode/197-inventor-of-401k-ted-benna-joins-us/

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Partial transcript:

 

Welcome to GRE! Why Don’t Stocks Create Wealth? After answering that, learn about some tradeoffs between LTRs and STRs, and the pros & cons of getting a construction loan and new-build rental properties. Today, on Get Rich Education.

____________________

 

Welcome to GRE! From Hialeah, FL to Haleakala, HI and across 188 nations worldwide - that’s almost all of them - I’m Keith Weinhold. This is Get Rich Education.

 

I find it interesting that there are still smart people out there who think that stocks create wealth.

 

Everyday people could create wealth just by investing in stocks or mutual funds or ETFs?

 

I’ll tell ya. I have never met anyone in my entire life that has become wealthy from investing in these vehicles.

 

Now, that’s something that shouldn’t offend stock adherents. That has been my personal experience. 

 

Just asking around here at GRE a bit, I found that our Content Manager, Matthew… he said that he once knew just one person that did get wealthy with stocks… and that is because that person’s company IPO’ed.

 

OK, well that’s worth knowing. But as for everyday investors, what one might call a retail investor that buys and owns Apple stock or Amazon stock or bought the S&P 500 Index fund from a big mutual fund company… I mean… do you know anyone that ever created wealth from stocks? Or do you even know anyone that ever knew someone that created wealth with stocks.

 

I'm talking about creating wealth. For example, someone that started at a level of either "just getting by" or starting at a level of "middle class" and then transitioned to "wealthy", simply through shrewd and savvy stock investing.

 

I think a lot of people invest in stocks just because that’s what the herd does.

 

But they never ask themselves at all… "Have I actually met anyone that's ever created wealth from stocks?"

 

And if you run with the herd, you don’t get ahead.

 

So why is this? How come virtually no one gets wealthy with stocks?

 

Well, look. We all learn and understand the world through different lenses. I'm about to share the thought paradigm that shifted my own personal journey… and why I have not personally - or through an LLC - or in any way, owned any stock, or mutual fund, or ETF since the year 2014.

 

Right now, major stock indices are flirting with bear market territory. This means a value loss of 20% from a recent peak. 

 

Recently, the Dow Jones posted its eighth straight weekly loss. That's its longest weekly losing streak since 1923.

 

Could we say that misery loves companies? Big Tech has shrunk to Medium Tech. Even staid reliables like Apple, Target, and Walmart are tanking.  

 

Other than a one-month virus "flash crash" in March of 2020, many Millennials and Gen Zers have zero experience with a sustained bear market.  

 

None have occurred for thirteen years, which is an unusually long time frame.

 

Perhaps these investors will "sell low"; maybe they'll stay the course.

 

Now, investing in the stock market is so common - and so herdlike - that if you’re talking in a general conversation and say: “the market” - people just assume that you mean the stock market.

 

Well, shouldn’t “the market” be creating wealth for people. 

 

After all, the S&P 500 has averaged a 10% annual return over time. In order to emphasize compounded returns, something that traditional, old school advisers often cite is "The Rule of 72".

 

You've probably heard of it.

 

What you do is take the number 72, divide it by your annual percent return (10), and that's how many years it takes your money to double. 

 

Therefore, an S&P 500 investor should double their money every 7.2 years. Well, that sounds pretty good to most people..

 

Then over the decades, several doublings should ensure a fantastic retirement and perhaps even a taste of wealth.

 

But why doesn't it?

 

Why doesn’t it provide a fantastic retirement most times?

And why doesn’t it put people on that wealthy echelon… ever? 

 

This is due to five chief drags—inflation, emotion, taxes, fees, and volatility. I’ve glossed over that before. But lets see how this all negates what so many investors think is some kind of good return.  

 

Let's subtract each one from this 10% unadjusted stock return.

 

Inflation

Many experts agree that the CPI, currently 8%+, understates the true rate of inflation. It could be 15% now.

 

But let’s just say that long-term, true inflation averages 5%.

 

Yes, you could make the case that it’s more. But let’s just use 5% inflation. Well then...

 

…your long-term 10% stock return minus 5% inflation = 5% inflation-adjusted return.

 

Emotion

Everyone knows you're supposed to "buy low" and "sell high". But many do the opposite.

 

Why?

 

One has difficulty buying low because prices have often fallen for a long period of time before the dip. The predominant emotion is discouragement.

 

When stock prices have gone down, down, down, like they have this year, so many people get emotional and sell low… and they justify that by saying… I’m sick of losing money… and if I sell, I guarantee that I’ll stop losing money. So many sell low.

 

But on the flip side, why isn't everyone selling high? It's because prices have grown. It's hard to sell out of upward momentum. Up, up, up, up, up, friends are making money. You’ve got FOMO. This emotion is euphoria. This makes people buy - maybe not at the peak - buy they often buy higher that what they sold for.

 

But despite all this, most people believe that they're above-average investors—despite the statistical impossibility. This effect is called illusory superiority.

 

It's like how 7 out of 10 people believe that they are above-average drivers.

 

People often sell lower & buy higher.

 

We'll just say this takes one's 5% inflation-adjusted stock return down to 4%. That's being kind.

 

Taxes & Fees

Long-term capital gains taxes start at 15%. The highest ordinary income tax rate is 37%, which is the short-term capital gains tax equivalent.

 

Those percentages are what get taken out of your profit - that’s what eats into the entire 10% return that we started out with here.

 

Even if your funds are sheltered in a 401(k) or many retirement account types, yes, you could get tax-deferred growth. But you must begin paying taxes in retirement.

 

Fees are something that vary quite widely.

 

So… an S&P 500 investor's return adjusted for: inflation, emotion, taxes, and fees is often below 2%. Maybe far below 2%.

 

We're not done.

 

Volatility

So many people miss this.

 

The Rule of 72 and other projections are based on a fixed annual rate of interest.

 

It's called the compound annual growth rate (CAGR).

 

Our example… with this Rule Of 72 assumed a smooth, exact 10% return every single year.

 

This is irresponsibly quixotic. The real world doesn't work this way.

 

Let's say that a price falls 20%—which again is a bear market. Now, you must gain 25% to get back to "even". That's just math.

 

Now, if it falls 40%, it must gain 66.7% just to return to sea level.

 

Using a smoothed CAGR diminishes the damaging effect of return volatility.

 

So let's take our 2% return that's already been adjusted for: inflation, emotion, taxes, fees. Now subtract out this volatility.

 

And now, you can see why real rates of return are often less than 0% for stock, mutual fund, and ETF investors. Maybe they’re minus 3%. Maybe they’re minus 12%.

 

Real stock returns often crumble faster than a Nature Valley granola bar. They're not good for you either—full of sugar and canola oil.

 

Note that I even used what many consider "good times" in my example—where we started with a 10% unadjusted return.

 

This is an audio format here on GRE Podcast Episode #399 so my analysis wasn't deeply technical nor replete with formulas for pinpoint accuracy.

 

You might remember when we had Garrett Gunderson here on the show a few times. He really goes deep on how stock & mutual fund investors typically lose prosperity year-after-year and Garrett thinks that I’m being kind when I say that a stock investor’s real return is “0”.

 

It helps you begin to understand why you rarely—if ever—met anyone that acquired wealth with these vehicles.

 

About ten years ago, while working at the state Department of Transportation in an 8' x 10' blue cubicle, I began to realize some things:

  • Investing in retirement plans makes me safe and normal. I don't want a life that's safe and normal. That’s not extraordinary at all.
  • Every dollar invested in stocks and mutual funds is a dollar that cannot leverage other people's money.
  • Retirement plans provide zero income until I'm old.
  • I won't get ahead by following the herd.

Later, I interviewed the actual man that invented the 401(k) plan, Ted Benna.

 

Benna told me directly that the plans don't serve people the way they were intended. This helped complete my catharsis.

 

And my interview with Ted Benna is recorded. You might remember that episode. That was GRE Podcast Episode 197… if you haven’t heard it. 

 

Yeah, the guy that actually invented the 401(k) in the late 1970s. That’s here on Episode 197.

 

So, now you understand much of why I haven't owned any stock, mutual fund, or ETF-based investment at all since 2014.

 

This show is called “Get Rich Education”. So I could talk about anything related to wealth-building and stay on-point. 

 

But now you understand why I don’t discuss stocks. 

 

Real estate has some drags too. For example, investors often underestimate their maintenance and repair costs.

 

Ultimately, the fact that Real Estate Pays 5 Ways™ is why it's superior. It's how anything less than a 20% to 25% fully-adjusted rate of return is disappointing (learn more). 

 

Because real estate is an illiquid asset, this acts as a healthy barrier against "panic" buying or selling. Illiquidity diminishes the deleterious effects of emotion and volatility.

 

I do know investors who have created financial freedom through real estate, a lot of them, and I'm one.

 

If I can distill it down into one word for you, the short story about why I've met countless people that have graduated from middle class to wealthy through real estate is leverage.

 

Some of this is natural bias because I hang out in real estate circles, so I just tend to meet more of these people.

 

To stock investors, leverage is only available to more sophisticated types. Even then, it often comes with margin call risk. It's in a more limited measure than its wide availability in real estate.

 

Bear markets… like we have right now in stocks make people re-evaluate things.

 

To a younger investor that's potentially experiencing their first sustained stock bear market now, it's important to understand that...

 

...generally, stocks are not a game designed to build wealth for everyday people anyway

 

Times like these make people revert to fundamentals.

 

Ultimately, your success as an investor hinges upon your ability to provide others with value.

Be a person of value in the world.

 

There have been few times in modern history when owning real estate demonstrates more intrinsic value than it does today.

 

You're providing others with what has increased in usefulness and is historically scarce in supply… at the same time.

 

Wealth comes down to your ability to be valuable.

 

When it comes to residential real estate, there are so many ways that we can segment it. Later on today, we’ll discuss new-build properties vs. existing properties and what’s going on in those markets today.

 

We can also parse the space with LTRs vs. STRs.

 

When we define that, of course, as the name would allude to, it is based on the duration of resident stay.

 

Depending on the jurisdiction and more, a rental period of under 30 days could be considered a STR (some people refer to these as AirBNBs or VRBOs)… or even up to lease periods of less than 6 months could be considered STR.

 

LTRs have more predictable long-term income… because a tenant often signs on for a lease period of one year or more… and LTRs are also more recession-resilient.

 

STRs have lower occupancy - but because the daily rate is so much higher, they can be more profitable than LTRs.

 

When you look at any investment, it’s so fundamental to understand who you serve. Back to my point about stocks, it helps you understand how you can be a person of value.

 

In LTRs, you serve families, roommates, and everyday mom & pops.

 

Until just five years ago, STRs principally served two groups of people -  Vacationers & business travelers. 

With what happened in the world starting in 2020 with the virus, the STR community was concerned that the business traveler would go away & not come back.

 

But it didn’t seem to matter, because increasingly, over the last 5+ year, you have more & more digital nomads and WFA-types that rent STRs.

 

LTRs - Midwest & South, away from city center

STR Location - resorts, beach communities, ski resorts

 

HOA limits are something that you have more of with STRs.

    STR lodging or rental tax to the resident, you also get to charge the resident with the cleaning fee

 

Property Mgmt. costs tend to be 8-10% of each month’s for the owner of LTRs.

For STRs, you’ll often pay 20% or more since there are more resident turns & more advertising & listings to manage. 

 

When it comes to financing, you’ll often find LTRs to have more availability than STRs. This is huge… since leverage is what really creates wealth. 




Damages: STRs tenants pay upfront and usually place a CC on file to cover any damages. So there is some more protection that way.

 

One great piece of REI guidance is that the best STRs are the property types where if that market dried up, you could fall back onto them and use that same property as a viable LTRs.

 

To summarize what you’ve learned so far today…

 

  • The definition of a bear market is when a market has lost 20% or more of its value from a recent high.

 

  • Stocks don’t create wealth due to inflation, emotion, taxes, fees, and volatility. A lot of people miss that until it’s too late and it’s nearly retirement time - or when they thought they could retire.

 

  • LTRs and STRs have a lot of trade-offs. LTRs are easier to finance and have more recession resistance. STRs can provide more income when its dialed in just right. LTRs have the longer track record.

 

Coming up, a guest & I are going to discuss today’s opportunity on brand new construction rental property. 

 

That’s straight ahead. I’m Keith Weinhold. This is Get Rich Education.

______________________

 

Oh, yeah. Some good content from our guest on the pros and cons of using a construction loan with these new-build rental properties. You sure don’t have to go that route if you don’t want to.

 

For this batch of properties, and it is an ongoing batch of constantly refreshing properties, if you want to get to the front of the line, go ahead and e-mail our investment coach Naresh.

 

You not only get access to available properties - SFHs up to four-plex & sometimes larger, existing build & new-build, some properties conducive to STRs at times - though most are LTRs… some really inexpensive properties, at times less than $150K - they would tend to be existing, renovated properties, not new ones. 

 

For access to all those property types and free coaching, contact Naresh here.

 

You can do that at: naresh@getricheducation.com

 

Coming up here on the show… next week, for milestone episode 400 - it is Miracle Morning author Hal Elrod & I, discussing investor mindset and relationship-building in real estate. Yes, it look longer than I expected to get Hal & I together at the same time. That finally happens next week. Our Operations Lead here at GRE, Aundrea, is expected to be here with you & I for that show next week too.

 

The week after Hal Elrod, the “International Man”, Doug Casey joins us. Last time he was here, we discussed ideals like liberty & freedom. This time, it’s going to be about economics & it’s usually pretty gloomy commentary with Doug… but he keeps it real.

 

Then, down the road, Rich Dad Tax Advisor Tom Wheelwright is back on the show with us yet again to help you cut your taxes toward zero.

 

So with Hal Elrod, Doug Casey, and Tom Wheelwright coming up… I’d say that one inspires you, one depresses you, and one informs you. 

 

Hal being the inspiration

Doug being the source of the depression - he knows that I kid, I was joking with Doug Casey about that last time

And then, Tom Wheelwright being informative with… seemingly… some new tax plan that he has to tell you about.

 

Then after that, negotiation expert Chris Voss returns to the show. You might have seen his masterclass course. 

 

So… GRE is so stacked with great shows in the near future here.

 

In inflationary times, there is no better place to invest than in real estate.

 

I mean, even if you bought a property with no loan & with no tenant in it, real estate would be an inflation hedge just based on that alone… just based on it’s capital price tracking inflation.

 

But then you get the leverage where you can 4X or 5X inflation… while also having your debt debased… while also having your cash flow OUTPACE inflation since your biggest expense - the mortgage - stays fixed.

 

This is just one of so many reasons why real estate is what’s made more ordinary people wealthy than anything else. 

 

I really encourage you to get started… not only do we have this new coaching service steeped in GRE principles… but it’s also free… and we also have available properties.

 

I encourage you to reach out to our friendly GRE Investment Coach, Naresh at

 

naresh@getricheducation.com 

 

Until next week for Episode 400, I’m your host, Keith Weinhold. DQYD!

Direct download: GREepisode399_b.mp3
Category:general -- posted at: 4:00am EDT

Are “coffin homes” coming to the United States? This is concerning. Housing is so expensive that people live in cocoons.

A new Biden plan makes efforts to increase American housing supply.

Finally! We need help on the supply side, not the demand side.

I explore recession prospects with you. 

During 7 of America’s 8 recessions (over the last sixty years), home prices only fell once.

What Really Matters: “If you had invested $1,000 in JP Morgan in 1882, you’d be dead today.”

You can borrow against your RE portfolio’s value with a cash-out refinance, tax-free. It’s like “lump sum cash flow”.

Add properties to your portfolio through our international network at GREmarketplace.com

Resources mentioned:

Show Notes:

www.GetRichEducation.com/398

GRE Video: What Really Matters

https://youtu.be/Yhkvjg-gj9Q

California’s Cocoon-Like Pods:

https://www.cbsnews.com/news/sleeping-pods-startup-800-a-month-brownstone-shared-housing/

Biden’s plan to increase American housing supply:

https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/16/president-biden-announces-new-actions-to-ease-the-burden-of-housing-costs/

American Median Home Price Since 1963:

https://fred.stlouisfed.org/series/MSPUS

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.imaccredited.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode398_.mp3
Category:general -- posted at: 4:00am EDT

Will you be banned as a real estate investor? Some jurisdictions consider adopting this stance to keep soaring prices in check.

Some workers cannot afford to return to the office. If they leave home, they would have new expenses for gasoline, meals, parking and the big one—child care.

Of the “5 Ways Real Estate Pays”, historically: three are now high, one is low, and one is the same.

Caeli Ridge joins us. She’s the President of Ridge Lending Group. They specialize in income property loans.

Despite higher mortgage interest rates, investor-centric mortgage companies like Ridge haven’t seen much decline in business. Learn why.

Their “All-In-One Loan” can reduce the amount of property interest that you pay over time. It’s a 30-year line of credit with high flexibility.

Use Ridge’s All-In-One Loan Simulator to see if you save: https://ridgelendinggroup.com/aio-loans/

We discuss interest-only loans (which I like) and negatively amortizing loans. The latter got borrowers in trouble during the Global Financial Crisis; LTVs were as high as 115%.

Interest rate lock periods are up to 90 days at Ridge.

Investing out-of-state is easy. A mobile notary comes to your home, office, or even on vacation at a resort.

Ridge helps you sequence your investor loans, taking a long-term, holistic approach to your financial freedom.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/397

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

All-In-One Loan Simulator to see if you save: 

https://ridgelendinggroup.com/aio-loans/

Dallas’ proposal to limit REIs:

https://www.businessinsider.com/hoas-and-legislators-consider-taking-action-against-real-estate-investors-2022-5

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode397_.mp3
Category:general -- posted at: 4:00am EDT

The mad scientist of multifamily is here today. 

Neal Bawa is a data scientist. He keeps emotion out of real estate for investors in his $947M portfolio.

He believes that higher mortgage interest rates are a smaller obstacle than the Fed’s currency creation and destruction. He says: “Accept the risk.”

We discuss investor confirmation bias.

Neal thinks American cash flow will keep diminishing.

Of all emerging trends, Neal believes that the work from home trend is among the most substantial.

Learn more about Neal at www.MultifamilyU.com or by searching “Neal Bawa”.

The blockchain is a digital ledger. It allows everyone to access information publicly and securely. It allows for the democratization of information.

Blockchain looks to disrupt the real estate title industry. Exorbitant title insurance fees could go extinct.

Tokenization is easier with blockchain. This means that you can sell real estate shares without friction.

Institutional investors are poised to own more of the real estate market, taking share from mom-and-pop operators.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/396

Neal Bawa’s resources:

Google search “Neal Bawa”

Grocapitus.com

MultifamilyU.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode396_.mp3
Category:general -- posted at: 4:00am EDT

Rents are spiking 13-15% annually in America today. When they rise, they rarely ever fall again. This is why rent amounts are called “sticky”. Learn why.

Even when I was a landlord during the GFC fifteen years ago, my rents didn’t fall.

Rents are skyrocketing due to:

  • Low housing supply
  • Higher prices
  • Higher interest rates
  • Demographics. 25-34 year-olds are in prime household formation years. They want their own place. This is America's most populous age cohort.

Next, I talk with an Alabama / Florida builder about how he overcomes today’s material supply chain and labor shortage difficulties.

They have a 93-day build time.

How? They store windows so that they cannot run out. 

Cabinets have been a problem so bad that they’ve had to leave homes 99% complete until cabinets were ready. 

Lumber and petroleum product price volatility has been a challenge.

They have their own division for titling vacant land for future building. 

Alabama has America’s 2nd-lowest property taxes. As an out-of-state investor, you get to pay property tax in the state where you own property, not where you live.

To get started with Alabama income property, start at: www.GREmarketplace.com/Alabama

This build-to-rent provider uses fixtures like: LVP, granite or quartz countertops, stainless steel appliances.

LTRs and STRs will be available shortly. Start at: www.GREmarketplace.com/Alabama

Resources mentioned:

Show Notes:

www.GetRichEducation.com/395

Get started with new-build AL & FL long and short-term rentals:

www.GREmarketplace.com/Alabama

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode395b_.mp3
Category:general -- posted at: 4:00am EDT

The housing crash is 100% certain. That’s because it’s a supply crash, not a price crash.

I define a price crash as a loss in valuation of 20% or more.

Here are the bubble factors that I consider in today’s show: 

Price, inflation-adjusted price, interest rates, affordability, bond yields, personal incomes, foreign buyers, equity position, housing supply and more.

From 2018 to 2022, I tell you about my recent housing forecast history.

Redfin shows us signs of a housing market slowdown. 

For Jacksonville investment property, start here: www.GREmarketplace.com/JAX

Properties that don’t cash flow with a 20% down payment often do with a 40% down payment. But your leverage falls from 5-to-1 down to 2.5-to-1.

Jacksonville has low cost properties, favorable climate, strong population growth, and growing industries like the Port Of Jacksonville.

Get started with Jacksonville property at: www.GREmarketplace.com/JAX

Resources mentioned:

Show Notes:

www.GetRichEducation.com/394

Get started with Jacksonville property:

www.GREmarketplace.com/JAX

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “GRE” to 307-213-3475 or:

eQRP.co

By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Make passive income with apartment and other syndications:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

Top Properties & Providers:

GREmarketplace.com

Follow us on Instagram:

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Direct download: GREepisode394_.mp3
Category:general -- posted at: 4:00am EDT